<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------ ----------
Commission file number 1-9167
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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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 558-4000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant based upon the closing price of the common stock on March 12,
1996 was approximately $23,386,000.
As of March 12, 1996 the Company had outstanding 5,454,940 shares of
common stock.
Continued
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Annual Reports, Forms 10-K, for the years ended December 31, 1980 to 1981,
1985, 1988 to 1990, and 1992 to 1994, Part IV, Exhibits.
Annual Reports for Registrant's Subsidiary, Techdyne, Inc., Forms 10-K for the
years ended December 31, 1987 to 1988, and 1990 to 1991, Part IV,
Exhibits.
Annual Reports for Registrant's former subsidiary, Viragen, Inc., Form 10-K
for the year ended December 31, 1991, Part IV, Exhibits.
Part III incorporates information by reference from the definitive Proxy
Statement in connection with the Registrant's Annual Meeting of
Shareholders to be held on June 5, 1996
<PAGE> 3
MEDICORE, INC.
Index to Annual Report on Form 10-K
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I
Item 1. Business.............................................................. 1
Item 2. Properties............................................................ 8
Item 3. Legal Proceedings..................................................... 12
Item 4. Submission of Matters to a Vote
of Security Holders................................................... 12
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters....................................... 12
Item 6. Selected Financial Data............................................... 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................................ 14
Item 8. Financial Statements and
Supplementary Data.................................................... 20
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.................................................. 20
PART III
Item 10. Directors and Executive Officers
of the Registrant..................................................... 20
Item 11. Executive Compensation................................................ 22
Item 12. Security Ownership of Certain
Beneficial Owners and Management...................................... 22
Item 13. Certain Relationships and Related
Transactions.......................................................... 22
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K............................................... 22
</TABLE>
<PAGE> 4
PART I
ITEM 1. BUSINESS
HISTORICAL
Medicore, Inc. ("Medicore"), incorporated in Florida in 1961,
manufactures and distributes medical products, and through its 80% owned
subsidiary, All American Medical & Surgical Supply Corporation, is engaged in
the sale and lease of home healthcare durables. Medicore is an international
contract manufacturer of electronic, electro-mechanical and plastic insert and
injection molded products primarily for the data processing, telecommunications
and instrumentation industries through its 63% owned public subsidiary,
Techdyne, Inc. ("Techdyne"), including its wholly-owned subsidiary Techdyne
(Scotland) Limited ("Techdyne (Scotland)"). Medicore also owns and operates
three kidney dialysis centers through its subsidiary Dialysis Corporation of
America ("DCA").
Medicore and its subsidiaries are collectively hereinafter referred to
as the "Company."
The Company's executive offices are located at 2337 West 76th Street,
Hialeah, Florida 33016 and at 777 Terrace Avenue, Hasbrouck Heights, New Jersey
07604. Its telephone number in Florida is (305) 558-4000 and in New Jersey is
(201) 288-8220.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
REVENUES 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Electro-mechanical................................... $30,424,358 $20,535,683 $15,287,883
Medical products..................................... 1,702,042 1,557,993 1,547,249
Medical services .................................... 2,469,372 2,024,589 2,089,627
Earned at corporate level............................ 2,413,790 735,759 388,105
Elimination of intersegment revenues:
Parent company real estate rental
charges to electro-mechanical
manufacturing..................................... (130,000) (130,000) (130,000)
Electro-mechanical manufacturing
sales to medical services......................... (219,482) (172,331) (224,667)
----------- ----------- -----------
Total Revenues...................... $36,660,080 $24,551,693 $18,958,197
=========== =========== ===========
</TABLE>
1
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING PROFIT (LOSS) (1)
Electro-mechanical................................... $2,218,269 $ 1,289,134 $ 287,783
Medical products..................................... 34,789 41,967 (4,969)
Medical services..................................... (322,156) (26,849) 184,737
---------- ----------- ----------
Total Operating Profit............................. 1,930,902 1,304,252 467,551
Earned at corporate level............................ 2,413,790 735,759 388,097
General corporate expenses........................... 505,169 660,445 524,463
Interest expense..................................... 246,393 207,703 202,208
---------- ----------- -----------
Income before income taxes,
and minority interest ............................. $3,593,130 $ 1,171,863 $ 128,977
========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
IDENTIFIABLE ASSETS (2)
Electro-mechanical....................... $12,879,101 $ 8,741,418 $ 5,542,866
Medical products......................... 780,343 696,564 765,869
Medical services ........................ 3,971,867 2,303,560 2,566,860
----------- ----------- -----------
17,631,311 11,741,542 8,875,595
----------- ----------- -----------
Corporate assets......................... 3,615,843 4,213,782 2,446,803
----------- ----------- -----------
Total Assets........................... $21,247,154 $15,955,324 $11,322,398
=========== =========== ===========
</TABLE>
FINANCIAL INFORMATION RELATING TO FOREIGN
AND DOMESTIC OPERATIONS AND EXPORT SALES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NET SALES AND OTHER INCOME
United States.............................. $ 24,349,700 $16,670,955 $12,822,908
Europe (3)................................. 12,310,380 7,880,738 6,135,289
------------- ----------- -----------
$ 36,660,080 $24,551,693 $18,958,197
============= =========== ===========
NET INCOME (LOSS)
United States.............................. $ 1,254,849 $ 297,950 $ (184,423)
Europe (3)................................. 996,422 566,158 202,568
------------- ----------- -----------
$ 2,251,271 $ 864,108 $ 18,145
============= =========== ===========
IDENTIFIABLE ASSETS (2) 1995 1994 1993
---- ---- ----
United States............................. $ 14,645,274 $12,044,745 $ 9,374,494
Europe (3)................................ 6,601,880 3,910,579 1,947,904
------------- ----------- -----------
$ 21,247,154 $15,955,324 $11,322,398
============= =========== ===========
</TABLE>
2
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- -------------
(1) Operating profit is total revenue exclusive of revenues earned at the
corporate level, less operating expenses and includes any applicable
amortization of costs in excess of net tangible assets acquired.
Operating expenses exclude general corporate expenses, interest
expense and minority interest of subsidiaries.
(2) Identifiable assets by segment include assets directly identifiable
with the applicable operations. Corporate assets consist primarily of
cash, receivables, and deferred expenses.
(3) Techdyne (Scotland) sales are primarily to customers in the United
Kingdom. In 1994, sales were expanded to Ireland, Germany and Israel.
MEDICAL PRODUCTS
The Company distributes medical supplies, primarily disposables, both
domestically and internationally, to hospitals, blood banks, laboratories and
retail pharmacies. Products distributed include exam gloves, prepackaged swabs
and bandages and glass tubing products for laboratories. In addition, the
Company distributes a line of blood lancets used to draw blood for testing.
Developed by the Company and manufactured by Techdyne, the lancets are
distributed under the names Medi-Lance(TM) and Lady Lite(TM) or as a private
label item if requested by the customer.
The Company's new 80% owned subsidiary, All American Medical &
Surgical Supply Corp., sells and leases durable medical equipment in the home
health care industry.
Marketing of medical products is conducted by independent manufacturer
representatives and employees of the Company.
ELECTRO-MECHANICAL MANUFACTURING
Techdyne is an international contract manufacturer of
electro-mechanical, electronic, and plastic insert and injection molded
products, primarily manufactured to customer specifications and designed for
original equipment manufacturers ("OEMs") and distributors in the data
processing, telecommunications and instrumentation industries.
Custom-designed products primarily include conventional and molded
cables and wire harnesses, and to a more limited extent, printed circuit boards
("PCBs") and electro-mechanical assemblies. Techdyne also manufactures
complete finished assemblies. Manufacturing is accomplished, if applicable, in
accordance with Underwriters Laboratories specifications and the Canadian
Standards Association requirements. In March, 1995, Techdyne received its ISO
9002 quality assurance designation which similar quality assurance designation
Techdyne (Scotland) has had since 1991. See "Quality Control" below.
Techdyne is also engaged in horizontal injection molding and vertical
insert molding for production of medical products and electronic components.
Medical products produced for the Company's medical supply operations include
the Medi-Lance(TM), Medi-Let and Lady Lite(TM) lancets, the latter developed for
women's use. See "Medical Supplies" above.
Techdyne custom designs and assembles over 800 components and finished
products for approximately 75 active accounts, principally OEMs and their
suppliers. The customer base consists primarily of Fortune 100 companies.
Approximately 60% of sales are domestic, and 40% effected by Techdyne
(Scotland) are in the European markets. For the year ended December 31, 1995,
approximately 55% of Techdyne's sales were made to numerous locations of two
major customers, Compaq Computer Corporation ("Compaq") (36%) and Avid
Technology, Inc. ("Avid") (19%). A loss of or substantially reduced sales to
any of these customers would have a materially adverse affect on Techdyne and
the Company, if such sales could not be replaced. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding loss
of Avid sales and anticipated reduction of Compaq sales by Techdyne (Scotland).
3
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Products and Services
Cable and Harness Assemblies
A cable is an assembly of electrical conductors insulated from each
other and twisted around a central core and jacketed. Cables may be molded or
non-molded. Techdyne maintains a large assortment of standard tooling for D-
subminiature connectors, Din connectors (circular connectors with from two to
four pairs of wires used for computer keyboards), flat ribbon cables, and
discrete cable assemblies.
Harnesses are wires with insulation and terminals ready to be attached
to connectors.
Printed Circuit Boards and Molded Assemblies
PCB assemblies are electronic assemblies consisting of a basic printed
circuit laminate with electronic components including diodes, resistors,
capacitors and transistors, inserted and wave soldered. PCBs may be used
either internally within the customer's products or in peripheral devices. The
variety of PCBs produced include through-hole assemblies, low and medium volume
surface mount PCB assemblies, and mixed technology PCBs. Through-hole
assemblies are standard rigid boards with components on one side and solder
pads on the other side. Surface mount circuit assemblies are components with
no leads which are soldered to pads on the surface of the PCB. The mixed
technology PCB combines both through-hole and surface mount.
Contract Manufacturing Products
Contract manufacturing involves the manufacture of complete finished
assemblies with all sheet metal, power supplies, fans, PCBs, as well as
complete sub-assemblies for integration into an OEM's finished products, such
as speaker and lock key assemblies and diode assemblies that consist of wire,
connectors and diodes that are over-molded, packaged and bar coded for
distribution. These products can be totally designed and manufactured by
Techdyne through its computer-aided design system, engineering and supply
procurement. Alternatively, the customer may provide specifications and
Techdyne will assist in the design and engineering, or just manufacture to the
customer's specifications. Contract manufacturing products also include rack
assemblies for data processing and video editing and custom disk drive
enclosures for OEMs.
By contracting assembly production, OEMs are able to keep pace with
continuous and complex technological changes and improvements by making rapid
modifications in their products without costly retooling and without any
extensive capital investments for new or altered equipment.
Medical Products
Lancets are produced for the Company which distributes medical
supplies. Lancets produced by Techdyne are vertical insert molded disposable
products distributed under the trade names Medi-Lance,_ and Lady Lite_ and
Medi-Let or under a private label if requested by the customer. See "Medical
Supplies" above.
Reworking and Refurbishing
Customers provide Techdyne with materials and sub-assemblies acquired
from other sources which the customer has determined requires modified design
or engineering changes. Techdyne redesigns, reworks, refurbishes and repairs
these materials and sub-assemblies.
Manufacturing and Supplies
Components and products are custom designed and developed to fit
specific customer requirements and specifications. Techdyne's industrial,
electrical and mechanical engineers work in close liaison with its customers'
4
<PAGE> 8
engineering departments from inception through design, prototypes, production
and packaging. The engineering staff also determines any special capital
equipment requirements, tooling and dies, which must be acquired.
Techdyne maintains a large assortment of standard tooling and modern
state-of-the-art equipment at all of its facilities. Techdyne operates
simultaneous production and assembly lines for its diverse mix of electrical
and electro-mechanical products.
Techdyne (Scotland)'s manufacturing facility, located in Livingston,
Scotland, focuses mainly on the electronics industry producing primarily molded
cables, wire harnesses and electro-mechanical assemblies, incorporating
multifaceted design and production capabilities.
Techdyne has introduced "supplier partnerships" to meet customers'
needs. This involves Techdyne accomplishing the in-house manufacturing
requirements of the customer. Through EDI (electronic data interchange) the
customer conveys its needs on a weekly basis based on a rolling quarterly
forecast.
Materials used in Techdyne's operations consist of metals, electronic
components such as cable, wire, resistors, capacitors, diodes, PCBs, and
plastic resins. These materials are readily available from a large number of
suppliers and manufacturers. Techdyne has not experienced any significant
disruptions from shortages in materials or delivery delays of its suppliers and
believes that its present sources and the availability of its required
materials are adequate. Techdyne has a completely computerized system of
material requirements planning, purchasing, sales and marketing functions.
Quality and Process Control
Techdyne received its ISO 9002 quality assurance designation in March,
1995. ISO 9002 is the international standard of quality with respect to all
quality systems of operations, including, among others, purchasing, design,
engineering, processes, manufacturing, sales, inventory control and quality.
Techdyne (Scotland) received its quality assurance designation in 1991.
Quality control is essential to Techdyne's operations since low-cost
and high quality production are primary competitive standards and are vital to
the services of Techdyne. See "Competition" below. Products, components,
assemblies and sub-assemblies manufactured by Techdyne are thoroughly inspected
visually and electronically to assure components are to strict specifications
and are functional and safe. Management believes it is one of the
manufacturers of choice for the major Fortune 100 companies who are its
customers based upon its excellent record of quality production. The Company's
extremely low product return rate of less than 50 PPM attests to its dedication
to quality.
Strict process controls are also standard operating procedure.
Process controls deal with the controls relating to the entire manufacturing
process. The Company strives for a CPK of two, i.e., twice as critical as
customer tolerances.
During the course of initial qualification and production cycles, new
and existing customers inspect Techdyne and its operations. Techdyne's product
and manufacturing quality receives excellent ratings and quality awards.
Marketing and Sales
Domestic sales are generated by four regional sales managers. There
are also two in-house sales people, including the President of Techdyne. The
regional sales managers have five independent manufacturer representative
agencies. Sales are also generated through catalogues, brochures and trade
shows.
Techdyne (Scotland) has three in-house sales personnel who market its
products and services to customers in Scotland, England, Ireland, Germany and
Israel.
Substantially all of Techdyne's sales and reorders are effected
through competitive bidding. Most sales are accomplished through purchase
orders with specific quantity, price and delivery terms. Some production, such
as its
5
<PAGE> 9
supplier partnerships (see "Manufacturing and Supplies" above), are
accomplished under open purchase orders with components released against
customer requests.
Most customers are Fortune 100 companies, with Techdyne's two major
customers for 1995 being Compaq and Avid. See "Electro-Mechanical
Manufacturing" above.
Backlog
At December 31, 1995, Techdyne's backlog of orders amounted to
approximately $6,211,000, of which approximately $3,110,000 was represented by
Compaq, Techdyne's largest customer for 1995. Management believes, based on
past experience and relationships with its customers and knowledge of its
manufacturing capabilities, that substantially all of its backlog orders are
firm and will be filled within this fiscal year. The purchase orders within
which Techdyne performs do not provide for cancellation. Over the last several
years cancellations have been minimal. There is no assurance that the backlog
data is a reliable indicator of future sales.
DIALYSIS OPERATIONS
The Company, through DCA and its subsidiaries, operates three
out-patient dialysis treatment centers, and through these centers and other DCA
subsidiaries, provides in-patient dialysis services to several hospitals. The
out-patient dialysis centers are located in Fort Walton Beach, Florida, and
Lemoyne and Wellsboro, Pennsylvania. Home patient dialysis services are also
provided by DCA as well as the sale of medical supplies for dialysis
treatments. Each of the dialysis centers offers home training to qualified
patients who wish to have their treatments at home, which includes continuous
ambulatory peritoneal dialysis and continuous cycling peritoneal dialysis.
Individuals with end stage renal disease ("ESRD"), chronic kidney
failure which is irreversible, require dialysis treatments or kidney
transplantation to sustain life. Most dialysis patients require treatments
three times a week, each treatment taking approximately four hours. Medicare
funds a substantial portion of the costs of the dialysis treatments in
accordance with rates established by the Health Care Financing Administration
regardless of the patient's age or financial circumstances. Presently,
Medicare under Part B of the Medicare Act, pays approximately 80% of the
allowable charges for each dialysis treatment, which averages for out-patients
between $118 to $125 per treatment, depending on regional wage variations. The
balance of the payments are derived from the patient's insurance company, state
programs such as Medicaid, or the patient's private funds. The in-patient
dialysis services, usually required for hospital patients with acute renal
failure or patients admitted to the hospital suffering from other illnesses who
might require dialysis, are paid by the hospital on the basis of pre-determined
and negotiated treatment fees.
DCA also provides ancillary services including the administration of
EPO, a bio-engineered protein used to treat anemia, providing therapeutic
plasmapheresis and certain tests and studies through outside agencies such as
nerve conduction, bone density and doppler flow studies.
The most prevalent form of treatment for ESRD patients is
hemodialysis, which involves the use of an artificial kidney known as a
dialyzer, to perform the function of removing toxins and excess fluids from the
blood stream. This is accomplished with a dialysis machine, a complex blood
filtering device which takes the place of certain functions of the kidney and
which machine also controls external blood flow and monitors the toxic and
fluid removal process. Dialysis treatments are performed by teams of licensed
nurses and trained technicians pursuant to physicians instructions.
In accordance with conditions for participation in the Medicare ESRD
program, each facility has a qualified medical director. Each facility has a
nurse administrator who supervises the day-to-day operations and the staff,
which consists of registered nurses, licensed practical nurses, patient care
technicians, a part-time social worker and a part-time registered dietitian.
Since 1989, the dialysis operations consisted of one center in Fort
Walton Beach, Florida until 1995 when DCA established two additional
out-patient dialysis facilities, one in Lemoyne, Pennsylvania which commenced
operations in
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June, 1995 and the other in Wellsboro, Pennsylvania which commenced operations
in October, 1995. The treatment statistics for the five years ended December
31, 1995 were as follows:
<TABLE>
<CAPTION>
Fiscal Year
----------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Outpatients at year end...................... 108 60 72 69 63
Outpatient treatments ....................... 10,903(1) 9,500 9,800 8,298 7,413
Acute inpatient treatments .................. 843 419 748 599 579
</TABLE>
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(1) Includes 3,060 home patient treatments which patients are billed for
dialysis treatment supplies rather than per treatment and is converted
into a per treatment basis pursuant to a formula developed by
Medicare.
Since DCA sold four of its dialysis centers in 1989, it has incurred
operational losses. Although DCA has reflected income over the years, this was
due to interest income, including interest on funds received through advances
to the Company. DCA initiated an expansion program in 1995 with two new
centers and a new marketing division, Renal Services of Pa., Inc., to develop
new in-patient service contracts with hospitals as well as out-patient dialysis
centers in the Pennsylvania region. The two new out-patient centers in
Pennsylvania are in the developmental stage and will most likely generate
losses during most of 1996 due to lead time needed to reach profitable
treatment capacity levels. See Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Regulation
The dialysis operations must adhere to stringent regulations of
federal and state authorities. Its operations are subject to the terms of the
Social Security Act and similar state laws which provide that it is unlawful to
solicit, offer, receive or pay any remuneration, directly or indirectly, for
referring a patient for treatment that is paid in whole or in part by Medicare,
Medicaid or similar state program.
The Omnibus Budget Reconciliation Act of 1993 contains certain
provisions known as "Stark II" that restrict physician referrals for certain
"designated health services" to entities with which a physician or an immediate
family member has a "financial relationship." Designated health services
include, among others, home health services and in-patient and out-patient
hospital services. DCA at its Fort Walton Beach facility, provided in-patient
dialysis treatments for a local hospital. The physician director of DCA's Fort
Walton Beach center had a financial interest in that facility and has patients
at the local hospital which thereby could be deemed self-referrals for
in-patient hospital services. DCA restructured its in-patient hospital
treatment relationship through another subsidiary. The President and Congress
are in the process of attempting to reform the health care system. It is
possible that federal and state governments will impose additional restrictions
upon activities of the type conducted by DCA, which might have a materially
adverse effect on the Company's business and results of operations.
Most of DCAs revenues are attributable to payments received from the
Medicare ESRD program which reimburses approximately 80% of the patient charges
for each dialysis treatment. The level of DCA's revenues and profitability may
be effected by potential legislation resulting in rate cuts. Management is
unable to predict whether future rate changes will be made and even if made
whether they will have a material effect on DCA's revenues and earnings.
Operating costs tend to increase over the years without any comparable
increases, if there are any increases at all, in the prescribed treatment
rates, which usually remain fixed and have decreased over the years.
PATENTS AND TRADE NAMES
The Company sells certain of its medical supplies and products under
the trade name Medicore(TM). Certain of its lancets are marketed under the
trade names Medi-Lance(TM) and Lady Lite(TM). See "Medical Supplies" above.
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The Company is the assignee of three patents relating to its lancets.
The issuance of a patent does not assure protection against the development of
similar, if not superior processes, know-how and products. The Company does
not rely on patents or trademarks. Dependency is placed more on design,
engineering, manufacturing cost containment, quality and marketing skills to
establish or maintain market position.
COMPETITION
The medical supply operations are extremely competitive and the
Company is not a significant competitive factor in this area.
In electro-mechanical manufacturing, Techdyne faces competition from
many areas including divisions of large electronic and high-technology firms as
well as from numerous smaller, specialized companies. Competitive price
advantages may also be available to competitors with less expensive off-shore
operations. Management believes the primary competitive factors to be price,
quality of production, prompt customer service, timely delivery, engineering
expertise and technical assistance to customers. Among this mix of competitive
standards, management believes it is very competitive with respect to delivery
time, quality, cost and customer service. Management also believes its
competitive position is enhanced through Techdyne (Scotland)'s European
manufacturing and marketing operations. See "Business - Electro-Mechanical
Manufacturing" above.
Due to the number and variety of competitors, reliable data relative
to Techdyne's competitive position in the electronic components and assembly
industry is difficult to develop and is not known.
The operation of kidney dialysis centers is very competitive with
numerous local providers, many owned by physicians, and several major
operators, who have substantially greater financial resources and many more
centers and patients than the Company. Hospitals and other out-patient dialysis
centers compete with the Company's dialysis operations. Peritoneal dialysis, a
more convenient and less expensive dialysis procedure, presents an additional
competitive aspect to hemodialysis treatment. The Company is not a significant
competitive factor in kidney dialysis services.
EMPLOYEES
The Company and its subsidiaries employ approximately 369 full time
employees of which 13 are administrative, 44 are with the dialysis operations,
16 are engaged in the medical supply and medical durables operations, and 296
are with Techdyne's electro-mechanical manufacturing operations (domestic and
Scotland). In addition, Techdyne utilizes temporary workers both domestically
and in Scotland, retained through local agencies, on a regular basis.
Presently, there are approximately 69 such workers.
ITEM 2. PROPERTIES
Ownership
DCA acquired two properties in 1987, one in Easton, Maryland
consisting of land and a one and one-half story frame building of approximately
8,000 square feet, of which 5,400 square feet is leased to the purchaser of one
of the dialysis centers DCA sold in 1989 and a competitor of DCA. DCA
maintains an office at this facility. The second property consists of land and
a 15,230 square foot brick building in Lemoyne, Pennsylvania. A portion of this
building was leased to the same competitor through April 30, 1995. DCA
constructed a new 5,000 square foot center at this facility, approved for 13
dialysis stations, with space available for expansion. DCA leases this
facility to its subsidiary. See "Certain Relationships and Related
Transactions" of the Company's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on June 5, 1996, which is hereby
incorporated by reference.
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The properties in Lemoyne, Pennsylvania and Easton, Maryland, are
subject to mortgages from a Maryland banking institution. As of December 31,
1995, the remaining principal amount of the mortgage on the Lemoyne property
was approximately $256,000 and on the Easton, Maryland property was
approximately $320,000. Each mortgage extends through November, 2003, bears
interest at 1% over the prime rate, and is secured by the real property and
DCA's personal property at those locations. The bank also has a lien on rents
due DCA and security deposits from leases of the properties. Written approval
of the lender is required for all leases, assignments or subletting,
alterations and improvements and sales of the properties. Under the terms of
the mortgages, the bank has the immediate right to demand repayment of the
outstanding balances. See Item 7, "Management's Discussions and Analysis of
Financial Condition and Results of Operations."
In 1990, the Company acquired two buildings from Techdyne, one a
16,000 square foot building in Hialeah, Florida housing Techdyne's executive
and administrative offices (approximately 5,000 square feet); engineering
(approximately 2,000 square feet); and prototype and production assemblies and
plastic injection molding (approximately 9,000 square feet). Adjacent to that
facility is the second building consisting of 12,000 square feet used as a
warehouse and inspection segments of Techdyne's operations. The Company leases
these facilities to Techdyne. See below. The Company also purchased a parcel
of land located adjacent to Techdyne's executive and administrative offices in
Hialeah, Florida, used for parking. See "Certain Relationships and Related
Transactions" of the Company's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on June 5, 1996, which is hereby
incorporated by reference.
The Company owns a small parcel of land near Techdyne's offices in
Hialeah, also used as a parking lot, and a small undeveloped parcel adjacent to
its warehouse facilities purchased for future expansion.
Leases - Company as Lessor
<TABLE>
<CAPTION>
LESSEE SPACE PROPERTY TERM RENT
- --------------- ----------- -------------- ------------- ----------
<S> <C> <C> <C> <C>
Renal Treatment 5,403 sq ft 402 Marvel Ct. 5 yrs. to $71,570/yr
Centers-Maryland, Easton, PA March 31, 1998; escalating 3%
Inc.(1) (2) one 5 year for 2 yrs and
renewal 5% the last 2
yrs. plus utilities
and real estate
taxes.
Dialysis Services of 5,000 sq ft 27 Miller Ave(4) 5 yrs. to $60,000 plus
Pennsylvania, Lemoyne, PA Nov. 30, 2000; plus utilities,
Inc. - Lemoyne(3) two 5 year real estate
renewals taxes and insurance
MCI 247 sq ft 27 Miller Ave.(4) 5 yrs. to $3,035/yr
Communications Lemoyne, PA Feb. 28, 1998 plus
Corp.(10) electric and taxes
Sheppard Copier 1,947 sq ft 27 Miller Ave.(4) 3 yrs. to $15,907 the
Group, Inc. (offices) Lemoyne, PA March 31, 1998 first yr;
and Terry $17,010/yr.
Sheppard(1) remainder of
term, plus
rental taxes.
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
LESSEE SPACE PROPERTY TERM RENT
- ------------- ----------- -------------- ------------- ---------
<S> <C> <C> <C> <C>
Techdyne(5) 16,000 sq ft 2230 W 77th St 5 yrs. to $130,000/yr
(exec. off. Hialeah, FL March 31, plus
mfg.) 2000 taxes
utilities,
insurance
(net, net)(6)
Techdyne(5) 12,000 sq ft 2200 W 77th St 5 yrs. to $130,000/yr
(warehouse) Hialeah, FL March 31, plus taxes,
2000 utilities,
insurance
(net, net)(6)
</TABLE>
Leases - Company or Subsidiary as Lessee
<TABLE>
<CAPTION>
IDENTITY OF
LESSEE SPACE PROPERTY LANDLORD TERM RENT
- ----------- ----------- -------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
The Company 2,800 sq ft 2337 W 76th St Viragen, Inc.(7) 5 yrs. to $19,600/yr
(exec. and Hialeah, FL Dec. 31, plus
admin.) 1997; two taxes and
5 yr. utilities
renewals
The Company 5,000 sq ft 75 W Commerce Brett and 5 yrs to $18,200/yr
(medical Center Suzanne Dec. 11, (escalat
supply and 2647 W 81 St Anderson 1997; one ing 3%,
consumer Hialeah, FL 5 yr each year)
product renewal plus
operations- utilities
offices and
warehouse)
The Company 3,900 sq ft 777 Terrace Ave Heights Plaza 5 yrs to $70,000/yr
(exec. Hasbrouck Associates March 31, plus
offices) Heights, N.J. 1996 electricity
taxes and
operational
increases
Techdyne 2,700 sq ft 2235 W 77th St Megabrella, Two yrs. $15,600/yr
(production) Hialeah, FL Inc. to Dec. (plus taxes
31, 1996; escalating
2 one yr. to $18,000
renewals yrs. during
renewals
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
IDENTITY OF
LESSEE SPACE PROPERTY LANDLORD TERM RENT
- ----------- ----------- -------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Techdyne 11,000 sq ft 9742 and 9754(8) George Whimpey 5 yrs. $68,400/yr
(mfg. Whithorn Drive of Texas, Inc. to Dec (escalating
& offices) Houston, TX 14, 1996 approx.
