BOVIE MEDICAL CORPORATION
7100 30th Avenue North
St. Petersburg, FL 33710
(813) 384-2323
_______________________
Notice of Annual Meeting of Shareholders
To be Held December 16, 1998
At 3:00 P.M.
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of BOVIE MEDICAL
CORPORATION (the "Company") will be held at 7100 30th Avenue
North, St. Petersburg, Florida on Thursday, December 16, 1998 at
3:00 P.M. to consider and take action on the following matters:
1. The election of Directors to serve until the next
Annual Meeting;
2. The ratification of the re-appointment of Bloom &
Company as auditors;
3. The transaction of such other business as may
properly come before the meeting or any adjournments thereof.
Only holders of record of shares of common stock at the
close of business on October 31, 1998 are entitled to notice of
and to vote at the Annual Meeting. A Proxy Statement explaining
the matters to be acted upon at the Annual Meeting follows.
Please read it carefully.
WHETHER OR NOT YOU EXPECT TO BE PERSONALLY PRESENT AT THE
MEETING, PLEASE BE SURE THAT THE ENCLOSED PROXY IS PROPERLY
COMPLETED, DATED, SIGNED AND RETURNED WITHOUT DELAY IN THE
ENCLOSED ENVELOPE. ANY PROXY MAY BE REVOKED AT ANY TIME BEFORE
IT IS EXERCISED BY FOLLOWING THE INSTRUCTIONS SET FORTH ON PAGE
ONE OF THE ACCOMPANYING PROXY STATEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
Andrew Makrides
President
50
BOVIE MEDICAL CORPORATION
7100 30 Avenue North
St. Petersburg, FL 33710
(813) 384-2323
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held on December 16, 1998
November 16, 1998
Solicitation and Voting of Proxies
This Proxy Statement is furnished in connection with the
solicitation on behalf of BOVIE MEDICAL CORPORATION (the "Company"
or "Bovie") of proxies to be voted at the Annual Meeting of
Shareholders to be held on December 16, 1998, at 7100 30th Avenue
North, St. Petersburg, FL 33710 at 3:00 P.M.
The Board of Directors of the Company has fixed the close
of business on October 31, 1998 as the record date for the
determination of holders of shares of outstanding common stock
entitled to notice of and to vote at the Annual Meeting. On
October 31, 1998, there were outstanding 14,629,643 shares of the
Company's common stock and 2,000,000 shares of Class A Preferred
Stock, the holders of which will be entitled to one vote per share
for each matter submitted to a vote at the Meeting. The presence,
in person or by proxy, of the holders of a majority of the issued
and outstanding shares entitled to vote will constitute a quorum
for the transaction of business.
A proxy in the accompanying form, which is properly signed,
dated and returned to the Company and not revoked, will be voted
in accordance with the instructions contained therein. If no
instructions are indicated, proxies will be voted as recommended
by the Board of Directors. Shareholders who execute proxies may
revoke them at any time prior to their being exercised by
delivering written notice to the Secretary of the Company or by
subsequently executing and delivering another proxy at any time
prior to the voting. Mere attendance at the Meeting will not
revoke the proxy, but a shareholder present at the Meeting may
revoke his proxy and vote in person.
As of the date of this Proxy Statement, the only business
which the management of the Company intends to present at the
Meeting are the matters set forth in the accompanying Notice of
Special Meeting. Management has no knowledge of any other
business to be presented at the Meeting. If other business is
brought before the Meeting, the persons named in the enclosed form
of proxy will vote according to their discretion.
The cost of soliciting proxies is estimated not to exceed
$20,000 and will be borne by the Company, including expenses in
connection with the preparation and mailing of this Proxy
Statement and all papers which now accompany or may hereafter
supplement it. The solicitation will be made by mail. The
Company will supply brokers or persons holding shares of record in
their names or in the names of nominees for other persons, as
beneficial owners, with such additional copies of proxies, proxy
materials and Annual Reports as may reasonably be requested in
order for such record holders to send one copy to each beneficial
owner, and will upon request of such record holders, reimburse
them for their reasonable expenses in mailing such material.
Representatives of Bloom and Company, the independent
auditors and principal accountants for the current year, are
expected to be present at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so, and are
expected to be available to respond to appropriate questions.
Certain directors, officers and employees of the Company,
not especially employed for this purpose, may solicit proxies,
without additional remuneration therefor, by mail, telephone,
telegraph or personal interview.
Shareholder Proposals
Management plans to hold its annual meeting of
shareholders for 1998 on December 15, 1999, and all shareholder
proposals intended to be presented at the next annual meeting
must be received by the Company by March 15, 1998 for inclusion
in the Company's next proxy statement. If the date of the next
annual meeting is subsequently advanced by more than 30 calendar
days or delayed by more than 90 calendar days from the date of
the annual meeting to which the proxy statement relates, the
Company shall, in a timely manner, inform security holders of
such change, and the date by which proposals of security holders
must be received by any means reasonably calculated to inform
them.
Directors and Executive Officers
As of October 31, 1998, the Company's Executive Officers
and directors were as follows:
Name Age Position Director Since
J. Robert Saron 45 Chairman of the Board August, 1994
Chief Executive
Officer, Director
Andrew Makrides 56 President,
Director December, 1982
Alfred V. Greco 63 Director April, 1998
Kenneth W.
Davidson 51 Director July, 1998
Delton
Cunningham 33 Secretary,
Treasurer-Vice President/CFO
Moshe
Citronowicz 45 Executive Vice President-
Chief Operating Officer
_________________________
J. Robert Saron, Chairman of the Board and Chief Executive
Officer, holds a Bachelors degree in Social and Behavioral
Science from the University of South Florida. From 1988 to
present Mr. Saron has served as President and director of Aaron
Medical Industries, Inc. (formerly Suncoast Medical
Manufacturing, Inc.). In March 1995 Mr. Saron was elected
Chairman and Chief Executive Officer of An-Con Genetics, Inc.
Andrew Makrides, President, member of the Board of Directors,
and former Chairman, received a Bachelor of Arts degree in
Psychology from Hofstra University and a Juris Doctor Degree
from Brooklyn Law School. He is a member of the New York Bar
and has practiced law from 1968 until joining An-Con Genetics,
Inc. as Executive Vice President and director, in 1982. Mr.
Makrides became President of the Company in 1985 and served as
such to date.
George W. Kromer, Jr., filled a vacancy on the Board of
Directors and became a director on October 1, 1995. Mr. Kromer
is a Senior Financial Correspondent for "Today's Investor" and
is utilized as a consultant by other companies whose shares are
listed on the American Stock Exchange and Over-the-Counter
Exchange. An-Con has also retained Mr. Kromer on a month-to-
month basis as a consultant in addition to his capacity as a
director. He received a Master's Degree in 1976 from Long
Island University in Health Administration. He also holds a
Bachelor of Science Degree from Long Island University's
Brooklyn Campus and an Associate in Applied Science Degree from
New York City Community College, Brooklyn, New York. See
Certain Transactions.
Moshe Citronowicz, is a graduate of the University of Be'er
Sheva, Be'er Sheva, Israel, with a Bachelor of Science degree in
Electrical Engineering. He has also received certificates from
Worcester Polytech, Lowell University and the American
Management Association for completion of seminars in MRP, master
scheduling, purchasing SPC, JIT, accounting and plant
management. Since coming to the United States in 1978, Mr.
Citronowicz has worked in a variety of manufacturing and high
tech industries. In October 1993, Mr. Citronowicz joined the
Company as Vice President of Operations. He is responsible for
all areas of manufacturing, purchasing, product re-design, as
well as new product design. In September 1997, Mr. Citronowicz
was appointed by the board of directors, to the position of
Executive Vice President and Chief Operating Officer.
Delton N. Cunningham, Vice President and Chief Financial Officer
of the Company, holds a Bachelor of Science in Accounting from
the University of Florida. He is a Certified Public Accountant
and is a member of the American Institute of Certified Public
Accountants and the Florida Institute of Certified Public
Accountants. Mr. Cunningham began his career with the Miami
office of Arthur Anderson & Company. In June of 1991, Mr.
Cunningham joined Aaron Medical Industries, Inc., as the
Company's Chief Financial Officer. In June of 1992 Mr.
Cunningham became Vice President of Aaron Medical Industries,
Inc. and in April of 1993, he was elected Corporate Secretary of
Aaron by the Board of Directors.
Alfred V. Greco, is President of Alfred V. Greco, P.C., counsel
to the Company. Mr. Greco is a member of the bar of the State
of New York and has been engaged in the practice of law for the
past 35 years in the City of New York. The main focus of Mr.
Greco's experience for the past 30 years has been in the area of
corporate and securities law during which he has represented a
large number of public companies, securities brokerage firms,
executives and registered representative and has developed a
broad range of experience in administrative, regulatory and
legal aspects of public companies. Mr. Greco graduated from
Fordham University School of Law with a Doctor of Law degree, in
June 1960. He was admitted to the New York State Bar in March,
1961.
Kenneth W. Davidson, is chairman and Chief Executive Officer of
Maxxim Medical, Inc., ("Maxxim") a Delaware corporation the
shares of which are listed on the New York Stock Exchange. Mr.
Davidson has been a director of Maxxim since 1982, and the Chief
Executive Officer President, Chairman of the Board of Maxxim
since 1986. Prior to that he was the Corporate Director of
Business Development at Intermedics Incorporated, which is
principally a manufacturer of implantable medical devices such
as pacemakers.
The Board of Directors had nine special meetings
during the year 1997, and each director attended personally or
telephonically at least 75% of the meetings. The Board does not
have any audit, nominating or compensation committees as of the
date hereof and these functions have been performed by the Board
to the date hereof.
No Director has indicated to the Company that he
intends to oppose any action intended to be taken at this Annual
Meeting of shareholders.
REMUNERATION
The following table sets forth the compensation paid
to the executive officers of the registrant for the three years
ended December 31, 1997:
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards Pay-outs
Securities
Name and Other Restricted Underlying
Principal Annual Stock Options/ Pay-
Position Year Bonus(a) Compen. Awards SARS(#) outs
J. Robert Saron
CEO/Chairman
1997 $155,865 $ 2,460 $ 9,352 -- --
1996 143,000 42,600 8,100 90,000 --
1995 116,000 39,600 23,700 -- --
Andrew Makrides
President
1997 103,382 1,784 9,598 -- --
1996 90,000 8,400 9,700 70,000 --
1995 77,000 11,800 8,000 -- --
Moshe Citronowicz
Executive
Vice President-
Chief Operating
Officer 1997 107,044 1,921 9,352 -- --
1996 104,600 11,200 8,100 25,000 --
1995 97,000 11,800 8,000 -- --
Delton Cunningham
Secretary, Treasurer,
Vice President/CFO
1997 90,325 1,516 9,262 -- --
1996 86,000 8,400 7,400 55,000 --
1995 82,900 8,800 8,000 -- --
(a) In 1997, the officers waived their right to 1996
bonuses and the bonuses were cancelled.
(b) Other compensation consists of medical insurance and auto
13A.
