SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
First Aid Direct, Inc.
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(Name of Registrant as Specified In Its Charter)
Not Applicable
--------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): $1,215,000 - determined by
reference to the purchase price for the assets to be sold.
(4) Proposed maximum aggregate value of transaction: $1,215,000
(5) Total fee paid: $243.00
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
FIRST AID DIRECT, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 30, 2003
A Special Meeting of the Shareholders of First Aid Direct, Inc. will be
held at 1:00 p.m., local time, at The Courtyard by Marriott - Ft. Lauderdale
North/Cypress Creek, 2440 West Cypress Creek, Ft. Lauderdale, FL 33309 on
Tuesday, September 30, 2003. At the Special Meeting, you will be asked to vote
on the following matters:
1. To approve our sale to VDC First Aid and Safety Supply, LLC, a related
party, of certain assets relating to our wholesale first aid and
safety supply business, under the terms of an asset purchase agreement
entered into between First Aid Direct and VDC First Aid and Safety
Supply on August 29, 2003, as described in more detail in the attached
proxy statement. As part of the asset sale, we will change our name to
Total First Aid, Inc.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The board of directors recommends that you vote FOR Proposal 1.
Only shareholders of record, as shown by the transfer books of First Aid
Direct at the close of business on September 9, 2003, will be entitled to notice
of and to vote at the meeting. A list of shareholders entitled to vote at the
Special Meeting will be available for examination by any shareholder for the
proper purpose during normal business hours at our offices for a period of at
least 10 days preceding the Special Meeting.
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
HOWEVER, EVEN IF YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, WE ASK THAT AS
PROMPTLY AS POSSIBLE YOU MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN
THE POSTAGE PRE-PAID ENVELOPE PROVIDED. SHAREHOLDERS ATTENDING THE SPECIAL
MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE PREVIOUSLY VOTED.
By Order of the Board of Directors
/s/ Scott Siegel
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Scott Siegel
Chief Executive Officer
Tamarac, Florida
September 15, 2003
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FIRST AID DIRECT, INC.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TABLE OF CONTENTS
Page No.
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Matters to be Considered at the Special Meeting
Proposal 1 - Sale of Substantially All of our Assets . . . . . . . . . 11
Dissenter's Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . . . 25
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Proposals of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 28
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Appendix A - Form of Asset Purchase Agreement
Appendix B - Fairness Opinion and Valuation Report of Stenton Leigh Capital
Corp.
Appendix C - Form of Articles of Amendment to the Articles of Incorporation
changing our name to Total First Aid, Inc.
Appendix D - Sections 607.1301, 607.1302 and 607.1320 of the Florida
Business Corporations Act regarding dissenting shareholder's
appraisal rights.
Appendix E - Annual Report on Form 10-KSB for the year ended December 31,
2003.
Appendix F - Quarterly Report on Form 10-QSB for the quarter ended June 30,
2003.
Appendix G - Pro Forma Financial Information.
SHAREHOLDERS SHOULD READ THE ENTIRE PROXY STATEMENT
CAREFULLY PRIOR TO RETURNING THEIR PROXIES
FIRST AID DIRECT, INC.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 30, 2003
GENERAL
The enclosed proxy is solicited on behalf of the board of directors of
First Aid Direct, Inc. for use at our Special Meeting of shareholders to be held
on Tuesday, September 30, 2003 at 1:00 p.m., and at any adjournment or
postponement thereof. The Special Meeting will be held at The Courtyard by
Marriott - Ft. Lauderdale North/Cypress Creek, 2440 West Cypress Creek, Ft.
Lauderdale, FL 33309. These proxy solicitation materials were mailed on or about
September 15, 2003 to all shareholders entitled to vote at the Special Meeting.
At the Special Meeting, our shareholders will be requested to approve our
sale to VDC First Aid and Safety Supply, LLC, a related party, of certain assets
relating to our wholesale first aid and safety supply business, under the terms
of an asset purchase agreement entered into between First Aid Direct and VDC
First Aid and Safety Supply on August 29, 2003. Under the asset purchase
agreement, within 30 days following the closing, we have agreed not to operate
as "First Aid Direct" and we will change our name to Total First Aid, Inc.
The purchaser of the assets is an affiliate of Van Dyne-Crotty, Inc.,
currently our largest shareholder. If the asset sale is approved at the Special
Meeting, Van Dyne-Crotty, Inc. and its affiliates have agreed to sell a total of
1,701,200 shares of our common stock to Scott Siegel, our chief executive
officer and members of his immediate family. In view of the interest of Van
Dyne-Crotty and Mr. Siegel in the transaction to be voted upon, the shares owned
by Van Dyne-Crotty and our management will be counted for purposes of
establishing a quorum at the Special Meeting, but those shares will be voted in
proportion to the votes cast (FOR and AGAINST) by our disinterested
shareholders. In order for the asset sale to be authorized at the Special
Meeting, it must be approved by holders of at least a majority of our
outstanding shares.
Our board of directors retained a financial advisor to assist it in
determining the fairness of the amount of consideration to be paid for the
assets under the asset purchase agreement. An analysis was conducted by Stenton
Leigh Capital Corp., a financial consulting firm which regularly analyzes and
advises companies with respect to business transactions. A description of the
analysis and a summary of the fairness opinion and valuation report of Stenton
Leigh Capital Corp. are discussed elsewhere in this proxy statement. A copy of
the fairness opinion and valuation report of Stenton Leigh Capital Corp. is set
forth as Appendix B to this proxy statement.
Only shareholders of record, as shown by the transfer books of First Aid
Direct at the close of business on September 9, 2003, will be entitled to notice
of and to vote at the meeting. On that date, 3,985,000 shares of our common
stock were issued and outstanding. A list of shareholders entitled to vote at
the Special Meeting will be available for examination by any shareholder for the
proper purpose during normal business hours at our offices for a period of at
least 10 days preceding the Special Meeting.
QUESTIONS AND ANSWERS
Following are some commonly asked questions raised by our shareholders and
answers to each of those questions.
1. WHAT MAY I VOTE ON AT THE SPECIAL MEETING?
At the Special Meeting, shareholders will consider and vote upon whether to
approve the sale by us of those of our assets relating to our wholesale first
aid and safety supply business to VDC First Aid and Safety Supply, LLC. The
assets are to be sold under the terms and conditions of an asset purchase
agreement entered into between First Aid Direct and VDC First Aid and Safety
Supply on August 29, 2003, for a purchase price of $1,215,000 in cash. We will
also receive those of our accounts receivable as of the closing date, estimated
to be approximately $315,000 at June 30, 2003, that VDC First Aid and Safety
Supply successfully collects during the 120-day period following the closing
date. We will retain the balance of our assets, consisting of the assets related
to the sale and/or distribution of our Roehampton Supply product line and our
Total First Aid product line. At closing of the asset sale, our outstanding
indebtedness to KeyBank Dayton, estimated to be approximately $215,000, will be
retired from the purchase price. We will continue to be responsible for the
payment of all of our other liabilities, which are estimated at approximately
$310,000 at June 30, 2003. Within 30 days following the closing, we will change
our name to Total First Aid, Inc.
2. WHAT WILL HAPPEN IF THE ASSET SALE TO VDC FIRST AID AND SAFETY SUPPLY IS
APPROVED BY OUR SHAREHOLDERS?
If the asset sale is approved by our shareholders, we will sell the assets
of our wholesale first aid and safety supply business, which represent
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substantially all of our assets, to VDC First Aid and Safety Supply under the
terms of the asset purchase agreement more fully described in this proxy
statement. We anticipate that the closing will occur within 30 days of the
approval by our shareholders. Following the sale of those assets, we will
continue to operate the portion of our business related to the distribution of
our Roehampton Supply and Total First Aid product lines. A vote to authorize
the asset sale to VDC First Aid and Safety Supply will also include approval to
change our name to Total First Aid, Inc.
3. WHAT WILL HAPPEN IF THE ASSET SALE TO VDC FIRST AID AND SAFETY SUPPLY IS
NOT APPROVED BY OUR SHAREHOLDERS?
If the asset sale is not approved by our shareholders, we will not sell our
assets to VDC First Aid and Safety Supply and we will continue to conduct our
historic business.
4. HOW WAS THE PURCHASE PRICE FOR THE ASSETS DETERMINED?
The purchase price for the assets proposed to be sold to VDC First Aid and
Safety Supply was negotiated between representatives of our company and
representatives of VDC First Aid and Safety Supply. Since those representatives
have an interest in the transaction, the disinterested members of our board of
directors also approved the transaction. The purchase price is also supported
by a fairness opinion and valuation report received from Stenton Leigh Capital
Corp. concluding that, (a) the fair market value of First Aid Direct's wholesale
first aid and safety supply business as of June 1, 2003 was approximately
$1,200,000, and (b) from a financial point of view, the consideration to be
received by us for the assets is fair. A copy of the fairness opinion and
valuation report from Stenton Leigh Capital Corp. is included as Appendix B to
this proxy statement.
5. DO ANY OF FIRST AID DIRECT'S MANAGEMENT OR SHAREHOLDERS HAVE AN INTEREST
IN THE ASSET SALE?
Yes. Van Dyne-Crotty, Inc. and its affiliates, who currently control
approximately 50% of our outstanding common stock, are principal shareholders of
VDC First Aid and Safety Supply. In addition, if the sale of assets is approved
at the Special Meeting, Van Dyne-Crotty and its affiliates have agreed to sell
1,701,200 shares of our common stock to Scott Siegel, our Chief Executive
Officer, and/or his designees.
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6. HOW WILL THE SHARES OWNED BY INTERESTED SHAREHOLDERS BE COUNTED?