1,280/yr)
Techdyne 200 sq ft 200 Turnpike MMP month $250/month
(office) Rd. Southborough Realty to plus heat,
MASS Trust month electricity and
janitorial
Techdyne 6,825 sq. ft. 800 Paloma Drive AmorRon Park 3 yrs. to $45,00/yrplus
(mfg. & Round Rock (Austin), Ltd. April 14, taxes, utilities,
offices) TX(9) 1998; insurance
one three (net, net)
year
renewal
All American 6,000 sq ft 225 60th Street Bart 2 yrs.; 3 yr. $31,300 first
Medical & (office & Brooklyn, NY Castallano renewal; yrs.; $32,400
Surgical warehouse) rt. of first second year
Corp.(10) refusal to plus utilities
purchase and insurance
Dialysis 5,214 sq. Paradise JACO, L.C. 5 yrs to $59,000/yr
Services ft. (3 story Village Dec 30,
of Florida, dialysis Professional 1999; one
Inc.-Fort facility) Park 5 yr.
Walton Bch.(11) Fort Walton renewal
Beach, FL
</TABLE>
Techdyne has an additional lease for two properties in Hialeah,
Florida owned by its parent, the Company. See above "Leases - Company as
Lessor."
In 1994, Techdyne (Scotland) purchased the 27,000 square foot facility
it had been leasing in Livingston, Scotland. The purchase was accomplished for
approximately $730,000 with a 15-year mortgage which has a U.S. dollar
equivalency of approximately $591,000 at December 31, 1995. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Techdyne and DCA believe that their equipment and facilities are adequate for
their current operations.
- -----------
(1) DCA (99.1% owned subsidiary) is the Lessor.
(2) Leases guaranteed by parent, Renal Treatment Centers, Inc. DCA has
acknowledged to lessees and their bank that such bank's security
interest in lessees' property is superior to any interest which DCA
may have as landlord.
(3) 100% owned subsidiary of DCA, the Lessor.
11
<PAGE> 15
(4) The Lemoyne, PA. property has an approximately 60% vacancy, including
Dialysis Services of Pennsylvania, Inc. - Lemoyne which occupies
approximately 5,000 sq. ft. of the premises.
(5) 63% owned public subsidiary.
(6) The $130,000 per year rental is the aggregate for both properties,
2230 West 77th Street, Hialeah, Florida and 2200 West 77th Street,
Hialeah, Florida with adjacent parking.
(7) Viragen, Inc. ("Viragen") is a former subsidiary of the Company which
was spun-off in 1986. Viragen is indebted to the Company for $374,000
at December 31, 1995 (exclusive of $113,000 in accrued royalties and
exclusive of $3,000 in annual interest) secured by a $429,000 note and
mortgage on this land and building owned by Viragen. This mortgage is
second to the $560,000 note and mortgage held by the Equitable Bank
which the Company has guaranteed. Viragen has given the Company the
right to take title to and possession of the building and Viragen's
equipment, which event would terminate the lease, if the Company
assumes the Equitable Bank mortgage, which is not presently
anticipated. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Certain
Relationships and Related Transactions" of the Company's definitive
Proxy Statement relating to the Annual Meeting of Shareholders to be
held on June 5, 1996, which is incorporated herein by reference.
(8) Right (i) of first refusal to lease space in adjacent building when
available; (ii) to locate to larger available space within lessor's
property; and (iii) to terminate the lease after December 14, 1994 by
paying three months rent and forfeiting the $3,175 security deposit.
(9) Right of first refusal to lease adjacent space (approximately 5,400
square feet).
(10) 80% owned subsidiary of the Company.
(11) 80% owned subsidiary of DCA.
ITEM 3. LEGAL PROCEEDINGS
The litigation initiated in 1994 in the Circuit Court of Florida, 11th
Judicial District, Dade County involving the Company's 63% owned public
subsidiary, Techdyne, against Techdyne's former president and director has been
settled on terms favorable to Techdyne.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the Company's
fiscal year to a vote of security holders through the solicitation of proxies
or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Company's common stock trades on the American Stock Exchange
under the symbol "MDK". The table below indicates the high and low sales
prices by quarter for the Company's common stock for the two years ended
December 31, 1995.
12
<PAGE> 16
<TABLE>
<CAPTION>
SALE PRICE
----------
HIGH LOW
---- ---
<S> <C> <C>
1995
----
1st Quarter............. 4 2 3/8
2nd Quarter............. 3 13/16 2 3/4
3rd Quarter............. 7 1/2 3
4th Quarter............. 6 1/2 3 1/4
1994
----
1st Quarter............. 2 1/4 3/4
2nd Quarter............. 1 5/8 15/16
3rd Quarter............. 1 1/2 1
4th Quarter............. 3 1/4 1 1/2
</TABLE>
(b) As of March 12, 1996, there were 1,489 shareholders of record.
The Company estimates, based upon its 1995 proxy solicitation, that its common
shares are held by approximately 4,000 shareholders.
(c) The Company has not paid any cash dividends in the last two years.
ITEM 6. SELECTED FINANCIAL DATA
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------
1995 1994 1993 1992(1) 1991(2)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ 36,660 $ 24,552 $ 18,958 $ 18,737 $ 17,879
Net income
(loss)...................................... 2,251 864 18 (869) (1,486)
Income (loss) per
common share................................ .38 .16 -- (.19) (.33)
Weighted average
shares out-
standing and
equivalents................................. 5,929,215 5,314,261 4,564,940 4,553,710 4,545,565
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31
------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital.......................... $ 7,034 $ 4,871 $ 2,497 $ 2,557 $ 4,442
Total assets............................. 21,247 15,955 11,322 11,723 13,310
Long-term debt........................... 964 1,667 918 1,249 2,019
Stockholders'
equity(3)............................... 9,754 8,027 5,881 5,885 7,061
</TABLE>
13
<PAGE> 17
- -----------
(1) In 1992 estimated useful lives for plant equipment and tools and
molds, previously 7 years, were increased to 10 years. The effect of
this change in estimate was to reduce 1992 depreciation expense by
approximately $215,000 or $.05 per common share, loss before
extraordinary credit by $203,000 or $.04 per common share and net loss
by $215,000 or $.05 per common share.
(2) During 1991, the Company revised the estimated useful lives for
certain asset categories to better reflect the estimated periods
during which such assets will remain in service.
Estimated useful lives for buildings and improvements, previously 20
years, were increased to 30 years. Estimated useful lives for office
furniture and equipment, previously 5-8 years, were increased to 8-10
years. The effect of this change in estimate was to reduce 1991
depreciation expense by approximately $88,000 or $.02 per common
share, and loss before extraordinary credit and net loss by $66,000 or
$.01 per common share.
(3) In 1993, the Company changed its method of accounting for income taxes
and implemented, on a retroactive basis, Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Prior
year amounts have been restated for the $188,000 retroactive effect of
adopting Statement No. 109.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 Compared to 1994
Consolidated revenues increased $12,108,000 (49%) in 1995 compared to
the previous year, including a $2,002,000 gain on a securities offering of
Techdyne, the Company's electronic and electro-mechanical subsidiary. See
"Liquidity and Capital Resources" below and Note 9 to "Notes to Consolidated
Financial Statements." Techdyne accounted for most of the $10,410,000 (44%)
sales increase. Techdyne revenues increased $9,889,000 (48%) over 1994 with
domestic revenues increasing $5,459,000 (43%) and European-based revenues
increasing $4,430,000 (56%).
The increase in domestic revenues of Techdyne for the year resulted
from an overall net increase in sales to existing customers, and continuing new
customer development efforts, coupled with additional revenues resulting from
an increased level of customer service made possible through Techdyne's Texas
manufacturing facilities, one in Houston, Texas and the other recently
established in Austin, Texas.
The revenues of Techdyne's Scottish-based subsidiary, Techdyne
(Scotland), continue to be highly dependent on sales to Compaq Computer Corp.
which accounted for approximately 86% and 80% of the sales of Techdyne
(Scotland) for 1995 and 1994, respectively. Sales by Techdyne (Scotland) to
Compaq in 1995 increased $4,280,000 (68%) compared to the preceding year.
While the Company believes that Techdyne (Scotland) will maintain substantial
sales to Compaq, the bidding for Compaq orders in Scotland has become more
competitive, which the Company anticipates may result in some loss of Compaq
business and will result in lower profit margins on Compaq sales. Techdyne
(Scotland) intends to pursue new business development efforts to replace
reductions in Compaq business and to pursue cost reduction efforts to remain
competitive with respect to Compaq, although there can be no assurance as to
the success of such efforts.
Approximately 80% of Techdyne's consolidated sales and 72% of the
Company's consolidated sales for 1995 were made to five customers. Compaq
accounted for 36% and 32%, Avid Technology for 19% and 17%, and the other three
customers each accounted for less than 10% of Techdyne's and the Company's
consolidated sales. The loss, or substantially reduced sales to, any of these
customers would have an adverse effect on the Company's
14
<PAGE> 18
operations. Techdyne had sales of $5,653,000 to Avid for 1995. As a result of
a change in the product platform of the product produced for Avid, Techdyne
anticipates a loss of a majority of its sales to Avid during the next year.
Techdyne intends to pursue new business development efforts to replace these
lost sales, although there can be no assurance as to the success of such
efforts.
Medical product sales revenues increased $144,000 (9%) in 1995 compared
to the preceding year. The principal product of this division the Medi-lance_,
accounted for 76% and 70% of medical product sales revenues in 1995 and 1994,
respectively.
Medical services sales revenues, which represents revenues of the
Company's dialysis division, increased $475,000(26%) in 1995 compared to the
preceding year. This increase primarily resulted from the commencement of
treatments at the Company's new dialysis centers in Lemoyne, Pennsylvania in
June 1995 and Wellsboro, Pennsylvania in October 1995, which accounted for
approximately $531,000 in revenues for the year ended December 31, 1995.
Revenues related to the Company's dialysis center in Fort Walton Beach, Florida
decreased approximately $57,000, which included revenues lost as a result of a
hurricane (see "Liquidity and Capital Resources" below), for the year ended
December 31, 1995 compared to the same period of the preceding year. Although
the new Lemoyne and Wellsboro, Pennsylvania centers (see "Liquidity and Capital
Resources" below) are expected to result in increased revenues, as was the case
for the year ended December 31, 1995, during their development stage, these
centers will adversely affect the Company's results of operations.
Gain on sale of marketable securities represents a gain attributable
to the sale of Viragen, Inc. common stock for which the carrying value had been
written-off in previous periods. See "Liquidity and Capital Resources" below.
Cost of goods sold as a percentage of consolidated sales remained
relatively stable between the periods, increasing in 1995 from 81% to 82% of
sales revenues.
Cost of goods sold for the Company's electronic and electro-mechanical
subsidiary, Techdyne, increased to 85% in 1995 compared with 84% in the
preceding year. The increase in sales revenues, along with improved
manufacturing efficiencies and overall cost reduction efforts resulted in an
increase in operating profits of $929,000 for 1995 for this subsidiary
compared to the preceding year.
Cost of goods sold for the medical product division was 61% for both
1995 and 1994. Operating profit for this division decreased approximately
$7,000 in 1995 compared to the preceding year, which included startup costs
of approximately $37,000 for the Company's new medical durable subsidiary, All
American.
Cost of medical services sales increased to 69% for the year ended
December 31, 1995 compared to 62% for the preceding year. This increase is
largely attributable to higher costs associated with the low volume of
treatments at the new Pennsylvania dialysis centers and includes relatively
high salary and benefit costs for the new facilities due to the competition for
health care workers in the area. Operating losses of the Company's new
dialysis centers which are in their developmental stages, resulted in an
increase in operating losses of $295,000 for 1995 for the Company's dialysis
subsidiary compared to the preceding year which included startup costs for the
two new dialysis centers of appoximately $80,000.
Selling, general and administrative expenses increased $685,000 (17%)
in 1995 over the previous year. This increase included increased support
activities associated with the increase in sales revenues, including increases
in administrative personnel and related benefits and sales commissions and
also included start up costs of approximately $117,000 related to the
Company's new medical durable subsidiary and two new dialysis centers which
were expensed during the fourth quarter of 1995 rather than being deferred.
Management of the Company believes that due to probable changes in the
accounting for startup costs it is no longer prudent to capitalize startup
costs. Selling, general and administrative expenses as a percentage of sales
decreased to 14% for the year ended December 31, 1995, compared to 17% for the
preceding year as a result of increased sales, costs containment efforts and
economies of scale, despite startup costs for new companies.
15
<PAGE> 19
Interest expense increased by approximately $39,000 (19%) in 1995 over
the previous year largely as a result of the mortgage associated with Techdyne
(Scotland)'s purchase of its manufacturing facility, previously leased, and an
increase in average interest rates.
The bulk of the Company's borrowings are related to real property
mortgages and Techdyne's line of credit, all of which are tied to the prime
interest rate. The prime rate was 8.5% at December 31,1995 and 1994,
respectively.
1994 Compared to 1993
Consolidated revenues increased $5,593,000 (30%) in 1994 compared to
the previous year, including a $524,000 gain on sale of marketable securities.
Revenues of the Company's electronic and electro-mechanical subsidiary,
Techdyne, accounted for most of the increase, increasing $5,248,000 (34%) over
1993, with domestic revenues increasing $3,502,000 (38%) and European-based
revenues increasing $1,746,000 (28%).
The increase in domestic revenues of Techdyne for the year resulted
from an overall net increase in sales to existing customers, and new customer
development efforts coupled with additional revenues resulting from an
increased level of customer service made possible through Techdyne's Texas
manufacturing facility.
The revenues of Techdyne's Scottish-based subsidiary, Techdyne
(Scotland), continue to be highly dependent on sales to Compaq Computer Corp.
which accounted for approximately 80% and 76% of the sales of Techdyne
(Scotland) for 1994 and 1993, respectively. Sales by Techdyne (Scotland) to
Compaq in 1994 increased $1,681,000 (36%) compared to the preceding year.
Approximately 73% of the Techdyne's consolidated and 64% of the
Company's consolidated sales for 1994 were made to five customers. Compaq
Computer Corp., accounted for 39% and 34%, IBM for 16% and 14%, Motorola for 8%
and 7%, Avid Technology for 6% and 5%, and Wang for 4% and 4% of Techdyne's and
the Company's consolidated sales, for 1994 and 1993, respectively. The loss of
any of these customers would have an adverse effect on the Company's operation.
Medical supply sales revenues increased $13,000 (1%) in 1994 compared
to the preceding year. The principal product of this division the
Medi-Lance(R), accounted for 70% and 71% of medical supply sales revenues in
1994 and 1993, respectively.
Medical services sales revenues, which represents revenues of the
Company's dialysis center, decrease $71,000 (4%) in 1994 compared to the
preceding year. This decrease included a decrease in inpatient hospital
dialysis treatment revenues of $116,000 (44%), a decrease in other treatment
revenues of $70,000 (5%) and an increase in revenues from ancillary services of
$115,000 (32%).
Gain on sale of marketable securities represents a gain of $524,000
attributable to the sale of Viragen, Inc. common stock during 1994 for which
the carrying value had been written-off in previous periods.
Other income decreased by approximately $182,000 due primarily to the
recording in 1993 of $200,000 attributable to the reversal of a reserve for
state income tax assessments and other expenses related to the disposition of
subsidiaries.
Cost of goods sold as percentage of consolidated sales remained
relatively stable between the periods, increasing in 1994 from 80% to 81% of
sales revenues.
Cost of goods sold for the Company's electronic and electro-mechanical
subsidiary. Techdyne, decreased to 84% in 1994 compared with 86% in the
preceding year. This improvement reflected a change in product mix to higher
margin products, the general increase in overall revenues with related improved
manufacturing efficiencies
16
<PAGE> 20
and overall cost reduction efforts. These factors resulted in an increased
operating profit of $1,001,000 for 1994 compared to the preceding year.
Cost of goods sold for the medical supply division decreased to 52% in
1994 compared to 58% in the preceding year largely as a result of increased
profit margins on the principal product of this division. The increase in
profit margin was largely responsible for an increase in operating profit of
$47,000 in 1994 compared to the preceding year.
Cost of sales related to medical services sales increased to 49% in
1994 compared to 43% in the preceding year, largely as a result of a 44%
decrease in inpatient hospital dialysis treatment revenues, which have a higher
profit margin, and from increased supply costs on other treatments. Inpatient
hospital treatment revenues comprised 8% and 14% of medical services sales
revenues for 1994 and 1993, respectively. The decrease in medical services
sales revenues and the decreased margins were largely responsible for an
operating loss of $27,000 in 1994 compared to an operating profit of $185,000
in 1993 for the medical services division.
Selling, general and administrative expenses increased $232,000 (6%)
in 1994 over the previous year. Included in this increase was $154,000 in
stock compensation expense and $50,000 in legal fees. Absent these two items,
selling, general and administrative expenses remained relatively constant
between the periods despite the 30% increase in consolidated sales revenues,
reflecting the Company's ongoing cost reduction efforts.
Interest expense increased by approximately $5,000 (3%) in 1994 over
the previous year. This rather minor increase resulted from reduced average
borrowings during the year being offset by an increase in interest rates
between the periods. The bulk of the Company's borrowings are related to real
property mortgages and Techdyne's line of credit, all of which are tied to the
prime interest rate. The prime rate was 8.5% and 6% at December 31, 1994 and
1993, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Working capital totaled $7,034,000 at December 31, 1995, an increase
of $2,163,000 over the prior year. The overall increase reflects net changes
in the components of working capital resulting from the 44% increase in sales,
as well as net proceeds of $3,321,000 from Techdyne's security offering
completed on October 2, 1995, offset somewhat by a decrease of approximately
$515,000 in the net of the tax valuation of marketable securities resulting
from 1995 security sales and a decreased valuation pursuant to Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities.
Included in the changes in components of working capital was an
increase of $3,386,000 in cash and cash equivalents, which included net cash
provided by operating activities of $1,777,000, net cash used in investing
activities of $1,217,000 (including additions to property plant and equipment
of $1,284,000 of which $645,000 relates to the Company's two new Pennsylvania
dialysis centers) and net cash provided by financing activities of $2,847,000
(including proceeds of $3,321,000 from Techdyne's security offering and
repayments on long-term debt of $434,000).
The increase in inventories includes increases resulting from higher
sales revenues and an increase in levels maintained by Techdyne (Scotland)
related to the requirements of a system implemented by its major customer,
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.
Medicore is a guarantor of Techdyne's bank loan agreement with a
Florida bank. This loan is secured by the receivables, inventory and fixed
assets of Techdyne, and the bank has mortgages on various real properties owned
by Medicore. Medicore subordinated to the bank $1,500,000 of advances made to
Techdyne and agreed to
17
<PAGE> 21
subordinate lease payments from Techdyne in the event of default. The
remaining principal balance under this note amounted to $550,000 and $807,000
at December 31,1994, respectively.
In February 1996, Techdyne refinanced this bank loan agreement with
another Florida bank. The new financing provides for a $2,000,000 line of
credit, due on demand, but in no event after June 30,1996, secured by
Techdyne's accounts receivable, inventory, furniture, fixtures and intangible
assets. A $712,500 term loan is secured by two buildings and land owned by
Medicore. The second term loan for $200,000 is secured by Techdyne's tangible
personal property, goods and equipment. Medicore has guaranteed these loans
and has subordinated $2,500,000 due from Techdyne, provided that Techdyne may
make payments to Medicore on this subordinated debt from funds from Techdyne's
security offering and from earnings. Techdyne 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 $712,500 term
loan facility. See "Certain Relationships and Related Transactions" of the
Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on June 5, 1996, which is incorporated herein by
reference and Notes 3 and 10 to "Notes to Consolidated Financial Statements."
Techdyne has outstanding borrowings of $145,000 from a local bank with
interest payable monthly and the notes maturing April, 1997. Techdyne
(Scotland) has a line of credit with a Scottish bank, with a U.S. dollar
equivalency of approximately $620,000 at December 31, 1995 which is secured by
the assets of Techdyne (Scotland) and guaranteed by Techdyne. This line of
credit operates as an overdraft facility. No amounts were outstanding under
this line of credit as of December 31, 1995.
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 $591,000 and $638,000 at December 31,
1995 and December 31, 1994, respectively.
During 1988, the Company, through DCA, its dialysis subsidiary,
obtained mortgages totaling $1,080,000 on its two buildings, one in Lemoyne,
Pennsylvania and the other in Easton, Maryland, which housed the Company's
dialysis centers. These centers were sold in October, 1989. The mortgages had
a combined remaining balance of $576,000 and $648,000 at December 31, 1995 and
December 31, 1994, respectively. The Company was in default of certain
covenants principally relating to net worth and debt service ratio requirements
under these loan agreement as of December 31, 1995 and December 31, 1994,
respectively. The lender has waived compliance with these covenants through
December 31, 1996. The lender has waived similar defaults in the past and the
Company anticipates that the lender would also waive similar future defaults,
although there can be no assurance of such waivers. In the event that waivers
could not be obtained, the Company would attempt to refinance these loan
agreements.
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,
which period has elapsed. Accordingly, while no notice has been given, the
unpaid principal balance is carried as a current liability. An unaffiliated
Maryland dialysis center continues to lease space from the Company in its
building. The Pennsylvania center relocated during 1995 and the Company
constructed its own new dialysis center at that property which commenced
treatments in June, 1995. The Company also opened a new dialysis center in a
leased facility in Wellsboro, Pennsylvania in October 1995. See Item 2,
"Properties" and Note 3 to "Notes to Consolidated 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. The principal balance under this mortgage amounted to $213,000 and
$226,000 at December 31, 1995 and December 31, 1994 respectively. This loan
was paid off through the refinanced Techdyne bank loan agreement which became
effective in February 1996.
18
<PAGE> 22
In April 1993, the Company purchased a vacant lot adjacent to
Techdyne'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 $95,000 and
$108,000 at December 31, 1995 and 1994, respectively.
Since the Company established Viragen in 1980, it had advanced
substantial sums to that former subsidiary spun- off in 1986. 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. Interest is at prime plus 1%. Interest earned
under the note agreement totaled $40,000 and $29,000 in 1995 and 1994,
respectively.
During 1995, the Company sold 173,000 shares of Viragen common stock,
previously written-off, realizing a gain and cash proceeds of $183,000. Under
the provision of FASB Statement No. 115, the remaining 951,000 shares were
recorded at an estimated fair value of $855,000 with the unrealized gain, net
of income tax effect, credited to a separate component of stockholder's equity.
Techdyne's unsecured claim against Wang Laboratories, Inc. ("Wang"),
formerly a major customer of Techdyne, was resolved in the Wang reorganization.
Pursuant to the first distribution in 1993 under Wang's Chapter 11 proceedings,
Techdyne 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 realizing proceeds from these sales totaling 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.
Techdyne completed a public offering of stock and warrants on October
2,1995, realizing net proceeds of approximately $3,321,000 from which it repaid
$1,500,000 of intercompany indebtedness to Medicore with the balance of the
proceeds to be used to establish new facilities, expand existing products,
upgrade plant and equipment, hire additional direct sales personnel and for
working capital. As a result of that offering, the Company's ownership in
Techdyne decreased from 83.1% to 62.5%. See Note 9 to "Notes to Consolidated
Financial Statements."
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 incurred losses of approximately $60,000 and had to
relocate its facility for approximately three months. The Company lost several
patients on a permanent basis as a result of the hurricane and shutdown.
The bulk of the Company's cash balances are carried in interest
yielding vehicles at various rates and mature at different intervals depending
on the anticipated cash requirements of the Company.
The Company formed a new 80% owned subsidiary, All American Medical &
Surgical Supply Corp., which provides durable medical equipment and supplies to
the home health care market with sales having commenced in early 1996. This
subsidiary and the Company's medical products represent the Company's medical
products division.
In November 1995, the Company organized a new subsidiary, Renal
Services of Pa., Inc. which has hired one employee to assist the Company in
securing additional acute dialysis contracts with hospitals and to assist in
locating potential dialysis center acquisition candidates and establishing new
dialysis facilities.
In November 1995, DCA, the Company's dialysis subsidiary, authorized
the declaration of a $1.30 per share dividend for which the Company's portion
related to its 99.1% ownership interest in DCA amounted to
19
<PAGE> 23
approximately $3,134,000 which was paid by a reduction in the intercompany
advances receivable from the Company and the minority interest portion of
approximately $29,000 was paid in cash. In October 1995, after receiving a
$1,500,000 repayment from Techdyne on intercompany advances, the Company
repaid approximately $1,000,000 of the indebtedness to DCA.
In December 1995, DCA filed a registration statement on Form SB-2 with
the Securities and Exchange Commission for an offering of 1,000,000 Units at
$3.75 each, with each Unit consisting of one share of DCA common stock and two
redeemable common stock purchase warrants with an exercise price of $4.50 per
share. Net proceeds of the offering, if successfully completed, are estimated
at $3,035,000. See Note 9 to "Notes to Consolidated Financial Statements".
DCA , having operated on a larger scale in the past, is seeking to
expand its outpatient dialysis treatment facilities and inpatient dialysis
care. Such expansion, whether through acquisition of existing centers, or the
development of its own dialysis centers, requires capital, which is the basis
for DCA's securities offering. Development of new dialysis centers is
estimated to cost from $600,000 to $750,000 per dialysis center, consisting of
from $75,000 to $150,000 for working capital with the balance for construction,
leases and equipment, subject to the location and size of any new dialysis
cent. No assurance can be given that DCA will be successful in implementing
its growth strategy or that the funds sought from the public sale of the DCA
securities will be adequate.
Given its current level of working capital, Techdyne's refinanced bank
loan and anticipated proceeds of DCA's public offering, management believes
current levels of working capital are adequate to successfully meet liquidity
demands for at least the next twelve months.
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. However, in the Company's medical services segment, revenue
per dialysis treatment is subject to reimbursement rates established and
regulated by the federal government. These rates do not automatically adjust
for inflation. Any rate adjustments relate to legislation and executive and
Congressional budget demands, and have little to do with the actual cost of
doing business. Therefore, dialysis services revenues cannot be voluntary
increased to keep pace with increases in nursing and other patient care costs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section to this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on directors of the Company is included under the caption
"Election of Directors" of the Company's definitive Proxy Statement relating to
the Annual Meeting of Shareholders to be held on June 5, 1996, which is hereby
incorporated by reference.
The executive officers of the Company are elected each year by the
Board of Directors at its first meeting following the Annual Meeting of
Shareholders to serve during the ensuing year and until their respective
successors are
20
<PAGE> 24
elected and qualified. There are no family relationships between any of the
executive officers of the Company. The following information indicates the
position and age of the executive officers at March 12, 1996, and their
business experience during the prior five years.
<TABLE>
<CAPTION>
POSITION
CURRENT POSITION AND HELD
NAME AGE AREAS OF RESPONSIBILITY SINCE
- ---- --- ----------------------- ------
<S> <C> <C> <C>
Thomas K. Langbein 50 Chairman of the Board 1980
of Directors, Chief
Executive Officer and
President
Dennis W. Healey 47 Senior Vice-President 1978
Treasurer 1980
Seymour Friend 75 Vice-President 1981
Director 1975
Daniel R. Ouzts 49 Vice-President (Finance) 1986
Controller 1983
</TABLE>
Thomas K. Langbein was appointed as Chairman of the Board of
Directors, Chief Executive Officer and President in 1980, which latter position
was relinquished in January, 1983 and reassumed in April, 1985 upon completion
of Techdyne's public offering. Mr. Langbein is an officer and director of most
of the Company's subsidiaries and was appointed President and Chief Executive
Officer of Techdyne in April, 1990. Barry Pardon succeeded to the Presidency of
Techdyne in November, 1991 at which time Mr. Langbein reassumed the position of
Chairman of the Board. He has been a director of Techdyne since it was
acquired by the Company in 1982. He is also a director of Techdyne's foreign
subsidiary, Techdyne (Scotland). Mr. Langbein was Chairman of the Board and
Chief Executive Officer of Viragen, Inc. ("Viragen"), a public company and
former subsidiary of the Company, until his resignation in April, 1993. Mr.