Option/SAR Grants Table
Values of
Number Securities
of Shares underlying
Name and Acquired unexercised
Principal on Value FY-END(#) sar/s at
Position Year Exercisable Realized Exercisable
J. Robert Saron
CEO 1997 -- -- --
1996 -- -- 101,250
1995 -- -- --
Andrew Makrides
President 1997 -- -- --
1996 -- -- 78,750
1995 -- -- --
Moshe Citronowicz
Vice President
Operations 1997 -- -- --
1996 -- -- 28,125
1995 -- -- --
Delton Cunningham
Vice, President/
CFO,Secretary,
Treasurer, 1997 -- -- --
1996 -- -- 61,875
1995 -- -- --
Outside Directors are compensated in their capacities as
Board members through option grants. Through the year 1997, the
Company's Board of Directors presently consisted of J.Robert
Saron, the CEO, Andrew Makrides, President, Joseph F. Valenti
and George W. Kromer, Jr. Mr. Saron is also President and CEO
of Aaron. Mr. Kromer has been retained on a month-to-month
basis pursuant to verbal agreement as a financial and public
relations consultant by An-Con for the past year at an average
monthly fee of $950.
In 1996 and 1997 George Kromer and Joseph Valenti were
awarded 105,000 and 120,000 options, respectively, each for five
to ten years to purchase An-Con stock from $.75 to $1.125 per
share.
There have been no changes in the pricing of any options
previously or currently awarded.
Employment Agreements
As of the 1st day of January, 1998, the Company cancelled
its prior employment agreements with its officers, and certain
key employees and entered into new employment agreements with
them. The agreements vary in terms over a period of between two
and five years and provide for compensation in amounts varying
from $51,100 for the lowest paid executive officer up to
$136,000 for J. Robert Saron, the highest paid executive officer
per year, plus additional amounts for automobile allowance ($500
to $600 per month). In addition to the foregoing, each
agreement for the company's executive officers provides for
customary executive benefits, indemnification for corporate
accounts and may be terminated (a) upon death, or (b) on thirty
(30) days notice by the officer to terminate, or (c) by the
Company without cause, (i) upon the majority approval of the
Board of Directors on thirty (30) days written notice (wherein
the Company shall be obligated to pay the employee compensation
under the agreement for the balance term of the agreement; the
employee may elect, in lieu of the above compensation, to cancel
his agreement and obtain severance payments equal to three times
the annual salary and bonus in effect during the month preceding
such termination; or (d) by the Company for cause, if during the
period of employment, the employee violates the non-compete
provisions of the agreement, or is found guilty of a felony or
crime of moral turpitude. The agreements provide for a covenant
not to compete directly or indirectly against the Company for a
period of one year from termination and for a 7 1/2 percent
salary increase per year subject to approval of the Board of
Directors.
In May of 1997 the officers as a group waived their right to
the bonuses as set forth in their contracts. The Board of
Directors will determine future bonuses.
Security Ownership of Certain Beneficial Owners and
Management of Bovie Medical Corporation.
The following table sets forth certain information as of
December 31, 1997, with respect to the beneficial ownership of
the Company's common stock by all persons known by the Company
to be the beneficial owners of more than 5% of its outstanding
shares, by directors who own common stock and by all officers
and directors as a group.
Number
of Nature Percentage of
Name and Title Shares of Outstanding
Address of Class Owned Ownership(i) shares(i)
5% beneficial
Owners
Tsang Yang
Tseng Common Stock 666,666 Includes 7.14%
190-1 Ming-Chun
Road Chi-Yi,
Taiwan
Robert
Speiser(ii) Common Stock 753,333 Includes 8.07%
1340 Boca Ciega Shares only
Isle Dr.
St. Petersburg,
FL 33706
Directors
J. Robert
Saron Common Stock 522,976 Includes 5.60%
(iii) 90,000
Ashley Drive shares
Seminole, reserved
FL 34642 for
options
J. Valenti
(iv) Common Stock 177,205 Includes 1.90%
5700 Mariner Dr. 120,000
Tampa, FL shares
33609 reserved
for options
G. Kromer Common Stock 105,000 Includes 1.12%
P.O. Box 188 105,000
Farmingdale, shares
NY, 11738 reserved
for options
A. Makrides Common Stock 420,667 Includes 4.50%
20 Damin Circle 70,000
St. James, shares
NY, 11780 reserved
for options
Officers and Directors
as a Group
Common Stock 1,528,497 Includes 16.37%
465,000
shares
reserved
for options
(i) Based on 8,279,948 shares and 1,064,000 options outstanding to
acquire shares on December 31, 1997. Officers and directors
have 465,000 options to acquire shares at December 31, 1997.
(ii) Mr. Robert Speiser resigned as the Company Chairman and Chief
Executive Officer on March 20, 1995.
(iii) Robert Saron, who replaced Mr. Speiser as Chairman, is the
President and a director of Aaron Medical Industries, Inc. As a
result of the exchange of shares pursuant to the Acquisition
Agreement, Mr. Saron is the beneficial owner of 407,976
additional shares of An-Con (in addition to the 25,000 shares he
had received prior to the merger). Mr. Saron also has the option
to acquire an additional 90,000 shares.
(iv) Joseph Valenti resigned as a director of the Company in July,
1998.
During 1996, one transaction took place that materially changed
shareholders'control of the Company. The Company acquired
Aaron Medical Industries, Inc. (Aaron) and Aaron shareholders
exchanged their shares for those of the Company on November 25,
1996. As a result of the exchange, Aaron shareholders received
37.7% of the outstanding shares of the Company at that time.
Reference is made to the Company's Proxy Statement for Special
Meeting of Shareholders held on September 8, 1998, which is
incorporated herein by reference. In February, 1998 and May,
1998 the Company issued a total of 8,000,000 shares in exchange
for the acquisition of certain assets from Advanced Refractory
Technologies, Inc. and Maxxim Medical, Inc. and upon issuance,
such shares constituted 48% of the Company's outstanding shares.
INTEREST OF MANAGEMENT IN MATTERS TO BE ACTED UPON
Valpex International Corporation ("Valpex"), a Company owned and
operated by Mr. Joseph Valenti, was a supplier of vacuum and
Krypton bulbs and vinyl pouches to Aaron for several years. In
1996, Mr. Valenti joined An-Con as a director. On May 10, 1996,
Valpex and Aaron entered a three year agreement that allows
Aaron to purchase products directly from Valpex's manufacturers
and suppliers. In exchange, Aaron agreed to pay a commission to
Valpex on purchases from the agreed upon list of Valpex's
suppliers. In 1997 and 1996, respectively, the equivalent sales
of Valpex to Aaron were $117,700 and $126,000, respectively.
George Kromer, a director, also serves as a consultant to the
Company with average consulting compensation of approximately
$950 per month.
Alfred V. Greco, who became a director of the Company in April,
1998, is also the principal of Alfred V. Greco, P.C., counsel
for the Company. During fiscal 1997, Alfred V. Greco, P.C.
performed legal services for the Company in an amount totaling
$61,301. Alfred V. Greco, P.C. is the owner of 51,500 shares of
common stock of the Company and Alfred Greco, its principal,
owns 10 year options to purchase a total of 75,000 shares of
common stock, exercisable at $.75 per share.
The aforesaid transactions were on terms no less favorable to
the Company than could have been obtained in arms-length
transactions with unrelated third parties.
Pursuant to the Company's Stock Exchange Agreement with Advanced
Refractory Technologies, Inc. ("ART") the Company is obligated
to expend its best efforts to elect the designee of ART to the
Board of Directors. However, due to a recent dispute concerning
interpretation of an aspect of the agreement with ART (not
involving the Manufacturing agreement or License Agreement with
ART), commencement of litigation for a declaratory judgment and
subsequent settlement thereof, management was unable to meet
with the designee prior to considering him for a Board seat.
Accordingly, management has presently deferred consideration of
the election of the designee. ART's designee, Keith Blakely, is
a founder, officer, principal shareholder and director of ART
and has been such for the past fifteen years. ART is a
principal shareholder of the Company and the owner of 2,000,000
shares of preferred stock.
Subsidiaries of Registrant
Aaron Medical Industries, Inc. is a 100% owned subsidiary of the
Company. The Company's acquisition of Aaron in January, 1995,
is deemed important to the Company's potential for growth in the
medical device and electrosurgical products industry. The
Company's medical device and electrosurgical products are all
manufactured by Aaron and bear the Aaron and Bovie trademark.
Aaron is the Company's major operating subsidiary and an
integral part of the Company.
Directors' Compensation
Independent (unaffiliated) directors, who are not employees, do
not receive cash compensation for attending meetings. However,
the company pays their expenses for attending meetings of the
Board. A total of approximately $5,000 was paid to cover
expenses of independent directors attending Board of Director
meetings during the year ended December 31, 1997. During fiscal
1997, independent directors were compensated essentially in the
form of stock options under the Company's 1996 Employee and
Consultant Stock Option Plan. A total of 195,000 stock options
were granted to directors in fiscal 1997.
PROPOSAL 1
ELECTION OF DIRECTORS
Management has proposed the election of its current Board of
Directors to Serve until the next annual meeting of shareholders
for the fiscal year ending December 31, 1998, which meeting is
currently scheduled to take place on December 15, 1999.
The present candidates for directors are:
Name* Director Since
Robert Saron August, 1994
Andrew Makrides December, 1982
George Kromer October, 1995
Alfred V. Greco April, 1998
Kenneth W. Davidson May, 1998
__________________
*See background of each director above under heading "Directors
and Executive Officers"
Required Vote for Election
The affirmative vote of a majority of the outstanding shares
entitled to vote and present, in person or by proxy, at the
annual meeting of shareholders at which a quorum is present, is
required for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
EACH OF THE ABOVE NAMED INDIVIDUALS AS DIRECTORS TO SERVE UNTIL
THE NEXT ANNUAL MEETING OF SHAREHOLDERS.
PROPOSAL 2
APPROVAL OF APPOINTMENT OF
INDEPENDENT AUDITORS
The accounting firm of Bloom & Company acted as the
independent public accountants for the Company for the fiscal
year ended December 31, 1997 and has been selected to act as the
independent public accountants for the current fiscal year and
for the year ending December 31, 1999. Although the selection
and appointment of independent accountants is not required to be
submitted to a vote of shareholders, the Board of Directors has
decided to request the shareholders to ratify the appointment.
Vote Required
The affirmative vote of a majority of the outstanding
shares of common (or voting) stock of the corporation present at
the meeting, in person or by proxy, a quorum being present, is
required for the ratification of the appointment of the
independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT
OF BLOOM & COMPANY AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
COMPANY FOR THE FISCAL YEARS ENDING DECEMBER 31, 1998 and 1999.
Other Matters
The Board of Directors of the Company knows of no other
matters to come before the Meeting, other than that which is set
forth herein and in the accompanying Notice of Annual Meeting.
However, if any other matters should properly come before the
meeting, it is the intention of the persons named in the
accompanying Proxy to vote such Proxies as in their discretion
they may deem advisable.
Rights of Dissenting Shareholders
Dissenting shareholders do not have any rights of appraisal
with respect to the proposals to which this Proxy Statement
relates. Any negative vote with respect to any specific
proposal, will, of course, be duly noted and recorded in the
computation to determine whether majority approval has been
obtained.
By Order of the Board of Directors
ANDREW MAKRIDES
President
Melville, New York
November 16, 1998
PROXY CARD
BOVIE MEDICAL CORPORATION
(formerly An-Con Genetics, Inc.)