In view of the interest of Van Dyne-Crotty and Scott Siegel in the proposed
transaction, the following voting procedure has been agreed upon: The shares
owned and/or controlled by Van-Dyne Crotty and our management will be counted
for purposes of determining whether a quorum of shareholders is present at the
Special Meeting. Once a quorum has been established, those shares will be voted
in the same proportions (For and Against) as are all shares voted (For and
Against) by disinterested shareholders. Unless a majority of our outstanding
shares vote to authorize the asset sale to VDC First Aid and Safety Supply, the
transaction will not be approved.
7. HOW DOES THE BOARD RECOMMEND THAT I VOTE ON THE PROPOSAL?
The board of directors recommends a vote FOR the proposal.
8. HOW DO I VOTE?
Sign and date each proxy card you receive and return it in the enclosed
postage-paid envelope prior to the Special Meeting.
9. CAN I REVOKE MY PROXY?
You have the right to revoke your proxy at any time before the Special
Meeting by:
* notifying the Secretary of First Aid Direct in writing;
* voting in person at the Special Meeting; or
* returning a later-dated proxy card.
10. WHAT SHARES ARE INCLUDED ON THE PROXY CARD(S)?
The shares on your proxy card(s) represent ALL of your shares. If you do
not return your proxy card(s), your shares will not be voted.
11. WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
If your shares are registered differently and are in more than one account,
you will receive more than one proxy card. Sign and return all proxy cards to
ensure that all your shares are voted. We encourage you to have all accounts
registered in the same name and address (whenever possible). You can accomplish
this by contacting our transfer agent, Florida Atlantic Stock Transfer, Inc.,
7130 Nob Hill Road, Tamarac, Florida 33321, telephone 954-726-4954, or if your
shares are held in "street name," by contacting the broker or bank holding your
shares.
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12. WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
Only holders of record of our common stock as of the close of business on
September 9, 2003 are entitled to notice of and to vote at the Special Meeting.
13. HOW MANY SHARES WERE OUTSTANDING ON THE RECORD DATE?
As of September 9, 2003, the record date for the Special Meeting, 3,985,000
shares of our common stock, the only outstanding voting securities of First Aid
Direct, were issued and outstanding. At the meeting, each outstanding share of
common stock will be entitled to one vote.
14. WHAT IS A "QUORUM" FOR PURPOSES OF THE SPECIAL MEETING?
A "quorum" is a majority of the outstanding shares entitled to vote. The
shares may be present or represented by proxy. For the purposes of determining a
quorum, shares held by brokers or nominees will be treated as present even if
the broker or nominee does not have discretionary power to vote on a particular
matter or if instructions were never received from the beneficial owner. These
shares are called "broker non-votes." Abstentions will be counted as present for
quorum purposes.
15. WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSAL?
Once a quorum has been established, for the asset sale to be approved a
majority of our outstanding shares (or 1,992,501 shares) must vote FOR the asset
sale.
If a broker indicates on its proxy that it does not have discretionary
authority to vote on a particular matter, the affected shares will be treated as
not present and entitled to vote with respect to that matter, even though the
same shares may be considered present for quorum purposes and may be entitled to
vote on other matters.
As described above, at the Special Meeting the shares owned or controlled
by Van Dyne-Crotty and our management as of the record date will be counted to
determine if a quorum is present, but the vote of those shares will be split
(FOR and AGAINST) in the same proportions as the votes cast (FOR and AGAINST) by
our disinterested shareholders at the Special Meeting.
16. WHAT HAPPENS IF I ABSTAIN?
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Proxies marked "abstain" will be counted as shares present for the purpose
of determining the presence of a quorum, but for purposes of determining the
outcome of a proposal, shares represented by such proxies will not be treated as
affirmative votes.
17. HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
Although we do not know of any business to be considered at the Special
Meeting other than the proposal described in this proxy statement, if any other
business is properly presented at Special Meeting, your signed proxy card gives
authority to the proxy holder, Scott Siegel, to vote on such matters at his
discretion.
18. WHEN IS THE ASSET SALE TO VDC FIRST AID AND SAFETY SUPPLY EXPECTED TO BE
COMPLETED?
If the proposal is approved at the Special Meeting, we expect to complete
the asset sale to VDC First Aid and Safety Supply as soon as practicable after
all of the conditions to the completion of the asset sale contained in the asset
purchase agreement have been satisfied or waived. The parties are working
toward satisfying the conditions to closing and completing the asset sale as
soon as possible. We expect to be able to complete the asset sale in the second
half of 2003.
19. AM I ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE ASSET SALE TO
VDC FIRST AID AND SAFETY SUPPLY?
Yes. Florida law provides that a shareholder is entitled to dissent from,
and obtain payment of the fair value of his or her shares, in the event of a
sale or exchange of all, or substantially all, of the property of a Florida
corporation, other than in the usual and regular course of business. For a
complete description of the appraisal rights available to our shareholders, and
how to exercise them, see the section of this proxy statement entitled
"Dissenter's Appraisal Rights".
20. WHO WILL BEAR THE COST OF THIS SOLICITATION?
First Aid Direct will bear the entire cost of the solicitation. We will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses incurred in sending proxies and proxy
solicitation materials to shareholders. Proxies may also be solicited in person,
by telephone, or by facsimile, by our directors, officers and employees of First
Aid Direct without additional compensation. We anticipate that the costs of the
solicitation will not exceed $5,000.
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MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
PROPOSAL 1
SALE OF ASSETS TO VDC FIRST AID AND SAFETY SUPPLY
The following is a description of the material aspects of the asset sale to
VDC First Aid and Safety Supply and related transactions, including the asset
purchase agreement and certain other agreements entered into (or to be entered
into) in connection with the asset purchase agreement. While we believe that
the following description covers the material terms of the asset sale, the asset
purchase agreement and the related transactions and agreements, the description
may not contain all of the information that is important to you. You should
carefully read this document and the other documents to which we refer for a
more complete understanding of the asset sale and the related transactions. In
particular, the following summary of the asset purchase agreement is not
complete and is qualified in its entirety by reference to the copy of the asset
purchase agreement attached to this proxy statement as Appendix A and
incorporated by reference herein. You should read the asset purchase agreement
carefully and in its entirety for a complete understanding of the terms of the
asset sale and related transactions.
INFORMATION ABOUT FIRST AID DIRECT
First Aid Direct is a national distribution business that wholesales first
aid and safety products to first aid distributors across the nation. Most of the
distributors operate mobile first aid van services that sell and service the
industrial first aid kits, mandated by OSHA regulations. These kits are placed
in many different types of businesses and industrial locations such as
factories, distribution warehouses, offices, auto repair shops and dealerships,
hotels and retail stores. First Aid Direct currently has approximately 158
distributors located in 31 states throughout the United States. A distributor
typically operates a number of routes. Each route consists of several hundred
locations that are visited by the route driver/salesman at least once a month.
The driver/salesperson will typically visit as many as 20 locations each day.
The driver/salesperson operates a van stocked with first aid supplies and uses
the inventory to refill the kits that are placed in each location. The kits
contain a mix of first aid products designed and packaged for industrial use,
including bandages, tapes, gauze, antiseptics, ointments and over-the-counter
medications such as aspirin, cough medications, etc. First Aid Direct has
specialized packaging that lends itself to the workplace. All items are packed
in multilingual boxes that wherever possible are dispenser packs that offer each
individual product in a sanitary sealed package as part of a tear off strip.
In addition, First Aid Direct provides a business-to-business program
called "Direct Ship". This program involves direct shipments of first aid and
safety products to businesses. Distributors typically do not service direct
ship customers because their product usage is too limited for a driver/salesman
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to service monthly or they need centralized billing, control and pricing. First
Aid offers these customers a direct order system using phone, fax or the First
Aid Direct web site. Approximately 2% of our business is based upon the "Direct
Ship" program and approximately 98% of our business is based upon independent
distributorship, hospitals and emergency service agencies.
In 2003 we launched our new Total First Aid line. We believe that there is
a large market not currently available through the mobile first aid industry.
This market includes workplaces supplied by industrial supply houses, safety
distributors, catalog companies, school bus and transportation van manufacturers
and distributors, fire extinguisher service companies, janitorial supply
companies, and office coffee companies. We will approach these markets with bulk
kits, unitized kits, custom unitized kits, and specialty kits. We will also
offer a custom filled kit and custom screen-printed kit programs.
Roehampton Medical Supply distributes a proprietary first aid specialty
line consisting primarily of emergency products, with emphasis on "burn
products" such as sterile burn sheets and trauma dressings and first responder
blankets.
The sale of assets to VDC First Aid and Safety Supply does not include the
assets relating to Total First Aid or Roehampton Supply, and we will continue to
operate sell and distribute these product lines following completion of the
asset sale to VDC First Aid and Safety Supply.
For more information about our business, please refer to our Annual Report
on Form 10-KSB for the year ended December 31, 2003, and our Quarterly Report on
Form 10-QSB for the quarter ended June 30, 2003. Copies of these reports are
attached as Appendices E and F to this proxy statement, respectively.
OUR RELATIONSHIP WITH VAN DYNE-CROTTY
In December 1999 Van Dyne-Crotty purchased 1,400,000 shares of the our
common stock from two of our then principal shareholders, Scott Siegel, who has
served as our CEO since August 2000, and Robert Sussman, who served as our CEO
prior to Mr. Siegel. In conjunction with the share purchase, Van Dyne-Crotty
and First Aid Direct entered into an asset purchase agreement which transferred
all of the assets of our van distribution business to Van Dyne-Crotty, and a
supply agreement under which Van Dyne-Crotty agreed to purchase all of its
requirements for first aid products and supplies from us for a five-year term,
unless First Aid Direct was sold to a competitor of Van Dyne-Crotty. Under the
terms of this supply agreement, we are required to sell the products at the
lowest of the prevailing market price for the best grade for each type of item
covered. We may alter the price of any item upon notice, but Van Dyne-Crotty
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may discontinue purchasing its total requirements of any item if the price is
not comparable or if the quality of the item is not competitive with similar
types of products. The determination of whether our pricing is not competitive
is made by price comparison with other wholesalers of first aid products. In
February 2002 we granted Van Dyne-Crotty a 5% discount from previous price
levels due to competitive market prices and the volume of purchases made by Van
Dyne-Crotty.