Langbein is President, sole shareholder and director of Todd & Company, Inc.
("Todd") a broker-dealer registered with the Securities and Exchange Commission
and a member of the National Association of Securities Dealers, Inc. Mr.
Langbein devotes most of his time to the affairs of the Company and Techdyne.
See "Executive Compensation" and "Certain Relationships and Related
Transactions" of the Company's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on June 5, 1996, which is
incorporated herein by reference.
Dennis W. Healey, a certified public accountant, was employed by the
Company as controller in 1976. He is Executive Vice President of Techdyne,
Vice President and Treasurer of DCA, Secretary-Treasurer of certain of the
dialysis subsidiaries, and serves as Treasurer of most of the Company's
subsidiaries. Mr. Healey is Executive Vice President, Chief Financial Officer,
Secretary - Treasurer and director of Viragen. Mr. Healey devotes all of his
time to the affairs of the Company, Viragen and Techdyne. See "Executive
Compensation" and "Certain Relationships and Related Transactions" of the
Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on June 5, 1996, which is incorporated herein by
reference.
Seymour Friend is a director of DCA. He resigned as a director of
Viragen in May, 1993. He is a real estate investor and devotes a portion of
his time to the affairs of the Company. See "Certain Relationships and Related
Transactions" of the Company's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on June 5, 1996, which is
incorporated herein by reference.
Daniel R. Ouzts, a certified public accountant, joined the Company in
1980 as Controller of its plasma division. In 1983 he became Controller of
the Company and in 1986 became Vice-President of Finance. Mr. Ouzts also serves
as Vice President of Finance and Controller for Techdyne. See "Certain
Relationships and Related Transactions" of the
21
<PAGE> 25
Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on June 5, 1996, which is incorporated herein by
reference.
<TABLE>
<CAPTION>
OTHER SIGNIFICANT EMPLOYEES
POSITION
CURRENT POSITION AND HELD
NAME AGE AREAS OF RESPONSIBILITY SINCE
- ---- --- ----------------------- ------
<S> <C> <C> <C>
Barry Pardon 44 President and 1991
Director of Techdyne 1990
</TABLE>
Barry Pardon joined Techdyne in November, 1980 as national sales
manager and initiated the independent manufacturer representatives sales force.
Mr. Pardon became Vice President of Marketing of Techdyne in 1981, was
appointed Executive Vice President (Marketing) in January, 1988, and appointed
President in November, 1991. Mr. Pardon is a director of Techdyne (Scotland).
ITEM 11. EXECUTIVE COMPENSATION
Information on executive compensation is included under the caption
"Executive Compensation" of the Company's definitive Proxy Statement relating
to the Annual Meeting of Shareholders to be held on June 5, 1996, which is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on beneficial ownership of the Company's voting securities
by each director and all officers and directors as a group, and for each of the
named executive officers disclosed in the Summary Compensation Table (see
"Executive Compensation" of the Company's definitive Proxy Statement relating
to the Annual Meeting of Shareholders which is incorporated herein by
reference), and by any person known to beneficially own more than 5% of any
class of voting security of the Company, is included under the caption
"Beneficial Ownership of the Company's Securities" of the Company's definitive
Proxy Statement relating to the Annual Meeting of Shareholders to be held on
June 5, 1996, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on certain relationships and related transactions is
included under the caption "Certain Relationships and Related Transactions" of
the Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on June 5, 1996, which is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following is a list of documents filed as part of this
report.
1. All financial statements
See Index to Consolidated Financial Statements
2. Financial statement schedules
See Index to Consolidated Financial Statements
22
<PAGE> 26
3. Exhibits
(2)(i) Articles of Merger dated March 11, 1986 whereby Packaging
Corporation International(1) was merged with and into the
Company (incorporated by reference to the Company's Current
Report, Form 8-K, March 13, 1986, Item 7(c)(28)(i)).
(ii) Plan of Merger dated March 11, 1986 whereby Packaging
Corporation International (1) merged with and into the Company
(incorporated by reference to the Company's Current Report on
Form 8-K, March 13, 1986, Item 7(c)(28)(ii)).
(3) Articles of Incorporation, as amended and By-Laws, as amended
(incorporated by reference to the Company's Annual Report on
Form 10-K for the Year Ended December 31, 1980 ("1980 Form
10-K"), Part IV, Item 11, (a) 3 (3)); and new Article XXV of
the By-Laws.
(4) Instruments defining the rights of security holders, including
indentures.
(i) 1989 Stock Option Plan (incorporated by reference to the
Company's current report on Form 8-K dated July 10, 1989
("July 1989 Form 8-K"), Item 7(c)(ii)).
(ii) Form of Stock Option Agreement issued pursuant to the 1989
Stock Option Plan (incorporated by reference to the Company's
July 1989 Form 8-K, Item 7(c)(iii)).
(iii) Form of Additional Non-Qualified Stock Option Agreement
issuable under the Stock Option Agreement (incorporated by
reference to the Company's July 1989 Form 8-K, Item 7(c)(iv)).
(10) Material contracts.
(i) Employment Agreement between the Company and Thomas K.
Langbein dated May, 1994, (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994 ("1994 Form 10-K"), Part IV, Item 14(a)
3(10)(i)).
(ii) Lease between the Company and Heights Plaza Associates, dated
April 30, 1981 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1981 ("1981 Form 10-K"), Part IV, Item 11 (a)(3)(xv)).
(iii) Amendment to lease between the Company and Heights Plaza
Associates, dated October 28, 1985 (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1985 ("1985 Form 10-K"), Part IV, Item 14 (a) 3
(10) (ix)).
(iv) Amendment to Lease between the Company and Heights
Plaza Associates, dated April 11, 1988 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 ("1990 Form 10-K"), Part
IV, Item 14(a) 3 (10) (iv)).
(v) Amendment to Lease between the Company and Heights
Plaza Associates dated March 18, 1991 (incorporated by
reference to the 1990 Form 10-K, Part IV, Item 14(a) 3 (10)
(v)).
(vi) Lease Agreement between the Company and Techdyne, Inc. (2)
dated July 17, 1990 (incorporated by reference to Techdyne
Inc.'s Annual Report on Form 10-K for the year ended December
31, 1991 ("Techdyne's 1990 Form 10-K"), Part IV, Item 14(a) 3
(10) (vii)).
(vii) Royalty Agreement between the Company and Viragen, Inc. (3)
dated November 7, 1986 (incorporated by reference to the
Company's Current Report on Form 8-K, December, 1986, Item 7
(c)(iv)).
23
<PAGE> 27
(viii) Amended Royalty Agreement between the Company and Viragen,
Inc. (3) dated November 21, 1989 (incorporated by reference to
the Company's Current Report on Form 8-K dated December 6,
1989, Item 7(c)(i)).
(ix) Employment Agreement between Techdyne (Scotland) Limited(4)
and John Clark Grieve dated March 11, 1988 (incorporated by
reference to Techdyne's Annual Report on Form 10-K for the
year ended December 31, 1987 ("Techdyne 1987 Form 10-K"), Part
IV, Item 14(a)(10)(x)).
(x) Guarantee of Techdyne (Scotland) Limited(4) Line of Credit
with The Royal Bank of Scotland Plc dated March 3, 1989
(incorporated by reference to the Techdyne 1988 Form 10-K,
Part IV, Item 14(a) (10)(vii)).
(xi) Loan Agreement between Dialysis Corporation of America(5) and
Mercantile-Safe Deposit and Trust Company dated November 30,
1988 (incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1988 ("1988 Form
10-K"), Part IV, Item 14(a) (10)(xxx)).
(xii) Stock Purchase Agreement for the sale of dialysis centers
between Dialysis Corporation of America, Dialysis Management
Company(6), Renal Treatment Centers, Inc., Renal Treatment
Centers-Acquisition, Inc. and the four dialysis subsidiaries
dated September 5, 1989 (incorporated by reference to the
Company's Current Report on Form 8-K dated September 12, 1989,
Item 7(c)(i)).
(xiii) Medical Director's Agreement between Dialysis Services of
Florida, Inc. - Fort Walton Beach (7) and Henry M. Haire,
M.D., P.A. dated December 19, 1988 (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1989 ("1989 Form 10-K"), Part IV, Item 14(a)
3(10)(xxi)).
(xiv) Renewal of Medical Director's Agreement between Dialysis
Services of Florida, Inc.-Fort Walton Beach (7) and Henry M.
Haire, M.D., P.A. dated August 1, 1994[*](incorporated by
reference to the Company's 1994 Form 10-K, Part IV, Item 14(a)
3(10)(xiv)).
(xv) Lease between Premier Development of Orlando, Inc. and
Dialysis Services of Florida, Inc. - Fort Walton Beach (7),
with Rider and Guarantee of Dialysis Corporation of America(4)
dated May 24, 1989 (incorporated by reference to the Company's
1989 Form 10-K, Part IV, Item 14(a)(xxii)).
(xvi) Addendum No. 1 to Lease between Premier Development of
Orlando, Inc. and Dialysis Services of Florida, Inc.-Fort
Walton Beach (7) dated August, 1991 (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 ("1993 Form 10-K"), Part IV, Item 14(a)
3(10) (xvi)).
(xvii) Lease Renewal between JACO, L.C. and Dialysis Services of
Florida, Inc.-Fort Walton Beach(7) dated November 29, 1993
(incorporated by reference to the Company's 1993 From 10-K,
Part IV, Item 14(a) 3(10) (xvii)).
(xviii) Agreement to Sell Real Property between the Company and
Techdyne, Inc.(2) dated March 27, 1990 (incorporated by
reference to Techdyne's Annual Report on Form 10-K for the
year ended December 31, 1989, Part IV, Item 14(a) 3(10)(x)).
[*] Confidential portions omitted, have been filed separately with the
Securities and Exchange Commission.
24
<PAGE> 28
(xix) Loan Agreement between the Company and Viragen, Inc.(3) dated
January 31, 1991 (incorporated by reference to the Company's
Current Report on Form 8-K, dated February 25, 1991
("February, 1991 Form 8-K"), Item 7(c)(ii)).
(xx) Florida Real Estate Mortgage and Security Agreement from
Viragen, Inc.(3) dated January 31, 1991 (incorporated by
reference to the February, 1991 Form 8-K, Item 7(c)(iii)).
(xxi) Lease Agreement between Techdyne (Houston), Inc. (8) and
George Wimpey of Texas, Inc. dated July 30, 1991 (incorporated
by reference to Techdyne's 1991 Form 10-K, Part IV, Item 14
(a) 3 (10) (viii)).
(xxii) Assignment and Assumption Agreement between Techdyne
(Houston), Inc. (8), the Company and George Wimpey of Texas,
Inc. dated February 28, 1992 (incorporated by reference to
Techdyne's Annual Report on Form 10-K for the year ended
December 31, 1991 ("Techdyne 1991 Form 10-K"), Part IV, Item
14 (a) 3 (10) (ix)).
(xxiii) Lease Agreement between Techdyne, Inc.(2) and George Wimpey
of Texas, Inc. dated February 4, 1994 (incorporated by
reference to the Company's 1993 Form 10-K, Part IV, Item 14(a)
3(10) (xxxiv)).
(xxiv) Lease between the Company and Viragen, Inc.(3) dated December
8, 1992 (incorporated by reference to the Company's current
report on Form 8-K dated January 21, 1993 ("January, 1993 Form
8-K"), Item 7(c)(i)).
(xxv) Addendum to Lease between the Company and Viragen, Inc.(3)
dated January 15, 1993 (incorporated by reference to the
Company's current report on Form 8-K dated January 21, 1993
("January, 1993 Form 8-K"), Item 7(c)(ii)).
(xxvi) Guaranty of payment by the Company in favor of Equitable Bank
dated August 2, 1991 (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1991, Part II, Item 6 (a)(28)(i)).
(xxvii) Compensation Agreement between the Company and Viragen,
Inc.(3) dated August 2, 1991 (incorporated by reference to
Viragen, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991 ("Viragen 1991 Form 10-K"), Part IV, Item 14
(a) 3(10(xxiii)).
25
<PAGE> 29
(xxviii) First Amendment to Lease between Dialysis Corporation
of America(5) and Renal Treatment Centers - Maryland, Inc.
dated November 16, 1992 (incorporate reference to the
Company's January, 1993 Form 8-K, Item 7(c)(xii)).
(xxix) Amendment to Loan Agreement between the Company and Viragen,
Inc.(3) dated August 6, 1991 (incorporated by reference to
the Viragen 1991 Form 10-K, Part IV, Item 14(a) 3 (10) (xxi)).
(xxx) Florida Real Estate Mortgage and Security Agreement from
Viragen, Inc.(3) to the Company dated August 6, 1991
(incorporated by reference to Viragen's 1991 Form 10-K, Part
IV, Item 14(a) 3 (10)(xxii)).
(xxxi) Lease Agreement between the Company and Brett D. Anderson and
Suzanne M. Anderson dated November 17, 1992 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992 ("1992 Form 10-K"), Part IV,
Item 14 (a) (10) (lvi)).
(xxxii) Mortgage between Techdyne (Scotland) Limited(4) and The Royal
Bank of Scotland dated August 8, 1994 (incorporated by
reference to the Company's June, 1994 Form 10-Q, Part II,
Item 6 (a) (28) (vi)).
(xxxiii) Agreement ("Missives") between Techdyne (Scotland) Limited(4)
and Livingston Development Corporation regarding Purchase by
Techdyne (Scotland) Limited(4) of Its Facility dated June 15,
1994 (incorporated by reference to the Company's June, 1994
Form 10-Q, Part II, Item 6 (a) (28) (vii)).
(xxxiv) Medical Directors Agreement between Dialysis Services
of Pennsylvania, Inc. - Wellsboro (9) and George Dy, M.D.
dated September 29, 1994 [*] (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 as amended January, 1995 ("September, 1994
Form 10-Q"), Part II, Item 6 (a) (10) (I)).
(xxxv) Agreement for In-Hospital Dialysis Services between Dialysis
Services of Pennsylvania, Inc. - Wellsboro (9) and Soldiers &
Sailors Memorial Hospital dated September 28, 1994 [*]
(incorporated by reference to the Company's September, 1994
Form 10-Q, Part II, Item 6 (a) (10) (ii)).
(xxxvi) Form of Promissory Note executed by all optionees to the
Company dated September 12, 1994 ** (incorporated by reference
to the Company's Current Report on Form 8-K dated
October 13, 1994 ("October, 1994 Form 8-K"), Item 7 (c) (99)
(i)).
(xxxvii) Form of Escrow Agreement executed by all optionees
with the Company and the Escrow Agent dated September, 1994
*** (incorporated by reference to the Company's October, 1994
Form 8-K, Item 7 (c) (99) (ii)).
(xxxviii) Consulting Agreement between the Company and
Performance Capital Corporation dated September 30, 1994
(incorporated by reference to the Company's October, 1994 Form
8-K, Item 7 (c) (99) (iii)).
(xxxix) Stock Option Agreement between the Company and
Performance Capital Corporation dated September 30, 1994
(incorporated by reference to the Company's October, 1994 Form
8-K, Item 7 (c) (99) (iv)).
(xl) Medical Directors Agreement between Dialysis Services of
Pennsylvania, Inc. - Lemoyne (9) and Herbert I. Soller, M.D.
dated January 30, 1995 [*](incorporated by reference to the
Company's 1994 Form 10-K, Part IV, Item 14(a) 3(10)(ix)).
(xli) Lease Agreement between Dialysis Services of Pennsylvania,
Inc. - Wellsboro(9) and James and Roger Stager dated January
15, 1995 (incorporated by reference to the Company's 1994 Form
10-K, Part IV, Item 14(a) 3(10)(lxii)).
(xlii) Lease Agreement between Techdyne, Inc. (2) and Megabrella,
Inc. dated January 16, 1995 (incorporated by reference to the
Company's 1994 Form 10-K, Part IV, Item 14(a) 3(10)(lviii)).
(xliii) Form of Exclusive Sales Representative Agreement between
Techdyne, Inc. (2) and sales representative ****
(incorporated by reference to the Company's 1994 Form 10-K,
Part IV, Item 14(a) 3(10)(lxiv)).
(xliv) 1994 Stock Option Plan of Techdyne, Inc. (2) (incorporated by
reference to the Company's 1994 Form 10-K, Part IV, Item
14(a) 3(10)(lxv)).
(xlv) Form of Stock Option Certificate issued under 1994 Stock
Option Plan of Techdyne, Inc. (2) (incorporated by reference
to the Company's 1994 Form 10-K, Part IV, 14(a) 3(10)(lxvi)).
[*] Confidential portions omitted, have been filed separately with the
Securities and Exchange Commission.
26
<PAGE> 30
(xlvi) Form of Stock Option Agreement dated February 17, 1995 issued
to directors of Techdyne, Inc. (2) ***** (incorporated by
reference to the Company's 1994 Form 10-K, Part IV, Item 14(a)
3(10)(lxvii)).
(xlvii) Lease Agreement between Dialysis Corporation of America (5)
and Service All Group, Inc. and Terry Sheppard dated March 24,
1995 (incorporated by reference to the Company's Form 10-K,
Part IV, Item 14(a) 3(10)(lxviii)).
(xlviii)Lease Purchase Agreement between the Company and B.
Braun Medical, Inc. dated August 24, 1995 (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for
the third quarter ended September 30, 1995 ("1995 Form 10-Q"),
Part II, Item 6(a)(10)(i)).
(xlix) Employment Agreement between All American Medical & Surgical
Supply Corp.(10) and Anthony Tepedino dated October 26, 1996
(incorporated by reference to the Company's 1995 Form 10-Q,
Part II, Item 6(a)(10)(ii)).
(l) Employment Agreement between All American Medical &
Surgical Supply Corp.(10) and Lou Ghelli dated October 26,
1995 (incorporated by reference to the Company's 1995 Form
10-Q, Part II, Item 6(a)(10)(iii)).
(li) Loan and Security Agreement between Techdyne, Inc.(2)
and Barnett Bank of South Florida, N.A. ("Barnett Bank")
for $2,000,000 dated February 8, 1996 (incorporated by
reference to Techdyne, Inc.'s Current Report on Form 8-K,
dated February 23, 1996 ("Techdyne February 1996 Form 8-K),
Item 7(c)(99)(i)).
(lii) Revolving Demand Promissory Note for $2,000,000 from
Techdyne, Inc.(2) to Barnett Bank dated February 8, 1996
(incorporated by reference to Techdyne February 1996 Form 8-K,
Item 7(c)(99)(ii)).
(liii) Unconditional and Continuing Guaranty of Payment and
Performance by the Company in favor of Barnett Bank
dated February 8, 1996 (incorporated by reference to
Techdyne February 1996 Form 8-K, Item 7(c)(99)(iii)).
(liv) Subordination Agreement among Barnett Bank, the
Company and Techdyne, Inc.(2) dated February 8, 1996
(incorporated by reference to Techdyne February 1996 Form 8-K,
Item 7(c)(99)(iv)).
(lv) Loan Agreement for $712,500 between Techdyne, Inc.(2)
and Barnett Bank dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item
7(c)(99)(v)).
(lvi) Promissory Note for $712,500 from Techdyne, Inc.(2)
to Barnett Bank, dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item
7(c)(99)(vi)).
(lvii) Mortgage and Security Agreement between the Company
and Barnett Bank dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item
7(c)(99)(vii)).
(lviii) Assignment of Leases, Rents and Profits by the Company in
favor of Barnett Bank dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item 7(c)(99)
(viii)).
(lix) Promissory Note for $200,000 from Techdyne, Inc.(2)
to Barnett Bank dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item
7(c)(99)(ix)).
27
<PAGE> 31
(lx) Security Agreement between Techdyne, Inc.(2) and
Barnett Bank dated February 8, 1996 (incorporated by reference
to Techdyne February 1996 Form 8-K, Item 7(c)(99)(x)).
(lxi) Lease between All American Medical & Surgical Supply
Corp.(10) and Bart Castellano dated November 1, 1995.
(lxii) Lease between Dialysis Corporation of America(5) and
Dialysis Services of Pennsylvania, Inc. - Lemoyne(9) dated
November 30, 1995.
(lxiii) 1995 Stock Option Plan of Dialysis Corporation of America(5).
(lxiv) Form of Stock Option Certificate dated November 10,
1995 issued under 1995 Stock Option Plan of Dialysis
Corporation of America(5).
(lxv) Employment Agreement between Techdyne, Inc.(2) and
Barry Pardon dated March 13, 1996(incorporated by reference to
Techdyne, Inc.'s Annual Report on Form 10-KSB for the year
ended December 31, 1995, Part IV, Item 13 (a) 2 (10)(viii)).
(11) Statement re computation of per share earnings.
(21) Subsidiaries of the registrant.
(27) Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K filed during fourth quarter.
- ---------- None
(1) Wholly-owned subsidiary merged into the Registrant in March, 1986.
(2) 63% owned subsidiary.
(3) Former public subsidiary of the Company; spun-off in 1986.
(4) 100% owned subsidiary of Techdyne, Inc.
(5) 99.1% owned subsidiary.
(6) Dissolved subsidiary of Dialysis Corporation of America.
(7) 80% owned subsidiary of Dialysis Corporation of America.
(8) 100% owned inactive subsidiary of Techdyne, Inc.
(9) 100% owned subsidiary of Dialysis Corporation of America.
(10) 80% owned subsidiary of the Company.
** All (10) optionees executed their options and executed the
same promissory note except as to amounts due.
*** All (10) optionees entered into the same escrow agreement
except as to the amounts of shares escrowed.
**** There are five such Agreements, all the same but for the
territory assigned.
***** Option to directors is the same except as to amount of
underlying shares purchasable.
28
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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 Thomas K. Langbein
-------------------------------
THOMAS K. LANGBEIN, Chairman
of the Board of Directors, Chief
Executive Officer and President
March 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
Chairman of the Board
of Directors, Chief
Executive Officer and
Thomas K. Langbein President March 26, 1996
- ------------------
THOMAS K. LANGBEIN
Senior Vice-President,
Principal Financial
Dennis W. Healey Officer and Treasurer March 26, 1996
- -----------------------
DENNIS W. HEALEY
Vice President and
Seymour Friend Director March 26, 1996
- -----------------------
SEYMOUR FRIEND
Vice-President
(Finance) and
Daniel R. Ouzts Controller March 26, 1996
- -----------------------
DANIEL R. OUZTS
Peter D. Fischbein Director March 26, 1996
- -----------------------
PETER D. FISCHBEIN
Anthony C. D'Amore Director March 26, 1996
- -----------------------
ANTHONY C. D'AMORE
</TABLE>
29
<PAGE> 33
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1995
MEDICORE, INC.
HIALEAH, FLORIDA
<PAGE> 34
FORM 10-K--ITEM 14(a)(1) AND (2)
MEDICORE, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Medicore, Inc. and
subsidiaries are included in Item 8:
Consolidated balance sheets--December 31, 1995 and 1994.
Consolidated statements of operations--Years ended December 31,
1995, 1994, and 1993.
Consolidated statements of stockholders' equity--Years ended December
31, 1995, 1994 and 1993.
Consolidated statements of cash flows--Years ended December 31, 1995,
1994 and 1993.
Notes to consolidated financial statements--December 31, 1995.
The following consolidated financial statement schedule of Medicore, Inc. and
subsidiaries is included in Item 14(d):
Schedule II--Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE> 35
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Medicore, Inc.
We have audited the accompanying consolidated balance sheets of Medicore, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. Our audits also included
the financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Medicore, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 1 to the Consolidated Financial Statements, the Company
changed its method of accounting for marketable securities in 1994.