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Andrew Makrides and Delton
Cunningham each with the power to appoint his or her substitutes,
and hereby authorizes them to represent and to vote, as designated
above, all the shares of common stock of Bovie Medical
Corporation, held of record by the undersigned on October 31,
1998, at the meeting of shareholders to be held on December 16,
1998 or any adjournment thereof.
In their discretion the proxies are authorized to vote upon such
other business as may properly come before the meeting. This
proxy, when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made,
this proxy will be voted FOR Proposals 1 and 2. Please sign
exactly as your name appears on the reverse side. When shares are
held by joint tenants, both should sign.*
When signing as attorney, as executor, administrator, trustee or
guardian, please give full title as such. If shareholder is a
corporation, please sign in full corporate name by President or
other authorized officer. If shareholder is a partnership, please
sign in partnership name by authorized person.
(To Be Signed on Reverse Side.)
FRONT OF CARD
BOVIE MEDICAL CORPORATION
A. Please indicate your vote by marking the selected box as
follows:
FOR AGAINST ABSTAIN 1. Election of Directors
A. Makrides
J. Robert Saron
George Kromer
Alfred V. Greco
Kenneth Davidson
2. Proposal to Approve the appointment
of Bloom and Company as the
independent auditors of the
Corporation for the fiscal years
ended December 31, 1998 and 1999.
Note: Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executive,
administrator trustee or guardian, please give full title as
such.
Signature:
Annual Report
Bovie Medical Corporation
(Formerly An-Con Genetics, Inc.)
1997
SELECTED FINANCIAL DATA
Years Ended December 31, In Thousands, Except Per Share Amounts.
Statement of Operations Data 1997 1996
Total revenues $ 7,371 $ 7,486
Gross profit 3,233 4,134
Earnings before interest and tax 78 450
Total interest and finance expense 88 76
Net earnings from operation 29 416
Earnings per common share -- .05
Dividends per common share -- --
Balance Sheet Data
Cash 48 121
Total Assets 3,838 3,899
Notes and loans payable 805 198
Shareholders equity $ 2,225 $ 2,020
CHAIRMAN'S LETTER
Dear Stockholder:
The year 1997 was one of identifying areas that would
result in improved growth and increased shareholder value. After
an in-depth study by management coupled with industry forecasts,
it was concluded that the electrosurgery market should continue to
experience solid growth.
Subsequent to the close of fiscal 1997 we were
successful in acquiring an exclusive worldwide license to DylynTM,
for use in a broad range of medical applications. DylynTM is a
multi patented coating technology developed by Advanced Refractory
Technologies, Inc., headquartered in Buffalo, New York. We are
currently field testing our first product, an electrosurgical
blade, "Slick TipTM" utilizing the DylynTM technology, with plans to
commence marketing "Slick TipTM" during the first quarter of 1999.
On May 11, 1998, as a result of a strategic
alliance with Maxxim Medical, Inc., a New York Stock Exchange
Company, with annual revenues exceeding $530 million, Maxxim
became the largest single stockholder in your Company. This
alliance with a leading manufacturer and marketer of a diverse
line of medical products places Bovie Medical Corporation in an
excellent position to grow, considering Maxxim's enormous and
respected distribution network.
In addition, your Company implemented the decision of
its stockholders and changed its name from An-Con Genetics, Inc.
to Bovie Medical Corporation. Our new stock symbol is .BOVI. and
the shares continue to trade on the OCT bulletin Board under the
new symbol.
The Bovie name enjoys an excellent reputation and has
been synonymous with electrosurgery since 1928. Management
believes that the new name more clearly reflects our core business
and strong commitment to the area of electrosurgery.
In closing, on behalf of your Company's management and
directors, I thank you for your continued loyalty, support and
above all, patience. These are exciting times and we look forward
to reporting to you on our progress throughout the year.
November, 1998
Sincerely,
J. Robert Saron
Chairman and CEO
AN-CON GENETICS, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
AN-CON GENETICS, INC.
INDEX TO FINANCIAL STATEMENTS
Contents
Independent Auditors' Report
Consolidated Balance Sheet at
December 31, 1997
Consolidated Statements of
Operations for the years ended
December 31, 1997 and 1996
Consolidated Statements of
Shareholders' Equity for the
years ended December 31, 1997 and 1996
Consolidated Statements of Cash
Flows for the years ended December
31, 1997 and 1996
Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Shareholders of
An-Con Genetics, Inc.
We have audited the accompanying consolidated balance sheet of An-
Con Genetics, Inc. and subsidiary as of December 31, 1997 and 1996
and the related consolidated statements of operations and
shareholders' equity, and cash flows for the years ended December
31, 1997 and 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present
fairly, in all material respects, the financial position of An-Con
Genetics, Inc. and subsidiary as of December 31, 1997 and 1996 and
the results of their operations, and their cash flows for the
years ended December 31, 1997 and 1996 in conformity with
generally accepted accounting principles.
BLOOM AND COMPANY
Hempstead, New York
April 10, 1998
Except for the notes 8,10, 12, 16, 17 and 18 to the Financial
Statements for which the date is August 20, 1998 and all other
notes April 23, 1998.
AN-CON GENETICS, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
Current assets:
Cash $ 48,246 $ 120,900
Trade accounts receivable,
net 791,825 856,400
Inventories 953,125 854,000
Prepaid expenses 67,930 56,100
Deferred tax asset 175,010 175,000
Other Assets 57,263 --
Total current assets 2,093,399 2,062,400
Property and equipment, net 1,439,500 1,418,200
Other assets:
Goodwill, net 40,000 62,700
Patent rights, net 257,552 348,300
Deposits 7,150 7,100
304,702 418,100
Total Assets $3,837,601 $3,898,700
The accompanying notes are an integral part of the financial
statements.
AN-CON GENETICS, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
1997 1996
Current liabilities:
Accounts payable $ 399,090 $ 787,500
Accrued expenses 235,790 309,300
Notes payable - current
portion 804,762 198,000
Due to shareholders 99,154 96,400
Current portion of
obligations under
capital leases -- 4,600
Total current liabilities 1,538,796 1,395,800
Long-term debt 74,107 482,700
Stockholders' equity:
Common stock par value
$.015; 15,000,000 shares
authorized, issued and
outstanding 8,279,948
and 8,110,648 shares,
on December 31, 1997
and 1996, respectively 124,071 121,700
Additional paid in
capital 13,030,962 12,921,400
Accumulated deficit (10,930,335) (10,958,900)
2,224,698 2,084,200
Subscription receivable -- ( 64,000)
Total stockholders' equity 2,224,698 2,020,200
Total liabilities and
stockholders' equity $ 3,837,601 $ 3,898,700
The accompanying notes are an integral part of the financial
statements.
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
Sales $ 7,371,281 $ 7,485,900
Cost of sales 4,138,774 4,134,434
Gross Profit 3,232,507 3,351,466
Other costs:
Research and development 96,738 105,681
Professional services 298,156 259,406
Salaries and related costs 1,280,370 1,168,019
Selling, general and
administration 1,479,249 1,338,000
Total other costs 3,154,513 2,871,106
Income from operations 77,994 480,360
Other income and (expense):
Interest income 4,005 --
Interest expense ( 87,696) ( 75,820)
Miscellaneous 34,288 11,003
( 49,403) 64,817
Income before income tax 28,591 415,543
Income taxes:
Current ( 8,577) ( 158,300)
Deferred -- ( 8,300)
Tax benefit 8,577 158,300
Net income (loss) $ 28,591 $ 407,243
The accompanying notes are an integral part of the financial
statements.
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(CONTINUED)
Earnings per share 1997 1996
Net income:
Basic N/S $ .0531
Diluted N/S $ .0521
Weighted average number
of shares
outstanding 8,186,256 7,663,872
Weighted average number
of share assuming
conversion of securities 8,443,972 7,817,205
N/S - Not Significant
The accompanying notes are an integral part of the
financial statements.
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
Number of Common Paid in
Warrants Shares Stock Capital
Balance January
1, 1996 80,000 4,305,340 $64,591 $11,541,144
Private placement
of Shares at $1
per share plus 1
warrant per share 120,000 120,000 1,800 118,200
Shares issued for
cash at $.45 per
share -- 57,778 867 19,133
Shares issued for
cash notes at
$.42 per share -- 200,000 3,000 81,000
Share issued
for cash at $.42
per share -- 50,000 750 20,250
Shares issued to
Aaron shareholders
at $.39 per share -- 3,352,530 50,288 1,306,812
Stock issue costs -- -- -- (174,800)
Shares issued for
services at $.40
per share -- 25,000 375 9,625
Subscriptions
collected -- -- -- --
Employee warrants 921,000 -- -- --
Income for year 1996 -- -- -- --
Balance, December
31, 1996 $1,121,000 $8,110,648 $121,671 $12,921,364
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(continued)
Subscriptions
Deficit Receivable Total
Balance
January 1, 1996 $(11,366,169) $(10,600) $ 228,966
Private placement
of Shares at $1
per share plus 1
warrant per share -- -- 120,000
Shares issued for
cash at $.45 per
share -- -- 20,000
Shares issued for
cash and notes
at $.42 per share -- (64,000) 20,000
Shares issued for
cash at $.42 per
share -- -- 21,000
Shares issued to
Aaron shareholders
at $.39 per share -- -- 1,357,100
Stock issue costs -- -- ( 174,800)
Shares issued for
services at $.40
per share -- -- 10,000
Subscription collected -- 10,600 10,600
Employee warrants -- -- --
Income for year 1996 407,243 -- 407,243
Balance, December
31, 1996 $(10,958,926) $ (64,000) $2,020,109
The accompanying notes are an integral part of the financial
statements. (continued on next page)
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(CONTINUED)
Number of Common Paid in
Warrants Shares Stock Capital
Balance
January 1, 1997 1,121,000 8,110,648 $121,671 $12,921,367
Shares exchanged
for warrants ( 200,000) 100,000 1,500 ( 1,500)
Shares issued to
retire debts -- 51,800 637 33,761
Shares issued for
services -- 17,500 263 6,737
Warrants issued 143,000 -- -- --
Collection of
Subscriptions
receivable -- -- -- --
Employee
contribution
of Bonus -- -- -- 70,600
Net income -- -- -- --
Balance as of
December 31,
1997 1,064,000 8,279,948 $124,071 $13,030,962
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(CONTINUED)
Subscriptions
Deficit Receivable Total
Balance
January 1, 1997 $(10,958,926) $(64,000) $2,020,109
Shares exchanged
for warrants -- -- --
Shares issued to
retire debts -- -- 34,398
Shares issued for
services -- -- 7,000
Warrants issued -- -- --
Collection of
subscriptions
receivable -- 64,000 64,000
Employee
contribution
of Bonus -- -- 70,600
Net income 28,591 -- 28,591
Balance as of
December 31,
1997 $(10,930,335) $ -- $2,224,698
The accompanying notes are an integral part of the financial
statements.