For the year ended December 31, 2002, Van Dyne-Crotty accounted for
approximately 32% of our revenues as it did for the year ended December 31,
2001. For the six months ended June 30, 2003 it accounted for approximately 32%
of our revenues.
In March 2000, we entered into an asset purchase agreement to buy certain
assets from Van Dyne-Crotty, which it had acquired from Roehampton Supply, Inc.
Included in the assets acquired by Van Dyne-Crotty from Roehampton Supply were
accounts receivable, inventory and the customer list related to certain products
associated with Roehampton Supply's line of first aid products. First Aid
Direct acquired the accounts receivable, inventory and the customer listings
from Van Dyne-Crotty at Van Dyne-Crotty's cost at the time of the Roehampton
transaction. As was the case with the December 1999 asset purchase agreement
described above, Van Dyne-Crotty retained equipment, product and marketing
information from Roehampton Supply associated with its van distribution
business. It assigned and sold to First Aid Direct those products, assets and
marketing information consistent with our wholesale distribution operations. The
Roehampton products sold to us have a similar customer base to our other
products and complement our product offerings. We market these products to
first aid distributors, hospitals, and emergency response teams. The Roehampton
Supply product line will be retained by us and will not be sold to VDC First Aid
and Safety Supply.
In March 2000 we entered into a non-competition agreement and a consulting
agreement with the original owner of the Roehampton Supply assets. The covenant
not to compete is for a five-year term and provides for a total payment of
$75,000 to be paid in 36 equal installments. The consulting agreement is for a
three-year term and provides for payment of $75,000 to the consultant in 36
equal installments.
VDC First Aid and Safety Supply, LLC will acquire the assets from us in the
transaction described in this proxy statement. Its principal member is VDC
Investment Co., LLC, which in turn is controlled by the principal shareholders
of Van Dyne-Crotty, Inc.
BACKGROUND OF THE ASSET SALE
In January 2002, Scott Siegel, in his capacity as our CEO, met with David
Senseman, on behalf of Van Dyne-Crotty, Inc., our principal shareholder, to
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discuss the possibility of transferring the assets of our wholesale first aid
and safety supply business to Van Dyne-Crotty, Inc. and/or its affiliate(s).
The discussion was prompted, in part, to address the differences between
management's vision of our future and that of the principal shareholder. Mr.
Siegel expressed his view that our future operations should not be dependent
upon the wholesale first aid and supply product operations. On the other hand,
Mr. Senseman addressed Van Dyne-Crotty's desire for us to continue our focus on
first aid and safety supply products to, among others, Van Dyne-Crotty's mobile
van first aid supply operations. Moreover, Van Dyne-Crotty expressed an interest
to withdraw from the public company environment, due in part to the increasing
degree of regulatory oversight and compliance and costs relating thereto, and,
in part, due to the effects of the general economic downturn that continues to
depress the market for small cap issuers. No agreements or understandings
resulted from this initial meeting and no further discussions took place at this
time.
In late 2002 and early 2003, First Aid Direct launched its Total First Aid
product line, thereby further distancing management's vision of our future
direction from that of Van Dyne-Crotty. Mr. Siegel and Mr. Senseman again met to
discuss the possibility of transferring the assets of our wholesale first aid
and safety products operations to Van Dyne-Crotty. Again, no definitive
agreements were reached.
In January 2003, First Aid Direct continued to expand its business focus
into new areas not directly aligned with the wholesale first aid and safety
products operations. In June 2003, Mr. Siegel and Mr. Senseman again met and
discussed the prospect of transferring the wholesale first aid supply assets to
Van Dyne-Crotty and/or its affiliate(s). At this time, Mr. Senseman was
receptive to a proposal to transfer the assets to an affiliate of Van
Dyne-Crotty, substantially upon the terms of the asset purchase agreement that
is the subject of this proxy statement.
On August 29, 2003 First Aid Direct and VDC First Aid and Safety Supply
executed the asset purchase agreement.
THE ASSET PURCHASE AGREEMENT
Under the terms of the asset purchase agreement, VDC First Aid and Safety
Supply agreed to purchase the assets of our wholesale first aid and safety
supply business, which represents substantially all of our assets. Revenues from
our wholesale first aid and safety supply business represented approximately 92%
and 91% of our total revenues for the fiscal years ended December 31, 2002 and
2001, and approximately 88% of our total revenues for the six months ended June
30, 2003. The assets we have agreed to sell VDC First Aid and Safety Supply
include:
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* the wholesale inventory which consists of all of our inventory of
goods, merchandise and supplies expect as may be related to the
Roehampton Supply or Total First Aid product lines;
* the name "First Aid Direct" and all trademarks and trade names related
thereto;
* all rights, title and interest in and to all contracts related to the
assets being acquired;
* all permits; and
* all books and records related to the assets being acquired, including
customer lists and purchasing and sales records;
We are not selling to VDC First Aid and Safety Supply, and we will retain,
the following assets following the closing of the proposed asset sale:
* all assets related to the sale and/or distribution of the Roehampton
Supply product line, including customer lists and inventory; and
* all assets related to the Total First Aid product line, including
customer lists, inventory, furniture, fixtures, equipment and
machinery.
The purchase price VDC First Aid and Safety Supply has agreed to pay for
the assets is $1,215,000 which is payable in cash at the closing of the
transaction. From this amount, our outstanding obligations to KeyBank Dayton
will be satisfied at the closing. As of June 30, 2003, the principal and
accrued but unpaid interest due to Key Bank Dayton was approximately $215,000.
VDC First Aid and Safety Supply will not assume any of our liabilities in
connection with the asset sale. Those liabilities are estimated at $310,00 as
of June 30, 2003.
We will also receive those of our accounts receivable as of the closing
date, estimated to be approximately $315,000 at June 30, 2003, that VDC First
Aid and Safety Supply successfully collects during the 120-day period following
the closing date. At the closing of the asset sale, VDC First Aid and Safety
Supply will pay us a $250,000 cash deposit against these receivables. All
accounts receivables collected during the 90 days after the closing of the asset
sale will be paid by VDC First Aid and Safety Supply to us within 105 days of
the closing date, less the $250,000 paid at closing. The accounts receivable
collected during the next 30 days will be paid to us within 135 days of the
closing date. Thereafter, VDC First Aid and Safety Supply will keep the
15
proceeds of any accounts receivable that it collects. VDC First Aid and Safety
Supply is obligated to use the same efforts to collect the accounts receivable
that it uses to collect its own accounts receivable, but it is not obligated to
use a collection agency or file suit in the pursuit of such collection. Based
upon our review of our accounts receivable, we believe that all or substantially
all of the receivables will be collected within the 120 days following the
closing of the asset sale.
We anticipate that the closing of the asset purchase agreement will occur
within 30 days from our receipt of shareholder approval for the asset sale at
the Special Meeting and the satisfaction of all conditions to closing specified
in the asset purchase agreement.
If the sale of assets is approved by our shareholders, at the time of
closing we will enter into a Services Agreement with VDC First Aid and Safety
Supply to provide offices and administrative services to VDC First Aid and
Safety Supply over a period of up to 90 days following the closing, in order to
permit an orderly transition of the business to VDC First Aid and Safety Supply.
Under the Services Agreement, VDC First Aid and Safety Supply will pay us their
allocable portion of rent and utilities, as well as the actual cost of personnel
to operate the business during the transition period.
We have made a number of customary representations and warranties, subject
in some cases to customary qualifications, to VDC First Aid and Safety Supply in
the asset purchase agreement regarding aspects of our business, financial
condition, structure, customer contracts, intellectual property and other facts
pertinent to the asset sale, including, among other things, representations
related to:
* the corporate organization, existence, good standing and qualification
of First Aid Direct;
* our articles of incorporation, bylaws and corporate records;
* our financial statements, including with respect to any material
adverse change in our financial condition, assets or liabilities since
December 30, 2002;
* our right, title and interest in our name and the related intellectual
property;
* the provisions of our customer and third party contracts;
* our ownership of the assets being purchased by VDC First Aid and
Safety Supply and the quality of the inventory included in the assets
being purchased;
* our compliance with applicable laws and regulations;
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* the absence of any order or proceedings relating to the asset sale;
* the absence of conflicts with existing agreement resulting from the
consummation or performance of the asset sale, or any litigation
involving the assets being purchased, including product liability
litigation;
* our payment of applicable taxes;
* our authority to enter into and perform our obligations under the
asset purchase agreement, the approval of the asset purchase agreement
and the asset sale by our board of directors and the enforceability of
the asset purchase agreement; and
* the payment of any brokerage fees, finder's fees or commissions with
respect to the transaction.
Our representations and warranties survive the closing of the asset sale.
We have agreed to indemnify VDC First Aid and Safety Supply against any breach
or default of any representation and warranty, noncompliance with the laws of
the State of Florida (other than bulk sales laws, the compliance of which has
been waived by both parties), the failure by us to file any tax return or pay
any taxes when due and payable before the closing date and all claims or
liabilities arising out of the operation of that portion of our business which
relates to the asset being purchased prior to the closing date of the asset
purchase agreement. VDC First Aid and Safety has the right to offset the amounts
due us for any amounts paid or losses suffered or damages incurred by it under
the indemnification provisions of the asset purchase agreement.