March 20, 1996
Miami, FL
ERNST & YOUNG LLP
F-2
<PAGE> 36
CONSOLIDATED BALANCE SHEETS
MEDICORE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
1995 1994
--------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,836,512 $ 1,450,260
Marketable securities 855,351 1,685,352
Short-term investments 188,954 181,230
Accounts receivable, less
allowances of $244,000 in
1995 and $133,000 in 1994 3,853,913 3,530,124
Inventories, less allowance for
obsolescence of $309,000
in 1995 and $255,000 in 1994 3,872,912 2,910,735
Current portion of note receivable
from Viragen, Inc. 146,245
Prepaid expenses and other current
assets 745,192 414,575
----------- -----------
TOTAL CURRENT ASSETS 14,499,079 10,172,276
NOTE RECEIVABLE FROM VIRAGEN, INC., less
current poertion 167,715
PROPERTY AND EQUIPMENT
Land and improvements 1,005,255 1,006,455
Building and building improvements 2,814,785 2,558,195
Equipment and furniture 5,300,487 4,333,075
Leasehold improvements 367,743 195,388
----------- -----------
9,488,270 8,093,113
Less accumulated depreciation and
amortization 3,880,549 3,430,447
----------- -----------
5,607,721 4,662,666
DEFERRED EXPENSES AND OTHER ASSETS 393,943 161,592
COSTS IN EXCESS OF NET TANGIBLE ASSETS
ACQUIRED, less accumulated amortization
of $311,290 in 1995 and $266,626 in
1994 746,411 791,075
----------- -----------
$21,247,154 $15,955,324
=========== ===========
</TABLE>
F-3
<PAGE> 37
CONSOLIDATED BALANCE SHEETS--Continued
MEDICORE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
1995 1994
------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,532,971 $ 2,311,373
Accrued expenses and other current
liabilities 1,692,985 1,121,799
Current portion of long-term debt 1,434,000 951,000
Income taxes payable 480,481 276,768
Deferred income taxes 325,033 640,434
----------- -----------
TOTAL CURRENT LIABILITIES 7,465,470 5,301,374
LONG-TERM DEBT 963,980 1,667,129
DEFERRED INCOME TAXES 1,564,757 787,076
MINORITY INTEREST IN SUBSIDIARIES 1,498,508 172,713
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value
Authorized 12,000,000 shares;
5,454,940 issued and outstanding 54,549 54,549
Capital in excess of par value 11,540,953 11,540,704
Deficit (1,807,723) (4,058,994)
Foreign currency translation adjustment (237,258) (227,745)
Notes receivable from options exercise (326,400) (326,400)
Unrealized gain on marketable securities
for sale 530,318 1,044,918
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 9,754,439 8,027,032
----------- ------------
$21,247,154 15,955,324
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 38
CONSOLIDATED STATEMENTS OF INCOME
MEDICORE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales $34,140,573 $23,730,189 $18,479,372
Gain on securities offering
of subsidiary 2,002,277
Realized gain on sale of
marketable securities 182,670 524,228
Other income 334,560 297,276 478,825
----------- ----------- -----------
36,660,080 24,551,693 18,958,197
COST AND EXPENSES
Cost of goods sold 28,072,444 19,108,768 14,795,661
Selling, general and
administrative expenses 4,748,113 4,063,359 3,831,350
Interest expense 246,393 207,703 202,209
----------- ----------- -----------
33,066,950 23,379,830 18,829,220
----------- ----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 3,593,130 1,171,863 128,977
Income tax provision 1,295,626 301,326 78,553
----------- ----------- -----------
INCOME BEFORE MINORITY
INTEREST 2,297,504 870,537 50,424
Minority interest in income
of consolidated subsidiaries 46,233 6,429 32,279
----------- ----------- -----------
NET INCOME $ 2,251,271 $ 864,108 $ 18,145
=========== =========== ===========
Earnings per share:
Net income per share $ .38 $ .16 --
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 39
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
MEDICORE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Foreign
Common Capital in Currency Notes Receivable
Stock .01 Excess of Translation from Treasury
Par Value Par Value Deficit Adjustment Options Exercise Stock
--------- ----------- ----------- ----------- ---------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1993 $48,466 $11,402,675 $ (4,941,247) $(283,721) $(340,838)
Foreign currency
translation adjustment (22,468)
Net Income 18,145
------- ----------- ------------ --------- ---------
Balance at
December 31, 1993 48,466 11,402,675 (4,923,102) (306,189) (340,838)
Cancellation of
281,700 shares of
common stock held
in treasury (2,817) (338,021) 340,838
Issuance of 410,000
shares of common stock
as compensation 4,100 149,650
Exercise of stock options
for 480,000 shares of
common stock 4,800 326,400 $(326,400)
Foreign currency
translation adjustment 78,444
Valuation of Marketable Securities
for sale (1,123,568 shares viragen)
Net Income 864,108
------- ----------- ------------ --------- ---------
Balance at
December 31, 1994 54,549 11,540,704 (4,058,994) (227,745) (326,400)
Exercise of subsidiary
stock options 249
Foreign currency translation
adjustments (9,513)
Sale of 172,500 shares of viragen
Net decrease in valuation
of remaining Viragen shares
Net income 2,251,271
------- ----------- ------------ --------- ---------
Balance at
December 31, 1995 $54,549 $11,540,953 ($1,807,723) ($237,258) ($326,400) $
======= =========== =========== ======== ========= ========
<CAPTION>
Unrealized Cash on
Marketable Securities
for Sale Total
--------------------- -----
<S> <C> <C>
Balance at
January 1, 1993 5,885,335
Foreign currency
translation adjustment (22,468)
18,145
---------
Net Income 5,881,012
Balance at
December 31, 1993
Cancellation of
281,700 shares of
common stock held
in treasury
Issuance of 410,000
shares of common stock
as compensation 153,750
Exercise of stock options
for 480,000 shares of
common stock 4,800
Foreign currency
translation adjustment 78,444
Valuation of Marketable Securities
for sale (1,123,568 shares viragen $1,044,918 $1,044,918
Net Income 864,108
---------- ----------
Balance at
December 31, 1994 1,044,918 8,027,032
Exercise of subsidiary
stock options 249
Foreign currency translation
adjustments (9,513)
Sale of 172,500 shares of viragen (160,425) (160,425)
Net decrease in valuation
of remaining Viragen shares (354,175) (354,175)
Net income 2,251,271
---------- ----------
Balance at
December 31, 1995 $ 530,318 $9,574,439
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 40
CONSOLIDATED STATEMENTS OF CASH FLOWS
MEDICORE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
-------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,251,271 $ 864,108 $ 18,145
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 542,702 457,711 414,369
Amortization 69,980 103,259 113,208
Bad debt expense (net recovery) 136,221 34,937 (66,403)
Provision for inventory
obsolescence 294,860 282,000 74,000
Stock compensation expense 153,750
Gain on sale of securities (182,671) (524,228)
Minority interest 46,233 6,429 32,279
Deferred income taxes 16,680 26,755 46,632
Gain on subsidiary stock offering (1,241,277)
Increase (decrease) relating to
operating activities from:
Accounts receivable (474,008) (1,262,338) (474,597)
Inventories (1,276,376) (1,161,939) 190,811
Prepaid expenses and other
current assets (373,819) (33,193) (18,072)
Accounts payable 1,246,694 753,277 20,873
Accrued expenses and other
current liabilities 510,124 482,164 (315,398)
Income taxes payable 210,398 238,034
Other (1,101)
----------- ---------- --------
Net cash provided by
operating activities 1,777,012 419,625 35,847
</TABLE>
F-7
<PAGE> 41
CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
MEDICORE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
INVESTING ACTIVITIES
Additions to property and
equipment, net of minor
disposals $(1,283,597) $ (414,419) $ (273,191)
Payments received on note
receivable from Viragen Inc. 21,470 26,837 57,172
Proceed from short-term investments 272,737 266,885 259,875
Short-term investments (280,461) (269,623) (264,296)
Proceeds from sale of securities 217,717 689,747
Deferred expenses and other assets (149,417) 20,774 (16,024)
Purchase portion of minority
interest in subsidiary (15,250)
----------- ---------- ----------
Net cash (used in) provided
by investing activities (1,216,801) 320,201 (236,464)
FINANCING ACTIVITIES
Net proceeds from subsidiary stock
offering 3,320,784
Proceeds from short-term
borrowings 115,000
Proceeds from long-term
borrowings 30,188
Payments on short-term
borrowings (70,000)
Payments on long-term
borrowings (433,673) (366,786) (373,151)
Proceeds from exercise of
stock options 400 4,800
Dividend payment to minority
shareholders (28,842) (5,000)
Deferred financing costs (11,944) (35,920) (6,538)
----------- ---------- ----------
Net cash provided by (used in)
financing activities 2,846,725 (402,906) (304,501)
Effect of exchange rate
fluctuations on cash (20,684) 10,553 (6,629)
----------- ---------- ----------
Increase (decrease) in cash and
cash equivalents 3,386,252 347,473 (511,747)
Cash and cash equivalents at
beginning of year 1,450,260 1,102,787 1,614,534
----------- ---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $4,836,512 $1,450,260 $1,102,787
=========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The Consolidated Financial Statements include the accounts of
Medicore, Inc., Medicore's 99.1% owned subsidiary, Dialysis Corporation of
America ("DCA")and Medicore's 62.5% owned subsidiary, Techdyne, Inc.
("Techdyne") (including its wholly-owned subsidiary Techdyne (Scotland) Limited
("Techdyne Scotland")), collectively known as the Company. All material
intercompany accounts and transactions have been eliminated in consolidation.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Sale of Stock By Subsidiaries: The Company follows an accounting policy of
income statement recognition for sales of stock by its subsidiaries. Techdyne
completed a public offering on October 2, 1995, pursuant to which the Company
recognized a gain of approximately $2,002,000 with applicable income taxes of
$761,000 which resulted in a net gain of approximately $1,241,000. The Company
will recognize a gain on completion of DCA's securities offering the amount of
which will depend on the net proceeds of the offering. See Note 9.
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 securites 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 secruities 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
identificaiton 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>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Electronic and mechanical components, net:
Finished goods $ 617,851 $ 203,681
Work in process 692,964 572,077
Raw materials and supplies 2,202,381 1,889,729
----------- ----------
3,513,196 2,665,487
Medical supplies 359,716 245,248
----------- ----------
$3,872,912 $2,910,735
=========== ==========
</TABLE>
F-9
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
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.
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 additional 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 will file consolidated federal and state tax returns with Techdyne
until October 2,1995, the date Techdyne's securities offering was completed,
after which Techdyne will file separate income tax returns with its income tax
liability reflected on a separate return basis. DCA will likewise be included
in the consolidated tax returns with the Company until and assuming the
completion of its public offering (see Note 9), after which it will file
separate income tax returns with its income tax liability reflected on a
separate return basis.
Foreign Currency Translation: The financial statements of 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
year. The translation adjustments resulting from the change in exchange rates
from year to year have been reported separately as a component of stockholders'
equity. Foreign currency transaction gains and losses, which are not material,
are included
F-10
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
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.
Other Income: Other income is comprised as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest income $160,470 $ 75,950 $ 78,996
Other 174,090 221,326 399,829
-------- -------- --------
$334,560 $297,276 $478,825
======== ======== ========
</TABLE>
Earnings Per Share: Primary earinings per share for 1995 is computed on the
basis of weighted shares oustanding plus common equivalent shares from dilutive
stock options using the modified treasury stock method for 1995 and the
treasury stock method for 1994. Earnings per share for 1993 has been computed
based on the weighted average number of shares of common stock outstanding.
Fully diluted per share data has not been presented as it is not dilutive.
Cash and 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. The credit risk associated with
cash and cash equivalents is considered low due to the high quality of the
financial institutions in which these assets are invested.
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.
Reclassifications: Certain reclassifications have been made to the 1994 and
1993 financial statements to conform to the 1995 presentation.
F-11
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
New Pronouncements: In 1996, the Company will adopt the provisions of FAS 121
- - Accounting for the Impairment of Long-Lived Assets. FAS 121 requires
impairment losses to be recorded on long-lived assets when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carring amount. Based on
current circumstances, the Company does not believe the effect of adoption will
be material. Also in 1996, the Company plans to adopt the provisions of FAS
123 - Accounting for Stock Based Compensation. The Company will continue to
account for stock-based compensation plans under the provisions of APB 25 -
Accounting for Stock Issued to Employees. The company will disclose the pro
forma information required for stock-based compensation plans in accordance
with FAS 123.
NOTE 2--TRANSACTIONS WITH VIRAGEN, INC.
The Company owns approximately 951,000 shares of Viragen (formerly a
majority-owned subsidiary of the Company) common stock (approximately 2.7% of
the Viragen shares outstanding at December 31, 1995). The carrying value of
these securities was written off as of December 31, 1991. During 1995 and 1994,
the Company sold approximately 173,000 shares and 375,000 shares of Viragen
stock and recognized a gain of approximately $183,000 and $524,000,
respectively.
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 by the National Quotation
Bureau, Inc. as of December 31, 1995. The trading price of the Viragen stock
has fluctuated significantly. The closing bid price of Viragen common stock
was $.89 as of December 31, 1995. The closing bid price was $4.56 as of March
22, 1996.
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 6, 1996. The note bears
interest at 1% over prime. The note balance includes amounts due from Viragen
that were previously written off by the Company. At December 31, 1995, the
total outstanding note balance was $373,936. The amount reflected on the
accompanying consolidated 1995 balance sheet of $146,245, is net of an
allowance for amounts previously written off as uncollectable. As the note
matures in August, 1996, the balance is carried as a current receivable. In
March, 1996, Viragen prepaid $165,000 toward principal and interest due in
August, 1996. Interest earned on the note amounted to $40,000, $29,000, and
$33,000 for 1995, 1994 and 1993, respectively.
The Company has a royalty agreement with Viragen, pursuant to which it receives
a royalty 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, 1994, with royalty payments due quarterly,
commencing March 31,1995.
Under the agreement, approximately $108,000 of royalties earned
F-12
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 3--LONG-TERM DEBT
pursuant to a previous agreement, will comprise the final payment under the new
agreement. Royalties income accrued under the amended agreement amounted to
$27,000, $38,000 and $3,000 for 1995, 1994 and 1993, respectively.
Techdyne's term loan amounted to approximately $550,000 and $807,000 at
December 31, 1995 and 1994, respectively. This loan was guaranteed by
Medicore and was secured by real properties of Medicore as well as
Medicore having subordinated $1,500,000 of its intercompany indebtedness from
Techdyne to the bank debt. Monthly principal payments increased to $17,300
subsequent to June 1, 1993 plus interest. The unpaid balance was due on June
1, 1996. Interest under the agreement was at a rate equal to 1% above the
fluctuating base rate of the bank.
In February 1996, Techdyne refinanced the term loan with a different Florida
bank. See Note 10.
Long-term debt is as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
-----------------------
<S> <C> <C>
Term loan secured by receivables,
inventory and fixed assets with a
carrying value of approximately
$5,402,000 at December 31, 1995.
Payments of principal and interest
are due monthly as described above. $ 549,508 $ 807,108
Mortgage note secured by land and
building with a net book value of
$865,000 at December 31, 1995.
Quarterly payments of approximately
$18,000 for 15 years commencing
October, 1994 including interest at
2% above bank base rate. 590,824 628,008
Mortgage note secured by land and
building with a net book value of
$387,000 at December 31, 1995.
Monthly principal payments of
$3,333 plus interest at 1% over
the prime rate. The loan is
redeemable at the bank's
option after November 30, 1993. 320,028 360,024
</TABLE>
F-13
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 3--LONG-TERM DEBT--Continued
<TABLE>
<CAPTION>
Deember 31,
1995 1994
----------------------
<S> <C> <C>
Mortgage note secured by land and
building with a net book value of
$645,000 at December 31, 1995.
Monthly principal payments of
$2,667 plus interest at 1% over
the prime rate. The loan is
redeemable at the bank's
option after November 30, 1993. $ 255,972 $ 287,976
Equipment purchase agreement secured
by equipment with a net book
value of $197,000 at December 31,
1995. Monthly payments of $4,435
commencing September 1995, including
principal and interest through
June 2000. 184,942
Promissory note with monthly
interest of 3/4% over the prime
rate secured by three certificates
of deposit. A single principal
payment is due on April 21, 1997
with interest payable monthly at
prime. 145,000 145,000
Mortgage note secured by land with a
net book value of $107,000 at December
31, 1995. Monthly principal payments
of $1,083 plus interest at 2% over the
prime rate. The entire unpaid principal
balance and accrued interest is due on
April 1, 1998. 95,334 108,333
</TABLE>
F-14
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 3--LONG-TERM DEBT---Continued
<TABLE>
<CAPTION>
December 31,
1995 1994
--------------------------
<S> <C> <C>
Mortgage note secured by land and
building with a net book value of
$484,000 at December 31, 1995.
Monthly principal payments of
$1,065 plus interest at 2% over
the prime rate. The unpaid principal
balance is due July 7, 1999. $ 212,951 $ 225,740
Other 43,421 55,940
---------- ----------
2,397,980 2,618,129
Less current portion 1,434,000 951,000
---------- ----------
$ 963,980 $1,667,129
========== ==========
</TABLE>
The prime rate was 8.5% as of December 31, 1995 and 1994.
The carrying amount of borrowings approximate their fair value.
Scheduled maturities of long-term debt outstanding at December 31, 1995 are:
1996 - $1,434,000, 1997 - $240,000, 1998 - $143,000, and 1999 and thereafter -
$580,980. Interest payments on all of the above debt amounted to $246,000,
$176,000 and $197,000 in 1995, 1994, and 1993, respectively.
The original balance of the $95,334 mortgage, which was obtained in April 1993,
was $130,000. The Company received $30,000 cash proceeds from the mortgage
with $100,000 representing a noncash financing activity which is a supplemental
disclosure as required by Statement on Financial Accounting Standards No. 95,
Statement of Cash Flows ("SFAS 95").
In July 1994, the Company obtained a $230,000 mortgage to refinance a mortgage
note and second mortage note secured by land and building which represents a
noncash financing activity and is a supplemental disclosure required by SFAS
95. This mortgage had a remaining balance of $212,951 at December 31, 1995.
F-15
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 3--LONG-TERM DEBT---Continued
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 the real property, Techdyne (Scotland) made a $110,000 payment
and obtained a 15 year mortgage of approximately $620,000 with a variable
interest rate of 2% above the bank's base rate. The mortgage transaction
represents a noncash financing activity which is a supplemental disclosure
required by SFAS 95. This mortgage had a remaining balance of $590,824 at
December 31, 1995.
Techdyne (Scotland) has established a line of credit with a Scottish bank with
a U.S. dollar equivalency of approximately $620,000 at December 31, 1995 and
$312,000 at December 31, 1994. This line of credit, which was increased in June
1995, operates as an overdraft facility and is secured by assets of Techdyne
(Scotland) with a carrying value of approximately $6,602,000 at December 31,
1995 and $3,911,000 at December 31, 1994, and is guaranteed by Techdyne. No
amounts were outstanding under this line of credit as of December 31, 1995 or
December 31, 1994.
Other debt includes various capital lease and other financing obligations.
Such new financing obligations, net of down payments, amounted to $208,000 and
$36,000 for 1995 and 1994, respectively, which represents a noncash financing
activity which is a supplemental disclosure required by SFAS 95.
NOTE 4--INCOME TAXES
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $5.7 million that expire in years 2005 through 2008. Of these
net operating loss carryforwards, $5.0 million are only available to offset
future Techdyne (US) taxable income which became a 62.5% owned subsidiary
pursuant to its public offering completed on October 2, 1995 and which will
file separate federal and state income tax returns with its income tax
liability reflected on a separate return basis subsequent to that date.
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. Significant components
of the Company's deferred tax liabilities and assets are as follows:
F-16
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 4--INCOME TAXES--Continued
<TABLE>
<CAPTION>
December 31,
1995 1994
---------------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 338,644 $ 275,000
Gain on sale of Techdyne stock 1,475,000 714,000
Unrealized gain on marketable
securities 325,033 640,434
---------- ----------
Total deferred tax liabilities 2,138,677 1,629,434
Deferred tax assets:
Obsolescence reserves 120,000 138,000
Inventory capitalization 62,000 63,000
Accrued expenses and other 109,000 48,000
---------- ----------
291,000 249,000
Net operating loss carryforward 2,163,000 2,279,000
Valuation allowance (2,205,113) (2,326,076)
---------- ----------
Net deferred tax assets 248,887 201,924
---------- ----------
Net deferred tax liabilities $1,889,790 $1,427,510
========== ==========
</TABLE>
A deferred tax liability of $1,475,000 and $714,000 at December 31, 1995 and
1994, respectively, resulted from income tax expense recorded on gains
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 will reverse upon the
occurrence of certain events relating to the divestiture of Techdyne. 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 has been recorded for the unrealized gain on marketable
securities. See Note 2.
F-17
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 4--INCOME TAXES -- Continued
Income before income taxes includes the following components:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------
1995 1994 1993
--------- --------- ----------
<S> <C> <C> <C>
United States $2,086,741 $ 317,385 $(144,000)
Foreign 1,506,389 854,478 272,977
---------- ---------- ---------
$3,593,130 $1,171,863 $ 128,977
========== ========== =========
</TABLE>
Significant components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 24,660 $ $
Foreign 493,286 261,445 87,260
State 13,006 8,748
------- ------- --------
517,946 274,451 96,008
Benefit from utilization
of net operating loss
carryforwards (63,776)
Deferred:
Federal 761,000
Foreign 16,680 26,755 46,321
---------- --------- ----------
777,680 26,755 46,321
---------- --------- ----------
$1,295,626 $ 301,206 $ 78,553
========== ========= ==========
</TABLE>
F-18
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 4-INCOME TAXES--Continued
The reconciliation of income tax attributable to income before income taxes and
minority interests computed at the U.S. federal statutory rate (34%) to income
tax expense is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Tax at statutory rate $ 1,221,664 $ 398,433 $ 43,852
Increase (reduction) in taxes
resulting from:
Loss for which no current
benefit is available 48,816
State income taxes-net
of federal income tax
effect 8,584 8,748
Lower effective income
taxes of other countries (15,064) (8,545) (22,863)
Valuation allowance
adjustments and other 89,026 (97,146)
----------- --------- ----------
$ 1,295,626 $ 301,326 $ 78,553
=========== ========= ==========
</TABLE>
Undistributed earnings of the Company's foreign subsidiary amounted to
approximately $2,410,000 at December 31, 1995 and $1,413,000 at December 31,
1994. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for U.S. federal and state income taxes has been
provided thereon. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to both U.S. income taxes (subject
to an adjustment for foreign tax credits) and withholding taxes payable.
Determination of the amount of unrecognized deferred U.S. income tax liability
is not practicable because of the complexities associated with its hypothetical
calculation; however, foreign tax credits may be available to reduce some
portion of the U.S. liability. Withholding taxes of approximately $121,000 and
$71,000 would be payable upon remittance of all previously unremitted earnings
at December 31, 1995 and December 31, 1994, respectively.
Income tax payments were approximately $300,000 in 1995, $38,000 in 1994, and
$29,000 in 1993.
F-19
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 5-STOCK OPTIONS AND STOCK COMPENSATION
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 excercised. 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 809,000 shares of its common stock as a service
award to officers, directors, consultants and certain employees of the Company
and certain of its subsidiaries under its 1989 Stock Option Plan. The options
are excercisable 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 up to 250,000
non-qualified options. Pursuant to this plan, in May 1994, Techdyne's Board of
Directors granted 227,500 options to certain of its officers, directors,
employees and consultants. These options are excercisable for a period of five
years at $1 per share. Options for 400 shares were exercised in the fourth
quarter of 1995.
On February 27, 1995 Techdyne granted non-qualified stock options, not part of
the 1994 Plan, to directors of Techdyne and its subsidiary for 142,500 shares
exercisable at $1.75 per share for five years. These options may be exercised
for cash or subject to 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
F-20
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 5-STOCK OPTIONS AND STOCK COMPENSATION--Continued
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 default, if any,
on the note. In April 1995, Techdyne granted a non-qualified stock option for
10,000 shares, not part of the 1994 Plan, to its general counsel at the same
price and terms as the directors options.
In November 1995, DCA adopted a stock option plan for up to 250,000
non-qualified options. Pursuant to this plan, in November 1995, DCA's Board of
Directors granted 210,000 options, currently 206,500 based upon termination of
certain DCA employees, to certain of its officers, directors, employees and
consultants. These options are exercisable for a period of five years through
November 9, 2000 at $1.50 per share.
The Board of Directors of the Company has determined that the fair value of the
underlying common stock was not in excess of the exercise price on the date of
grant for the stock options granted during 1995 and 1994 and, therefore, no
amounts have been charged to operations in connection with any grants of
options.
Transactions for options are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Options outstanding and exercisable
at January 1 400,000 505,000 530,000
Granted 809,000 400,000
Excercised (480,000)
Canceled/expired (25,000) (25,000)
--------- -------- --------
Options outstanding and exercisable
at December 31 1,209,000 400,000 505,000
========= ======= =======
Option price $1.25-$3.00 $1.25 $.69 - $2.13
</TABLE>
The Company recorded compensation expense of $153,750 in 1994 for the issuance
of 410,000 shares of common stock, to certain officers, directors and
employees.
F-21
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 6--OPERATIONS BY INDUSTRY SEGMENT, GEOGRAPHIC LOCATION AND
FOREIGN OPERATIONS
Industry segment and geographical data and foreign operations for the years
ended December 31, 1995, 1994, and 1993, included on pages 1, 2 and 3 of Form
10-K are an integral part of these financial statements. The following
summarizes additional information about the reported industry segments:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
DEPRECIATION EXPENSE
Medical Services $ 116,510 $ 85,734 $ 80,067
Medical Products 19,735 17,548 15,788
Electro-Mechanical 332,602 285,691 244,338
CAPITAL EXPENDITURES
Medical Services $ 877,545 $ 30,879 $ 80,203
Medical Products 7,132 30,567 16,479
Electro-Mechanical 530,669 1,052,606 188,269
</TABLE>
A majority of the Company's electro-mechanical sales are to certain major
customers. The loss of, or substantially reduced sales to, any of these
customers would have an adverse effect on the Company's operations, if such
sales were not replaced.
Electro-mechanical sales to major customers are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
Customers 1995 1994 1993
--------- ------------------------------------------
<S> <C> <C> <C>
IBM(1) $ 2,502,000 $3,305,000 $2,091,000
Compaq Computer Corp. 10,849,000 8,058,000 6,683,000
Avid Technology 5,653,000 1,156,000 915,000
</TABLE>
__________
(1) Less than 10% of sales for 1995.
F-22
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 6--OPERATIONS BY INDUSTRY SEGMENT, GEOGRAPHIC LOCATION AND FOREIGN
OPERATIONS--Continued
Included in the sales to Compaq were sales by Techdyne (Scotland) of
$10,587,000, which accounted for 86% of the sales of Techdyne (Scotland) for
1995. The Company anticipates that increased competition in the bidding for
this Compaq business may result in some loss of Compaq sales and reduced profit
margins on remaining Compaq sales. Techdyne (Scotland) is pursuing cost
reduction and new business development efforts and is presently unable to
quantify the ultimate effects of the Compaq change.
The Company anticipates a loss of a majority of its sales to Avid as a result
of a change in one of the products it produces for Avid. Although the Company
is pursuing cost reduction and new business development efforts, it anticipates
a substantial reduction in sales in 1996 as a result of lost Avid sales
although it is unable to presently quantify the ultimate effects of the Avid
sales loss.
Medicore services revenues, which represents revenues of the Company's dialysis
division, are attributable to payments received under Medicare, which is
supplemented by Medicaid or comparable benefits in the states in which the
Company operates. Reimbursement rates under these programs are subject to
regulatory changes and governmental funding restrictions. Although the Company
is not aware of any future rate changes, significant changes in reimbursement
rates could have a material effect on the Company's operations.
Medical products revenues, which represents medical supply and durable medical
equipment sales, are highly dependent, in the durable equipment division, on
payments received under Medicare and Medicaid and, therefore, are subject to
regulatory changes and government funding restrictions. Although the Company
is not aware of any future rate changes, significant changes in reimbursement
rates could have a material adverse effect on the Medical Products Division .
Medical product sales are highly dependent on contracts which have become
increasingly difficult to secure due to changes in government procurement
procedures. Significant reductions in government contract revenues would have
a material adverse effect on the operations of the Medical Products Division.
F-23
<PAGE> 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 8--COMMITMENTS AND CONTINGENCIES
COMMITMENTS: The Company and subsidiaries have leases on several facilities
which expire at various dates. The aggregate lease commitments at December 31,
1995 are approximately: 1996 - $349,000; 1997 - $234,000; 1998 - $117,000; 1999
and thereafter - $75,000. Total rent expense was approximately $533,000 in
1995, $502,000 in 1994, and $506,000 in 1993.
Pursuant to completion of its recent offering, Techdyne 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, the completion date of the underwriting,
to provide financial consulting services pertaining to Techdyne's business.
CONTINGENCIES: A litigation initiated by Techdyne in 1994 in the Florida
courts against the subsidiary's former president has been settled on terms
favorable to Techdyne.
Upon completion of DCA's public offering, for which there can be no assurance,
DCA will retain the representative of the underwriters to provide financial
consulting services pertaining to DCA's business, at a monthly fee of $3,000
per month for a period of 18 months, all of which shall be payable in advance
on the closing of the offering. See Note 9.
NOTE 9 -- SUBSIDIARY STOCK OFFERINGS
Techdyne completed a public offering of common stock and warrants on October 2,
1995 providing that subsidiary with net proceeds of approximately $3,321,000
for which the Company has recognized a gain of approximately $2,002,000,
with applicable income taxes of $761,000, which resulted in a net gain of
approximately $1,241,000. Techdyne repaid $1,500,000 toward its intercompany
indebtedness to the Medicore and will use the balance of the funds for
expanding operations, upgrading plant and equipment and for working capital.
The offering reduced the Company's ownership of Techdyne from approximately 83%
to approximately 63% (73% considering the convertible note issued by Techdyne,
convertible at $1.75 per share with the balance due the Company for the
intercompany indebtedness of approximately $2,686,000 at December 31, 1995).
F-24
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 9 -- SUBSIDIARY STOCK OFFERINGS--Continued
DCA filed a registration statement with the Securities and Exchange Commission
in December 1995 which has not become effective to date, proposing to offer
units consisting of common stock and warrants for an aggregate of approximately
$3,750,000 with net proceeds to DCA of approximately $3,035,000 (approximately
$3,524,000 if the over-allotment option is fully exercised). DCA intends to
use the proceeds from the offering to acquire and/or develop free standing
outpatient dialysis centers and for expanding its inpatient dialysis treatment
services.
DCA, presently 99.1% owned by the Company, upon completion of the offering
would be approximately 70% owned (67% if the overallotment option is exercised
in full). There is no assurance this offering will be completed.
NOTE 10 -- BANK LOAN REFINANCING
On February 8, 1996, Techdyne refinanced its term loan by entering into several
loans with a Florida bank. One credit facility is a $2,000,000 line of credit,
due on demand but in no event after June 30, 1996, secured by Techdyne's
accounts receivable, inventory, furniture, fixtures and intangible assets and
bears interest at the bank's prime rate plus 1.25%.
The bank has also extended two commercial term loans to Techdyne, one for
$712,500 for five years expiring on February 7, 2001 at an annual rate of
interest equal to 8.28% with monthly payments of principal and interest of
$6,925 based on a 15-year amortization schedule with the unpaid principal and
accrued interest due on the expiration date. This term loan has a prepayment
penalty and is secured by a mortgage on properties in Hialeah, Florida owned by
Medicore, two of which properties are leased to Techdyne and one parcel
being vacant land used as a parking lot. Under this term loan Techdyne is
obligated to adhere to a variety of affirmative and negative
F-25
<PAGE> 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 10 -- BANK LOAN REFINANCING--Continued
covenants, including but not limited to a debt service ratio of 1:25 to 1:00,
maintenance of capital funds equal to or in excess of $3,500,000, have a
capital fund ratio of total debt to capital funds of 1.5 to 1.0; and Techdyne
may not merge or acquire businesses, create or transfer any assets to a
subsidiary, if the aggregate annual value of such transactions exceeds
$750,000, cannot sell its interests in its subsidiary Techdyne (Scotland) or
allow that Scottish subsidiary to sell all or substantially all of its assets
or properties, except inventory in the ordinary course of business, for which
the aggregate book value exceeds $500,000; and this term loan further provides
for restrictions on transactions with related persons, restrictions on
dividends except if such does not exceed 30% of Techdyne's net income in any
year, precludes changes in ownership in Techdyne which would reduce the
Company's ownership to less than 51%, and restricts Techdyne from engaging in
any new unrelated business.