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
Cash flows from
operating activities:
Net income $ 28,591 $ 407,249
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and
amortization 311,138 260,600
Shares issued for services 7,000 10,000
Deferred income taxes -- 8,300
Change in assets
and liabilities:
(Increase) decrease in
receivables 64,565 ( 204,100)
(Increase) decrease in
prepaid expenses ( 11,876) 17,724
Increase in inventories ( 109,925) ( 247,769)
Increase in other
receivables ( 7,738) --
Increase (decrease) in
accounts payable ( 388,126) 112,400
Increase in accrued
expense 7,578 60,900
Total adjustments ( 127,384) 18,055
Net cash provided
(used in)operations $( 98,793) $ 425,304
The accompanying notes are an integral part of the financial
statements
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(Continued)
1997 1996
Net cash provided by
(used in)operating
activities $ ( 98,793) $ 425,304
Cash flows from
investing activities:
Increase in fixed assets (244,352) (300,200)
Increase in security deposits ( 10) 600
Acquisition of patent rights ( 13,371) --
Purchase of Technology -- (156,600)
Net cash used in investing
activities (257,733) (456,200)
Cash flows from financing
activities
Receipt of common stock
subscription 64,000 10,600
Common shares issued -- 181,000
Loans from shareholders 2,736 --
Cost of issuing common stock-
purchase of Aaron -- ( 79,700)
Increase in long term borrowing 69,534 --
Payment of long term borrowing (220,466) (125,900)
Term loan 150,000 --
Repayment of term loan ( 41,936) --
Borrowing - line of credit 485,000 --
Repayment - line of credit (225,000) --
Net cash used
in financing activities 283,868 ( 14,000)
Net increase (decrease)
in cash ( 72,658) ( 44,896)
Cash at beginning of year 120,904 165,800
Cash at end of year $ 48,246 $ 120,904
Cash paid during the twelve months ended December 31:
1997 1996
Interest $ 71,651 $ 70,000
Income Taxes -0- -0-
The accompanying notes are an integral part of these financial
statements.
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
1. In February of 1997, 10 year convertible subordinated
debentures of the Company came due and the Company offered each
bond holder 2,200 shares of common stock for each $1,000 bond and
accrued interest of $550. Nineteen bondholders accepted the offer
and forty-three bondholders received cash for their bonds and
accrued interest. The total amounts of principal and accrued
interest on the converted bonds were $19,000 and $10,826
respectively. The balance of the bondholders have not redeemed
their bonds or accepted the share offer.
2. The Company issued 10,000 shares of common stock in exchange
for $4,572 of accounts payable.
3. The Company issued 100,000 shares of common stock and
cancelled 200,000 warrants that were issued in conjunction with a
private placement of the Company's securities.
The Company exchanged its patent for Baroscope Technology and
related equipment and inventories for notes receivable in the
amount of $49,525. The costs of the patent (net of amortization)
equipment, and inventories were $31,735, $7,000, and $10,790
respectively.
The Company accepted $70,600 from management as a contribution to
capital for an outstanding liability for bonuses earned in 1996.
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
1. During 1996, the Company sold 200,000 common shares, at $.42
per share for $64,000 of subscription receivables and $20,000
cash. The subscription is due in August 1997, and bears interest
at 6% per annum.
2. The Company issued 25,000 restricted shares for sales services
valued at $.40 per share or $10,000 which was 50% of the market
value of the Company's unrestricted shares at the time of
issuance.
3. In November 1996, 99% of Aaron's shareholders accepted
3,352,530 shares of An-Con's common stock and rejected the cash
recission offer of $1,357,100 made by the Company. The common
stock issue costs of $95,000, associated with the purchase of
Aaron, were charged to capital in excess of par value when An-Con
shares were released to the Aaron shareholders in December 1996.
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
(CONTINUED)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: (CONTINUED)
4. The registration statement related to 3,399,096 of shares
issued to the previous shareholders of Aaron became effective on
November 8, 1996, as amended on November 27, 1996. As of January
11, 1997, the previous shareholders of Aaron may seek to remove
restrictions pursuant to Rule 144.
The accompanying notes are an integral part of the financial
statements.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in the Preparation of Financial Statements
The preparation of consolidated 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.
Consolidated Financial Statements
The consolidated financial statements include the accounts of An-
Con and its wholly owned subsidiary Aaron Medical Industries, Inc.
Intercompany transaction accounts have been eliminated.
Fair Values of Financial Instruments
Cash and cash equivalents. Holdings of highly liquid investments
with maturities of three months or less when purchased are
considered to be cash equivalents. The carrying amount reported
in the balance sheet for cash and cash equivalents approximates
its fair values.
Accounts receivable and accounts payable. The carrying amount of
accounts receivable and accounts payable on the balance sheet
approximates fair value.
Short term and long term debt. The carrying amount of the bonds
and notes payable, and amounts due to shareholders approximates
fair value.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined principally on the average actual cost method.
Inventory at December 31, 1997 and 1996 were as follows:
1997 1996
Raw material s $ 528,547 $ 402,700
Work in process 244,772 237,700
Finished goods 179,806 213,600
Total $ 953,125 $ 854,000
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-lived Assets
Long-lived and assets consist of property plant and equipment,
intangible assets.
Property, plant and equipment are recorded at cost less
depreciation and amortization. Depreciation and amortization are
accounted for on the straight-line method based on estimated
useful lives. The amortization of leasehold improvements is based
on the shorter of the lease term or the life of the improvement.
Betterments and large renewals, which extend the life of the
asset, are capitalized whereas maintenance and repairs and small
renewals are expenses as incurred. The estimated useful lives
are: machinery and equipment, 7-15 years; buildings, 30 years; and
leasehold improvements 10-20 years.
Intangible assets consist of patent rights and goodwill. Goodwill
represents the excess of the cost of assets of the acquired
companies over the values assigned to net tangible assets. These
intangibles are being amortized by the straight-line method over
a 5-year period.
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No.121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed Of. In accordance with SFAS No.121, the Company reviews
long-lived assets for impairment whenever events or changes in
business circumstances occur that indicate that the carrying
amount of the assets may not be recovered. The Company assesses
the recoverability of long-lived assets held and to be used based
on undiscounted cash flows and measures the impairment, if any,
using discounted cash flows. Adoption of SFAS No.121 did not have
a material impact on the Company's consolidated financial
position, operating results or cash flows.
Revenue Recognition and Product Warranty
Revenue from sales of products is generally recognized upon
shipment to customers. The Company warrants its products for one
year. The estimated future costs of warranties are not material.
Income is recognized in the financial statements (and the customer
billed) when products are shipped from stock. Net sales are
arrived at, by deducting discounts and freight from gross sales.
AN-CON GENETICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Environmental Remediation
The Company accrues environmental remediation costs if it is
probable that an asset has been impaired or a liability incurred
at the financial statement date and the amount can be reasonably
estimated. Environmental compliance costs are expenses as
incurred. Certain environmental costs are capitalized based on
estimates and depreciated over their useful lives.
Earnings Per Common and Common Equivalent Share
In February 1997, the Financial Accounting Standards Board issued
SFAS 128. "Earnings Per Share." SFAS 128 establishes new
standards for computing and presenting earnings per share ("EPS").
Specifically, SFAS 128 replaces the previously required
presentation of primary EPS with a presentation of basis EPS,
requires dual presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital
structures, and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the financial
statements issued for periods ending after December 15, 1997. In
1997, the Company adopted SFAS 128.
Research and Development Costs
Only the development costs that are purchased from another
enterprise and have alternative future use are capitalized and are
amortized over five years.
Income Taxes
The Company and its wholly-owned subsidiary file a consolidated
federal income tax return.
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Nonmonetary Transactions
The accounting for non-monetary assets is based on the fair values
of the assets involved. Cost of a non-monetary asset acquired in
exchange for another non-monetary asset is recorded at the fair
value of the asset surrendered to obtain it. The difference in
the costs of the assets exchanged is recognized as a gain or loss.
The fair value of the asset received is used to measure the cost
if it is more clearly evident than the fair value of asset
surrendered.
Stock-Based Compensation
The Company has adopted Accounting Principles Board Opinion 25 for
its accounting for stock based compensation. Under this policy:
1. Compensation costs are recognized as an expense over the period
of employment attributable to the employee stock options.
2. Stocks issued in accordance with a plan for past or future
services of an employee is allocated between the expired costs and
future costs. Future costs are charged to the periods in which
the services are performed. The proforma amounts of the
difference between compensation cost included in net income and
related cost measured by the fair value based method, including
tax effects are disclosed.
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS
130, "Reporting Comprehensive Income". SFAS 130 establishes
standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains, and losses) in a full
set of general purpose financial statements. Specifically, SFAS
130 requires that all items that meet the definition of components
of comprehensive income be reported in a financial statement for
the period in which they are recognized. However, SFAS 130 does
not specify when to recognize or how to measure the items that
make up comprehensive income. SFAS 130 is effective for fiscal
years beginning after December 15, 1997, and early application is
permitted.
Management believes the application of SFAS 130 will not have a
material effect on the Company's future financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS
131, "Financial Reporting for Segments of Business Enterprise."
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Standards(continued)
SFAS 131 supersedes the "industry segment" concept of SFAS 14
with a "management approach" concept as the basis for
identifying reportable segments. SFAS 131 is effective for
fiscal years beginning after December 15, 1997 and early
application is permitted. Management believes the application of
SFAS 131 will not have a material effect on the Company's future
financial statements.
NOTE 2. DESCRIPTION OF BUSINESS
An-Con Genetics, Inc. ("the Company") was incorporated in 1982,
under the laws of the State of Delaware and has its principal
executive office at 1 Huntington Quadrangle, Melville, New York
11747.
Currently, the Company is actively engaged in the business of
manufacturing and marketing medical products and developing
related technologies.
Aaron Medical Industries, Inc.
On January 11, 1995 the Company acquired a 100% ownership interest
in Aaron Medical Industries, Inc. a St. Petersburg, Florida based
Company engaged in the manufacturing and distributing of medical
products. Total assets acquired were valued at $2,012,800 and
liabilities assumed were valued at $681,000. The assets were
valued at $335,800 more than their cost basis which created
goodwill.
The goodwill is being written off over 5 years using the straight-
line method. Because a registration statement was not timely
filed the Aaron shareholders have been given the choice of
accepting cash at $.22 cents per share for their Aaron shares,
$1,331,800, or taking the An-Con shares in exchange. The Aaron
shareholders had 30 days from the effective day of the
registration statement (November 8, 1996) to accept the shares
offered or receive cash.
The $.22 cents per share valuation for the Aaron shares exchanged
was determined by (a) a separate fair valuation of current assets,
which included (i) discounted value of receivables (ii) market
value of inventory at estimated selling price, less cost of
disposal and reasonable profit allowance, (iii) pre-paid expenses
and security deposits at present value; (b) non-current assets of
plant, property and equipment at current replacement cost; (c)
intangible assets at present value of future benefits; (d) present
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. DESCRIPTION OF BUSINESS (CONTINUED)
Aaron Medical Industries, Inc. (continued)
value of liabilities, accounts and note payable and long term
debt. The amount of goodwill was determined by comparing the
financial position of Aaron at December 31, 1994 with the
financial position of similar companies in the same industry.
Aaron's largest current product line is battery operated
cauteries. Cauteries were originally designed for precise
hemostasis in ophthalmology. Today they have a variety of uses
including sculpting woven grafts in bypass surgery, vasectomies,
evacuation of subungual hematoma (smashed fingernail) and for
stopping bleeding in many types of surgery. Aaron manufactures
many types of cauteries.