VDC First Aid and Safety Supply has made a number of customary
representations and warranties, subject in some cases to customary
qualifications, to us in the asset purchase agreement regarding VDC First Aid
and Safety Supply's corporate organization, its authority to enter into the
asset purchase agreement and other facts pertinent to the asset sale, including:
* its corporate organization, existence and good standing;
* its authority to enter into and perform its obligations under the
asset purchase agreement, the approval of its board of directors, and
the enforceability of the asset purchase agreement; and
* the payment of any brokerage fees, finder's fees or commissions with
respect to the transaction.
17
VDC First Aid and Safety Supply's representations and warranties also
survive the closing of the asset sale. VDC First Aid and Safety Supply agreed
to indemnify us against any breach or default of any representation and warranty
and any claims or damages arising out of its ownership of the assets after the
closing of the asset purchase agreement.
The representations and warranties contained in the asset purchase
agreement and the indemnification provisions of the agreement are extensive and
not easily summarized. You are urged to carefully read the asset purchase
agreement, a copy of which is appended to this proxy statement as Appendix A.
Under the asset purchase agreement, for a period of three years following
the closing date, we are prohibited from, directly or indirectly:
* owning 1% or more of any entity that engages in the business of
distributing or selling first aid and/or safety supplies anywhere in North
America;
* advising any other entity to engage in the distribution or sale of
first aid and/or safety supplies anywhere in North America;
* requesting or advising any customer of VDC First Aid and Safety Supply
to terminate or alter its business relationship with VDC First Aid and Safety
Supply or otherwise interfere with the wholesale first aid and safety supply
business of VDC First Aid and Safety Supply;
* inducing or attempting to induce any employee of VDC First Aid and
Safety Supply to terminate his or her employment relationship; or
* competing with VDC First Aid and Safety Supply for sales to certain
customers specified on a schedule to the agreement.
Notwithstanding these prohibitions, we are not prohibited from:
* continuing to distribute and sell sterile thermal blankets and burn
dressings in substantially the same manner as such products were being
distributed and sold by us, through our Roehampton product line prior to the
date of the asset purchase agreement; and
* continuing to distribute and sell bulk first aid kits, unitized first
aid kits, custom first aid kits, specialty first aid kits, tablets and other
first aid and safety products to markets other than the van distribution market
in substantially the same manner as such products were being distributed and
sold by us, through our Total First Aid product line, prior to the date of the
asset purchase agreement.
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The closing of the asset sale is subject to a number of customary
conditions precedent. In addition, we have agreed that the to be included in
the assets on the closing date will have a minimum value of $500,000 and we have
also agreed to call and hold a special meeting of our shareholders to approve
the asset sale. This proxy statement relates to such a special meeting of our
shareholders.
OPINION OF FINANCIAL ADVISOR TO THE BOARD OF DIRECTORS OF FIRST AID DIRECT
Pursuant to an agreement dated June 6, 2003, Stenton Leigh Capital Corp.
was engaged to provide an independent fairness opinion to our board of directors
addressing the fair market value of our wholesale first aid and safety supply
business and the fairness of the consideration to be received by us under the
asset purchase agreement.
In connection with its opinion, Stenton Leigh reviewed numerous factors
including our history, the history of our industry, our relationship with Van
Dyne-Crotty, our business strategy, products and services, competition in our
industry, the market value for our common stock, our management and our
financial condition. In reaching its conclusion as to the fairness of
consideration to be paid, Stenton Leigh performed a valuation of the "fair
market value" of our wholesale first aid and safety supply business, the assets
of which are covered by the asset purchase agreement. The valuation excluded
the assets attributable to our Total First Aid and Roehampton Supply product
lines, which are not covered by the asset purchase agreement. Fair market value
is defined as "the price at which the property would change hands between a
willing buyer and a willing seller when the former is not under any compulsion
to buy and the latter is not under any compulsion to sell, both parties having
reasonable knowledge of all relevant facts".
On July 3, 2003 Stenton Leigh Capital Corp. delivered its valuation report
and fairness opinion to our board of directors. The opinion and valuation
report concluded, based upon and subject to the various factors and assumptions
described in its opinion and valuation report, that (a) the fair market value of
our wholesale first aid and safety supply business, comprised of the assets to
be sold to VDC First Aid and Safety Supply under the asset purchase agreement,
was approximately $1,200,000, and (b) the consideration to be received by First
Aid Direct under the asset purchase agreement is fair.
Stenton Leigh's opinion and valuation report were based on conditions
existing and made available to it. Accordingly, although subsequent developments
could potentially impact Stenton Leigh's opinion, Stenton Leigh has not assumed
any obligation to update, revise or reaffirm its opinion.
Stenton Leigh Capital Corp. was paid a total of $25,000 for its services in
connection with its fairness opinion, one-half of which was paid by First Aid
Direct and the other half by Van Dyne-Crotty. A copy of the fairness opinion and
19
valuation report rendered by Stenton Leigh Capital Corp. is attached as Appendix
B to this proxy statement. You are encouraged to carefully read this opinion and
valuation report.
CONSIDERATION OF THE ASSET SALE BY FIRST AID DIRECT'S BOARD OF DIRECTORS
First Aid Direct's board of directors consulted with senior management and
its financial and legal advisors and considered a number of factors, including
the following, in evaluating the asset sale:
* the historic operating climate of our wholesale first aid and safety
supply business and its potential for growth in a highly competitive
industry segment;
* the potential benefits associated with the asset sale:
* the less attractive alternative terms which may be available to it in
the current economic environment;
* the terms of the asset purchase agreement;
* the potential that the value of the assets would decline with the
passage of time; and
* the analyses performed by Stenton Leigh Capital Corp. and its fairness
opinion and valuation report.
The foregoing factors considered by our board of directors, while not
exhaustive, includes the material factors considered by the board of directors
in its review of the proposed asset sale. Our board of directors did not find
it practicable to, and did not, quantify or otherwise assign relative or
specific weight or values to any of these factors, and individual directors may
have given different weights to different factors.
First Aid Direct's board of directors has unanimously approved the asset
sale and the transactions contemplated by the asset purchase agreement, and has
determined that the terms of the asset purchase agreement and the asset sale are
in the best interests of our shareholders. The decision by First Aid Direct's
board of directors was based on several potential benefits of the asset sale.
These potential benefits and material factors include:
* the belief that, after reviewing First Aid Direct's on-going financial
condition, results of operations and business and earnings prospects,
and notwithstanding the concerted efforts of management and the board
of directors to scale the business and increase the revenues of the
20
wholesale first aid and safety supply portion of its business, that
continuing this line of business was not reasonably likely to create
greater value for our shareholders than the prospects presented by the
asset sale;
* the terms of the asset purchase agreement;
* the belief that the asset sale represents the most favorable
alternative currently available to First Aid Direct to maximize
shareholder value; and
* the opinion of Stenton Leigh Capital Corp., concluding that the
consideration to be paid to us under the asset purchase agreement is,
from a financial point of view, fair, and our board of director's view
that the material information and data upon which Stenton Leigh
Capital Corp.'s fairness opinion and valuation report are based did
not materially change between the date of the opinion and August 29,
2003, the date the asset purchase agreement was executed.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO FIRST AID DIRECT
The asset sale is a taxable event to us. First Aid Direct will recognize
gain or loss in an amount equal to the cash received in exchange for the assets,
less First Aid Direct's adjusted tax basis in the purchased assets. First Aid
Direct's gain (if any) will be offset to the extent of current year losses from
operations plus available net operating loss (NOL) carryforwards, subject to
applicable limitations under the ownership change rules under Internal Revenue
Code 382 and the Alternative Minimum Tax rules. Under Section 382, where an
ownership change occurs, the annual utilization of the NOL carryforwards may be
restricted. Additionally, to the extent any gain on the sale of assets exceeds
the current year loss from operations, an alternative minimum tax may be due on
the excess. Any tax liabilities as a result of the asset sale are expected to
be immaterial.
ACCOUNTING TREATMENT
If the asset purchase agreement and the asset sale are approved by our
shareholders as describe herein, First Aid Direct will record the asset sale in
accordance with accounting principles generally accepted in the Untied States.
Upon the completion of the asset sale, First Aid Direct will recognize a
financial reporting gain, if any, equal to the net proceeds (the sum of the
purchase price received less the expenses related to the asset sale) less the
net book value of the assets sold.
21
SELECTED PROFORMA FINANCIAL INFORMATION
Proforma financial information, which gives effect to the asset sale as if
such transaction had occurred at December 31, 2002, is attached to this proxy
statement as Appendix G.
OTHER MATTERS RELATED TO THE ASSET SALE
If the asset sale is approved by our shareholders, the following additional
actions will occur:
* Messrs. Kevin M. Crotty and Stephen D. Smiley, members of our board of
directors who are affiliates of Van Dyne-Crotty will resign their
positions with our company, as will James M. Striplen III. Following
the closing our board of directors may elect to fill the vacancies
caused by these resignations, or our board of directors may continue
with only Messrs. Siegel and Widnes as the remaining members. We have
not identified any candidates to replace Messrs. Kevin M. Crotty,
Stephen D. Smiley and James M. Striplen III on our board of directors
as of the date of this proxy statement.
* we will file Articles of Amendment to our Articles of Incorporation
with the Secretary of State of Florida changing the name of First Aid
Direct to Total First Aid, Inc. The name change will enable us to
transfer our rights to the name "First Aid Direct" as required by the
asset purchase agreement. Other than changing our name to Total First
Aid, Inc., the asset sale will not result in any other changes to our
Articles of Incorporation. By voting "FOR" this Proposal 1, you will
also be consenting to the name change of our company. The form of the
Articles of Amendment to our Articles of Incorporation is attached
hereto as Appendix C. We anticipate that we will file these Articles
of Amendment as soon as practicable following the closing of the asset
purchase agreement; and
* we will enter into the Services Agreement with VDC First Aid and
Safety Supply, as described above, under which we will provide VDC
First Aid and Safety Supply with offices, utilities and administrative
services for a 90-day transition period following the closing.