The mortgage issued by the Company to secure the $712,500 term loan provides
the bank with reappraisal rights so that should the principal amount
outstanding under the note exceed 75% of the reappraisal value of the mortgaged
property, such excess has to be repaid by Techdyne and/or Medicore. Medicore
as lessor to Techdyne of these mortgaged properties has assigned the
leases, rents and profits to the bank as further security for this $712,500
term loan, provided the Company may continue to collect the rents until an
event of default, if any. Medicore has also subordinated the $2,500,000 of
indebtedness due to it from Techdyne, provided Techdyne may make payments to
Medicore on the subordinated debt from funds received in Techdyne's
recently completed public offering (see Note 9) or from retained earnings
arising subsequent to March 31, 1995, so long as at the time of payment
Techdyne is in compliance with the financial covenants of the term loan
agreement. Medicore, as lessor of the properties mortgaged, has
subordinated its interests in the leases to the mortgage held by the bank to
secure this term loan.
The second commercial term loan is for the principal amount of $200,000 for a
period of five years bearing interest at a per annum rate of 1.25% over the
bank's prime rate and requiring monthly principal payments with accrued
interest of $3,333 through expiration on February 7, 2001. This $200,000 term
loan
F-26
<PAGE> 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
MEDICORE, INC. AND SUBSIDIARIES
December 31, 1995
NOTE 10 -- BANK LOAN REFINANCING--Continued
carries no prepayment penalty and is secured by all of Techdyne's tangible
personal property, goods and equipment, and all cash or noncash proceeds of
such collateral.
Medicore has unconditionally guaranteed the payment and performance by
Techdyne of the $2,000,000 revolving loan and the two commercial term loans.
A default of the $712,500 term loan will be deemed a default of the $2,000,000
revolving line, but only a financial default of the $2,000,000 revolving line
will be deemed a default of the $712,500 term loan.
NOTE 11 -- RELATED PARTY TRANSACTIONS
During 1995, 1994 and 1993, the Company paid premiums of approximately
$490,000, $460,000 and $424,000, respectively, for insurance through a director
and stockholder, and the relative of a director and stockholder.
During 1995, 1994 and 1993, legal fees of $217,000, $190,000 and $184,000,
respectively, were paid to an officer of the Company.
NOTE 12 -- QUARTERLY FINANCIAL INFORMATION (Unaudited)
The Company recorded the following (gains) losses which were material to the
results of the fourth quarter:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Inventory valuation and
obsolescence $207
Reversal of reserve for income
tax assessments and other
expenses related to disposition
of subsidiaries $(200)
Recovery of reserved account
receivable and reduction
of allowance for doubtful
accounts
Expense startup costs of new
dialysis centers 80 (104)
----- ----- -----
$ 80 $207 $(304)
===== ===== =====
</TABLE>
F-27
<PAGE> 61
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
MEDICORE, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C
- -----------------------------------------------------------------------------------------------------------------------------
Additions Additions
Balance at Charged to Charged to
Beginning Cost and Other Accounts
Classification of Period Expenses Describe
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Reserves and allowances deducted
from asset accounts:
Allownce for uncollectible
accounts........................................... $133,000 $136,221
Reserve for inventory obsolescence................... 255,000 294,860
-------- -------- --------
$388,000 $431,081 $0
======== ======== ========
YEAR ENDED DECEMBER 31, 1994:
Reserves and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts........................................... $ 44,000 $ 34,937
Reserve for inventory obsolescence................... 157,000 282,000
-------- -------- --------
$201,000 $316,937 $0
======== ======== ========
YEAR ENDED DECEMBER 31, 1993:
Reserves and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts........................................... $ 85,000 $(66,403)
Reserve for inventory obsolescence................... 275,000 74,000
-------- -------- --------
$360,000 $ 7,597 $0
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
---------------------------------
COL. D COL. E
---------------------------------
Other Charges Balance
Add (Deduct) at End of
Describe Period
----------------------------------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Reserves and allowances deducted
from asset accounts:
Allownce for uncollectible
accounts........................................... $ (25,221) (1) $244,000
Reserve for inventory obsolescence................... (230,860) (2) 319,000
---------- --------
$ (266,081) $553,000
========== ========
YEAR ENDED DECEMBER 31, 1994:
Reserves and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts........................................... $ 54,063 (1) $133,000
Reserve for inventory obsolescence................... (184,000) (2) 255,000
---------- --------
$ (129,937) $388,000
========== ========
YEAR ENDED DECEMBER 31, 1993:
Reserves and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts........................................... $ 25,403 (1) $ 44,000
Reserve for inventory obsolescence................... (192,000) (2) 157,000
---------- --------
$ (166,597) $201,000
========== ========
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Net write-offs against inventory reserves.
<PAGE> 62
MEDICORE, INC.
EXHIBIT INDEX
----------------
(2)(i) Articles of Merger dated March 11, 1986 whereby Packaging
Corporation International(1) was merged with and into the
Company (incorporated by reference to the Company's Current
Report, Form 8-K, March 13, 1986, Item 7(c)(28)(i)). *
(ii) Plan of Merger dated March 11, 1986 whereby Packaging
Corporation International (1) merged with and into the Company
(incorporated by reference to the Company's Current Report on
Form 8-K, March 13, 1986, Item 7(c)(28)(ii)). *
(3) Articles of Incorporation, as amended and By-Laws, as amended
(incorporated by reference to the Company's Annual Report on
Form 10-K for the Year Ended December 31, 1980 ("1980 Form
10-K"), Part IV, Item 11, (a) 3 (3)); and new Article XXV of
the By-Laws. *
(4) Instruments defining the rights of security holders, including
indentures.
(i) 1989 Stock Option Plan (incorporated by reference to the
Company's current report on Form 8-K dated July 10, 1989
("July 1989 Form 8-K"), Item 7(c)(ii)). *
(ii) Form of Stock Option Agreement issued pursuant to the 1989
Stock Option Plan (incorporated by reference to the Company's
July 1989 Form 8-K, Item 7(c)(iii)). *
(iii) Form of Additional Non-Qualified Stock Option Agreement
issuable under the Stock Option Agreement (incorporated by
reference to the Company's July 1989 Form 8-K, Item 7(c)(iv)).
*
(10) Material contracts.
(i) Employment Agreement between the Company and Thomas K.
Langbein dated May, 1994, (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994 ("1994 Form 10-K"), Part IV, Item 14(a)
3(10)(I)).*
(ii) Lease between the Company and Heights Plaza Associates, dated
April 30, 1981 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1981 ("1981 Form 10-K"), Part IV, Item 11 (a)(3)(xv)). *
(iii) Amendment to lease between the Company and Heights
Plaza Associates, dated October 28, 1985 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1985 ("1985 Form 10-K"), Part IV, Item
14 (a) 3 (10) (ix)). *
(iv) Amendment to Lease between the Company and Heights
Plaza Associates, dated April 11, 1988 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 ("1990 Form 10-K"), Part
IV, Item 14(a) 3 (10) (iv)). *
<PAGE> 63
(v) Amendment to Lease between the Company and Heights
Plaza Associates dated March 18, 1991 (incorporated by
reference to the 1990 Form 10-K, Part IV, Item 14(a) 3 (10)
(v)). *
(vi) Lease Agreement between the Company and Techdyne, Inc. (2)
dated July 17, 1990 (incorporated by reference to Techdyne
Inc.'s Annual Report on Form 10-K for the year ended December
31, 1991 ("Techdyne's 1990 Form 10-K"), Part IV, Item 14(a) 3
(10) (vii)). *
(vii) Royalty Agreement between the Company and Viragen, Inc. (3)
dated November 7, 1986 (incorporated by reference to the
Company's Current Report on Form 8-K, December, 1986, Item 7
(c)(iv)). *
(viii) Amended Royalty Agreement between the Company and Viragen,
Inc. (3) dated November 21, 1989 (incorporated by reference to
the Company's Current Report on Form 8-K dated December 6,
1989, Item 7(c)(i)). *
(ix) Employment Agreement between Techdyne (Scotland)
Limited(4) and John Clark Grieve dated March 11, 1988
(incorporated by reference to Techdyne's Annual Report on Form
10-K for the year ended December 31, 1987 ("Techdyne 1987 Form
10-K"), Part IV, Item 14(a)(10)(x)). *
(x) Guarantee of Techdyne (Scotland) Limited(4) Line of
Credit with The Royal Bank of Scotland Plc dated March 3, 1989
(incorporated by reference to the Techdyne 1988 Form 10-K,
Part IV, Item 14(a) (10)(vii)). *
(xi) Loan Agreement between Dialysis Corporation of
America(5) and Mercantile-Safe Deposit and Trust Company dated
November 30, 1988 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1988 ("1988 Form 10-K"), Part IV, Item 14(a) (10)(xxx)). *
(xii) Stock Purchase Agreement for the sale of dialysis
centers between Dialysis Corporation of America, Dialysis
Management Company(6), Renal Treatment Centers, Inc., Renal
Treatment Centers- Acquisition, Inc. and the four dialysis
subsidiaries dated September 5, 1989 (incorporated by
reference to the Company's Current Report on Form 8-K dated
September 12, 1989, Item 7(c)(i)). *
(xiii) Medical Director's Agreement between Dialysis
Services of Florida, Inc. - Fort Walton Beach (7) and Henry
M. Haire, M.D., P.A. dated December 19, 1988 (incorporated
by reference to the Company's Annual on Form 10-K for the
year ended December 31, 1989 ("1989 Form 10-K"), Part IV,
Item 14(a) 3(10)(xxi)). *
(xiv) Renewal of Medical Director's Agreement between Dialysis
Services of Florida, Inc.-Fort Walton Beach (7) and Henry M.
Haire, M.D., P.A. dated August 1, 1994[*](incorporated by
reference to the Company's 1994 Form 10-K, Part IV, Item 14(a)
3(10)(xiv)). *
(xv) Lease between Premier Development of Orlando, Inc.
and Dialysis Services of Florida, Inc. - Fort Walton Beach
(7), with Rider and Guarantee of Dialysis Corporation of
America(4) dated May 24, 1989 (incorporated by reference to
the Company's 1989 Form 10-K, Part IV, Item 14(a)(xxii)). *
[*] Confidential portions omitted, have been filed separately with the
Securities and Exchange Commission.
<PAGE> 64
(xvi) Addendum No. 1 to Lease between Premier Development of
Orlando, Inc. and Dialysis Services of Florida, Inc.-Fort
Walton Beach (7) dated August, 1991 (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 ("1993 Form 10-K"), Part IV, Item 14(a)
3(10) (xvi)). *
(xvii) Lease Renewal between JACO, L.C. and Dialysis Services of
Florida, Inc.-Fort Walton Beach(7) dated November 29, 1993
(incorporated by reference to the Company's 1993 From 10-K,
Part IV, Item 14(a) 3(10) (xvii)). *
(xviii) Agreement to Sell Real Property between the Company and
Techdyne, Inc.(2) dated March 27, 1990 (incorporated by
reference to Techdyne's Annual Report on Form 10-K for the
year ended December 31, 1989, Part IV, Item 14(a) 3(10)(x)).
*
(xix) Loan Agreement between the Company and Viragen,
Inc.(3) dated January 31, 1991 (incorporated by reference to
the Company's Current Report on Form 8-K, dated February 25,
1991 ("February, 1991 Form 8- K"), Item 7(c)(ii)). *
(xx) Florida Real Estate Mortgage and Security Agreement
from Viragen, Inc.(3) dated January 31, 1991 (incorporated by
reference to the February, 1991 Form 8-K, Item 7(c)(iii)). *
(xxi) Lease Agreement between Techdyne (Houston), Inc. (8)
and George Wimpey of Texas, Inc. dated July 30, 1991
(incorporated by reference to Techdyne's 1991 Form 10-K, Part
IV, Item 14 (a) 3 (10) (viii)). *
(xxii) Assignment and Assumption Agreement between Techdyne
(Houston), Inc. (8), the Company and George Wimpey of Texas,
Inc. dated February 28, 1992 (incorporated by reference to
Techdyne's Annual Report on Form 10-K for the year ended
December 31, 1991 ("Techdyne 1991 Form 10-K"), Part IV, Item
14 (a) 3 (10) (ix)). *
(xxiii) Lease Agreement between Techdyne, Inc.(2) and George
Wimpey of Texas, Inc. dated February 4, 1994 (incorporated by
reference to the Company's 1993 Form 10-K, Part IV, Item 14(a)
3(10) (xxxiv)). *
(xxiv) Lease between the Company and Viragen, Inc.(3) dated
December 8, 1992 (incorporated by reference to the Company's
current report on Form 8-K dated January 21, 1993 ("January,
1993 Form 8- K"), Item 7(c)(i)). *
(xxv) Addendum to Lease between the Company and Viragen, Inc.(3)
dated January 15, 1993 (incorporated by reference to the
Company's current report on Form 8-K dated January 21, 1993
("January, 1993 Form 8- K"), Item 7(c)(ii)). *
(xxvi) Guaranty of payment by the Company in favor of Equitable Bank
dated August 2, 1991 (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1991, Part II, Item 6 (a)(28)(i)). *
(xxvii) Compensation Agreement between the Company and Viragen,
Inc.(3) dated August 2, 1991 (incorporated by reference to
Viragen, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991 ("Viragen 1991 Form 10-K"), Part IV, Item 14
(a) 3(10(xxiii)). *
<PAGE> 65
(xxviii) First Amendment to Lease between Dialysis Corporation
of America(5) and Renal Treatment Centers - Maryland, Inc.
dated November 16, 1992 (incorporate reference to the
Company's January, 1993 Form 8- K, Item 7(c)(xii)). *
(xxix) Amendment to Loan Agreement between the Company and
Viragen, Inc.(3) dated August 6, 1991 (incorporated by
reference to the Viragen 1991 Form 10-K, Part IV, Item 14(a) 3
(10) (xxi)). *
(xxx) Florida Real Estate Mortgage and Security Agreement
from Viragen, Inc.(3) to the Company dated August 6, 1991
(incorporated by reference to Viragen's 1991 Form 10-K, Part
IV, Item 14(a) 3 (10)(xxii)). *
(xxxi) Lease Agreement between the Company and Brett D.
Anderson and Suzanne M. Anderson dated November 17, 1992
(incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992 ("1992 Form
10-K"), Part IV, Item 14 (a) (10) (lvi)). *
(xxxii) Mortgage between Techdyne (Scotland) Limited(4) and
The Royal Bank of Scotland dated August 8, 1994 (incorporated
by reference to the Company's June, 1994 Form 10-Q, Part II,
Item 6 (a) (28) (vi)). *
(xxxiii) Agreement ("Missives") between Techdyne (Scotland)
Limited(4) and Livingston Development Corporation regarding
Purchase by Techdyne (Scotland) Limited(4) of Its Facility
dated June 15, 1994 (incorporated by reference to the
Company's June, 1994 Form 10-Q, Part II, Item 6 (a) (28)
(vii)). *
(xxxiv) Medical Directors Agreement between Dialysis Services
of Pennsylvania, Inc. - Wellsboro (9) and George Dy, M.D.
dated September 29, 1994 [*] (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 as amended January, 1995 ("September, 1994
Form 10-Q"), Part II, Item 6 (a) (10) (I)). *
(xxxv) Agreement for In-Hospital Dialysis Services between Dialysis
Services of Pennsylvania, Inc. - Wellsboro (9) and Soldiers &
Sailors Memorial Hospital dated September 28, 1994 [*]
(incorporated by reference to the Company's September, 1994
Form 10-Q, Part II, Item 6 (a) (10) (ii)). *
(xxxvi) Form of Promissory Note executed by all optionees to the
Company dated September 12, 1994 ** (incorporated by reference
to the Company's Current Report on Form 8-K dated October 13,
1994 ("October, 1994 Form 8-K"), Item 7 (c) (99) (I)). *
(xxxvii) Form of Escrow Agreement executed by all optionees
with the Company and the Escrow Agent dated September, 1994
*** (incorporated by reference to the Company's October, 1994
Form 8-K, Item 7 (c) (99) (ii)). *
(xxxviii) Consulting Agreement between the Company and
Performance Capital Corporation dated September 30, 1994
(incorporated by reference to the Company's October, 1994 Form
8-K, Item 7 (c) (99) (iii)). *
[*] Confidential portions omitted, have been filed separately with
the Securities and Exchange Commission.
<PAGE> 66
(xxxix)Stock Option Agreement between the Company and
Performance Capital Corporation dated September 30, 1994
(incorporated by reference to the Company's October, 1994 Form
8-K, Item 7 (c) (99) (iv)). *
(xl) Medical Directors Agreement between Dialysis Services of
Pennsylvania, Inc. - Lemoyne (9) and Herbert I. Soller, M.D.
dated January 30, 1995 [*](incorporated by reference to the
Company's 1994 Form 10-K, Part IV, Item 14(a) 3(10)(ix)). *
(xli) Lease Agreement between Dialysis Services of Pennsylvania,
Inc. - Wellsboro(9) and James and Roger Stager dated January
15, 1995 (incorporated by reference to the Company's 1994 Form
10-K, Part IV, Item 14(a) 3(10)(lxii)). *
(xlii) Lease Agreement between Techdyne, Inc. (2) and
Megabrella, Inc. dated January 16, 1995 (incorporated by
reference to the Company's 1994 Form 10-K, Part IV, Item 14(a)
3(10)(lviii)). *
(xliii)Form of Exclusive Sales Representative Agreement
between Techdyne, Inc. (2) and sales representative ****
(incorporated by reference to the Company's 1994 Form 10-K,
Part IV, Item 14(a) 3(10)(lxiv)). *
(xliv) 1994 Stock Option Plan of Techdyne, Inc. (2) (incorporated by
reference to the Company's 1994 Form 10- K, Part IV, Item
14(a) 3(10)(lxv)). *
(xlv) Form of Stock Option Certificate issued under 1994 Stock
Option Plan of Techdyne, Inc. (2) (incorporated by reference
to the Company's 1994 Form 10-K, Part IV, 14(a) 3(10)(lxvi)).
*
(xlvi) Form of Stock Option Agreement dated February 17, 1995 issued
to directors of Techdyne, Inc. (2) ***** (incorporated by
reference to the Company's 1994 Form 10-K, Part IV, Item 14(a)
3(10)(lxvii)). *
(xlvii) Lease Agreement between Dialysis Corporation of America (5)
and Service All Group, Inc. and Terry Sheppard dated March 24,
1995 (incorporated by reference to the Company's Form 10-K,
Part IV, Item 14(a) 3(10)(lxviii)). *
(xlviii)Lease Purchase Agreement between the Company and B.
Braun Medical, Inc. dated August 24, 1995 (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for
the third quarter ended September 30, 1995 ("1995 Form 10-Q"),
Part II, Item 6(a)(10)(i)). *
(xlix) Employment Agreement between All American Medical & Surgical
Supply Corp.(10) and Anthony Tepedino dated October 26, 1996
(incorporated by reference to the Company's 1995 Form 10-Q,
Part II, Item 6(a)(10)(ii)). *
(l) Employment Agreement between All American Medical &
Surgical Supply Corp.(10) and Lou Ghelli dated October 26,
1995 (incorporated by reference to the Company's 1995 Form
10-Q, Part II, Item 6(a)(10)(iii)). *
(li) Loan and Security Agreement between Techdyne, Inc.(2)
and Barnett Bank of South Florida, N.A. ("Barnett Bank") for
$2,000,000 dated February 8, 1996 (incorporated by reference
to Techdyne, Inc.'s Current Report on Form 8-K, dated February
23, 1996 ("Techdyne February 1996 Form 8-K), Item
7(c)(99)(i)). *
<PAGE> 67
(lii) Revolving Demand Promissory Note for $2,000,000 from
Techdyne, Inc.(2) to Barnett Bank dated February 8, 1996
(incorporated by reference to Techdyne February 1996 Form 8-K,
Item 7(c)(99)(ii)). *
(liii) Unconditional and Continuing Guaranty of Payment and
Performance by the Company in favor of Barnett Bank dated
February 8, 1996 (incorporated by reference to Techdyne
February 1996 Form 8-K, Item 7(c)(99)(iii)). *
(liv) Subordination Agreement among Barnett Bank, the
Company and Techdyne, Inc.(2) dated February 8, 1996
(incorporated by reference to Techdyne February 1996 Form 8-K,
Item 7(c)(99)(iv)). *
(lv) Loan Agreement for $712,500 between Techdyne, Inc.(2)
and Barnett Bank dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item
7(c)(99)(v)). *
(lvi) Promissory Note for $712,500 from Techdyne, Inc.(2)
to Barnett Bank, dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item
7(c)(99)(vi)). *
(lvii) Mortgage and Security Agreement between the Company
and Barnett Bank dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item
7(c)(99)(vii)). *
(lviii) Assignment of Leases, Rents and Profits by the
Company in favor of Barnett Bank dated February 8, 1996
(incorporated by reference to Techdyne February 1996 Form 8-K,
Item 7(c)(99)(viii)). *
(lix) Promissory Note for $200,000 from Techdyne, Inc.(2)
to Barnett Bank dated February 8, 1996 (incorporated by
reference to Techdyne February 1996 Form 8-K, Item
7(c)(99)(ix)). *
(lx) Security Agreement between Techdyne, Inc.(2) and
Barnett Bank dated February 8, 1996 (incorporated by reference
to Techdyne February 1996 Form 8-K, Item 7(c)(99)(x)). *
(lxi) Lease between All American Medical & Surgical Supply
Corp.(10) and Bart Castellano dated November 1, 1995.
(lxii) Lease between Dialysis Corporation of America(5) and
Dialysis Services of Pennsylvania, Inc. - Lemoyne(9) dated
November 30, 1995.
(lxiii) 1995 Stock Option Plan of Dialysis Corporation of America(5).
(lxiv) Form of Stock Option Certificate dated November 10,
1995 issued under 1995 Stock Option Plan of Dialysis
Corporation of America(5).
(lxv) Employment Agreement between Techdyne, Inc.(2) and
Barry Pardon dated March 13, 1996(incorporated by reference to
Techdyne, Inc.'s Annual Report on Form 10-KSB for the year
ended December 31, 1995, Part IV, Item 13 (a) 2 (10)(viii)). *
(11) Statement re computation of per share earnings.
<PAGE> 68
(22) Subsidiaries of the registrant.
(27) Financial Data Schedule (for SEC use only).
- ----------
(1) Wholly-owned subsidiary merged into the Registrant in March, 1986.
(2) 63% owned subsidiary.
(3) Former public subsidiary of the Company; spun-off in 1986.
(4) 100% owned subsidiary of Techdyne, Inc.
(5) 99.1% owned subsidiary.
(6) Dissolved subsidiary of Dialysis Corporation of America.
(7) 80% owned subsidiary of Dialysis Corporation of America.
(8) 100% owned inactive subsidiary of Techdyne, Inc.
(9) 100% owned subsidiary of Dialysis Corporation of America.
(10) 80% owned subsidiary of the Company.
* Exhibits incorporated by reference are not included.
** All (10) optionees executed their options and executed the same
promissory note except as to amounts due.
*** All (10) optionees entered into the same escrow agreement except as to
the amounts of shares escrowed.
**** There are five such Agreements, all the same but for the territory
assigned.
***** Option to directors is the same except as to amount of underlying
shares purchasable.
<PAGE> 1
(10)(1xi) Lease between All American Medical & Surgical Supply Corp. and Bart
Castellano dated November 1, 1995
<PAGE> 2
RIDER TO AGREEMENT OF LEASE
DATED: NOVEMBER 1, 1995
Bart Castellano, as Landlord-Owner
All American Medical and Surgical Supply Corp., as Tenant.
THE PARTIES AGREE THAT IF ANY PROVISIONS OF THIS RIDER SHALL BE IN
CONFLICT WITH ANY PROVISION OF THE PRINTED PART OF THIS AGREEMENT OF LEASE, THE
PROVISION OF THIS RIDER SHALL CONTROL.
Thirty-Six: Provided that the Tenant is not in default under any terms and
conditions of this lease, Tenant, after December 1, 1996 has the right to
cancel this lease upon thirty days notice by certified mail to the Landlord and
the payment of two months additional rent to the Landlord.
Thirty-Seven: Notwithstanding anything to the contrary contained herein, the
Parties understand and agree that the Tenant shall be solely responsible for
the payment of all other equipment, utilities and services, including, but not
limited to water consumed, as set forth in the metered annual New York City
water bills; sewer; telephone; gas; sidewalk cleaning, etc., used in or about
the demised premises.
Thirty-Eight: The tenant shall, at its own cost and expense, provide General
liability insurance in an amount of not less that One Million Dollars
($1,000,000), which by its terms and conditions shall insure the
Owner-Landlord, as well as the Tenant, and/or their respective successors and
assigns, as their interests may appear, as additional insureds. Said policy or
a certificate thereof, of insurance, shall be delivered to the Landlord on the
execution of this lease, and any renewals of the said policies shall also be
delivered on the anniversary date of the policy.
Thirty-nine: The tenant has inspected the demised premises and the building in
which it is located and is taking same "as is". No promises or representations
have been made by the Landlord concerning the condition of the demised premises
which are not written in this Lease or Rider.
Fortieth: In conformance with the terms of paragraph numbered 38 herein, the
Tenant hereby agrees to secure a liability policy in the minimum limits of
$1,000,000 for one accident, and $100,000 for property damage, and list the
Landlord herein in such policy. Should the Tenant fail to comply, the Landlord
may secure insurance and the bills for the insurance therefore shall be
rendered by the Landlord to the Tenant, and shall be due and payable by the
Tenant when so rendered, and the amount therefore shall be deemed to be due and
payable as additional rent.
<PAGE> 3
Upon the execution of this lease and thereafter not less than fifteen days
prior to the expiration date of any policy delivered pursuant to this
paragraph, Tenant shall deliver to the Landlord the originals of all policies
or renewal policies, as the case may be, required by this lease, bearing
notations evidencing the payment of the premiums therefore. In lieu of any
such policies, the Tenant may deliver certificates of the insured, in form and
substance satisfactory to Landlord, as to the issuance and effectiveness of
such policies and the amounts of coverage afforded thereby, accompanied by
copies of such policies in form and substance satisfactorily to Landlord. Such
blanket policies shall provide specific allocation to the demised premises of
the coverage afforded thereby, and shall give to the Landlord no less
protection than that which would be afforded by separate policies.
<PAGE> 4
RIDER TO AGREEMENT OF LEASE
Forty-one: Tenant also covenants to pay, from time to time as provided in this
lease, as additional rent, all other amounts and obligations which Tenant
assumes or agrees to pay under this lease and, without prejudice to any other
rights, powers or remedies of Landlord, a late payment charge equal to five
percent of the amount of any item of rent or additional rent not paid within
five (5) days after the date when due (or, if a demand therefore is required by
the provisions of this lease, within five (5) days after the date of such
demand). In the event of any failure on the part of Tenant to pay any
additional rent, Landlord shall have all the rights, powers, and remedies
provided for in this lease, at law, in equity or otherwise, in the case of
nonpayment of fixed rent. Nothing herein shall be construed to extend the due
dates of Tenant's payments under this lease, or to waive any right or remedies
of Landlord in the event of Tenant's late payment. Tenant's obligations to pay
fixed rent and additional rent shall survive the expiration of the lease term
or earlier termination of this lease, but only for the period prior expiration
of earlier termination.