Aaron additionally manufactures a variety of specialty lighting
instruments for use in ophthalmology, as well as a patented
flexible lighting instrument for general surgery, hip
replacement surgery, and for the placement of endotracheal
tubes. An industrial version of this light is distributed
through a large automotive tool distributor, and various retail
outlets and stores.
Aaron Medical Industries, Inc. manufactures and sells its
products under the Aaron label worldwide and has private label
arrangements.
ECU Technology
On December 15, 1995 the Company's subsidiary, Aaron, purchased
design rights for the technology to manufacture a 30 watt
electrosurgical coagulation device (ECU) for $185,000. The
purchase price was paid with $100,000 in cash and $85,000 in
notes. The notes were payable over eighteen months and bear 10%
interest per annum. Monthly payment on the note was $5,105.85.
The notes were paid and retired in 1997.
The ECU was being made by a third party manufacturer. The
Company had a one year contract with the manufacturer to produce
the unit at a fixed price with a provision for a second year
extension at an agreed upon price. The Company has hired an
electrical engineer to head up the project and has relocated the
production to the St. Petersburg facility.
Aaron has also hired a former director of sales for a physicians
office products Company. As part of his arrangement he has
loaned the Company $30,000 to be paid back over 2 years at 10%
interest. The note was retired in 1997.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. DESCRIPTION OF BUSINESS (CONTINUED)
ECU Technology(continued)
The Company has developed a 120 watt electrosurgical coagulation
device (ECU) to be marketed in 1998. Through December 31, 1997
the Company has spent $94,372 in its development.
NOTE 3. TRADE ACCOUNTS RECEIVABLE
As of December 31, 1997 and 1996 the trade accounts receivable
were as follows:
1997 1996
Trade accounts receivable $ 805,755 $ 872,500
Less: allowance for
doubtful accounts ( 13,930) ( 16,100)
Trade accounts
receivable, net $ 791,825 $ 856,400
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
As of December 31, 1997 and 1996 property, plant and equipment
consisted of the following:
1997 1996
Equipment $1,422,180 $1,375,700
Property held under
capital leases -- 16,200
Building 637,485 637,500
Furniture & Fixtures 229,189 134,800
Leasehold Improvements 230,109 143,200
Molds 56,742 31,000
2,575,705 2,338,400
Less: Accumulated
depreciation (1,136,205) ( 920,200)
Net property, plant,
and equipment $1,439,500 $ 1,418,200
Depreciation expenses for the years ended December 31, 1997 and
1996 were $216,000 and $166,400 respectively.
Plant, property and equipment, includes the capitalized lease of
the Company's telephone equipment. The lease agreement expired in
May 1997, and the assets were retired. The assets and liabilities
under capital leases are recorded at the lower of the present
value of the minimum lease payments or the fair value of the
assets.
The assets are amortized over their estimated productive lives.
Amortization of assets under capital leases is included in
depreciation expense for 1997 and 1996. This amortization
amounted to $0 and $3,200 for 1997 and 1996 respectively.
NOTE 5. RENTAL AGREEMENTS
On May 6, 1997, an agreement was entered into with the landlord of
734 Walt Whitman Rd., Melville, New York for a new lease on
premises beginning May 6, 1997 and extending for three years to
May 5, 2000. The annual rental is $14,722 payable $1,226.83 per
month.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. RENTAL AGREEMENTS (CONTINUED)
The following is a schedule of future minimum rental payments as
of December 31, 1997:
1997
1997 $ --
1998 14,722
1999 14,722
2000 4,907
$34,351
Total consolidated rent expense for the Company was $19,294 in
1997 and $24,000 in 1996.
NOTE 6. ACCRUED BONUS
For the year 1996 accrued bonuses earned by the officers and
employees of the Company amounted to $65,600. The bonus
arrangement based on employment contracts called for the payment
to certain employees of 10% of the profits in excess of $200,000
and 1% of the profits over $300,000.
During 1997, the Board of Directors of the Company requested
officers of the Company to waive their rights to contract
bonuses. All officers agreed and waived their contract bonuses.
NOTE 7. DUE TO SHAREHOLDERS
A former Chief Executive Officer (CEO) and past President made
cash loans to the Company during the period October 12, 1990 to
December 31, 1993 of $180,500. In addition to these loans, the
past CEO advanced his own cash of $76,100 in the form of loans
for product development, travel and other expenses. Interest on
these loans were at 9% to 12% and had been accrued from
inception. His loan balance at December 31, 1996 was $ -0- and
accrued interest amounted to $73,800. Accrued interest has not
been paid and the Company has been negotiating to settle this
matter.
In response to the recission offer made by An-Con to Aaron's
former shareholders, certain shareholders owning 46,800 shares
have not contacted the Company. The recission price owed to
these shareholders, including $6,566 of accrued interest is
$25,353.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INTANGIBLE ASSETS
At December 31, 1996, the intangible assets consisted of the
following:
Balance Balance
Beginning Additions at end of Accumulated
of period at cost Dispositions Period Amortization
Classification:
Patents, trademarks,
patent rights
(ECU Aaron 1200) $ -- $93,000 $ -- $ 93,000 $ --
Patent rights
(Multifunction
Cautery) 59,400 -- -- 59,400 20,800
Patent rights
(Cauteries) 71,500 -- -- 71,500 58,700
Patent rights
(ECU Aaron 800) 185,000 25,900 -- 210,900 43,600
Borascope
Technology -- 37,700 -- 37,700 1,100
$315,900 $156,600 $ -- $ 472,500 $ 124,200
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INTANGIBLE ASSETS(CONTINUED)
At December 31, 1997, the intangible assets consisted of the
following:
Balance Balance
Beginning Additions at end of Accumulated
of period at cost Dispositions Period Amortization
Classification:
Patents,
trademarks,
patent rights
ECU Aaron 1200 $93,000 $ 1,372 $ -- $ 94,372 $ --
Multifunction
Cautery 59,400 -- -- 59,400 32,637
Patent rights
(Cauteries) 71,500 -- -- 71,500 71,213
ECU Aaron 800 210,900 11,923 -- 222,823 86,693
Borascope
Technology 37,700 -- (37,700) -- --
$472,500 $13,295 $(37,700) $448,095 $190,543
During 1996 the Company purchased the technology for two
electro-surgical products from a non-affiliated third party
manufacturer, the Aaron 800 for $25,900 and the Aaron 1200 for
$93,000. The Company also purchased the rights to a product
called the BoroScope for $37,700, which the Company subsequently
sold in 1997 for $49,525, the above costs have been capitalized.
The cost of patents, trademarks, patent rights, technologies and
copyrights acquired are being amortized on the straight-line
method over their remaining lives, ranging from 2 to 5 years.
Amortization expense charged to operations in 1997 and 1996 were
$60,157 and $67,700 respectively.
1997
Goodwill (Purchase Aaron) $152,500
Goodwill (Purchase Suncoast
Covenant not to compete) 15,500
(Purchase Suncoast) 20,000
188,000
Less accumulated amortization (148,000)
Goodwill, net $ 40,000
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INTANGIBLE ASSETS(CONTINUED)
Goodwill represents the excess of the cost of Companies acquired
over the fair value of their net assets at dates of acquisition
and is being amortized on the straight-line method over 5 years.
Amortization expense charged to operations for 1997 and 1996 were
$22,700 and $37,600, respectively.
NOTE 9. LONG-TERM DEBT
The long-term debt of the Company includes the mortgages,
convertible debentures and notes payable of the Company.
1997 1996
Bonds payable $ 20,000 $ 78,000
Mortgage payable 460,610 478,100
Term loan 108,064 --
Borrowing-line
of credit 260,000 --
Other 30,195 124,600
878,869 680,700
Less: Current
portion (804,762) (198,000)
Long-term debt $ 74,107 $ 482,700
Bonds payable - Convertible Debenture
As of April 21, 1987, the Company had sold 1,711 convertible
debenture units. Each unit consisted of $1,000 subordinated
debentures and 50 common stock warrants.
As of December 31, 1997, 1,691 units of debentures had been
converted into common shares of An-Con Genetics, Inc. or have been
redeemed. The remaining number of outstanding debentures was 20
units.
In February of 1997, the 10-year notes of $78,000 and accrued
interest of $42,580 turned over to New York State came due and the
Company offered each bond holder 2,200 shares of common stock for
their $1,000 bond and accrued interest of $550. Nineteen
bondholders accepted the offer and forty-three bondholders
received cash for their bonds and accrued interest. The balance
of the bondholders have not redeemed their bonds or accepted the
share offer.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. LONG-TERM DEBT(continued)
Mortgage Payable
10% - Mortgage payable to former landlord for purchase of property
at 7100 30th Avenue North, St. Petersburg, Florida secured on June
26, 1995 for $500,000 payable in monthly installments of $5,673.06
inclusive of interest until July 1,1998 when a balloon payment of
$ 442,733 is due.
Notes Payable to a Commercial Bank
The notes payable is for a term loan of $150,000. The interest on
the term loan is the bank's prime rate plus 1%. The loan is
repaid in equal monthly payments plus accrued interest based on a
three year amortization. The bank has a security interest in
inventory, accounts receivable and equipment of the Company (the
collaterals).
Line of Credit - Commercial Bank
The advances under-line of credit is limited to the lesser of
$400,000 or 65% of accounts receivable from non affiliated
parties. The annual interest rate on the loan is the bank's
prime rate plus one percent. The line expires March 31, 1998.
The bank has a security interest in inventory, accounts
receivable and equipment of the Company (the collateral).
7% Note Payable
7% - Notes payable in connection with the purchase of a probe
scope technology payable $779.14 per month for 48 months self-
liquidating beginning November 1996 with the last payment due
October, 2000.
9% Note Payable
9% - Note payable to insurance premium finance Company at
$5,661.00 per month for 2 months.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. LONG-TERM DEBT(continued)
The following are maturities of long term debt for each of the
next 5 years:
1998 $ 804,762
1999 59,235
2000 14,872
$ 878,869
NOTE 10. DISCONTINUED OPERATIONS
The Company's unconsolidated subsidiaries, Automated Diagnostics
and Xenetics Biomedical, discontinued operations in 1987 and
1989, respectively. Automated and Xenetics were majority owned
subsidiaries of the Company, the minority shares of which were
owned by supportive private investors, many of whom also owned
shares of the Company. Automated was formed to fund development
of technologies owned by the Company which proved to be not
commercially viable and Automated discontinued operations,
Xenetics acquired Omnifix, a technology for a biodegradable
tissue fixative, which was assigned to An-Con as part of a
repayment of indebtedness in connection with Xenetics?
discontinuance of operations. On information and belief, prior
to the discontinuance of each of the operations of Automated and
Xenetics, the Company agreed to merge with them and consolidate
operations. In view of the above and the Company's lack of
finances at the required time, the previously agreed upon
mergers have not taken place. However, the Company has
continued the development of OmniFix. In consideration of the
Company's failure to consummate its agreement to merge, the
board of directors of the Company has resolved to deliver
153,333 shares of its common stock to Automated and Xenetic
shareholders on an adjusted basis, having given effect to the
one-for-fifteen reverse stock split declared in 1994. When
the Company issues the 153,333 restricted shares the Company
will dilute present shareholders by .0115% due to its obligation
to Automated Diagnostics and Xenetics shareholders).