INTERESTS OF FIRST AID DIRECT'S DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SHAREHOLDERS IN THE ASSET SALE
Some of our directors and principal shareholders have interests in the
asset sale that are different from, or in addition to, those of our shareholders
22
generally. The First Aid Direct board of directors was aware of these interests
when it approved the asset purchase agreement. These potential conflicts of
interest are discussed below.
Messrs. Kevin M. Crotty and Stephen D. Smiley, members of our board of
directors, are employed by Van Dyne-Crotty and are also directors and/or
officers of that company. VDC First Aid and Safety, the purchaser of the assets,
is an affiliate of Van Dyne-Crotty. If the asset sale is consummated, Messrs.
Kevin M. Crotty, Stephen D. Smiley and James M. Striplen III will resign as
directors of First Aid Direct following the closing of the asset purchase
agreement.
Van Dyne-Crotty, an affiliate of VDC First Aid and Safety, is a principal
shareholder of First Aid Direct, controlling approximately 50% of the vote of
our outstanding common stock. At the Special Meeting, the shares controlled by
Van Dyne-Crotty will be counted for purposes of establishing a quorum, but will
then split its vote (FOR and AGAINST) in the same proportions as the votes cast
by our disinterested shareholders at the Special Meeting.
Mr. Scott Siegel, our CEO, is currently a party to a voting trust agreement
covering 300,000 shares of our common stock beneficially owned by him which will
terminate on the closing of the asset sale. He does not currently have voting
rights over those securities. In addition, subject to our shareholders'
approving the asset sale at the Special Meeting, Mr. Siegel has entered into
agreements with Van Dyne-Crotty and its affiliates to purchase an aggregate of
1,701,200 shares of our common stock. The purchase price for the shares is
$187,132, or approximately $.11 per share, and Mr. Siegel has agreed to pledge
the shares to be purchased as security for the payment of the entire purchase
price. The $.11 per share purchase price represents the market price for First
Aid Direct common stock at the time agreement in principle to the assets sale
was reached between Mr. Siegel and Mr. Senseman. The market price for our
common stock on the date the asset purchase agreement was executed was $.11 per
share. In the event the sale of shares to Mr. Siegel [or his designee(s)] is
completed, there will be a change of voting control over First Aid Direct.
Following such purchase and the termination of the voting trust agreement, Mr.
Siegel will control approximately 50.20% of our common stock and, accordingly,
will effectively be in the position to control the election of our board of
directors, and, therefore, our business and operations in future periods.
OUR PRINCIPAL SHAREHOLDERS BEFORE AND AFTER THE ASSET SALE
As of the date of this proxy statement, we have 3,985,000 shares of our
common stock issued and outstanding. The following table contains information
regarding beneficial ownership of our common stock as of September 9, 2003 held
by:
* persons who own beneficially more than 5% of our outstanding voting
securities,
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* each of our directors,
* each of our executive officers, and
* all of our directors and officers as a group.
A person is deemed to be the beneficial owner of securities that can be
acquired by such a person within 60 days from September 9, 2003, upon exercise
of options, warrants or convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that options, warrants and
convertible securities that are held by such a person (but not those held by any
other person) and are exercisable within 60 days from that date have been
exercised. Unless otherwise noted, we believe that all persons named in the
table have sole voting and investment power with respect to all shares of our
voting securities beneficially owned by them.
Prior to Asset Sale After Asset Sale (1)(2)
--------------------------------- ---------------------------------
Name of Amount and Nature of Percentage Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class Beneficial Ownership of Class
- ------------------------------- -------------------- ----------- -------------------- -----------
Scott Siegel (2) 300,000 7.5% 2,001,200 50.2%
Kevin M. Crotty 1,000 * 0 n/a
Stephen D. Smiley 7,200 * 0 n/a
Bruce A. Widnes 0 n/a 0 n/a
James M. Striplen III 0 n/a 0 n/a
Daniel W. Crotty,
as trustee (2)(3) 2,000,000 50.2% 0 n/a
Van Dyne-Crotty, Inc. (4) 1,631,000 40.9% 0 n/a
All officers and directors and
as a group 2,000,000 50.2% 2,001,200 50.2%
<FN>
* represents less than 1%
(1) Gives effect to the sale of 70,200 shares of common stock by
affiliates of Van Dyne-Crotty, Inc. to Mr. Siegel and the sale of
1,631,000 shares of common stock by Van Dyne-Crotty, Inc. to Mr.
Siegel and/or members of his immediate family. No additional shares of
common stock are being issued by us in connection with the asset sale.
(2) The shares beneficially owned prior to the asset sale does not give
effect to an aggregate of shares of our common stock owned by Mr.
Siegel which are subject to a voting trust agreement which will
terminate upon the closing of the asset sale. Mr. Siegel and certain
of his relatives and Van Dyne-Crotty entered into a Voting Trust
Agreement dated December 16, 1999 with Daniel W. Crotty serving as
voting trustee under which 2,000,000 shares of common stock were
transferred to Mr. Daniel W. Crotty. The voting trust agreement had a
term of 10 years. The voting trust covered all existing securities as
well as any shares of common stock received upon exercise of stock
options or warrants. The agreement also provides that the parties to
the voting trust agreement other than Van Dyne-Crotty may not transfer
their shares over a five-year period without giving Van Dyne-Crotty an
opportunity to purchase the shares at the same price that the shares
could be sold to the third party included in the notice of the
transaction. The shares beneficially owned by Mr. Siegel after the
asset sale gives effect to the termination of this Voting Trust
Agreement.
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(3) Mr. Daniel W. Crotty is voting trustee under a voting trust agreement
executed in connection with the Van Dyne-Crotty transaction in
December 1999. He has the right to vote Mr. Siegel's shares and the
shares acquired by members of Van Dyne-Crotty's management. This
agreement will terminate on the closing of the asset sale.
(4) The principal stockholders of Van Dyne-Crotty are Messrs. L. William
Crotty, Daniel W. Crotty, Kevin M. Crotty, Robert S. Crotty, Brian
Crotty and Shane Crotty. These individuals in their capacity at Van
Dyne-Crotty capacity have the voting rights and dispositive power for
the shares of our common stock owned by Van Dyne-Crotty.
VOTE REQUIRED AND BOARD RECOMMENDATION
The approval of the sale of substantially all of our assets to VDC First
Aid and Safety Supply under the terms of the asset purchase agreement requires
the affirmative vote of a majority of our outstanding shares, provided that a
quorum has been established. A vote in favor of the sale of assets to VDC First
Aid and Safety Supply includes a change in our name to Total First Aid, Inc.
At the Special Meeting, the shares of our common stock owned and/or
controlled by Van Dyne-Crotty and our management will be counted for purposes of
establishing a quorum. However, the votes attributable to those shares will be
split (FOR and AGAINST) in the same proportions as the votes cast (FOR and
AGAINST) by our disinterested shareholders at the Special Meeting.
THE BOARD OF DIRECTORS OF FIRST AID DIRECT BELIEVES THAT THE PROPOSED ASSET
SALE IS IN THE BEST INTERESTS OF FIRST AID DIRECT AND OUR SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE SALE OF SUBSTANTIALLY ALL
OF OUR ASSETS TO VDC FIRST AID AND SAFETY SUPPLY UNDER THE TERMS OF THE ASSET
PURCHASE AGREEMENT.
DISSENTER'S APPRAISAL RIGHTS
Pursuant to Section 607.1320 of the Florida Business Corporation Act, a
holder of our common stock may dissent and elect to receive the fair value of
such shareholder's shares as of the day prior to the date the asset sale was
approved, without including the incremental value or the diminution in value, if
any, arising from the asset sale, judicially determined and paid. In order to
perfect such shareholder's appraisal rights, a dissenting shareholder (a
"Dissenting Shareholder") must fully comply with the statutory procedures of
Sections 607.1301, 607.1302 and 607.1320 of the Florida Business Corporation Act
summarized below. Such Sections are attached hereto as Appendix D. Shareholders
are urged to read such Sections in their entirety and to consult with their
legal advisors. EACH SHAREHOLDER WHO MAY DESIRE TO ASSERT APPRAISAL RIGHTS IS
CAUTIONED THAT FAILURE ON HIS OR HER PART TO ADHERE STRICTLY TO THE REQUIREMENTS
OF FLORIDA LAW IN ANY REGARD MAY CAUSE A FORFEITURE OF ANY APPRAISAL RIGHTS.
25
To exercise appraisal rights, a Dissenting Shareholder must satisfy the
following conditions:
1. Each Dissenting Shareholder who desires to receive an appraisal value
for his or her shares must file with First Aid Direct, prior to the
taking of the vote on Proposal 1, a written notice of such
shareholder's intent to demand payment if the asset sale is approved.
A proxy or vote against the asset sale will not alone be deemed to be
the written notice of intent to demand payment. In order to dissent,
the shareholder need not vote AGAINST the asset sale, but cannot vote
FOR the asset sale.
2. Within 10 days after the vote is taken, we will give written notice of
the authorization of the asset sale, if obtained, to each shareholder
who filed notice of intent to demand payment for such shareholder's
shares. The shareholder must then make written demand on First Aid
Direct for the payment of the fair value of the shares.
3. Within 20 days after the giving of the foregoing notice by First Aid
Direct, each Dissenting Shareholder who elects to dissent shall file
with First Aid Direct a notice of such election, stating such
shareholder's name and address, the number of shares of our common
stock as to which he dissents and a demand for payment of the fair
value of such shareholder's shares. Any Dissenting Shareholder failing
to file such election to dissent within the period set forth shall
lose the right to dissent from the asset sale. Any shareholder filing
an election to dissent shall deposit the certificate(s) representing
such shareholder's shares with First Aid Direct simultaneously with
the filing of the election. First Aid Direct may restrict the transfer
of such shares from the date the election to dissent is filed.