In additional thereto, if any check from the Tenant shall be returned unpaid to
the Landlord, then the Tenant shall pay the further sum of $25.00 to the
Landlord, as liquidated damages, for the expenses incurred by the Landlord for
the special handling of said check.
All rent shall be paid to the Landlord without notice, demand, counterclaim,
set off, deduction, or defense, and nothing shall suspend, defer, diminish,
abate or reduce any rent, except as otherwise specifically provided in this
lease.
Forty-two: The parties agrees that provided the Tenant is in substantial
compliance with the terms and conditions of this lease agreement, and the
monthly rent and additional rent as paid to date, the Tenant shall be given the
right of first refusal to match any offer by a bonafide purchase for value of
the demised premises, if and when the property is place for sale. The Tenant
shall be given written notice, by certified mail or delivery by hand, of any
intention to sell the demised premises of the real property by the Landlord.
Said written notice shall also include a copy of the contract of sale between
the Landlord and the proposed bonafide purchase. The Tenant shall then have
twenty (20) days in order to notify the Landlord by certified mail of accepting
Landlord's offer to sell the premises. In the event that the Tenant accepts
top match any offer, the Parties agree that they will consummate the
sale/purchase in the normal course of real estate transactions of this nature.
Forty-three: The parties agree that the Tenant shall have the option to renew
this lease for an additional Three years (3) under the terms and conditions set
forth herein for the Three (3) years as follows:
(a) For the period December 1, 1998 through November 30, 1999, the annual
rental shall be Thirty Three Thousand Six Hundred ($33,600) dollars payable in
equal monthly installments of $2,800/month, payable on the first day of the
month.
<PAGE> 5
(b) For the period December 1, 1999 through November 30, 2000, the annual
rental shall be Thirty Four Thousand Eight Hundred ($34,800) dollars payable in
equal monthly installments of $2,900/month, payable on the first day of the
month.
(c) For the period December 1, 2000 through November 30, 2001, the annual
rental shall be Thirty Six Thousand ($36,000) dollars payable in equal monthly
installments of $3,000/month, payable on the first day of the month.
Forty-Four: The Tenant is responsible to keep the sidewalk along the premises
free of debris, snow and ice. The Landlord will otherwise be responsible for
the maintenance of aforesaid sidewalk.
RIDER TO AGREEMENT OF LEASE
Forty-Five: Landlord to keep in good and safe order, condition and repair, the
roof, exterior walls, flooring, foundations, paving and outside walks and other
structural components of the Building and surrounding grounds and all commons
areas within and without the building.
Forty-Six: Landlord permits Tenant's installation of interior and exterior
signs identifying the Tenant and its business, such signs to be reasonable in
number, size and design.
---------------------------------------------
Bart Castellano
---------------------------------------------
All American Medical and Surgical Supply Corp.
<PAGE> 6
THIS LEASE made the day of November 1995 between,
BART CASTELLANO at 5600 First Avenue, Brooklyn, New York
hereinafter referred to as LANDLORD, and
ALL AMERICAN MEDICAL AND SURGICAL SUPPLY CORP.
herein jointly, severally and collectively referred to as TENANT.
WITNESSETH, that the Landlord hereby lease to the Tenant, and the Tenant
hereby hires and takes from the Landlord the Entire Premises.
in the building known as 225 60th Street, Brooklyn, New York
to be used and occupied by the tenant as warehouse/offices (approximately)
6,000 sq. ft.)
and for no other purpose, for a term to commence on December 1 1995
and to end on
November 30, 1997, unless sooner terminated as hereinafter
provided, at the ANNUAL RENT of
(a) Thirty One Thousand Two Hundred Dollars ($31,200) payable in equal
monthly installments of $2,600 per month from December 1, 1995 to November
30, 1996, and (b) Thirty Two Thousand Four Hundred Dollars (32,400)
payable in equal monthly installments of $2,700 per month from December 1,
1996 to November 30, 1997.
all payable in equal monthly installments in advance on the first day of
each and every calendar month during said term, except the first installment,
which shall be paid upon the execution hereof.
THE TENANT JOINTLY AND SEVERALLY COVENANTS:
FIRST - That the Tenant will pay the rent as above provided.
REPAIRS SECOND - That, throughout said term the Tenant will take good care of
the demised premises, fixtures and appurtenances, and all alterations,
additions, and improvements to either; make all repairs in and about the
same necessary to preserve them in good order and condition, which repairs
shall be, in quality and class, equal to the original work; promptly pay
the expense of such repairs; suffer no waste or injury; give prompt notice
to the Landlord of any tire that may occur; execute and comply
ORDINANCES with all laws, rules, orders, ordinances and regulations at any time
issued or in force (except those requiring structural AND alterations)
applicable to the demised premises or to the Tenant's occupation thereof,
of the Federal, State, and Local VIOLATIONS Governments, and of each and
every department, bureau and official thereof, and of the New York Board
of Fire Underwriters; permit at all times during business hours, the
Landlord and representatives of the Landlord to make repairs and
improvements
ENTRY to enter the demised premises for the purpose of inspection, and to
exhibit them for purposes of sale and rental; suffer the Landlord to make
repairs and improvements to all parts of the building and to comply with
Landlord to erect , use, maintain, repair and replace pipes and conduits
in the demised premises and to the floors above and below; indemnify and
save harmless
INDEMNIFY the Landlord against any and all liability, penalties, damages,
expenses and judgements arising from injury during said term LANDLORD to
person or property of any nature, occasioned wholly or in part by any act
or acts, omission or omissions of the Tenant, or of the employees, guests,
agents, assigns or undertenants of the Tenant and also for any matter or
thing growing out of the occupation of the demised premises or of the
streets, sidewalks or vaults adjacent thereto permit, during the six
months next prior to the expiration of the term the usual notice "To Let"
to be placed and to remain unmolested in a conspicuous place upon the
exterior of the demised premises; repair at or before the end of the term,
all injury done by the installation or removal of furniture and property;
and at the end of the term, to quit and surrender the demised premises
with all alterations, additions and improvements in good order and
condition. Wear and Tear excepted.
<PAGE> 7
MOVING THIRD - That the Tenant will not disfigure or deface any part of
the building, or suffer the same to be done, except so far INJURY as my be
necessary to affix such trade fixtures as are herein consented to buy the
Landlord; the Tenant will not obstruct, or SURRENDER permit the obstruction
of the street or the sidewalk adjacent thereto; will not do anything, or
suffer anything to be done on the demises premises which will increase the
rate of fire insurance upon the building or any of its contents, or be
liable to cause structural injury to said building will not permit the
accumulation of waste or refuse matter, and will not, without written
NEGATIVE consent of the Landlord first obtained in each case, either sell,
assign mortgage or transfer this lease, underlet the demised COVENANTS
premises or any part thereof for any purpose other than the one first
above stipulated, or for any purpose deemed extra hazardous on account of
fire risk, nor in violations of any law or ordinance. That the Tenant
will not obstruct or permit the OBSTRUCTION obstruction of the light,
halls, stairway or entrances to the building, and will not erect or
inscribe any sign, signals or SIGNS advertisements unless and until the
style and location thereof have been approved by the Landlord; and if any
be erected or inscribed without such approval, the Landlord may remove the
same. No water cooler, air conditioning unit or system or other AIR
CONDITIONING apparatus shall be installed or used without the prior
written consent of the Landlord.
IT IS MUTUALLY COVENANTED AND AGREED
FOURTH - If the demised premises shall be partially damaged by fire or
other cause without the fault or neglect of Tenant, Tenant's servants,
employees, agents, visitors or licensees, the damages shall be repaired by
and at the expense of Landlord and the rent until such repairs shall be
made shall be apportioned according to the part of the demised premises
which is usable by Tenant. But if such partial damage is due to the fault
or neglect of Tenant, Tenant's service, employees, agents, visitors or
licensees, without prejudice to any other rights and remedies of Landlord
and without prejudice to the rights of Subrogation of Landlord's insurer,
the damages shall be repaired by Landlord but there shall be no
apportionment or abatement of rent. No penalty shall accrue for
reasonable delay which may arise by reason of adjustment of insurance on
the part of Landlord
FIRE CLAUSE and/or Tenant, and for reasonable delay on account of "labor
troubles", or any other cause, untenantable by fire or other cause Either
Party may, within (30) days after such fire or other cause, give the other
party a notice in writing of such decision, which notice shall be given as
in Paragraph Twelve hereof provided, and thereupon the term of this lease
shall expire by lapse of time upon the third day after such notice is
given, and Tenant shall vacate the demised premises and surrender the same
to Landlord. If Tenant shall not be in default under this lease then,
upon the termination of this lease under the conditions provided for in
the sentence immediately preceding. Tenant's liability for rent shall
cease as of the day following the casualty. Tenant hereby expressly
waives the provisions of Section 237 of the Real Property Law and Agrees
that the foregoing provisions of this Article shall govern and control in
lieu thereof. If the damage or destruction be due to the fault or neglect
of Tenant the debris shall be removed by and at the expense of, Tenant.
FIFTH - If the whole or any part of the premises hereby demised shall be taken
or condemned by any competent authority for EMINENT any public use or
purpose then the term hereby granted shall cease from the time when
possession of the part so taken shall DOMAIN be required for such public
purpose and without apportionment of award, the Tenant hereby assigning to
the Landlord all right and claim to any such award, the current rent,
however, in such case to be apportioned.
Sixth - If before the commencement of the term, the Tenant be adjudicated a
bankrupt, or make a "general statement," or take LEASE NOT the benefit of
any insolvent act or if a Receiver or Trustee be appointed for the
Tenant's property, or if this lease or the estate IN EFFECT of the Tenant
hereunder be transferred or pass to or devolve upon any other person or
corporation, or if the Tenant shall default in the performance of any
agreement by the Tenant contained in any other lease to the Tenant by the
Landlord, be terminated and in that case, neither the Tenant nor anybody
claiming under the Tenant shall be entitled to go into possession of the
demised DEFAULTS premises. If after the commencement of the term, any of
the events mentioned above in this subdivision shall occur, or if Tenant
shall make default in fulfilling any of the covenants of this lease other
than the covenants for the payment of rent or "additional TEN DAY
NOTICErent" or if the demised premises become vacant or deserted, the
Landlord may give to the Tenant ten days' notice of intention to end the
term of this lease, and thereupon at the expiration of said ten days') if
said condition which was the basis of said notice shall continue to exist)
the term under this lease shall expire as fully and completely as if that
day were the date herein definitely fixed for the expiration of the term
and the Tenant will then quit and surrender the demised premises to the
Landlord, but the Tenant shall remain liable as hereinafter provided.
If the Tenant shall make default in the payment of the rent reserved
hereunder, or any item of "additional rent" herein mentioned, or any part of
either or in making any other payment herein provided for, or if the notice
last above provided for shall have been given and if the immediate condition
which was the basis of said notice shall exist at the expiration of said ten
days' period, the Landlord may immediately, or at any time thereafter, re-enter
the demised premises and remove all persons and all or any property therefrom,
either by summary dispossess proceedings, or by any suitable action or
proceeding at law, or by force, without being liable to indictment, prosecution
or damages therefore and repossess and enjoy said premises together with all
additions, alterations and improvements. In any such case or in the event that
this lease be "terminated" before the commencement of the term, as above
provided, the Landlord may either re-let the demised premises or any part
thereof as
<PAGE> 8
for the agent of the Tenant, and receive the rents therefore, applying the same
first to the payment of such expenses as the Landlord may have incurred, and
then to the fulfillment of the covenants of the Tenant herein, and the balance
if any, at the expiration of the term first above provided for, shall be paid
to the tenant. Landlord may rent the premises for a term extending beyond the
term hereby granted without releasing Tenant from any liability. In the event
that the term of this lease shall expire as above in this subdivision "Sixth"
provided, or terminate by summary proceedings or otherwise, and if the Landlord
shall not remain liable for, and the Tenant hereby agrees to pay to the
Landlord, until the time when this lease would have expired but for such
termination or expiration, the equivalent of the amount of all of the rent and
"additional rent" reserved herein, less the avails of reletting, if any, and
the same shall be due and payable by the Tenant to the Landlord on the several
rent days above specified, that is, upon each of such rent days the Tenant
shall pay to the Landlord the amount of deficiency then existing. The Tenant
hereby expressly waives any and all right of redemption in case the Tenant
shall be dispossessed by judgement or warrant of any court or judge, and the
Tenant waives and will waive all right to trial by jury in any summary
proceeding hereafter instituted by the Landlord against the Tenant in respect
to the demised premises. The words "re-enter" and "re-entry" as used in this
lease are not restricted to their technical legal meaning. Landlord shall
mitigate damage.
In the event of a breach or threatened breach by the Tenant of any of the
covenants or provisions hereof, the Landlord shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity, as if re-entry,
summary proceedings and other remedies were not herein provided for.
SEVENTH - If the Tenant shall make default in the performance of any covenant
herein contained, the Landlord may perform the same for the account of the
Tenant. If a notice of mechanic's lien be filed against the demised premises
or against premises of which the demised premises are part of, for, or
purporting to be for, labor or material alleged to have been furnished, or to
be furnished to or for the Tenant at the demised premises and if the Tenant
shall fail to take such action as shall cause such lien to be discharged within
30 days after the filing of such notice ,the Landlord may pay the amount of
such lien or discharge the same by deposit or by bonding proceedings, and in
the event of such deposit or bonding proceedings, the Landlord may require the
lienor to prosecute an appropriate action to enforce the lienor's claim. In
such case, the Landlord may pay any judgement recovered on such claim. Any
amount paid or expense incurred by the Landlord as in this subdivision of this
lease provided, and any amount as to which the Tenant shall at anytime be in
default for or in respect to the use of water, electric current or sprinkler
supervisory service, and any expense incurred or sum of money paid by the
Landlord by reason of failure of the Tenant to comply with any provision
hereof, or in defending any such action, shall be deemed to be additional rent
for the demised premises, and shall be due and payable by the Tenant to the
Landlord on the first day of the next following month or at the option of the
Landlord on the first day of any succeeding month. The receipt by the Landlord
of any installment of the regular stipulated rent hereunder or any of said
"additional rent" shall not be a waiver of any other "additional rent"
EIGHTH - The failure of the Landlord to insist, in any one or more instances
upon a strict performance of any of the covenants of this lease, or to exercise
any option herein contained, shall not be construed as waiver or a
relinquishment for the future of such covenant or option, herein contained
shall not be construed as a waiver or a relinquishment for the future of such
covenant or potion, but the same shall continue and remain in full force and
effect. The receipt by the Landlord of rent, with knowledge of the breach of
any covenant thereof, shall not be deemed a waiver of such breach and no waiver
by the Landlord of any provision hereof shall be deemed to have been made
unless expressed in writing and signed by the Landlord. Even though, the
Landlord shall consent to an assignment hereof no further assignment shall be
made without express consent in writing by the Landlord
NINTH - If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than the tenant, the Landlord
may collect rent from the assignee, under-tenant or occupant and apply the net
amount collected to the rent herein reserved, and no such collection shall be
deemed a waiver of the covenant herein against assignment and underletting, or
the acceptance of the assignee under-tenant or occupant as tenant, or a release
of the tenant from the further performance by the Tenant of the covenants
herein contained on the part of the Tenant.
TENTH -This lease shall be subject and subordinate at all times, to the lien of
the mortgages now on the demised premises, and as to all advances made or
hereafter to be made upon the security thereof, and subject and subordinate, to
the lien of any mortgage or mortgages which at any time may be made a lien upon
the premises. The Tenant will execute and deliver such further instrumentation
subordinating this lease to the lien of any such mortgage of mortgages as shall
be desired by mortgagee or proposed mortgagee. The Tenant hereby appoints the
landlord the attorney-in-fact of the Tenant, irrevocably, to execute and
deliver any such instrument or instruments for the Tenant.
ELEVENTH - All improvements made by the Tenant to or upon the demised premises
except said trade fixtures, shall when made, at once be deemed to be attached
to the freehold and become the property of the Landlord and at the end or other
expiration of the term, shall be surrendered to the Landlord in as good
condition and order as they were in when installed, reasonable wear and damages
by the elements excepted.
TWELFTH - Any notice or demand which under the terms of this lease or under any
statute must or may be give or made by the partied hereto shall be in writing
and shall be given or made by mailing the same by certified or registered mail
address to the respective parties at the addresses set forth in this lease.
<PAGE> 9
THIRTEENTH - The landlord shall not be liable for any failure of water supply
or electrical current, sprinkler damage, or failure of sprinkler service, nor
of injury or damage to person or property caused by the elements or by other
tenants or persons in said building or resulting from steam, gas, electricity,
water, rain, or snow, which may leak or flow from any part of said buildings or
from the pipes, appliances or plumbing works of the same, or from the street or
sub-surface, or from any other place or for a governmental authority in
construction of any public work.
FOURTEENTH - No diminution or abatement of rent, or other compensation shall be
claimed or allowed for inconvenience or discomfort arising from the making of
repairs or improvements to the building or to its appliances nor for any space
taken to comply with any law, ordinance, or order of governmental authority.
In respect to the various "service" if any, herein expressly or impliedly
agreed to be furnished by the Landlord to the Tenant, it is agreed that there
should be no diminution or abatement of the rent, or any other compensation,
for interruption or curtailment of such "service" when such interruption or
curtailment shall be due to accident, alterations or repairs desirable
necessary to be made or to inability or difficulty in securing supplies or
labor for the maintenance of such service or to some other cause, not gross
negligence on the part of the Landlord. No such interruption or curtailment of
such service shall be deemed a constructive eviction. The Landlord shall not
be required to furnish, and the Tenant shall not be entitled to receive any of
such services during any period wherein the Tenant shall be in default in
respect to the payment of rent. Neither shall there be any abatement or
diminution of rent because of making repairs, improvements or decorations to
the demised premises after the date above fixed for the commencement of the
term, it being understood that rent shall, in any event, commence to run at
such date above so fixed.
SIXTEENTH - In the event that an excavation shall be made for building or other
persons upon land adjacent to the demised premises or shall be contemplated to
be made, the Tenant shall afford to the person or persons causing or to cause
such excavation, license to enter upon the demised premises for the purpose of
doing such work as said persons shall deem to be necessary to preserve the wall
or walls, structure or structures upon the demised premises from injury and to
support the same proper foundations.
SEVENTEENTH - No vaults or space not within the property line of the building
are leased hereunder. Landlord makes no representation as to the location of
the property line of the building. Such vaults and space as Tenant may be
permitted to use or occupy are to be used under a revocable license and if such
license be revoked by the Landlord as to use of part or all of the vault or
space Landlord shall not subject any liability; Tenant shall not be entitled
to any compensation or reduction in rent in rent nor shall this be deemed
constructive or actual eviction. Any tax, fee or charge of municipal or other
authorities for such vaults or space shall be paid by the Tenant for the Period
of the Tenant's use or occupancy thereof.
EIGHTEENTH - That during seven months prior to the expiration of the term
hereby granted, applicants shall be admitted at all reasonable hours of the day
to view premises until rented, and the Landlord and the Landlord's agents shall
be permitted at any time during the term to visit and examine them at any
reasonable hour of the day and workmen may enter at any reasonable hour of the
day when authorized by landlord' or the Landlord's agents. The Landlord shall
accord reasonable care to the Tenant's property) and without in any matter
affecting the obligations and covenants of this lease; it is however, expressly
undersigned that the right and authority hereby reserved , does not impose nor
does Landlord assume, by reason thereof, any responsibility or liability
whatsoever for the care or supervision of the sad premises or any of the pipes,
fixtures, appliance, or appurtenances, contained or therewith in any manner
contained.
NINETEENTH - The Landlord has made no representations or promises in respect to
said building or to the demised premises except those contained herein, and
those if any, contained in some written communication to the Tenant, signed by
the Landlord. This instrument may not be changed, modified, discharged or
terminated orally.
TWENTIETH - If the Tenant shall at any time be in default hereunder, and if the
Landlord shall institute an action or summary proceeding against the Tenant
based upon such default, then the Tenant will reimburse the Landlord for the
expense of attorney's fees and disbursements of funds thereby incurred by the
landlord so far as the same are reasonable amount. Also so long as the Tenant
shall be a Tenant hereunder the amount of such expenses shall be deemed to be
additional rent hereunder and shall be due from the Tenant to the Landlord on
the first day of the month following the incurring of such respective expenses.
TWENTY-FIRST - Landlord shall not be liable for failure to give possession of
the premises upon commencement date by reason of the fact that premises are not
ready for occupancy or due to a prior Tenant wrongfully holding over or any
other person wrongfully in possession or for any other reason; in such event
the rent shall not commence until possession is given or is available, but the
term is herein shall not be extended provided tenant may take posses rent fee.
<PAGE> 10
TWENTY-SECOND - If the demised premises or any part thereof consist of a store,
or of a first floor, or of any part thereof, the Tenant will keep the sidewalk
and curb in front thereof clean at all times and free of snow and ice, and will
keep insured in favor of the Landlord, all plate glass therein and furnish the
Landlord with policies of insurance covering the same.
TWENTY-THIRD - If by reason of the conduct upon the demised premises of a
business not herein permitted, or if by reason of the improper or careless
conduct of any business upon or use of the demised premises, the fire insurance
rate shall at any time be higher than it otherwise would be, then the Tenant
will reimburse the Landlord, as additional rent hereunder, for that part of all
fire insurance premiums hereafter paid out by the Landlord which shall have
been charged because of the conduct of such business not so permitted, or
because of the improper or careless conduct of any business upon or use of the
demised premises , and will make such reimbursement upon the first day of the
month following such outlay by the Landlord; but this proceeding wherein the
Landlord and Tenant are parties, a schedule or "make-up" of rate for the
building on the demised premises, purporting to have been issued by New York
Fire Insurance Exchange, or other body making fire insurance rates for the
demised premises, shall be prima facie evidence of the facts therein stated and
of the several items and charges included in the fire insurance rate then
applicable to the demised premises.
TWENTY -FOURTH - If a separate water meter be installed for the demised
premises, or any part thereof, the Tenant will keep the same in repair and pay
the charges made by the municipality or water supply company for or in respect
to the consumption of water, as and when bills therefor are rendered. As
additional rent the Tenant's proportionate part, determined as aforesaid, of
the sewer rent or charge imposed or assessed upon the building of which the
premises are a part.
TWENTY-FIFTH - That the Tenant will purchase from the Landlord, if the Landlord
shall so desire, all electric current that the Tenant requires at the demised
premises and will pay the Landlord for the same, as the amount of consumption
shall be indicated by the meter furnished therefor. The price for said current
shall be the same as the amount of consumption similar to that of the Tenant by
the company supplying the electricity in the same community. Payments shall be
due as and when bills shall be rendered. The Tenant shall comply with like
rules, regulations and contract provisions as those prescribed by said company
for a consumption similar to that of the Tenant.
TWENTY-SEVENTH - The sum of Twenty six hundred ($2,600) Dollars is deposited by
the Tenant herein with the Landlord herein as security for the faithful
performance of all covenants and conditions of the lease by the said Tenant.
If the Tenant faithfully performs all the covenants and conditions on his part
to be performed , then the sum deposited shall be returned to said Tenant.
TWENTY-EIGHTH - This lease is granted and accepted on the especially understood
and agreed condition that the Tenant will conduct his business in such a
manner, both as regards to noise and kindred nuances, as will in no wise
interfere with, annoy, or disturb any other tenants, in the conduct of their
several business or the landlord in the management of the Landlord in the
management of the building; under penalty of forfeiture of this lease promptly.
TWENTY-NINTH - The Landlord hereby recognizes J.A. Maguire, JR. as the broker
who negotiated and consummated this lease with the Tenant herein, and agrees
that if,as, and when the Tenant exercises the option, if any, contained herein
to renew this lease, or fails to exercise the option, if any, contained therein
to cancel this lease, the Landlord will pay to said broker a further commission
in accordance with the rules and commission rates of the real estate board in
the community. A sale, transfer or other deposition of the Landlord's
interest is said lease shall not operate to defeat the Landlord's obligation to
pay the said commission to the said broker. The Tenant herein hereby
represents to the Landlord that the said broker is the sole and only broker who
negotiated and consummated this lease with the Tenant.
THIRTIETH - The Tenant agrees that it will not require, permit, suffer, nor
allow the cleaning of any window, or windows, in the demised premises from the
outside (within the meaning of Section 202 of the Labor Law) unless the
equipment and safety devices required by law, ordinance, regulation or rule,
including without limitation Section 202 of the New York Labor Law are provided
and used, and unless the rules or any, supplemental rules of the Industrial
Board of the State of New York are fully complied with; and the Tenant hereby
agrees to indemnify the Landlord, Owner, Agent, manager and/or Superintendent,
as a result of the Tenant's requiring , permitting, suffering, or allowing any
window, or windows in the demised premises to be cleaned from the outside in
violation of the requirements of the aforesaid laws, ordinances, regulations
and/or rules.
THIRTY-FIRST - The invalidity or unenforceability of any provision of this
lease shall in no way affect the validity or enforceability of any other
provision hereof.
THIRTY-SECOND - In order to avoid delay, this lease has been prepared and
submitted to the Tenant for signature with the understanding that it shall not
bind the landlord unless and until it is executed and delivered by the
Landlord.
THIRTY-FIFTH - This lease and obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant
to be performed shall in nowise be affected, impaired, or excused because
Landlord is unable to supply or is delayed in supplying any service expressly
or impliedly to be supplied or is unable to make, or is delayed in making any
repairs, additions alterations, or decoration or if Landlord is prevented or
delayed from doing so by reason of the conditions of supply and demand which
have been or are affected by war or other emergency.
<PAGE> 11
THE LANDLORD COVENANTS
FIRST - That if and so long as the Tenant pays the Rent and additional rent
reserved thereby, and performs and observes the covenants and provisions
thereof, the Tenant shall quietly enjoy the demised premises, subject, however,
to the terms of this lease and to the mortgages above mentioned.
SEE ATTACHED RIDER
and it is mutually understood and agreed that the covenants and agreements
contained in within lease shall be binding upon the parties hereto and upon
their respective successors, heirs, executors, and administrators
IN WITNESS WHEREOF, the Landlord and Tenant have respectively signed and sealed
these present the day and year first above written.
----------------------------------------------
Bart Castellano
----------------------------------------------
All American Medical and Surgical Supply Corp.
<PAGE> 1
(10)(1xii) Lease between Dialysis Corporation of America and Dialysis
Services of Pennsylvania, Inc. - Lemoyne dated November 30, 1995
<PAGE> 2
COMMERCIAL LEASE
PARTIES
This Agreement of Lease ("Lease") made this 30th day of November, 1995 between
DIALYSIS CORPORATION OF AMERICA (for the purpose of this Lease to be known as
"Lessor" and DIALYSIS SERVICES OF PENNSYLVANIA, INC. - LEMOYNE (for the purpose
of this Lease to be known as "Lessee").
1. PREMISES
WITNESSETH, that Lessor, in consideration of the rents and covenants
hereinafter mentioned, does demise and lease unto Lessee all that certain space
of 5,000 square feet, to be used for an artificial kidney dialysis center and
related office purposes, as set forth on Schedule A attached, in the DCA
LEMOYNE BUILDING, 27 Miller Avenue, Lemoyne, Pennsylvania (the "Space").
Lessee shall not use, store on the premises or in the Space or dispose of
hazardous, biological medical or toxic substances during the term of this Lease
except in full compliance with federal and state environmental laws. Violation
of this clause will result in the immediate termination of this Lease with a
forfeiture of all unused rents and deposits and Lessee to be held fully
responsible and liable for all costs and expenses incurred in the clean up and
removal of such substances and any and all damages resulting therefrom,
consequential or otherwise. Termination of this Lease shall not affect or
impair any rights or remedies that Lessor may have at law or in equity with
respect to this environmental clause, and Lessee hereby indemnifies and holds
harmless the Lessor, its officers, directors, employees, successors and assigns
from and against all demands, claims, civil or criminal actions or causes of
action, penalties, fines, losses, damages, liabilities, obligations, costs,
disbursements, expenses of fees of any kind or nature (including, without
limitation, damages, costs, attorneys', paralegals', consultants', or experts'
fees and disbursements and costs of litigation) which may at any time be
imposed upon, incurred by or asserted or awarded against Lessor which are,
directly or indirectly related to, resulting from, or arising in connection
with a violation of this clause or any federal, state or local environmental
law by Lessee or its agents, servants, invitees, employer, or other
representatives. This indemnification includes use and disposal of hazardous
and non-hazardous medical waste as per Section 3 hereof..