NOTE 11. OPTIONS
As of December 31, 1997, outstanding options were as follows:
Number of Options Exercise
Currently Exercisable Price
677,000 $ 0.750 up to $1.15
387,000 $ 1.125
1,064,000 $ 0.8064 weighted average
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. OPTIONS (CONTINUED)
In 1996 the Company issued 921,000 ten-year non-statutory stock
options to employees exercisable at from $.75 to $1.15 a share.
In 1997, the Company issued 100,000 shares of common stock in
exchange for 200,000 options. Also, 143,000 warrants were issued
to the Company's employees as a part of the employee benefit plan
(Note 16).
The options became exercisable in 1996 and 1997 and expire at
various dates through December, 2007. At December 31, 1997,
1,064,000 shares of stock were reserved for that purpose.
1,064,000 options are currently exercisable with a weighted
average life of 9.6-years and a weighted average exercise price
of $.8064.
The Company used the Black-Scholes Model to determine the value of
the options with the following weighted average assumptions, zero
dividend yield; expected volatility of 26%; and risk free interest
rate of 6%. (See Note 16 - Employee Benefit Plans)
NOTE 12. NET OPERATING LOSS CARRYFORWARDS
The tax effects of temporary differences that gave rise to the
deferred tax assets are as follows:
1997 1996
Deferred tax assets - current:
Net operating loss carry-forwards $ 175,000 $ 175,000
Deferred tax assets - non-current:
Net operating loss carry-forwards 2,460,115 2,506,700
Patent rights, primarily due to
amortization 63,200 62,200
Total gross deferred tax assets 2,523,315 2,568,900
Less: Valuation allowance (2,523,315) (2,568,900)
Net deferred tax assets -
non-current $ -- $ --
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. NET OPERATING LOSS CARRYFORWARDS(CONTINUED)
The Company had NOLs of approximately $7,028,900 at December 31,
1997, primarily because of the past operating losses associated
with discontinued businesses. These NOLs and corresponding
estimated tax assets, computed at 35% tax rate, expire as follows:
Year lossExpiration Loss Estimated
incurred Date Amount Tax Asset
1984 1999 $ 671,900 $ 235,165
1985 2000 764,000 267,000
1986 2001 301,000 105,000
1987 2002 730,000 255,000
1988 2003 757,000 265,000
1989 2004 374,000 131,000
1990 2005 382,000 134,000
1991 2006 246,000 86,000
1992 2007 1,004,000 352,000
1993 2008 465,000 163,000
1994 2009 1,197,000 419,000
1995 2010 637,000 223,000
Total 7,528,900 2,635,165
Current 500,000 175,000
$ 7,028,900 $ 2,460,165
Under the provisions of SFAS 109, NOLs represent temporary
differences that enter into calculation of deferred tax assets.
Realization of deferred tax assets associated with the NOL is
dependent upon generating sufficient taxable income prior to
their expiration. Management believes that there is a risk that
certain of these NOLs may expire unused and, accordingly, has
established a valuation allowance against them. Although
realization is not assured for the remaining deferred tax
assets, based on the historical trend in sales and
profitability, sales backlog, and budgeted sales of the
Company's wholly owned and consolidated subsidiary, Aaron
Medical Industries, Inc., management believes it is more likely
than not they will be realized through future taxable earnings.
However, the net deferred tax assets could be reduced in the
near term if management's estimates of taxable income during the
carryforward period are significantly reduced.
The valuation allowance of $2,506,700, as of January 1, 1997 was
reduced as a consequence of recognizing deferred tax assets of
$8,577 and NOL carry-forward benefit of $28,591. If an
ownership change occurs in the future, Internal Revenue Code,
Section 382 limits the annual use of a corporation's NOL but
AN-CON GENETICS,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. NET OPERATING LOSS CARRYFORWARDS(CONTINUED)
does not eliminate the carry-forward. In each post-ownership
change year, the corporation can use its NOL carry forwards, up to
the amount of the "Section 382 Limitation," to offset annual
income. The amount of tax assets expired in 1997 was $8,577.
Pursuant to Section 382(b), the "Section 382 Limitation" equals
the value of the corporation (immediately before the ownership
change, Sec. 382(e), multiplied by the long term tax exempt rate
(the highest Long Term AFR in effect for any month in the three
calendar month period ending with the month of the change, Sec.
382(f)). If the corporation does not have income for the year at
least equal to Section 382 limitation, the unused portion of the
limitation is carried forward to the following year.
Pursuant to the Internal Revenue Code, IRC. Sec. 368(a), the
acquisition of Aaron by An-Con is a considered Type B
reorganization. The transaction should not limit the net
operating loss carry-forward of An-Con.
Income before taxes and provisions for income tax expense
(benefit) from continuing operations at December 31, are:
Current Federal income tax $ 6,262
Current State income tax 2,315
Total $ 8,577
The actual income tax expense attributable to earnings from
continuing operations for the year ended December 31, 1997
differed from the amounts computed by applying the US Federal
tax rate of 30% to pretax earnings from continuing operations as
a result of the following:
Benefit of operating loss carryforwards (8,577)
NOTE 13. RETIREMENT PLANS
The Company and or its subsidiary provides a tax-qualified
profit-sharing retirement plan under sec.401k of the IRC. (the
"Qualified Plans") for the benefit of eligible employees with an
accumulation of funds for retirement on a tax-deferred basis and
provides for annual discretionary contribution to individual
trust funds.
All employees are eligible to participate if they have one year of
service to the Company. The employees may make voluntary
contribution to the plan up to 15% of their annual compensation.
The Company's contributions to the plan are discretionary but may
CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. RETIREMENT PLANS (CONTINUED)
not exceed 25% of the first 4% of the annual compensation that an
employee contributes to the plan. Vesting is graded and depends
on the years of service. After six years of service the employees
are 100% vested.
The Company has made a contribution during 1997 and 1996 of
$10,557 and $14,000 respectively, for the benefit of its
employees.
The Company also maintains a group health and dental insurance
plan. The employees are eligible to participate in the plan after
three months of full-time service to the Company.
NOTE 14. RELATED PARTY TRANSACTIONS
During 1997, a company that was controlled by a board member
received commissions from the purchase of materials the Company
used in the production of certain of the Company's products. The
value of these materials sold to the Company for 1997 and 1996 was
$117,700 and $126,000, respectively. In May of 1996, the Company
signed a termination agreement with the supplier of these
products, which allows the Company to purchase these products
directly from the manufacturer. In exchange, the Company will pay
commissions to the board member for a period of 3 years based on
the amount of material purchased from certain vendors.
NOTE 15. PROPERTIES
The Company had moved its executive offices to the Aaron
facility located at 7100 30th Avenue N., St. Petersburg, Florida
33710-2902, during the first quarter of 1995.
The Company has additional executive office space at 734 Walt
Whitman Road, Melville, which it leases for $1,226.83 per month.
The lease runs through the year 2000.
As part of the purchase of 7100 30th Avenue North, St.
Petersburg, Florida (manufacturing facility) the seller
acknowledged it had previously conducted assessments to document
environmental conditions existing on the property, the results
of which are set forth in a June 23, 1994 Contamination
Assessment Report (CAR) and a January 27, 1995 Contamination
Assessment Addendum (CARA). The Florida Department of
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. PROPERTIES(CONTINUED)
Environmental Protection (FDEP) stated in a letter, dated March
31, 1995, that based on their review of the CARA, the CAR could
not be approved and that additional work was needed to be
performed.
In February of 1998, the environmental engineering firm Geo-
Ambient conducted a second addendum to the CAR, (CAR Addendum II)
to complete the additional work requested by the FDEP. Based on
the results of CAR Addendum II, Geo-Ambient recommended to the
FDEP that a "no further action" status be granted for the site.
However, as of the date of filing the FDEP has not yet issued a
Site Completion Rehabilitation Order (SCRO).
The Company has received a report and recommendations on the
results of the water tests performed. As a result of previous
sampling that showed that one on-site monitoring well still had
groundwater exceedances for vinyl chloride and total xylene, the
state Department of Environmental Protection has placed the site
on a "monitoring-only" plan. The plan includes 4 quarters of
sampling, concluding in May, 1999. The first quarter report was
issued this past July. Because the exceedances were very slight,
the mortgagee has requested a "no further action".
DEP disagreed, instead requiring the monitoring plan. At the end
of the period, DEP will likely approve a "no further action"
unless the well concentrations have not declined. In that case,
DEP could ask for further monitoring or some type of groundwater
treatment. The SCRO is on hold and the Company believes it will
not be issued for more than a year pending action on the above
issue.
Based on the above paragraph and the "no further action" finding
by Geo-Ambient and the future issuance of an SCRO by the FDEP
management of An-Con has estimated the present value of the cost
of environmental work to be zero.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Environmental conditions -Purchase of Building
(See Note 15 - properties)
Leases
The Company leases administrative facilities under an operating
lease that expires in 2000. Rental expense was $19,294 in 1997
and $24,400 in 1996. Minimum rental commitments under all non-
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. COMMITMENTS AND CONTINGENCIES(CONTINUED)
Leases(continue)
cancelable leases with an initial term in excess of one year are
payable as follows: 1998 - $14,722; 1999 - $14,722; 2001 and
beyond $4,907. Commitments for construction or purchase of
property, plant, and equipment approximated $50,000 at December
31, 1997.
Employment Agreements
The Company has employment agreements with six key employees.
These agreements are for terms from 2-5 years and call for
salaries of $35,000 to $118,335. Bonus arrangements call for 10%
of the profits over $200,000 for the Chairman to 1% of the profits
over $300,000 for the international sales representative for
profits of the Company.
During 1997 officers waived their right to 1996 bonuses and
allowed the board of directors to determine future bonuses. These
bonuses valued at $70,600 were shown as a contribution to paid in
capital.
Employee Benefit Plans
In 1996, the Company established stock option plans under which
officers, key employees and non-employee directors may be granted
options to purchase shares of the Company's authorized but
unissued Common Stock. Under Employee Stock Warrant Plans, the
Company issued warrants for the purchase of 1,064,000 shares of
restricted common stock at exercise prices ranging from $.75 to
$1.125, in 1997, 1996.
The Company has adopted the disclosure-only provision of Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized for the common stock option plans.
Had the compensation cost for the Company's two stock option
issuances been determined based on the fair value at the grant
date for awards in 1996 consistent with the provisions of SFAS
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
No.123, the Company's net earnings and earnings per share would
have been reduced to the pro forma amounts indicated below:
1997 1996
Net earnings-as reported $ 28,591 $407,300
Net earnings-pro forma ( 5,499) 347,300
Earnings per share before
extraordinary items-as reported N/S .053
Earnings per share before
extraordinary items-pro forma N/S .045
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the
following weighted average assumptions, zero dividend yield;
expected volatility of .26%; risk-free interest rate of 6%; and
expected lives of 3 years.
Options currently expire no later than ten years from the grant
date. When proceeds are received by the Company from exercises,
they are credited to Common Stock and Capital in excess of par
value.
Speiser
On December 29, 1992, Robert Speiser, the then, Chief Executive
Officer of An-Con,obtained a confession of judgement in the
Supreme Court, State of New York, counties of Suffolk and
Westchester for amounts due on loans to the Company of $92,239 and
$190,957 inclusive of interest at 12% to May 27, 1992 and 9%
thereafter.