4. Upon filing a notice of election to dissent, the Dissenting
Shareholder shall thereafter be entitled only to payment pursuant to
the procedure set forth herein and shall not be entitled to vote or to
exercise any other rights of a shareholder. A notice of election may
be withdrawn in writing by the Dissenting Shareholder at any time
before an offer is made by First Aid Direct, as provided below, to pay
for such shareholder's shares. However, the right of the Dissenting
Shareholder to be paid the fair value of such shareholder's shares
shall cease, and he or she shall be reinstated to have all rights as a
shareholder as of the filing of such shareholder's notice of election,
including any intervening preemptive rights and the right to payment
of any intervening dividend or other distribution or, if any such
rights have expired or any such dividend or distribution other than in
cash has been completed, in lieu thereof, at the election of First Aid
Direct, the fair value thereof in cash as determined by First Aid
Direct as of the time of such expiration or completion, but without
26
prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
a. Such demand is withdrawn as provided;
b. First Aid Direct abandons the asset sale;
c. No demand or petition for the determination of fair value by a
court has been made or filed within the required time; or
d. A court of competent jurisdiction determines that such Dissenting
Shareholder is not entitled to the relief provided by this
section.
5. Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within 10 days
after the effective date or the date which the asset sale is approved, whichever
is later (but in no event later than 90 days after the asset sale is approved),
First Aid Direct shall make a written offer to each Dissenting Shareholder who
has made demand as herein provided, and will make a written offer to each such
shareholder to pay for such shares at a specified price deemed by First Aid
Direct to be the fair value thereof. If the asset sale has not been consummated
within 90 days after the approval thereof, the offer may be conditioned upon
such effectuation. Such offer is to be accompanied by (i) a balance sheet of
First Aid Direct as of the latest available date (not more than 12 months prior
to the making of an offer), and (ii) a profit and loss statement of First Aid
Direct for the 12-month period ended on the date of such balance sheet.
6. If, within 30 days after the making of such offer, the Dissenting
Shareholder accepts the same, payment for the shares of that Dissenting
Shareholder is to be made within 90 days after the making of such offer or the
date of the effectuation of the asset sale, whichever is later. Upon payment of
the agreed value, the Dissenting Shareholder shall cease to have any interest in
such shares.
7. The court shall also determine whether each such Dissenting
Shareholder is entitled to receive payment for such shareholder's shares. If
First Aid Direct fails to make such an offer, or if it makes such an offer and
any Dissenting Shareholder fails to accept the offer within the 30 day period
thereafter, then First Aid Direct, within 30 days after receipt of written
demand from any Dissenting Shareholder given within 60 days after the date of
the effectuation of asset sale shall, or, at its election within such 60 day
period may, file an action in any court of competent jurisdiction in Broward
County, Florida, requesting that the fair value of such shares be found and
determined. The court's jurisdiction shall be plenary and exclusive. If First
Aid Direct fails to institute such proceeding within the above-prescribed
period, any Dissenting Shareholder may do so in the name of First Aid Direct.
All Dissenting shareholders, wherever residing, will be made parties to the
proceedings as an action against their shares. A copy of the initial pleading
27
will be served on each Dissenting Shareholder. All Dissenting Shareholders who
are proper parties to the proceeding are entitled to judgment against First Aid
Direct for the amount of the fair value of their shares, as well as at the
discretion of the court, an allowance for interest at such rate as the court may
find fair and equitable. First Aid Direct shall pay each Dissenting Shareholder
the amount found to be due to him within 10 days after final determination of
the proceedings.
8. The court may, if it elects, appoint one or more appraisers to
receive evidence and recommend a decision on the question of fair value.
9. The judgment of the court is payable only upon and concurrently with
the surrender to First Aid Direct of the certificate(s) representing the shares.
Upon payment of the judgment, the Dissenting Shareholder ceases to have any
interest in such shares.
10. The costs and expenses of the proceeding are determined by the
court and assessed against First Aid Direct, except that all or any part of such
costs and expenses may be apportioned and assessed against any or all of the
Dissenting Shareholders who are parties to the proceeding and to whom First Aid
Direct has made an offer to pay for their shares, if the court finds their
refusal to accept such offer to have been arbitrary, vexatious or not in good
faith. Expenses include reasonable compensation for, and expenses of,
appraisers, but shall exclude the fees and expenses of counsel for, and experts
employed by, any party. If the value of shares, as determined by the court,
materially exceeds the amount that First Aid Direct offered to pay for the
shares then the court may, in its discretion, award to any Dissenting
Shareholder who is a party to the proceedings, such sum as the court may
determine to be reasonable compensation to any expert(s) employed by the
Dissenting Shareholder in the proceeding.
11. Successful assertion by shareholders of their dissenters' appraisal
rights is dependent upon compliance with the requirements described above.
Non-compliance with any provision may result in failure to perfect those rights
and the loss of an opportunity to receive payment for shares pursuant to an
appraisal.
Because of the complexity of the provisions of the Florida law relating to
dissenters' appraisal rights, shareholders who are considering dissenting from
the asset sale are urged to consult their own legal advisers.
OTHER MATTERS
As of the date hereof, there are no other matters that First Aid Direct
intends to present, or has reason to believe others will present, at the Special
Meeting. If, however, other matters properly come before the Special Meeting,
the accompanying proxy authorizes the persons named as proxies or their
substitutes to vote on such matters as they determine appropriate.
28
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders to be considered for inclusion in the Proxy
Statement and proxy card for the 2004 Annual Meeting of Shareholders pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934 must be received by the
Secretary of First Aid Direct on or before December 31, 2003. These proposals
must also comply with the other rules of the Securities and Exchange Commission
governing the form and content of proposals in order to be included in the proxy
statement. The submission of a shareholder proposal does not guarantee that it
will be included in First Aid Direct's Proxy Statement.
ADDITIONAL INFORMATION
In conjunction with this proxy statement, we are attaching our Annual
Report on Form 10-KSB for the year ended December 31, 2002 and our Quarterly
Report on Form 10-QSB for the quarter ended June 30, 2003 as Appendices E and F
to this proxy statement, respectively. Pro forma financial information
relating to the asset sale is attached to this proxy statement as Appendix G.
In addition, we are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, and we file reports, proxy statements and
other information with the SEC. You may read and copy any materials we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. Our public filings are also available
to the public from commercial document retrieval serves and at the Internet web
site maintained by the SEC at www.sec.gov.
29
FIRST AID DIRECT, INC.
SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 30, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF FIRST AID DIRECT, INC.
The undersigned hereby appoints Scott Siegel proxy with power of
substitution and hereby authorizes him to represent and to vote, as designated
below, all of the shares of common stock of First Aid Direct, Inc. held of
record by the undersigned on September 9, 2003 at the Special Meeting of
Shareholders to be held at The Courtyard by Marriott - Ft. Lauderdale
North/Cypress Creek, 2440 West Cypress Creek, Ft. Lauderdale, FL 33309, on
Tuesday, September 30, 2003 at 1:00 p.m., local time, and at all adjournments
thereof, with all powers the undersigned would possess if personally present. In
his or her discretion, the Proxy is authorized to vote upon such other business
as may properly come before the meeting.
1. Proposal to approve the sale of certain assets relating to the wholesale
first aid and safety supply business of First Aid Direct, Inc. to VDC First Aid
and Safety Supply LLC, a related party, under the terms of the asset purchase
agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" PROPOSAL 1.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF THE SPECIAL
MEETING AND PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
DATED: NUMBER OF SHARES:
(Signature)
(Signature if jointly held)
(Printed name(s))
Please sign exactly as name appears herein. When shares are held by Joint
Tenants, both should sign, and for signing as attorney, as executor, as
administrator, trustee or guardian, please give full title as such. If held by
a corporation, please sign in the full corporate name by the president or other
authorized officer. If held by a partnership, please sign in the partnership
name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY.
THANK YOU.
APPENDIX A
======================================
ASSET PURCHASE AGREEMENT
between
FIRST AID DIRECT, INC.
as Seller
and
VDC FIRST AID AND SAFETY SUPPLY LLC
as Purchaser
======================================
Effective
12:01 a.m.
August 29, 2003
======================================
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made this 29th day of
August 2003, between FIRST AID DIRECT, INC. (the "Seller"), and VDC FIRST AID
AND SAFETY SUPPLY LLC (the "Purchaser").
RECITALS
--------
A. Seller is engaged in the business of selling at the wholesale level first
aid and safety supplies.
B. Purchaser desires to purchase from Seller, and Seller desires to sell to
Purchaser, upon the terms and conditions specified herein, all of the Purchased
Assets, as defined in Article I, of such business.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals, and in
consideration of the promises, covenants, terms and conditions specified herein,
the parties hereto agree as follows:
ARTICLE I. DEFINITIONS.
--------- -----------
For all purposes of this Agreement, the following defined terms shall have the
meanings set forth in this Article I:
1.1 "Accounts Receivable" means all of the monies owed to Seller by its
customers of the Business, including by way of example, but not limitation,
current receivables, delinquent receivables and finance charges.
1.2 "Business" means the Wholesale First Aid and Safety Supply Business
conducted by Seller prior to the Closing Date and by Purchaser after the Closing
Date.
1.3 "Closing" means the actions taken as provided in Article VI in
connection with the consummation of the transactions contemplated by this
Agreement.
1.4 "Closing Date" means the time and date when the Closing of the
transactions contemplated by this Agreement shall be deemed effective, which
shall be 12:01 a.m. on the day of the Closing.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Contracts" means all written or oral contracts, agreements, commitments
and orders, purchase orders (including but not limited to Customer Contracts),
and license agreements of the Business, but does not include any leases,
contracts, agreements or
arrangement for or in regard to real estate, equipment or leased employees.
Contracts also include all of Seller's rights under any
non-competition/restrictive covenant agreements with employees or former
employees.