2. TERM
The term of this Lease shall be, subject to the conditions hereof, for five
years beginning on the first day of December, 1995, and ending on the 30th day
of November, 2000 ("Term").
In the event said commencement falls on a date later than the first day of a
month, then Lessee shall pay a prorated rent for said partial month.
3. RENT
IN CONSIDERATION of which, Lessee agrees to pay to Lessor for the use of the
Space the sum of Sixty Thousand ($60,000) Dollars per annum plus any applicable
rental tax to be payable in monthly installments as follows: The first
installment of Five Thousand ($5,000) Dollars to be payable upon the execution
of this Lease, and thereafter in monthly installments of Five Thousand
<PAGE> 3
($5,000) Dollars, in advance on the first day of each calendar month during the
Term beginning January 1, 1996.
In addition, the Lessee agrees to pay for its pro rata share of the following:
(i) electric charges less the square footage of other tenants that
are separately metered;
(ii) water and sewerage charges;
(iii) real estate and municipal taxes;
(iv) snow and ice removal from sidewalks and parking areas;
(v) trash removal;
(vi) janitorial services for all common areas;
(vii) fuel;
(viii) pest control if provided by Lessor;
(ix) lawn maintenance;
(x) lock and/or key replacement; and
(xi) HVAC, provided to the extent there is a separate HVAC for the
Space, then to that extent Lessee shall pay full share.
Lessee's pro rata charges shall be determined based upon the percentage of the
Space to the square footage of the other rentable space within the building,
common area, hallways, public bathrooms, mechanical rooms excluded. These
charges will be billed to Lessee at the end of each month in which the charges
were incurred. Payment by the Lessee shall be due and payable within five (5)
days of such billing and will be subject to Section 4, the late charges clause.
Rentable space within the building is 12,100 sq. ft. Lessee's pro rata
percentage is 41.3%.
The Lessee shall be responsible to obtain and pay for its own janitorial and
telephone services for the Space. All refuse and rubbish shall be removed by
the Lessee from the Space and shall be placed in plastic liners or other
suitable containers prior to disposal in the outside dumpster, not on top or
outside around the dumpster. In addition, Lessee shall pay to Lessor the cost
of removal from the building and the Space of any of Lessee's refuse and
rubbish which exceeds the refuse and rubbish usually attendant upon the use of
such premises as offices. Such excess refuse removal charges will be billed to
the Lessee at the end of the month in which incurred and is due and payable as
additional rent.
Lessee shall have the right to inspect documents relating to the above
mentioned charges upon reasonable notice and during normal business hours of
the Lessor.
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Lessee represents that medical waste, hazardous or non-hazardous, is subject to
and will comply with federal and state hazardous waste laws and non-hazardous
medical waste regulation. Lessee shall solely be responsible for lawful use
and disposal of hazardous and non-hazardous medical waste, which Lessee shall
have properly removed and disposed of by bona fide licensed medical waste
sanitation agencies, all of which shall be accomplished at the sole expense of
the Lessee.
4. LATE CHARGE
Rental payments are due on the first day of each month. Late payment shall be
subject to a ten (10%) percent late charge per month or any portion thereof.
Payments, when received by Lessor, shall be applied to late charges, if any,
and then delinquent rents.
5. SECURITY DEPOSIT
(a) A "security deposit" in the amount of $_______ shall be paid on
the execution of this Lease in an amount equal to the ____ months rent, and
shall be held by Lessor as security for the performance by Lessee of all the
terms, covenants and conditions of this Lease and/or the correction of damage
in excess of normal wear and tear; otherwise, the "security deposit" or any
balance thereof, shall be returned without interest after the Lessee has
vacated and left the Space in acceptable, clean condition and surrendered all
keys to Lessor. It is understood and agreed that the said "security deposit"
is not to be considered as the last or any monthly rent payments under the
Lease.
(b) In the event of any delinquent payments or breach of any terms,
covenants or conditions of this Lease, the security deposit will be credited
immediately in the amount due to the Lessor and will be replenished by the
Lessee on the first day of the following month along with said month's rent.
6. RENEWAL OPTION
Lessee shall have the option of renewing this Lease at an increased rental
based upon (i) a three (3%) percent increase plus (ii) the increase in the
Consumer Price Index (revised) United States City Average All Items and
Commodity Groups, issued by the Bureau of Labor Statistics of the United States
Department of Labor ("CPI"). The CPI will be determined for the six (6) moths
prior to the expiration date of this Lease as compared to the CPI dated on the
commencement of this Lease, provided, that no rental increase shall be greater
than thirty (30%) percent of the then current rental payment under the Lease.
The Lease shall thereupon continue on the same terms and conditions as herein
contained for two periods of five years each, provided that:
(a) Lessee is not in default hereunder;
(b) Lessee gives notice of its exercise of this option not less
than ninety (90) days prior to the expiration of the Term (or renewal Term as
the case may be).
7. PLACE OF PAYMENT
The rent shall be promptly paid on the several days and times specified herein
without deduction or abatement, unless hereinafter provided to the contrary, at
the office of Lessor, 402 Marvel Court,
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2nd Floor, P.O. Box 1878, Easton, Maryland 21601, or such other address as
Lessor may, from time to time, designate in writing.
8. INABILITY TO GIVE POSSESSION
Lessor shall not be liable to Lessee for any damage which may be caused to
Lessee by the failure of the Lessor to give possession of the Space by
______________; failure of which shall give Lessee the right to terminate this
Lease.
9. HOLDING OVER AS RENEWAL
A hold over by Lessee beyond the Term of this Lease or any hereinabove duly
authorized additional Term, or failure of Lessee to give notice of its
intention to vacate the Space at the end of such Term at least ninety (90) days
prior to such end of Term, shall, at the option of Lessor, be deemed a renewal
of this Lease for six (6) months and thereafter on a month-to-month basis, and
for the entire period herein stated Lessee shall be a non-tenant subject to
dispossession without further notice or process of law and in accordance with
Section 16, with the renewal being under and subject further to an automatic
ten (10%) percent increase in the monthly rental payments for each six (6)
month hold-over period.
10. UTILITIES, JANITORIAL, ETC.
Lessor agrees to provide the utilities (electricity sufficient to provide an
adequate and uniform level of illumination, ventilating and air circulating
equipment, and other building machinery and equipment, heat, hot and cold
water), repairs, daily janitorial services in the common areas only, and the
required removal of snow and ice from the pavement(s), driveway(s), and parking
area(s), for which Lessee should pay its pro rata share as per Section 3;
provided that any repairs to a HVAC relating to the Space shall be the
responsibility of Lessee or per Section 13. If the Lessee desires to introduce
call boxes, telegraph, or telephone wires and instruments, Lessee may do so at
Lessee's own expense, subject to the prior written approval of the Lessor, and
the Lessor will place or direct the placing of same as to where, and how, and
to what extent they are to be placed, at the cost and expense of Lessee and
without such direction, no boring or cutting for wires will be permitted. The
attaching of wires to the outside of the building is absolutely prohibited.
Lessor will have the immediate right to reimbursement for repairs of any such
unauthorized installations. No attachment shall be made to the electrical
system of the building for the running of electric fans or motors, for the
storing of electricity, or for any other purpose without the written consent of
the Lessor. Further, the electricity supplied to the Space shall not be used
for any other purpose than lighting florescent lamps, typewriters, adding
machines, electric clocks, addressographs, mimeograph machines, dictating
equipment, personal computers, and other office equipment and dialysis
equipment that will not require an unusual amount of electricity, without the
written consent of the Lessor. Under no circumstances will any main frame
computers be installed in the Space. The Lessor in all cases reserves and
retains the right to require the placing and using of electrical protecting
devices to prevent the transmission of excessive currents of electricity in,
to, or through the building, and to require the changing of wires and their
placing and arrangement as the Lessor may deem necessary; and further, to
require compliance on the part of all using or seeking access to such wires
with such rules as the Lessor may establish relating thereto, and in the event
of non-compliance with the requirements and rules, the Lessor shall have the
right to immediately cut and prevent the use of such wires.
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Lessor shall not in any way be responsible or liable to Lessee at any time for
any loss, damage or expense resulting from any change in the quantity or
character of the electric service or for its being no longer suitable for
Lessee's requirements or for any cessation or interruption of the supply or
current unless the same arises from Lessor's failure to pay its utility bills
or from Lessor's acts of gross negligence, nor shall any such loss, damage or
expense or non- supply of electric service or current in any way affect the
tenancy or in any way relieve Lessee of any obligation under the terms of this
Lease.
Lessee covenants and agrees that at all times it use of electric current shall
never exceed the capacity provided by Lessor. Lessee shall make no changes,
alternations, additions, substitutions ("changes") to any risers, conduits,
meters, panel boxes, switch gear, wiring, any other part of electric service
without the express prior written consent of the Lessor.
Lessee acknowledges that the leased Space is based upon the normal providing of
dialysis services and use of office space between the hours of 6:00 a.m. and
6:00 p.m. Monday through Saturday, exclusive of Sundays and holidays, wherein
the Lessor is required to provide electric and other services as required in
this Lease. The use of this Space in excess of the hours and days stated
herein will result, at the discretion of the Lessor, in an additional charge.
The additional charge shall be a standard hourly rate which Lessor shall
determine and may adjust from time to time, based upon the actual cost of
providing and maintaining building services and electric current for a minimum
four hour period, inclusive of overhead, depreciation and such other expenses
as are customarily incurred in the operation, maintenance and safekeeping of a
similar class dialysis center.
11. NEGATIVE COVENANTS OF LESSEE
(a) Waste, Damage, or Injury to Premises; Restoration. No waste,
damage or injury to the Space shall be committed, and at the end of the Term,
the Space shall be restored, at the option of the Lessor, to the same condition
in which it was at the commencement of the Term, and the cost of said
restoration shall be paid by Lessee, which cost shall be treated as additional
rent due and owing under the terms of this Lease. This Section 11(a) is
subject to the exceptions of ordinary wear and tear and unavoidable damage by
fire, elements, casualty, or other cause or happening not due to Lessee's
negligence.
(b) Lawful Possession, Fire Precautions, Machinery Weights. Lessee
shall not carry on any unlawful or immoral business in or about the Space, and
shall not carry on any business which will endanger the building from fire or
cause the forfeiture of any fire insurance, and Lessee will indemnify Lessor
for and replace lost insurance and/or any deductible under existing insurance
policy if caused by Lessee. Lessee shall not operate any machinery or
equipment that may be harmful to the building or disturbing the other occupants
of the building, nor place anything in any portion of the Space with such
weight that is beyond the safe carrying capacity of the structure. Any
violation will be grounds for immediate eviction with the balance of that
month's rent and security deposit forfeited. The operation of a dialysis
center shall not be deemed a violation of this Section 11(b) or any other
provision of this Lease.
(c) Signs. Lessee shall not place any signs upon the exterior of the
Space, nor cause any lettering of any kind whatsoever to be placed upon the
outside windows of the Space, without the written consent of Lessor, which
consent shall not be unreasonably withheld. Lessee may, however, place a sign
upon its door after first obtaining approval from Lessor as to size and style
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and content. Lessee will be identified by name and business on any sign or
directory placed outside or inside the building by Lessor for purposes of
identifying tenants, at Lessee's expense.
(d) Alterations. Lessee shall make no alternations, additions, or
improvements in or about the Space without Lessor's prior written consent. All
such work shall be done at such time and in such manner as shall minimize any
inconvenience to other occupants of the building. As a condition precedent to
Lessor's consent, Lessee shall deliver to Lessor written plans and
specifications for all work and written plans and specifications for all
heating, ventilating and air conditioning. Lessor shall have the right to
approve any contractor to be used by Lessee in connection with any approved
alterations and improvements to the Space. Lessee shall comply with all
governmental rules and regulations in connection with such work and shall
prevent any lien or obligation from being created against or imposed upon the
building and will discharge all liens and charges for services rendered or
materials furnished immediately after said liens occur or such charge becomes
due and payable. Any alternations, additions or improvements made by Lessee
and any fixtures installed as part thereof, shall become the property of
Lessor, provided, however, that Lessor shall have the right to require Lessee
to remove such fixtures or improvements and restore the Space to its original
condition at Lessee's cost upon the expiration or sooner termination of this
Lease. All such expense shall be charged against the security deposit in
accordance with Section 5.
(e) Vacation. Lessee shall neither vacate nor desert Space during
the Term nor permit the same to be empty and unoccupied.
(f) Assigning, etc. by Lessee. Lessee shall not have the privilege
of assigning or subletting the Space, or mortgaging any interest it may have by
virtue of this Lease.
(g) Encumbrance. The Lessee shall not, by any act or omission,
encumber the title of the Lessor not shall the interest or estate of the Lessor
be in any way subject to any claim by way of lien of encumbrance, whether
claimed by operation of law of by virtue of any express or implied contract by
Lessee. Lessee will hold harmless the Lessor against any such claims. All
such claims may be charged against the security deposit in accordance with
Section 5 or otherwise charged directly to Lessee as additional rent accruing
for the month following the date of the claim.
12. LESSOR'S RIGHTS
(a) Right of Inspection. It is agreed and understood that Lessor,
Lessor's duly authorized agents, contractors, and employees may enter the Space
during normal business hours and at any other reasonable times during the Term,
for the purpose of inspecting and maintaining the premises.
(b) Rules and Regulations. Lessor may from time to time establish
reasonable rules and regulations for the safety, care, and cleanliness of the
Space, and for the preservation of good order therein. Such rules and
regulations shall, when notice thereof is given to Lessee, form a part of this
Lease.
13. RESPONSIBILITY OF LESSEE
(a) Damages or Injury to Property. All damages or injuries done to
the Space or to the HVAC relating to the Space by the Lessee and/or Lessee's
customers, clerks, servants, agents,
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employees, visitors, invitees of Lessee, and individuals for whom Lessee is
responsible (collectively "Lessee's Agents") other than those caused by
ordinary wear and tear, shall be the sole responsibility of Lessee and shall be
repaired by Lessee at its expense. Lessee covenants and agrees to make such
repairs within ten (10) days' written notice given to Lessee by Lessor, and if
Lessee shall neglect to make said repairs or commence to make the same promptly
or complete the same within ten (10) days after receiving such notice, Lessor
shall have the right to make such repairs at the expense and cost of Lessee,
and the amount thereof may be charged against the security deposit in
accordance with Section 5 or otherwise charged directly to Lessee as additional
rent accruing for the month following the date of repair.
(b) Payment of Judgments, etc. Lessee shall bear, pay and discharge,
when and as the same become due and payable, all judgments and lawful claims
for damages or otherwise against Lessor, arising from Lessee's and the Lessee's
Agent's use or occupancy of the Space and Lessee will assume the burden and
expense of defending all such suits, whether brought before or after the
expiration of this Lease, and will protect, indemnify and save harmless Lessor,
or Lessor's agents, servants, employees, and the public at large, and Lessee
will pay Lessor's reasonable legal fees in bringing an action against or
defending an action caused by Lessee.
(c) Discharge of Liability. In consideration of securing this Lease
at the above-stated rent, Lessee does hereby release and discharge the Lessor,
its agents, servants and/or employees, and said Lessor's successors and/or
assigns, from any and all liability by reason of any injury, loss and/or damage
to any person or property, caused by any fire, the breaking, bursting, stoppage
and/or leakage of any water pipe, gas pipe, sewer, basin, water closet, steam
pipe, and drain in any part or portion of the Space and/or any part or portion
of the building of which the Space is a part, and from all liability for any
and all injury, loss and/or damage caused by the water, gas, steam, waste, and
contents of said water pipes, gas pipes, steam pipes, sewers, basins, water
closets, and drains or the elements or from any kind of injury, loss, and/or
damage which may arise from any other cause in the Space, on the premises or in
the building.
(d) Governmental Orders. Lessee agrees, at its own expense, to
promptly comply with all requirements of any legally constituted public
authority made necessary by reason of Lessee's occupying of the Space; and
failure of Lessee to so comply will allow Lessor to comply and all costs and
expenses to effect compliance to be charged to Lessee as additional rent
accruing for the month following effectuation of such compliance.
14. RESPONSIBILITY OF LESSOR
(a) Partial or Total Destruction of Property. In the event that the
building or the Space shall be totally or substantially damaged by fire or
other casualty or happening, this Lease shall not terminate, but in such event
Lessor agrees to repair, restore, or rebuild the Space as the case may be,
subject to the availability of insurance proceeds, to its condition immediately
prior to such damage or destruction with due diligence and within four (4)
months after such damage; and in the event that the Space cannot be repaired,
restored, or rebuilt as aforesaid, within such four (4) month period, Lessee's
sole remedy shall be the right to cancel and terminate this Lease without
further liability on the part of either party. The rent payable hereunder
shall entirely abate from the date of such destruction in case the Space is
substantially destroyed or so damaged as to be rendered untenantable, until the
Space shall have been restored, repaired or rebuilt, as the case may be, and
put in proper condition for use and occupancy. Lessor agrees to institute such
repairs immediately after such damage and to complete the same with due
diligence and within a
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reasonable time. If the Space is damaged but not wholly destroyed by any such
causalities, rental shall abate in such proportions as use of the Space has
been destroyed, and the Lessor shall restore the Space to substantially the
same condition as before the damage within a reasonable time and with all due
diligence, whereupon full rental shall recommence.
(b) Damage for Interruption of Use. Lessor shall not be liable for
any damage, compensation or claim by reason of inconvenience of annoyance
arising from the necessity of making repairs, alterations and/or additions to
any portion of the Space, the interruption in the use of the Space, or the
termination of this Lease by reason of the destruction of the Space.
15. REMEDIES OF LESSOR
If Lessee should remove or prepare to remove, or attempt to remove from the
Space before the expiration of the Term or at any time during the continuance
of this Lease, or if Lessee shall be in default in the payment of any
installment of rent for the period of ten (10) days, or should there be a
default in any of the covenants or conditions as herein contained, and should
Lessee fail to remedy such default within twenty (20) days of notice, or if
Lessee should become insolvent, or make an assignment for the benefit of
creditors, or if a petition in bankruptcy is filed by or against Lessee or Bill
of Equity or other proceeding for the appointment of a receiver for Lessee is
filed, or if proceedings for reorganization or for composition with creditors
under any state or federal law be instituted by or against Lessee, or if the
real or personal property of Lessee shall be sold after levy by any sheriff,
marshall or constable, then in that event, rent for the unexpired portion of
the then current Term, at the rate which is then due and collectible under the
terms of this Lease, shall immediately become due and payable and shall be
collectible by distraint or otherwise, with the security deposit forfeited, and
Lessor shall have the further right in said event, to terminate this Lease, by
giving notice in writing to Lessee herein or to the person then in charge of
the Space, and through Lessor's agent or attorney, to re-enter and remove all
persons and Lessee's property therefrom without being guilty in any manner of
trespassing, and without prejudice to any remedies for arrears of rent or
breach of covenant, and Lessor, through its agent or attorney, may resume
possession of the Space and shall relet the same for the remainder of the Term
at the best rent Lessor can then obtain, and the Lessee shall make good any
difference in the rent.
16. ACCEPTANCE OF NOTICE TO QUIT DISPOSSESSION; WAIVER
OF REMEDIES BY LESSEE; WAIVER OF DEMAND
Lessee hereby accepts notice to quit, remove from, and surrender up possession
of the Space to Lessor at the expiration of the Term hereof, whenever it may be
determined. On failure to pay rent due for ten (10) days, or upon breach of
any other condition of this Lease with security deposit forfeited, Lessee shall
be a non-tenant, subject to dispossession by Lessor, without further notice or
process of law, with release of error and of damages, and Lessor may reenter
the premises and dispossess Lessee without thereby becoming a trespasser.
Lessee hereby waives the benefit(s) of all exemption laws of this Commonwealth
that now are in force or may hereinafter be in force, or in any distress or
distresses that may be made for collection of the whole of said rent, or any
part thereof. Lessee also waives the benefit of stay of execution,
inquisition, extension, right of appeal, certiorari and all errors, in all
proceedings arising out of this Lease. Lessee does also hereby waive any and
all demand for payment of the rent herein provided for, either on the day due
or on any other date, either on the land itself or in any other place, and
agrees that such demand shall not be a condition of reentry or of recovery of
possession without legal process or by means of any action or proceeding
whatsoever.
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17. CONFESSION OF JUDGMENT
If rent and/or charges hereby reserved as rent shall remain unpaid for ten (10)
days beyond any day when the same ought to be paid, Lessee hereby empowers any
attorney of any court of record to appear for Lessee, in any and all actions
which may be brought for rent and/or the charges, payments, costs and expenses
reserved as rent, or agreed to be paid by Lessee and/or to sign for Lessee an
agreement for entering into any competent court an amicable action or actions
for the recovery of rent or action or actions to confess judgment against
Lessee for all or any part of the rent specified in this Lease and then unpaid
including charges, payments, costs and expenses reserved as rent or agreed to
be paid by Lessee, and of interest and costs together with an attorney's
commissions of ten (10%) percent; and judgment and ejectment as herein provided
may be entered concurrently therewith. Judgment may be confessed repeatedly
until any deficiency is collected.
18. EJECTMENT
At the end of said Term, whether the same shall be determined by forfeiture or
expiration of the Term, or upon the breach of any of the conditions of this
Lease, and subject to other provisions of this Lease, Lessee authorizes an
attorney of a court of record in Pennsylvania to appear for Lessee in an
amicable action in ejectment and confess judgment against Lessee in such action
and Lessee in such event further authorizes the immediate issuance of a Writ of
Possession for the same, with Writ of Execution for the costs, and with
reasonable attorney's fees for prosecution of such action.
19. REMEDIES CUMULATIVE
No remedy contained herein shall be exclusive, rather all remedies of Lessor
shall be cumulative and concurrent.
20. POSSESSION - DEFINED
Possession of the Space includes the exclusive use of the same, together with
the use in common with any other occupants of the building, of the hallways,
stairs, elevator(s) (if any), toilet rooms, parking area (if any), heat, air
conditioning, electric light and water.
21. INDEMNITY AND PUBLIC LIABILITY INSURANCE
Lessee agrees to indemnify and save harmless Lessor from and against all claims
of whatever nature arising from any act, omission or negligence of Lessee, of
Lessee's contractors, licensees, agents, servants or employees, or arising from
any accident, injury or damage whatsoever caused to any person or to the
property of any person, occurring during the Term hereof in or about Lessee's
Space or arising from any accidental injury or damage occurring outside of the
Space but within the area of the Lessor's property where such accident, damage
or injury results or is claimed to have resulted from an act or omission
constituting negligence on the part of Lessee or Lessee's agents or employees.
This indemnity and hold harmless agreement shall include reasonable attorney's
fees incurred in or in connection with any such claim or proceeding brought
thereon, and the defense thereof.
Lessee agrees to maintain in full force during the Term a comprehensive general
liability policy under which Lessor and Lessee are named as insured, and under
which insurer agrees to indemnify
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and hold harmless from and against all cost, expense and/or liability arising
out of or based upon any and all claims, accidents, injuries and damages. Each
such policy shall be non-cancelable with respect to Lessor without ten (10) days
prior notice to Lessor and a duplicate original or certificate thereof shall be
delivered to Lessor. The minimum limits of liability of such insurance shall be
One Hundred Thousand ($100,000.00) Dollars for injury (or death) to more than
one person, and Twenty-five Thousand($25,000.00) Dollars with respect to damage
of property.
22. CONDEMNATION
If any part of the Space should be taken or condemned for a public or
quasi-public use, and a part thereof remains which is susceptible for the use
intended hereunder, this Lease shall, as to the part so taken, terminate as of
the date title shall vest in the condemnor, and the rent payable hereunder
shall be adjusted so that the Lessee shall be required to pay for the remainder
of the Term only such portion of such rent at the value of the part remaining
after the condemnation bears to the value of the entire Space at the date of
condemnation; but in such event Lessor shall have the option to terminate this
Lease as of the date when title to the part so condemned vests in the
condemnor. If all the Space, or such part thereof be taken or condemned so
that there does not remain a portion susceptible for occupation hereunder, this
Lease shall thereupon terminate. Whether or not a portion of the Space is
susceptible for the use intended shall be determined by arbitration if the
parties cannot otherwise agree on said portion. If a part of all of the Space
be taken or condemned, all compensation, except as otherwise provided in this
Section 22, awarded upon such condemnation or taking shall, go to the Lessor
and the Lessee shall have no claim thereto.
23. SUBORDINATION; ASSIGNMENT BY LESSOR
The rights and interest of Lessee under this Lease shall be subject and
subordinate to any mortgage that may be placed upon the Space and to any and
all advances to be made thereunder, and to the interest thereon, and all
renewals, replacements, and extensions thereof. Whether this Lease is dated
prior to or subsequent to the date of said mortgage, Lessee shall execute and
deliver whatever instruments may be required for such purposes and in the event
Lessee fails to do so within ten (10) days after demand in writing, Lessee does
hereby make, constitute and irrevocably appoint Lessor as its attorney-in-fact
and in its name, place and stead so to do. Lessor may assign its interest in
this Lease or any part thereof, and such assignee shall thereupon be deemed
Lessor hereunder.
24. QUIET ENJOYMENT
Lessee, upon paying the said rent and performing the covenants of this Lease,
on its part to be performed, shall and may peaceably and quietly enjoy the
Space for the Term and any duly authorized additional term.
25. SPACE PREPARATION
It is clearly understood that the Space shall be rented by the Lessee on an "as
is" basis, and the only space preparation work that shall be done shall be the
work as outlined on Addendum #1 attached to and a part of this Lease.
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26. LEASE CONTAINS ALL AGREEMENTS
It is expressly understood by the parties that the whole agreement between them
is embodied in this Lease (executed in duplicate) and that no part or items are
omitted, unless the terms are hereinafter modified by written agreement(s).
27. SUCCESSORS
This Lease shall be binding upon the parties hereto and their respective
successors and/or assigns.
28. HEADINGS NO PART OF LEASE
Any headings preceding the text of the several paragraphs and subparagraphs
hereof are inserted solely for convenience of reference and shall not
constitute a part of this Lease not shall they affect its meaning, construction
or effect.
29. NOTICE
Lessee hereby appoints as its agent to receive service of all proceedings and
notices requested under this Lease, the person in charge of the Space at the
time, or occupying the Space; and if no person is in charge of, or occupying
the Space, then any such service of process or notice may be made by attaching
the same on the main entrance to the Space. A copy of all services and notices
under this Lease shall also be sent to Lessee's last known address, if
different from the Space.
30. NO ESTATE IN REALTY
This Lease shall create the relationship of Lessor and Lessee between the
parties hereto; no estate shall pass out of Lessor. Lessee has no interest
subject to levy or sale, and Lessee's interest, which is use of the Space upon
payment of the rent and not being in default of this Lease, is not assignable.
31. EFFECT OF TERMINATION OF LEASE
No termination of this Lease prior to the normal ending thereof, by lapse of
time or otherwise, shall affect Lessor's right to collect rent for the period
prior to termination thereof or for any indemnifications of Lessee to Lessor as
contained herein.
32. SEVERABILITY
The invalidity of any provision of this Lease as determined by a court or
administrative agency of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
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IN WITNESS WHEREOF, the parties hereto have each caused this
instrument to be signed by their respective officers thereunto duly authorized
and attested by their respective secretaries, all on the date and year first
above written.