These loans represent amounts claimed by Mr. Speiser to have been
expended on behalf of the Company and funds loaned to the Company.
As reported to the Board of Directors, Mr. Speiser's actions were
motivated solely to deter threatened action by a landlord to file
a judgement at that time of $41,700 in rental arrears on the
Melville, NY lease. Mr. Speiser has indicated that he does not
intend to enforce this judgement. On March 29, 1993 and in
subsequent letters of instruction to the Sheriff of Suffolk
County, Mr. Speiser requested that the execution of the above-
mentioned judgements be held in abeyance for a 60-day period,
until August 30, 1993.
On February 28, 1994, the executive order expired. As of
December 31, 1997, the Company had repaid $235,100 of the
principal amount upon which the aforesaid judgements were based.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has accrued a liability for $73,800 to Mr. Speiser
which was the balance of his loan to the Company and accrued
interest on that loan. Mr. Speiser is disputing this amount
because he feels he is due additional interest and back wages he
estimated to be an additional $80,000. See "certain
Relationships and Related Transactions". Presently there is no
lawsuit between the Company and Mr. Speiser .
The Company is pursuing a settlement of this matter.
Product Liability
The Company currently has product liability insurance which, it
believes to be adequate for its business. The Company's
existing policy expires in May 1998.
Regulation
In June 1995 pursuant to an inspection of the facilities of the
Company's subsidiary Aaron, the FDA issued a warning letter
advising of federal good manufacturing practices ("GMP")
deficiencies. The letter cited, among other things, the Company's
failure; (a) to follow its own complaint handling procedure, to
immediately review, evaluate, investigate and document the
complaint; (b) to evaluate significant equipment changes in
manufacturing processes and the quality assurance tests; (c) to
have and implement documented formal change control procedures for
changes made to devices or manufacturing processes; (d) to have,
follow and document conformance with appropriate written finished
device test procedures assuring devices and meet all finished
specifications prior to distribution; (e) to have, follow and
document conformance with written procedures for acceptance of
components; (f) to conduct a plan in periodic orders of the
quality assurance and good manufacturing practice programs in
accordance with written procedures; (g) to establish and implement
adequate record keeping procedures.
Until such deficiencies were removed the FDA indicated it was in
no position to restore GMP standing to the Company or permit
approval of any pending pre-market submissions by the Company.
On July 12, 1995, the FDA indicated that while the Company's
response appeared adequate, further verification was needed
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
before the FDA would be in a position to support the approval of
any pending pre-market submissions, or related Export
Certificates for the Company's products. After follow-up
correspondence, on December 15, 1995, the FDA acknowledged that
the Company's corrective action plan dated November 27, 1995,
appeared adequate.
However, the FDA determined that it was necessary to set another
evaluation date for May 1996 to ascertain whether the Company
was meeting GMP guidelines. This date was extended to March
1997 when the FDA made its inspection. The FDA has cleared the
Company and the Company is presently submitting applications for
new products to the FDA.
Bank Line of Credit and Term Loan
The bank line of credit and term loan require the Company:
1. To maintain a current ratio of not less than 1.10 to one,
senior debt to net worth ratio of not more than 1.5 to one, and
an interest coverage ratio of not less than eight to one.
2. Not to expend more than $400,000 for acquisition of fixed
assets, in the course of the year.
3. To submit its audited financial statements, forms C, and 10Q,
and accounts payable and receivable aging schedules.
4. Maintain its depository and cash management accounts with
the bank.
5. Not to guarantee obligations of any other person or encumber
its assets with any mortgage, security deed, or lien other than
security interests required by the bank loan agreement.
6. Not to default in any material contract with third parties.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. EARNING PER SHARE
The earnings per share were as follows:
For the Year Ended 1997
Income Share Per Share
Basic Earning Per
Share Income before
extraordinary items $ 28,591 8,186,256 N/S
Effect of Dillutive
securities Convertible
shares of Xenetics
Biomedical, Inc. and
Automated Diagnostics,
Inc. 153,333
Warrants 104,383
Diluted Earnings per Share
Income before extraordinary
items assuming conversion
of Securities $28,591 8,443,972 N/S
For the Year Ended 1996
Income Share Per Share
Basic Earning Per Share
Income before extraordinary
items $415,543 7,663,872 $.0531
Effect of Dillutive securities
Convertible shares of Xenetices
Biomedical, Inc. and Automated
Diagnostics, Inc. 153,333
Diluted Earnings per Share
Income before extraordinary
items assuming conversion
securities $415,543 7,817,205 $.0521
Warrants to purchase 387,000 shares of common stock at $11/8
during 1997 and 921,000 to purchase shares of common stock at
various prices in 1996 were not included in the computation of
diluted earnings per share because warrants' exercise prices were
greater than the average price of common shares in 1997 and 1996,
respectively.
N/S - Not Significant
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. SUBSEQUENT EVENTS
Bank Line of Credit
On January 29, 1997 the Company signed notes which effectively set
up a term loan credit line with a commercial bank for $550,000.
The line of credit terminates on April 30, 1998 unless renewed or
extended by the bank in writing. The agreement required the
Company pay-off the $260,000 outstanding balance of the loan by
April 1, 1998 and subsequently apply for the renewal of the line
of credit. However, since the repayment of the loan has been
delayed the Company is in technical default. The management plans
to renew the loan. The bank has taken a security interest in
accounts receivable, inventories and equipment.
Acquisition of BSD Development Beta Corporation
On February 9, 1998, the Company exchanged 5,000,000 shares of its
common stock for all preferred and common shares of BSD
Development Beta Corporation (BSD)and assumed an 8% Convertible
Debenture of BSD, in principal amount of $750,000. As a part of
the agreement with the sellers, the Company acquired through BSD
$250,000 cash, a secured note receivable of $750,000, due in May
1998, and certain equipment valued at $2,000,000. The equipment
will be used for coating electro-surgical blades and other medical
devices using DYLYN technology under a management agreement with
Advance Refractory Technologies (ART), the seller of the equipment
which has agreed to operate and maintain the equipment.
As a part of the agreement with ART, the Company obtained an
exclusive ten-year renewable license to use the DYLYN Technology
for coating specified medical products.
2,000,000 of the 5,000,000 shares exchanged were with ART for the
shares they held in BSD. As part of the agreement An-con
contracted to exchange ARTs 2,000,000 shares for 2,000,000 shares
of preferred An-con stock yet to be authorized. An-con has until
September 9, 1998 to deliver the preferred stock or they will have
to issue to ART an additional $500,000 worth of shares of common
stock as a late penalty.
Patent Infringement Lawsuit
On January 22, 1998, Aaron and MegaDyne Medical Products,
Inc.(MMP), a Utah Corporation, entered an agreement to settle an
action that MMP had brought against the Company, in District court
of Utah, for infringing a patent for an electro-surgical product.
Aaron agreed to pay $150,000 for damages resulting from the patent
infringement, for a period, of six months not to manufacture or
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. SUBSEQUENT EVENTS (CONTINUED)
Patent Infringement Lawsuit(Continued)
sell any electro-surgical instrument that infringes the Patent,
and to provide MMP with a list of customers who had purchased the
infringing product. Additional costs associated with the
settlement were legal fees of $92,038, write down or inventory of
$12,047 and estimated future sales refunds of $7,500. Total costs
charged as Selling, General and Administrative, were $261,585.
Restated Statement of Operations
The Company's financial statements were restated to capitalize
$70,600 of forgiveness of debt, by the Company's managers, and to
include $261,585 paid for the settlement of a patent infringement
lawsuit in selling, general, administration expenses. The
forgiveness of debt and the loss from a lawsuit were previously
presented as extraordinary items.
NOTE 19. INDUSTRY SEGMENT REPORTING
The Company's principal markets are the United States, Europe, and
Latin America, with the U.S. and Europe being the largest markets
based on revenues. The Company's major products include
cauteries, Bend-A-lights, nerve locators, reusable pen lights and
electrodes. Cauteries, disposable and replaceable, account for
40% and 50% of Company's sales for 1997 and 1996, respectively.
One significant customer accounted for 9% and 14% of revenues in
1997 and 1996, respectively. In 1997 that customer accounted for
$.6 million of non-medical sales which is 65% of that segments
sales. The Company's ten largest customers accounted for
approximately 51% of net revenues for 1997. At December 31, 1997,
the same ten customers accounted for approximately 47% of
outstanding accounts receivable.
Summary information by geographic area and significant industry
segment for years ended December 31,1997 and 1996 were as follows:
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. INDUSTRY SEGMENT REPORTING (CONTINUED)
Operating
Identifiable Sales Income Assets
1997 - (in thousands)
Geographic Area
United States $ 5,602 $ 259 $ 3,731
Europe 1,769 81 107
$ 7,371 $ 340 $ 3,838
Segment
Medical Products $ 6,409 $ 302 $ 3,282
Non medical products 962 38 556
$ 7,371 $ 340 $ 3,838
Operating
Identifiable Sales Income Assets
1996-(in thousands)
Geographic Area
United States $ 5,980 $ 384 $ 3,803
Europe 1,406 86 96
Latin America 100 10 --
$ 7,486 $ 480 $ 3,899
Segment
Medical Products $ 6,181 $ 451 $ 3,236
Non medical products 1,305 29 663
$ 7,486 $ 480 $ 3,899
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. INDUSTRY SEGMENT REPORTING (CONTINUED)
Foreign Operations 1997 1996
Total assets $ 107 $ 96
Total liabilities -0- -0-
Net property, plant
and equipment -0- -0-
The Company had no assets (other than certain trade receivables)
or liabilities outside the United States, in the two years ended
December 31, 1997.
During 1997, a substantial portion of the Company's consolidated
net sales and consolidated income from operations was derived from
foreign operations. Foreign operations are subject to certain
risks inherent in conducting business abroad, including price and
exchange controls, limitations on foreign participation in local
enterprises, possible nationalization or expropriation, potential
default on the payment of government obligations with attendant
impact on private enterprise, political instability and health
care regulation and other restrictive governmental actions.
Changes in the relative value of currencies take place from time
to time and could adversely affected the Company's results of
operations and financial condition. The future effects of these
fluctuations on the operations of the Company's and its
subsidiaries are not predictable.
Management's Discussion and Analysis for the Year 1997.
Results of Operations
An-Con's net revenues for 1997 were approximately $7.3 million as
compared to $7.5 million for 1996, respectively. Sales of Aaron
Medical accounted for substantially all of 1997 and 1996 sales.
The decrease in sales of $114,619 (1.5%) was the net result of
$194,770 (3%) increase in revenues from sale of medical products
and $309,389 (24%) decrease in sales of non-medical products. The
sales for medical products represented approximately 87% of total
sales in 1997 as compared to 83% in 1996. This was due to a
decrease in non-medical lighting products of $309,517 which is
directly attributable to one customer decreasing purchases from
the Company. The Company believes this trend by this customer
will continue in 1998 but at a lower rate. Percentage of gross
profit from sales decreased from 45% in 1996 to 44% in 1997
principally due to slightly higher cost of materials.
Because the Company's sales volume and gross profit percentage ,
for the two years was approximately the same cost of goods sold
did not materially change from 1996 to 1997. During 1997 and
1996, Aaron's family of cauteries accounted for 43% and 39% of
sales, and 39% and 33% of cost of goods sold, respectively.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. INDUSTRY SEGMENT REPORTING (CONTINUED)
In early 1998 the Company increased pricing on certain medical
products by 10%. This should cause sales and margins to increase
slightly in 1998.