1.7 "Customer Contracts" means all or oral written contracts, agreements,
commitments and orders from customers of the Business.
1.8 "DEA" means the United States Drug Enforcement Agency.
1.9 "Encumbrance" means with respect to the Business or any Purchased Asset,
any mortgage, pledge, security interest, lien, claim, charge, encumbrance,
option, lease, restriction or restraint on transfer.
1.10 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.11 "Excluded Assets" means the assets of Seller which are not Purchased
Assets. The "Excluded Assets" include, without limitation: (i) the
merchandise, inventory, supplies, accounts receivable and other assets
associated with either the Roehampton Product Line or the Total First Aid
Product Line, (ii) Seller's books and records, other than the Records, (iii)
Seller's contracts, other than the contracts included in the Purchased Assets,
(iv) Seller's furniture, fixtures and warehouse equipment, and (v) Seller's
cash.
1.12 "ERISA Plan" means any and all employee pension benefit plans (as
defined in Section 3(2) of ERISA) and any and all employee welfare benefit plans
(as defined in Section 3(1) of ERISA) which covers Employees.
1.13 "FDA" means the United States Food and Drug Administration.
1.14 "Knowledge" means actual knowledge or knowledge that could be expected
to be obtained after a reasonable investigation.
1.15 "Lease" means (i) any lease, sublease or rental agreement by which
Seller leases any tangible property which is used in the Business, or (ii) any
lease or rental agreement by which Seller leases or rents any of the Purchased
Assets.
1.16 "Litigation" means claims, suits, actions, investigations, proceedings
or written claims or demands.
1.17 "Material Adverse Effect" means a materially adverse effect on the
Business, Purchased Assets, operations, prospects or condition, financial or
otherwise, of Seller taken as a whole, or an effect which could reasonably
foreseeably impair (i) the ability of Seller to perform any obligation under
this Agreement or (ii) the value of such to Purchaser.
1.18 "Name" means First Aid Direct, Inc.
-2-
1.19 "Permits" means licenses, qualifications, permits, approvals,
franchises and authorizations (federal, state and local) issued to Seller by any
governmental agency or individual with respect to the Business.
1.20 "Purchase Price" means the sum of $1,215,000 plus the amount to be paid
pursuant to Sections 2.4.
1.21 "Purchased Assets" means only the following assets of Seller used in
the Business as of the Closing Date:
(1) The Wholesale Inventory.
(2) All Accounts Receivable.
(3) The Name and all tradenames and trademarks.
(4) All right, title and interest in and to all Contracts.
(5) All Permits.
(6) All Records.
(7) All goodwill relating to the Business.
1.22 "Records" means the customer lists and purchasing and sales records,
product records and other similar information with respect to the Wholesale
First Aid and Safety Supply Business.
1.23 "Roehampton Product Line" means the licensed line of sterile thermal
blankets and burn dressings being distributed and sold by Seller as of the date
of this Agreement.
1.24 "SEC" means the United States Securities and Exchange Commission.
1.25 "Shareholder Vote" means the affirmative vote of the shareholders of
Seller approving this Agreement at the meeting (or any adjustments thereof)
referred to in Section 8.1.
1.26 "Taxes" means corporate taxes, franchise taxes, sales taxes, use taxes,
real property taxes, personal property taxes, state business taxes, federal,
state and local income taxes, FICA taxes and FUTA taxes, other payroll taxes and
all related assessments, charges, duties, deficiencies, penalties, interest and
fines for which Seller is liable.
-3-
1.27 "Total First Aid Product Line" means the line of repackaged/unitized
first aid kits being distributed and sold by Seller through the Total First Aid
division of its business as of the date of this Agreement.
1.28 "Wholesale Inventory" means all of Seller's inventory of goods, wares,
merchandise and supplies used or intended for use in connection with the
Business, except for the merchandise, inventory and supplies associated with the
Roehampton Product Line and the merchandise, inventory and supplies associated
with the Total First Aid Product Line; the Roehampton Product Line, the Total
First Aid Product Line and the merchandise, inventory and supplies associated
with those product lines are not being sold by Seller to Purchaser.
1.29 "Wholesale First Aid and Safety Supply Business" means the wholesale
business of the sale and distribution of first aid and safety supplies, but does
not include the sale or distribution of the Roehampton Product Line or the Total
First Aid Product Line.
ARTICLE II. PURCHASE AND SALE.
---------- -----------------
2.1 Purchase and Sale. As of the Closing Date, upon the terms, subject to
-------------------
the conditions, and for the consideration hereinafter set forth, Seller shall
sell, convey, assign, transfer and deliver all of the Purchased Assets to
Purchaser.
2.2 Allocation of Purchase Price. The purchase price shall be allocated,
-------------------------------
subject to adjustment as set forth in Section 2.4, as follows:
Accounts Receivable As set forth in Section 2.4.
Wholesale Inventory $500,000
Customer Lists, Contracts and Goodwill Balance of Purchase Price
2.3 Payment of Purchase Price. Purchaser shall pay Seller the Purchase
----------------------------
Price as follows:
(a) The payment at Closing on behalf of Seller of all monies owed by Seller
to KeyBank Dayton. ("KeyBank") as of the Closing.
(b) The sum of $1,215,000 at Closing less the amount set forth in paragraph
(a) above.
(c) $250,000 at Closing as a down payment for the Accounts Receivable.
(d) The payments provided for in (a) and (b) above shall be made by wire
transfer of immediately available funds to such bank account as KeyBank or
Seller may respectively specify in writing to Purchaser at least five days prior
to the date of payment.
-4-
2.4 Post-Closing Payment for Accounts Receivable. On or before 105 days
------------------------------------------------
after the Closing Date, Purchaser shall pay to Seller the actual amounts
collected by Purchaser on the Accounts Receivable within the first 90 days after
the Closing Date, less the $250,000 paid to Seller at the Closing for Accounts
Receivable. On or before 135 days after the Closing Date, Purchaser shall pay
to Seller the actual amounts collected by Purchaser on the Accounts Receivable
within the first 120 days after the Closing Date, less (i) the $250,000 paid to
Seller at the Closing for Accounts Receivable and (ii) the amount paid to Seller
pursuant to the first sentence of this paragraph for the first 90 day's
collections. The remaining Accounts Receivable collected by Purchaser after
such 120 day period shall be retained by Purchaser with no further obligation to
Seller. Purchaser shall collect the Accounts Receivable during such 120-day
period on the same basis, in the same manner and with the same effort as it
collects its accounts receivable. Seller shall not, however, be obligated to
turn any Accounts Receivable over to a collection agency or to file any lawsuit
to collect such.
2.5 Offset. Purchaser may offset from its obligation for payment under this
------
Article any amounts paid, losses suffered or damages incurred by Purchaser for
which it is indemnified by Seller pursuant to Section 8.2 of this Agreement.
2.6 No Assumption of Liabilities. Purchaser has not agreed, and does not
-------------------------------
agree, to assume any liabilities, debts or obligations of Seller whether with
respect to the Business, Purchased Assets or otherwise. Except as expressly set
forth in this Agreement, Seller shall be responsible for all expenses, costs,
liabilities, claims, debts, obligations, contracts, suits and actions arising
out of or pertaining to the Business and Purchased Assets prior to the Closing
Date.
2.7 No Sale of Excluded Assets. Seller does not hereby sell, convey, assign
--------------------------
or transfer to Purchaser any of the Excluded Assets.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER.
----------- ----------------------------------------
Seller represents and warrants to Purchaser as of the date of this Agreement and
as of the Closing Date the following:
3.1 Power and Authority.
---------------------
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and has full power and
authority to carry on the Business as it is presently conducted, and to own the
Purchased Assets.
(b) The Board of Directors of Seller has duly authorized (by
affirmative vote of (i) a majority of its entire number of directors, and (ii) a
majority of its disinterested directors), and Seller has taken all necessary
action (subject to obtaining the Shareholder Vote, which shall have been
obtained prior to the Closing) to authorize, the execution, delivery and
performance of this Agreement by Seller and the consummation of the transactions
contemplated by this Agreement by Seller. A certificate by the Secretary of
Seller
-5-
certifying the actions by the Board of Directors and the Shareholder Vote
approving this Agreement and the consummation of the transactions contemplated
by this Agreement shall be delivered at the Closing.
3.2 Execution and Delivery. The execution, delivery and performance of
----------------------
this Agreement by Seller, and the consummation of the transactions contemplated
by this Agreement, will not:
(a) violate, result in a breach of any of the terms or conditions of,
or constitute a default under, the Articles of Incorporation or By-Laws or
similar documents of Seller, or under any contract, agreement, commitment,
undertaking, understanding, note, bond, license or other instrument or
obligation to which Seller is a party, or by which any of the Purchased Assets
may be bound or affected, or which would adversely affect the value of the
Business and the Purchased Assets or the ability of Seller to transfer good
title to and possession of the Purchased Assets to the Purchaser; or
(b) violate or conflict with any applicable law, judgment, order, writ,
injunction or decree of any court, administrative agency or governmental body
applicable to Seller.
3.3 Capacity and Authority. Seller has full capacity, power and
------------------------
authority (subject to the Shareholder Vote) to enter into this Agreement, and to
carry out the transactions contemplated by this Agreement. The obligations of
Seller set forth in this Agreement are legal, valid and binding obligations of
Seller enforceable in accordance with their terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditor's rights generally and
except that such enforceability is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.4 Title to and Condition of Properties.
-----------------------------------------
(a) Except as set forth in Schedule 3.4, Seller has good, valid and
-------------
marketable title to all of the Purchased Assets, free and clear of all
Encumbrances. At the Closing Seller shall transfer to Purchaser good, valid and
marketable title to the Purchased Assets, free and clear of Encumbrances (other
than the security interest of KeyBank Dayton, for which Purchaser shall obtain
the release upon payment at the Closing of the amount owed by Seller to KeyBank
Dayton as contemplated by Section 2.3(a)), and take all actions necessary, in
the reasonable opinion of Purchaser, to ensure full compliance with this
representation and warranty.