<TABLE>
<S> <C>
ATTEST: DIALYSIS CORPORATION OF AMERICA
By:__________________________ By:___________________________________
Secretary BART PELSTRING, President
ATTEST: DIALYSIS SERVICES OF PENNSYLVANIA,
INC. - LEMOYNE
By:__________________________ By:____________________________________
Secretary THOMAS K. LANGBEIN,
Chief Executive Officer
</TABLE>
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ADDENDUM #1
It is agreed that the following work shall be performed to the leased space by
the Lessor at a cost estimated (attach estimate) of $_______ to be paid by the
Lessee:
<TABLE>
<S> <C>
LESSOR: DIALYSIS CORPORATION OF AMERICA
By:_________________________________
LESSEE: DIALYSIS SERVICES OF
PENNSYLVANIA, INC. - LEMOYNE
By:_________________________________
Date:
</TABLE>
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(10)(1xiii) 1995 Stock Option Plan of Dialysis Corporation of America
<PAGE> 2
1995 STOCK OPTION PLAN
OF
DIALYSIS CORPORATION OF AMERICA
__________
1. Purpose. DIALYSIS CORPORATION OF AMERICA, a Florida
corporation, (the "Company") hereby establishes the 1995 Stock Option Plan (the
"Plan"). The purpose of the Plan is to advance the interests of the Company
and its stockholders by providing a means by which the Company and its
subsidiaries shall be able to attract, retain and reward competent officers,
directors, consultants, key employees (including officers and directors who are
employees), attorneys, advisors and others, and provide such persons with an
opportunity to participate in the increased value of the Company which their
effort, initiative, and skill have helped and will help to produce. The Plan
and granting of options shall encourage those persons to have a proprietary
interest in the Company and to provide their continued efforts.
2. Definitions.
2.1 The following terms, whenever used in this Plan, shall have
the meanings set forth below.
(a) "Affiliate" means any corporation, a majority of the
voting stock of which is directly or indirectly
owned by the Company.
(b) "Affiliation" or "Affiliated" means any person who
has a relationship with or is otherwise then
affiliated with the Company as a Participant; the
absence or cessation of the designation as
Participant shall mean that such person no longer has
an Affiliation or is Affiliated with the Company or
an Affiliate.
(c) "Award" means a grant made under this Plan in the
form of Non-Qualified Stock Options.
(d) "Board" means the Board of Directors of the Company.
(e) "Committee" means a committee appointed by the Board.
(f) "Company" means Dialysis Corporation of America and
its Affiliates unless the context therwise indicates.
(g) "Exercise Price" shall mean the price per Share of
Stock at which an Option may be exercised.
(h) "Fair Market Value" of a Share as of a specified date
shall mean the closing price of a Share on the principal
securities exchange on which such Shares are traded on the day
immediately preceding the date as of which Fair Market Value
is being determined, or on the next preceding date on which
such Shares are
<PAGE> 3
traded if no Shares were traded on such immediately
preceding day; or if the Shares are not traded on a securities
exchange, Fair Market Value shall be deemed to be the average
of the high bid and low asked prices of the Shares in the
over-the-counter market on the day immediately preceding the
date as of which Fair Market Value is being determined or on
the next preceding date on which such high bid and low asked
prices were recorded. If the Shares are not publicly traded,
Fair Market Value shall be determined by the Committee or the
Board, taking into consideration all factors it deems
appropriate, including, without limitation, recent sale and
offer prices of the Stock in private transactions negotiated
at arm's length. In no case shall Fair Market Value be less
than the par value of the Stock.
(i) "Option" means a right (Non-Qualified Stock Option)
to purchase Stock.
(j) "Participant" means a person designated by the Board
or the Committee to receive an Award under the Plan
who has a relationship with or is otherwise then
Affiliated with the Company or an Affiliate as either
an officer, director (including directors who are not
employees of the Company) consultant, key employees,
attorney or advisor or similarly situated persons, at
the time of such designation.
(k) "Plan" means this 1995 Dialysis Corporation of
America Stock Option Plan, as amended from time to
time.
(l) "Share" means a share of Stock adjusted in accordance
with Section 14 of the Plan (if applicable).
(m) "Stock" means the common stock, $.01 par value per
share, of the Company.
(n) "Successor" means the legal representative of the
estate of a deceased Participant or the person or
persons who may acquire the right to exercise an
Option or to receive Shares issuable in satisfaction
of an Award, by bequest or inheritance.
(o) "Term" means the period during which an Option may be
exercised.
2.2 Gender and Number. Except when otherwise indicated
by context, reference to the masculine gender
shall include, when used, the feminine gender and any
term used in the singular shall also include the
plural.
3. Administration. The Plan shall be administered by the Board;
provided, to the extent the Board deems it advisable or the law requires the
same, the Board may appoint a Committee consisting of not less than three (3)
members comprised of at least two disinterested administrators to administer
the Plan. The Board may from time to time remove members from, or add members
to, the Committee. Vacancies on the Committee, however caused, shall be filled
by the Board. Hereinafter all references in this Plan to the Board with
respect to the administration of the Plan shall mean the Committee upon the
formation of such Committee. Subject to the provisions of the Plan, the Board
shall determine the individuals to whom and the time or times at which Options
shall be granted, the number of Shares to be subject to each Option, and the
Term
2
<PAGE> 4
of any such Option, and shall determine other terms and provisions of the
respective Options, which may or may not be identical, including but not
limited to restrictions that may be imposed on the Options and Shares and the
nature of such restrictions. The Board shall also interpret the Plan,
prescribe, amend and rescind rules and regulations relating to the Plan, and
make all other determinations necessary or advisable for the administration of
the Plan. The determinations of the Board shall be made in accordance with its
judgment as to the best interests of the Company and its stockholders and in
accordance with the purposes of the Plan. A majority of members of the Board
shall constitute a quorum, and all determinations of the Board shall be made by
a majority of its members. Any determination of the Board under the Plan may
be made, after the consultation of the entire Board, without notice or meeting
of the Board, by a writing signed by a majority of the Board.
The Board may authorize the modification, extension or renewal of any
Option outstanding under the Plan, or accept the exchange of outstanding
Options (to the extent not theretofore exercised) for the granting of new
Options in substitution therefor, when, and subject to such conditions, as are
deemed to be in the best interests of the Company and in accordance with the
purposes of the Plan, provided notwithstanding the foregoing, no such
modifications of an Option shall, without the consent of the Optionee, alter or
impair any rights or obligations under an Option theretofore granted under the
Plan.
No member of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under it.
4. Shares Available Under the Plan. The number of Shares
available for distribution under this Plan shall not exceed 250,000 Shares
(subject to adjustment in accordance with Section 14 hereof). These Shares may
consist, in whole or in part, of authorized but unissued Stock or treasury
Stock not reserved for any other purpose. Any Shares subject to the terms and
conditions of an Award under this Plan which are not used because the terms and
conditions of the Award are not met or the Options granted under the Plan shall
expire or terminate for any reason without having been exercised in full or
shall cease for any reason to be exercisable in whole or in part, the
unpurchased Shares subject to such Option may again be used for an Award under
the Plan.
5. Participation. Participation in the Plan shall be limited to
Participants of the Company selected by the Board. Participation is entirely
at the discretion of the Board, and is not automatically continued after an
initial period of Participation or Affiliation.
6. Stock Options.
6.1 Agreements. An Award of an Option shall be evidenced by a
Stock Option Certificate in such form and not inconsistent with the
Plan as the Board shall approve from time to time, which shall include
the following terms and conditions:
(a) Type of Option; Number of Shares. A statement
identifying the Option represented thereby as Non-Qualified
Stock Option and the number of Shares to which the Option
applies and shall provide for adjustment in accordance with
the provisions of Section 14 hereof.
(b) Option Price. A statement of the Exercise Price for
the Stock subject to the Option which shall not be less then
the par value of the Stock.
3
<PAGE> 5
(c) Exercise Term. A statement of the Term of each
Option granted as established by the Board, subject to earlier
termination as provided in Sections 6.2 and 6.3 of the Plan,
and provided that no Option shall be exercisable after five
years from the date of grant.
(d) Payment for Shares. A statement that the Exercise
Price shall be payable in cash in full at the time
of exercise.
(e) Nontransferability. Each Stock Option Certificate
shall state that the Option is not transferable other
than by will or the laws of descent and distribution
or a Change in Control of the Company as provided in
Section 8 hereof, and during the lifetime of the
Participant is exercisable only by him or by his
guardian or legal representative.
(f) Rights as a Shareholder. An Optionee shall
have not rights as a shareholder with respect
to any Shares covered by his Option until the
date of the issuance of a stock certificate
for such Shares. No adjustment shall be made
for dividends (ordinary or extraordinary,
whether in cash, securities or other
property) or distributions or other rights
for which the record date is prior to the
date such stock certificate is issued, except
as provided in Section 14.
6.2 Termination of Affiliation Due to Death, Disability, or
Retirement. If a Participant ceases Affiliation with the Company or
an Affiliate by reason of his death, permanent disability or
retirement at or after age 65 all Options outstanding shall remain
exercisable for a period of nine (9) months from such death,
disability or retirement, but not beyond the expiration date of said
Options. If the termination of Affiliation is due to retirement, then
any vesting period as provided in the Stock Option Certificate, if not
then completed, shall continue during such nine (9) month period
commencing from the retirement date. If termination of Affiliation is
due to death or permanent disability of the Participant, all such
Participant's Options shall become fully exercisable. For this
purpose, Affiliation will be treated as continuing intact while the
Participant is on sick leave or other bona fide leave of absence,
to be determined in the sole discretion of the Board.
6.3 Termination of Affiliation for Reasons Other Than Death,
Disability or Retirement. Except as otherwise determined by
the Board:
(a) In the event a Participant ceases Affiliation with
the Company voluntarily or involuntarily, except for
the involuntary termination for cause, death,
retirement or permanent disability, if there is a
vesting period, then any Shares not vested to the
date of such termination shall be forfeited; and, in
any event, the Participant shall have thirty (30)
days from such termination to exercise the Option, to
the extent of Shares then vested, at the Exercise
Price.
4
<PAGE> 6
(b) In the event a Participant ceases Affiliation with
the Company by involuntary termination for cause, the
Option shall immediately be null and void,
notwithstanding the extent of Shares then vested.
"Voluntary termination" means cessation of Affiliation with the
Company based upon free choice or free will for whatever reason. Free choice
and free will remain free choice and free will and shall not be affected or
deemed involuntary due to the nature of working conditions, salary, personal
relationships, the outlook for the Company or its business or similar reasons.
"Involuntary termination for cause" includes (i) conviction of a felony, (ii)
willful failure to carry out the policies and directives of management and/or
the Board of Directors, (iii) breach of any agreement, representation or
covenant with the Company, (iv) engaging, alone or with others, in felonious or
other dishonest acts or practices, or (v) non-performance of the Optionee's
obligations and responsibilities to the Company or not acting in the best
interests of the Company.
6.4 Acceleration of Vesting and Exercise Due to Change in Control
or Registration of the Shares.
If there is any vesting period, then:
(a) Should the Company file a Form S-8 registration to
cover the Options or Shares, for which registration
there is no present intent, on the effective date of
such registration the Shares shall immediately fully
vest and the Options shall become fully exercisable.
(b) Change in Control, as provided in Section 8 hereof,
shall also provide for full exercisability of the
Option.
7. Termination of Affiliation. Transfers of employment or
directorships, or as consultant, advisor or attorney between the Company and an
Affiliate, or between Affiliates, will not constitute termination of
Affiliation for purposes of any Award.
8. Change in Control. Upon the occurrence of any Change in
Control through an Acquiring Person, Reorganization or Board Change as set
forth herein, all Options granted under the Plan shall be fully exercisable and
the Company or surviving entity shall immediately redeem all outstanding
Options for cash in an amount equal to the excess of the greater of (i) the
price per Share paid in such acquisition by Acquiring Person or in such
Reorganization, or (ii) the highest Fair Market Value of the Stock during ten
(10) days following a public announcement that an Acquiring Person has acquired
the requisite beneficial ownership of the outstanding Stock or ten (10) days
following the commencement of or announcement of an intention to make a tender
offer or exchange offer the consummation of which would result in the requisite
beneficial ownership by an Acquiring Person, or (iii) the Fair Market Value
upon a Change in the Board, over the Option Exercise Price.
8.1 Acquiring Person. Any person or group of affiliated or
associated persons, other than present management, its parent,
or Optionees, who have acquired beneficial ownership of
twenty-five (25%) percent or more of the outstanding Shares,
or who commence, or announce an intention to make a tender
offer or exchange offer the consummation of which would result
in the beneficial ownership by a person or
5
<PAGE> 7
group of twenty-five (25%) percent or more of such outstanding
Shares, and such acquisition is completed.
8.2 Reorganization. A reorganization shall mean that
substantially all of the assets of the Company are acquired by
another person or entity other than the existing Board (see
Section 8.3) or a reorganization involving the acquisition of
the Company by another or its merger or consolidation with
another. The Reorganization shall be deemed to have occurred
upon consummation or the reorganization transaction.
8.3 Board Change. Board Change shall be the date that a majority
of the Board shall be persons other than persons (a) for whose
election proxies shall have been solicited by the Board, or
(b) who are then serving as directors appointed by the Board
to fill vacancies on the Board caused by death or resignation
(but not by removal) or to fill newly created directorships.
Within ten (10) days of such Change in Control the Company, Acquiring
Person or successor, as the case may be, shall give written notification to the
Participant of such redemption of the Options. The Participant shall have the
right to elect to keep the Options by written notification to the Company,
Acquiring Person, or successor, as the case may be, within five (5) days of the
redemption notification by virtue of any Change in Control. Notwithstanding
anything herein to the contrary, the Options shall continue in full force and
effect upon such Change in Control if elected to be kept by the Participant
even if subsequent to but by virtue of such Change in Control the Participant
no longer has an Affiliation. Such Options shall thereafter terminate as
otherwise provided in the Plan.
9. Exercise of Option. Subject to the provisions of Section 6 to
8, each Award under the Plan shall be exercisable as follows:
9.1 Vesting. The Option shall be either fully exercisable on the
date of grant or shall become exercisable thereafter in such
installments as the Board may specify.
9.2 Full Vesting of Installments. Once an installment becomes
exercisable it shall remain exercisable until expiration or
termination of the Option, unless otherwise specified by the
Board.
9.3 Partial Exercise. Each Option may be exercised at any time or
from time to time, in whole or in part, in accordance with its
terms, for up to the total number of Shares with respect to
which it is then exercisable.
9.4 Acceleration of Vesting. The Board shall have the right to
accelerate the date of exercise of any Award.
10. Effective Date of the Plan. The Plan was adopted by the Board
and stockholders as of November 10, 1995. The Plan shall expire at the end of
the day on November 9, 2000 (except as to Options outstanding on that date).
6
<PAGE> 8
11. Right to Terminate Affiliation. Nothing in the Plan shall
confer upon any Participant the right to continue Affiliation with the Company
or affect any right which the Company may have to terminate such Affiliation of
the Participant.
12. Withholding Taxes. The Company shall have the right to deduct
from all payments under this Plan, whether in cash or in Stock, an amount
necessary to satisfy any federal, state or local withholding tax requirements.
13. Amendment, Modification and Termination of the Plan. The
Board may at any time terminate, suspend, amend or modify the Plan in any
respect at any time, except that the Board will not, without authorization of
the stockholders of the Company obtained within 12 months before or after the
Board adopts a resolution authorizing the effectuation of any change (other
than through adjustment for changes in capitalization as provided in Section
14) which will:
(a) Materially increase the total amount of Stock which may be
awarded under the plan.
(b) Materially increase the benefits accruing to Participants
under the Plan;
(c) Change the class of Participants eligible to participate in
the Plan.
(d) Extend the duration of the Plan.
No termination, suspension, amendment or modification of the Plan will
adversely affect any right acquired by any Participant or any Successor under
an Award granted before the date of termination, suspension, amendment or
modification, unless otherwise agreed to by the Participant; but it will be
conclusively presumed that any adjustment for changes in capitalization
provided for in Section 14 does not adversely affect any right.
14. Adjustment for Changes in Capitalization. Upon the occurrence
of any of the following events, an Optionee's rights with respect to Options
granted to him hereunder shall be adjusted as hereinafter provided, unless
otherwise specifically provided in the Stock Option Certificate as per Section
6.1:
14.1 Stock Dividends and Stock Splits. Any change in the number of
outstanding Shares occurring through Stock splits, reverse
Stock splits, or Stock dividends after the grant of an Award
will be reflected proportionately in the aggregate number of
Shares then available for Awards and in the number of Shares
subject to Awards then outstanding; and a proportionate change
will be made in the Exercise Price as to any outstanding
Options.
14.2 Consolidations or Mergers. If the Company shall be the
surviving corporation in any merger of consolidation, each
outstanding Option shall pertain and apply to the securities
to which a holder of the number of Shares subject to the
Option would have been entitled.
14.3 Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than
a transaction described in Section 14.2 above) pursuant to
which securities of the Company or of another corporation are
7
<PAGE> 9
issued with respect to the outstanding shares of Common Stock,
an Optionee upon exercising an Option shall be entitled to
receive for the Exercise Price the securities he would have
received if he had exercised his Option prior to such
recapitalization or reorganization.
14.4 Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will
terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such
other conditions as shall be determined by the Board.
14.5 Issuances of Securities. Except as expressly provided herein,
no issuance by the Company of shares of Stock or any class, or
securities convertible into shares of Stock of any cla
ss, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares subject to
the Options. No adjustments shall be made for dividends paid
in cash or in property other than securities of the Company.
14.6 Fractional Shares. No fractional shares shall be issued under
the Plan and any fractional Shares resulting from adjustments
as provided herein will be rounded to the nearest whole Share.
14.7 Adjustments. Upon the happening of any of the events
described in Sections 14.1, 14.2 or 14.3 above, the class and
aggregate number of Shares set forth in Section 4 hereof that
are subject to Options which previously have been or
subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such
subparagraphs. The Board or the successor Board shall
determine the specific adjustments to be made under this
Section 14 and, subject to Section 3, its determination shall
be conclusive.
14.8 Company's Right to Make Adjustments and Reorganizations. The
grant of an Award pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital
or business structure or to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its
business or assets.
15. Securities Law Requirements. No Shares shall be issued upon
the exercise of any Option unless and until the Company has determined that (i)
it and the Participant have taken all actions required to register the Shares
under the Securities Act of 1933 or perfect an exemption from the registration
requirements thereof; (ii) any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and (iii) any
other applicable provision of state or federal law has been satisfied. Nothing
herein is deemed nor shall be construed to confer any registration rights upon
the Participant for an Option or the Shares, and no such registration right
with respect to any Option or Share is provided to any Participant by the
Company.
16. Miscellaneous.
16.1 Proceeds. The proceeds received by the Company from the sale
of the Shares pursuant to the exercise of the Option will be
used for general corporate purposes.
8
<PAGE> 10
16.2 No Obligation to Exercise. The granting of an Award shall
impose no obligation upon the Participant to exercise the
Option.
16.3 Means of Exercising Options. An Option (or any part thereof)
shall be exercised by giving written notice to the Company at
its principal office address. The notice shall identify the
Option being exercised and specify the number of Shares as to
which such Option is being exercised, accompanied by full
payment of the Exercise Price therefor either (a) in United
States dollars in cash or by check, or (b) at the discretion
of the Board, through delivery of Shares of Stock having a
Fair Market Value equal as of the date of the exercise to the
cash exercise price of the Option, (c) at the discretion of
the Board, by delivery of the Optionee's personal recourse
note bearing interest payable not less than annually at not
less than 100% of the lowest applicable Federal rate, as
defined in Section 1274 (d) of the Code, (d) at the discretion
of the Board and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient
amount of the proceeds from the sale of the Stock acquired
upon exercise of the Option and an authorization to the broker
or selling agent to pay that amount to the Company, which sale
shall be at the Optionee's direction at the time of exercise,
or (e) at the discretion of the Board, by any combination of
(a), (b), (c) and (d) above.
16.4 Governing Law, Construction. The validity an construction of
the Plan and the agreement evidencing Options shall be
governed by the laws of the State of Florida, or the laws of
any jurisdiction in which the Company or its successors in
interest may be organized.
9
<PAGE> 1
(10)(1xiv) Form of Stock Option Certificate dated November 10, 1995 issued
under 1995 Stock Option Plan of Dialysis Corporation of America
<PAGE> 2
STOCK OPTION CERTIFICATE
(Non-Qualified Stock Option)
This stock option is granted by
DIALYSIS CORPORATION OF AMERICA
to:
CERTIFICATE SHARES: 1,500
No. 001
("Optionee")
---------------------
Address:
----------------------------
in accordance with and pursuant to the terms of the 1995 Stock Option Plan (the
"Plan") of Dialysis Corporation of America, a Florida corporation (the
"Company").
The terms of the Plan are incorporated by reference and shall be
considered to be a part of this Stock Option Certificate. A copy of the Plan
is attached hereto.
The terms of the Stock Option granted to you include the following:
1. On November 10, 1995, the Board of Directors of the Company
granted to the Optionee an Option (the "Option") to purchase all or any part of
an aggregate of _____ shares (the "Shares") of the Common Stock, $.01 par value
(the "Common Stock"), of the Company, at the price of $1.50 per share
("Exercise Price"), subject to adjustment in accordance with the terms and
conditions set forth in the Plan.
2. This Option shall expire at 5:00 p.m., Florida time, on
November 9, 2000, subject to earlier termination as provided in the Plan.
Should your affiliation with the Company terminate for any reason,
voluntary or involuntary, for cause or otherwise, or due to death, retirement
or disability, the exercisability of the Option and the extent of the
availability of the Shares shall be governed by Sections 6.2, 6.3, and 6.4 of
the Plan.
Upon the occurrence of any Change in Control as defined in Section 8
of the Plan, the Option shall continue to be fully exercisable, and the Company
or surviving entity shall redeem the Option for cash in an amount as delineated
in Section 8; provided, you have the right to keep the Option by written
notification to the Company, Acquiring Person or Successor, as the case may be,
within five (5) days of the redemption notification as provided in Section 8 of
the Plan. If you elect to keep the Option, it shall continue in effect, even
if your affiliation with the Company ceases by virtue of such Change in
Control.
3. This Option may be exercised by giving written notice to the
Company in the form attached hereto as Exhibit A stating the number of Shares
to be purchased and by concurrently
<PAGE> 3
tendering payment by check equal to the Exercise Price for the Shares being
purchased upon such exercise. Upon exercise and payment, the certificate for
the purchased Shares shall be issued as soon as possible as fully-paid and non-
assessable Shares.
4. This Certificate and the Options granted herein and the Shares
issubable upon exercise are not transferable by the Optionee otherwise than by
will or the laws of descent and distribution, and shall be exercised only by
the Optionee, subject to certain rights of the Optionee's legal representative,
as provided in the Plan.
The Optionee acknowledges that he has no contractual right to require
the registration of the Option or the Shares; and the Optionee understands that
the Shares issued upon exercise of the Option shall have a legend on the face
thereof indicating the restrictions on transfer; and that such Shares and the
Option shall have stop transfer instructions issued against the same.
At the time of any exercise of the within Option, the Optionee shall
represent to and agree with the Company in writing that he is acquiring the
Shares in respect of which the Option is being exercised for the purpose of
investment and not with a view to distribution.
The Company shall not be obligated to take any other affirmative
action in order to cause or facilitate the exercise of the Option or the
issuance of Shares pursuant thereto to comply with any state or federal law,
rule or regulation.
Any transfer in violation of this Section may cause termination of the
Option.
5. This Option shall be subject to exercise as provided herein
and as provided by the terms of the Plan and shall, in accordance with such
terms, be binding upon the Company and the Optionee.
6. This Certificate shall be governed by and construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, Dialysis Corporation of America has hereunto set
its hand as of the 10th day of November, 1995.
DIALYSIS CORPORATION OF AMERICA
By:
--------------------------
Bart Pelstring, President
<PAGE> 4
EXHIBIT A
Exercise Letter
, 199
--------------------
Dialysis Corporation of America
2337 W. 76th Street
Hialeah, Florida 33016
Gentlemen:
1. Pursuant to the terms of the Stock Option Certificate dated
November 10, 1995 (the "Option") of Dialysis Corporation of America, a Florida
corporation (the "Company"), the undersigned elects to exercise the Option to
the extent of purchasing _____ shares (the "Option Shares") of Common Stock,
$.01 par value (the "Common Stock"), of the Company (giving effect to all
adjustments since the date of the Option) and hereby tenders $
in payment of the exercise price by delivery of a check payable to the order of
the Company.
2. The Option Shares purchased hereby should be registered as
follows:
(Name)
- -------------------------------------------
(Street)
- -------------------------------------------
(City, State)
- -------------------------------------------
(Social Security No.)
- -------------------------------------------
3. The undersigned acknowledges that the Option Shares purchased
hereby are subject to, and the certificates representing such Option Shares may
be legended to reflect, certain resale restrictions under the Securities Act of
1933, as amended, and agrees to comply with all such restrictions and to
execute such documents or take such other actions as the Company may require in
connection with such restrictions.
Very truly yours,
--------------------------
- ------------------------ Signature
- ------------------------ --------------------------
Address Print Name
- ------------------------
<PAGE> 1
(11) Statement re computation of per share earnings
<PAGE> 2
EXHIBIT 11--COMPUTATION OF EARNINGS PER COMMON SHARE
MEDICORE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY
Weighted average common
shares outstanding 5,454,940 5,120,913 4,564,940
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 474,275 193,348
---------- ----------
5,929,215 5,314,261 4,564,940
========== ========== ==========
Net income $2,251,271 $ 864,108 $ 18,145
========== ========== ==========
Net income per share $ .38 $ .16 $ -
========== ========== ==========
FULLY DILUTED
Weighted average common
shares outstanding 5,454,940
Net effect of dilutive stock
options-based on the modified
treasury stock method using
ending market price 505,155
----------
5,960,095
==========
Net income $2,251,271
==========
Net income per share $ .38
==========
</TABLE>
Note: Fully diluted earnings per common share were the same as
primary earnings per common share and are not presented for 1994
and 1993.
<PAGE> 1
(21) Subsidiaries of the registrant
<PAGE> 2
Exhibit (21) Subsidiaries
<TABLE>
<CAPTION>
Percentage
Jurisdiction of Owned By
Subsidiaries Incorporation Registrant
------------ --------------- ----------
<S> <C> <C>
All American Medical & Surgical Supply New York 80%
Corp.
DCA Medical Services, Inc. (1) Florida 99%
Dialysis Corporation of America Florida 99%
Dialysis Services of Florida, Inc.-
Fort Walton Beach (1) Florida 79.2%
Dialysis Services of Pennsylvania, Inc.
Lemoyne (1) Pennsylvania 99%
Dialysis Services of Pennsylvania, Inc.
Wellsboro (1) Pennsylvania 99%
Renal Services of Pa., Inc.(1) Pennsylvania 99%
Techdyne, Inc. Florida 62.5%
Techdyne (Scotland) Ltd.(2) Scotland 62.5%
</TABLE>
___________________
(1) Dialysis Corporation of America is the owner of
100% of the outstanding shares of DCA Medical
Services, Inc., Dialysis Services of Pennsylvania,
Inc. - Lemoyne, Dialysis Services of Pennsylvania,
Inc. - Wellsboro, Renal Services of Pa., Inc., and
80% of Dialysis Services of Florida, Inc. - Fort
Walton Beach.
(2) Owned 100% by Techdyne, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,836,512
<SECURITIES> 855,351
<RECEIVABLES> 3,853,913<F1>
<ALLOWANCES> 0
<INVENTORY> 3,872,912<F2>
<CURRENT-ASSETS> 14,499,079
<PP&E> 9,488,270
<DEPRECIATION> 3,880,549
<TOTAL-ASSETS> 21,247,154
<CURRENT-LIABILITIES> 7,465,470
<BONDS> 963,980
0
0
<COMMON> 54,549
<OTHER-SE> 9,699,890
<TOTAL-LIABILITY-AND-EQUITY> 21,247,154
<SALES> 34,140,573
<TOTAL-REVENUES> 36,660,080
<CGS> 28,072,444
<TOTAL-COSTS> 28,072,444
<OTHER-EXPENSES> 4,748,113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 246,393
<INCOME-PRETAX> 3,546,897
<INCOME-TAX> 1,295,626
<INCOME-CONTINUING> 2,251,271
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,251,271
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
<FN>
<F1>Accounts Receivable are net of allowance of $244,000 at December 31, 1995.
<F2>Inventories are net of reserve of $309,000 at December 31, 1995.
</FN>
</TABLE>