Research and development expenses decreased by 8.5% from $105,700
to $96,738 from 1996 to 1997, respectively. The Company continued
to invest in the development of ECU devices, and other Aaron
products which is evidenced by acquisition costs in 1997 of
$11,925. Research and development costs are made up of material
costs, engineering costs and payroll.
Research and development costs of the Company will increase in
1998 by the depreciation expense on the reactors the Company
purchased from BSD (see Note 18 to the financial statements
subsequent events' acquisition of BSD development Beta
Corporation ). The Company is developing DYLYN coated products
with these reactors. When the products being developed are
marketed and the reactors are used for manufacturing,
depreciation will be charged to operations. The Company
estimated the lives of the reactors to be 10 years.
The increase in net interest of 16% amounting to $11,896 was
mainly attributable to the Company's decision to utilize a bank
line of credit and a term loan to finance its working capital
needs.
The trend in interest costs should remain at 1997 levels or higher
because the Company intends to maintain its credit line and
refinance the first mortgage on its building.
The Company's effective income tax rate would have been 30% except
that An-Con has loss carryforwards. For 1997 the Company
recognized $8,577 in tax benefit for the current year.
General and administrative expenses of the Company increased by
$141,249 (10.5%) from $1.3 million in 1996 to $1.5 million in
1997. This was mainly attributable to the settlement of the
Megadyne lawsuit of $261,585.
Salaries increased by 9.6% from $1.1 million in 1996 to $1.2
million in 1997. The increase in salaries were in part because of
hiring additional engineering and quality control personnel.
Total other costs as a percentage of sales were 38% in 1996 as
compared to 43% in 1997. Total other costs increased due to the
Megadyne lawsuit. For 1998 the Company believes total other
costs should not be significantly higher than they were in 1997.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. INDUSTRY SEGMENT REPORTING (CONTINUED)
Income from operations decreased to $77,994 in 1997, from
$480,360 in 1996, a 84% decrease. Income from operations as
measured by a percentage of sales was 6.4% in 1996 and 1.1% in
1997. The decrease of $402,366 from 1996 to 1997 was mainly
attributable to a decrease in sales and gross profit of $309,517
and $183,441, respectively, on non-medical lighting sales and
the Megadyne lawsuit.
Net income of the Company in 1997 was $28,591 as compared to
$407,243 in 1996. Income decreased by $378,652 from 1996 to
1997. The primary reason for reduction of the net income was a
$261,585 loss due to the settlement of a patent infringement
lawsuit.
Cost of professional services increased by 15% from $259,400 in
1996 to $298,156 in 1997. Additional professional fees were
related to the consulting and legal costs of acquiring new
technologies and products. Legal fees in 1998 will increase
because the Company has completed the BSD transaction and is
negotiating to purchase the Bovie brand-name from Maxxim.
The Company sells its products through distributors both in the
international market and in the USA. The distributors are
contacted through response to company advertising in
international medical journals or at domestic or international
trade shows. The Company began attending trade shows in foreign
countries in 1993. Since that time, international sales have
more than doubled from the 1993 sales of $553,000. The main
focus for export sales has been Western Europe. The Company has
distributors in all major markets there. The Company intends to
continue marketing its products, targeting different regions of
the world, while returning to major markets for increased market
exposure and to introduce new products.
During 1997, international sales of the Aaron Medical product
line continued to increase. These sales were $1.78 million,
which represented 24% of total sales. This compares favorably
to 1996 where total international sales were $1.51 million,
representing 20% of total sales. The increase from 1996 to 1997
represents a 19%($281,867) increase in international sales
volume.
Though consolidation in U.S. distribution continued in 1997,
Aaron retained all distributor relationships and acquired
preferred vendor status with industry leaders such as McKesson,
General Medical, Owens & Minor, and Physician Sales & Service.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. INDUSTRY SEGMENT REPORTING (CONTINUED)
Preferred vendor status denotes participation in a variety of
sales and marketing programs whereby the Company grants
preferred pricing and/or rebates to a customer and the customer
provides a variety of benefits such as preferred marketing
advertising, and distribution of the Company's products. Aaron
entered into a vendor focus agreement with Owens & Minor and an
exclusive U.S. sales agreement with Physician Sales & Services
for the Aaron 800. Additional sales were generated by
electrosurgical product OEM agreements.
An adequate supply of raw materials is available from both
domestic and international suppliers. The relationship between
the Company and its suppliers is generally limited to individual
purchase order agreements, supplemented by contractual
arrangements with key vendors to ensure availability of certain
products. The Company has developed multiple sources of supply
where possible.
New product development and improvements to the Company's facility
required by regulatory agencies in 1997 amounted to $86,909.
These expenditures were funded primarily through internal cash
flow and bank financing. In order to provide additional working
capital, the Company has secured a fourteen month $400,000 credit
facility with a local commercial bank in the first quarter of 1997
and a $150,000 three year note to purchase fixed assets with
interest at 1% over prime.
Discontinued Operations
As part of a lawsuit settlement with a competitor of the
company, the company agreed to discontinue sales of its coated
blade products. Sales and gross profits from this product for
1996 and 1997 were $370,677 - $489,582 and $203,131 - $332,916,
respectively. The company is developing a new line of coated
blade products, that the Company believes is proprietary, which
the Company believes will be marketed in the second half of
1998. The cost of the discontinued operations in 1997 was
$261,585.
Financial Condition
As of December 31, 1997, cash totaled $48,246 down from $120,900
at December 31, 1996. Cash used by operating activities was
$98,793 in 1997 compared to $425,300 cash generated from
operating activities in 1996. Net working capital of the
Company on December 31, 1997 was $557,237 as compared to
$666,600 in 1996.
The amount of cash used in investing activities was $257,733 in
1997, compared to $456,200 in 1996. The Company continued to
invest in property, plant and equipment needed for future
business requirements, including manufacturing capacity.
The Company's ten largest customers accounted for approximately
51% of net revenues for 1997. At December 31, 1997, the same
ten customers accounted for approximately 47% of outstanding
accounts receivables.
The net cash inflow from financing was $283,868 in 1997 as
compared to $14,000 in 1996. The most significant items of
financing activity in 1996 were the reduction of notes payable
of $125,900 and the $79,700 in professional fees associated with
the Aaron purchase. Sources of funds were the receipt of
subscriptions receivable of $10,600 and issuance of 427,778
common shares for services valued at $181,000.
In 1997, the major sources of financing were $485,000 gross,
borrowing from the bank line of credit and $150,000 term loan
from the bank. The cash used in financing activities were
principally to repay the line of credit and long term debt,
$225,000 and $41,936 respectively.
The Company believes that it has the financial resources needed
to meet business requirements in the foreseeable future,
including capital expenditures for the expansion of its
manufacturing site, working capital requirements, and product
development programs.
Outlook
The statements contained in this Outlook are based on current
expectations. These statements are forward looking, and actual
results may differ materially.
The Company believes that the world market for disposable
medical products, such as the Company's battery-operated
cauteries, has significant growth potential because these type
of products have not been affordable or effectively marketed
outside the U.S. heretofore. Because of these factors, the
Company has designed certain disposable products to be reusable.
The Company presently has a significant portion of the U.S.
cautery market and does not expect a dramatic growth in sales of
cautery-related products domestically unless an OEM arrangement
can be obtained with a co-leader in this market.
The Company has focused on expanding its line of electrosurgical
products. Electrosurgical products sold by the Company are the
standard stainless steel electrodes, the patented Multi-Function
Cautery, and the Aaron 800 high frequency desiccator and the as
Aaron 1200. The Aaron 1200 will be introduced in the second
quarter of 1998.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. INDUSTRY SEGMENT REPORTING (CONTINUED)
Outlook (continued)
From 1996 to 1997, the Company's electrosurgical sales increased
by more than 3% from $1,331,523 to $1,377,029. This increase
was attributable to a 50% increase in Resistick sales and a 22%
decrease in sales of generators. In 1998 Resistick sales ceased
due to the settlement of the Company lawsuit with MegaDyne.
Except for the possible introduction of new electrosurgical
products the Company does not expect electrosurgical sales to
increase in 1998. Aaron through its private label capability
sees unique opportunities in the domestic market as its
competitors do not private label. The electrosurgical product
line is a larger market than the Company has normally sold into
and is dominated by two main competitors, ValleyLab and Conmed.
The combined markets for the Company's electrosurgical products
exceed $100 million annually. Electrosurgical product sales
moved from fifth place to second in total Company sales by
product line in 1997.
Non-Medical Products
The Company for 1997, sold $.962 million of its flexible
lighting products used primarily in the automotive and locksmith
industries. Approximately $.627 million was sold to one
customer. The Company is expanding this market line with the
addition of a higher quality flexible light unit. The higher
quality version of the Bend-A-Lite will be sold into the same
markets as the Company presently sells its less expensive unit.
The Company no longer intends to manufacture a fiber optic
flexible scope to compete in the automotive, aircraft and
quality maintenance markets. The Company sold its rights in
this product to a customer.
Liquidity and Future Plans
Since the acquisition of Aaron Medical Industries, Inc. the
Company has partially changed its direction from acquiring
ownership interest in companies to acquiring new product
technology and expanding manufacturing capabilities through
Aaron. The Aaron 800 and 1200 are prime examples of this new
direction. Other products and technologies are being evaluated
for future development.
AN-CON GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. INDUSTRY SEGMENT REPORTING (CONTINUED)
Liquidity and Future Plans (Continued)
In order to continue its strong international sales growth and
maintain its ability to sell in Europe, management is
implementing an ISO9000/EN46001 quality system and expects to be
certified and have its CE mark (International Quality control)
by the third quarter of 1998. The Company has obtained a line
of credit with a local commercial bank for $400,000 and a
$150,000 loan for capital improvements. Interest on these loans
is to be paid at 1% over prime.
The Company's future results of operations and the other
forward-looking statements contained in the Outlook, in
particular the statements regarding growth in the medical
products industry, capital spending, research and development,
and marketing and general and administrative expenses, involve a
number of risks and uncertainties. In addition to the factors
discussed above, among the other factors that could cause actual
results to differ materially, are the following: business
conditions and the general economy; competitive factors such as
rival manufacturers' availability of products at reasonable
prices; risk of nonpayment of accounts receivable; risks
associated with foreign operations; and litigation involving
intellectual property and consumer issues.
An-Con believes that it has the product mix, facilities,
personnel, and competitive and financial resources for continued
business success, but future revenues, costs, margins, product
mix and profits are all subject to the influence of a number of
factors, as discussed above.
EXECUTIVE OFFICERS AND DIRECTORS
J. Robert Saron - Chairman of the Board of Directors
and CEO
Andrew Makrides - President and Director
George W. Kromer, Jr. - Director
Alfred V. Greco - Director
Kenneth W. Davidson - Director
Moshe Citronowicz - Executive Vice President and
Chief of Operations
Delton Cunningham - Secretary - Treasurer
Manhattan Transfer & Registrar Company
Transfer Agent
Holbrook, NY 11741
Alfred V. Greco, P.C.
Counsel
New York, NY 10103
Bloom and Company
Auditors
Hempstead, NY 11550