(b) The Wholesale Inventory (i) is marketable and merchantable, (ii) is
not slow moving or obsolete, (iii) is free from defects and damages (patent and
latent), (iv) does not include damaged goods or inventory in excess of the
quantity that would normally be sold in a 12 month period based on the sales of
the Business for the 12 full calendar months prior to the Closing Date, and (v)
has respective expiration dates which are greater than 12 months after the
Closing Date. Seller has no reason to believe the Wholesale Inventory in the
aggregate is not saleable at its normal gross profit margins
-6-
experienced over the last 12 months. The Wholesale Inventory is stored, and has
been maintained and handled, in a commercially reasonable manner consistent with
best industry practices, and is fit for the purpose for which it was procured.
The Wholesale Inventory is accurately valued on Seller's financial statements at
the lower of cost or market, the cost thereof being determined on a first-in
first-out basis.
3.5 Taxes. With respect to the Business:
-----
(a) Seller has filed all tax returns that it was required to file, and all
such tax returns were true, correct and complete in all material respects.
(b) All deficiencies asserted as a result of any examination of any tax
return have been paid in full, accrued on the books of Seller or finally
settled, and no issue has been raised in any such examination which, by
application of the same or similar principles, reasonably could be expected to
result in a proposed deficiency; no tax claims have been or are being asserted
or proposed, and to Seller's or Shareholders' Knowledge no proposals or
deficiencies for any Taxes are being threatened, and no audit or investigation
of any tax return is currently underway, pending or threatened; Seller has not
entered into any waivers or agreements for the extension of time for the
assessment of any Taxes or deficiencies thereof, nor are there any requests for
rulings, nor are there any outstanding subpoenas or requests for information,
notices of proposed reassessment of any property owned or leased by Seller or
any other matter pending between Seller and any taxing authority.
(c) Seller shall pay, and shall be solely responsible for, all Taxes
(foreign, federal, state and local) which have accrued or will accrue by virtue
of the consummation of this transaction including by way of example but not
limited to any transfer, sales or use tax; no lien for Taxes has attached or
will attach to any of the Purchased Assets by reason of the consummation of this
transaction or by reason of any activity of Seller either prior to or after the
Closing Date.
3.7 Material Events.
----------------
(a) Since December 31, 2002, with respect to the Business there has not been
any occurrence, event, change in business, financial or accounting practices,
damage, destruction or loss, or any other condition or event which has or would
have a Material Adverse Effect.
(b) Seller has not since December 31, 2002, with respect to the Business:
(i) mortgaged, pledged or subjected to lien or other encumbrance any of the
Purchased Assets that will not be satisfied at the Closing;
(ii) other than in the ordinary course of business, sold or transferred
any of the Purchased Assets or cancelled any debt or claims; or
(iii) waived any rights of material value.
-7-
3.6 Compliance with Laws. Seller is in compliance with all applicable laws,
--------------------
rules, regulations, ordinances and standards including, but not limited to, FDA,
employment, environmental, age, sex or age discrimination, occupational safety
and health and hazardous substances with respect to the Business.
3.7 Permits. Set forth in Schedule 3.7 is a complete and accurate list of
------- ------------
all Permits held by or granted to Seller which are in effect as of the date of
this Agreement and which are necessary to the conduct of the Business. Seller
possesses all Permits applicable to Seller which are necessary for the conduct
of the Business or the operation of the Purchased Assets. All such Permits are
now, and as of the Closing Date will be, in full force and effect without
modification. All such Permits may be, and on the Closing Date will be,
effectively transferred or assigned to Purchaser without the consent of any
government agency so as to allow Purchaser to operate the Business and use the
Purchased Assets in substantially the same manner as such are currently being
operated and used by Seller except where such Permits are not assignable or
require Purchaser's actions to remain in force. No violation of any such Permit
has been recorded and no proceeding which might result in revocation or
limitation thereof is pending or, to Seller's threatened.
3.8 Litigation. Except as disclosed in Schedule 3.8:
---------- -------------
(a) there is no Litigation pending or, to Seller's Knowledge, threatened
against, or affecting, the Purchased Assets or the Business, by any person or
entity, including, but not limited to, any administrative agency, arbitrator or
governmental body;
(b) there is no outstanding order, writ, injunction or decree of any court,
administrative agency, governmental body or arbitration tribunal against or
affecting the Purchased Assets or the Business; and
(c) to Seller's Knowledge, there is no existing fact, circumstance or
condition which would reasonably be expected to give rise to any Litigation.
3.9 Contracts.
---------
(a) Except as set forth in Schedule 3.9, and other than Contracts which
------------
are terminable upon 30 days notice by Seller, Seller is not a party with respect
to the Business to any material agreement, loan, credit, lease, sublease,
franchise, license, contract, commitment or instrument or subject to any
corporate restriction (i) that has, or the performance or violation of which
could reasonably be foreseen to have, a Material Adverse Effect; (ii) which has
a term in excess of one year; or (iii) involves the payments or financial
obligation of $5,000 or more. No contract, agreement, lease, commitment or
order is necessary for Purchaser to conduct the Business substantially as it is
presently conducted. True and complete copies of all Contracts have been
furnished to Purchaser by Seller prior to the Closing.
-8-
(b) Except as set forth in Schedule 3.9, each of the Contracts may be
-------------
assigned to Purchaser pursuant to this Agreement without any breach, default,
acceleration or termination thereof, and all of the rights of Seller under the
same shall upon assignment to Purchaser pursuant to this Agreement be
enforceable by Purchaser after the Closing Date, without the consent or
agreement of any other person, except such consents as are hereafter obtained by
Seller without any adverse effect upon Purchaser, the Purchased Assets, and/or
the Business.
(c) Seller is not in default under any Contract nor has Seller received any
notice of default with respect to any Contract. There are no facts or
conditions which have occurred which would (either with notice or lapse of time,
or both) constitute a default with respect to any Contract by Seller, or which
would cause the acceleration of any obligation of Seller to the same. To
Seller's Knowledge, there are no facts or conditions which have occurred which
would (either with notice or lapse of time, or both) constitute a default by a
party (other than Seller) to a Contract, or cause the acceleration of any
obligation of such other party to a Contract. All Contracts are legally valid
and binding and are in full force and effect.
(d) There are no persons holding powers of attorney from Seller with respect
to the Business.
(e) No Contract calls for the purchasing by Seller of any goods, products or
services at prices substantially in excess of prevailing market prices on the
Closing Date or the leasing or sale by Seller of any goods, products or services
at prices substantially below prevailing market prices on the Closing Date.
3.10 Customers. Attached as Schedule 3.10 is a true and complete list of
--------- --------------
all of Seller's customers of the Business as of the Closing Date. Such list
shall include the name and address of each customer and the amount of purchases
of each customer for the six-month period ending ten days prior to the Closing
Date. Except as set forth in Schedule 3.10, to Seller's Knowledge, no customer
-------------
on the list is planning to or has threatened to terminate its business
relationship with the Business. To Seller's Knowledge, other than in the
ordinary course of business, there are no presently existing facts or
circumstances which would reasonably be expected to give rise to any termination
or reduction of business relations with any existing customer of the Business.
3.11 ERISA Compliance.
-----------------
(a) Each ERISA Plan is in compliance with the provisions of ERISA, the Code
and all other applicable federal and state laws and the rules and regulations
promulgated thereunder interpreting or applying these laws and each ERISA Plan
(and related trust or funding vehicle, if any) has at all times been
administered and maintained in accordance with its terms and applicable Laws,
including, without limitation, the filing of all applicable reports.
-9-
(b) With respect to each ERISA Plan intended to be qualified under Section
401(a) of the Code, a favorable determination letter has been received from the
Internal Revenue Service stating that the ERISA Plan is so qualified and that
the related trust is exempt from federal income taxation under Section 501 of
the Code.
(c) With respect to each ERISA Plan, all reports required under ERISA or any
other Law to be filed by Seller or any ERISA Affiliate with the relevant
governmental authority, the failure of which to file would result in a liability
of Seller or such ERISA Affiliate, have been duly filed and all such reports are
true and correct in all material respects as of the date given.
(d) Seller has made or shall make all contributions required to be made by
Seller under each ERISA Plan for all periods through and including the Closing
Date, or adequate accruals therefor have been or shall be provided therefor.
(e) There are no pending or, to Seller's Knowledge, threatened, claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted, and there exists no basis in fact for a claim,
suit or action against (i) the assets of any ERISA Plan or trust or any
fiduciary of any ERISA Plan with respect to the operation of such ERISA Plan, or
(ii) the assets of any employee welfare benefit plan within the meaning of ERISA
Section 3(1) or any fiduciary thereof with respect to the operation of any such
ERISA Plan. Any bonding required by ERISA with respect to any ERISA Plan has
been obtained and is in full force and effect.
(f) Seller (i) has never participated in or been required to contribute to
any plan with respect to employees which is subject to Title IV of ERISA, nor
(ii) has it incurred, or shall incur, any liability under Title IV of ERISA to
the Pension Benefit Guaranty Corporation for any ERISA Plan subject to Title IV
of ERISA or to any other person.
(g) Seller does not maintain nor has it established any welfare benefit plan
within the meaning of ERISA Section 3(1) and which provides for continuing
benefits or coverage for any participating employees or the beneficiary of a
participant after such participant's termination of employment, except as may be
required by COBRA and the regulations thereunder and at the expense of the
participant or the beneficiary of the participant.
(h) No ERISA Plan has participated in, engaged in or been a party to any
"prohibited transaction" (as defined in ERISA or the Code) and Seller has not
incurred, and does not reasonably expect to incur, any liability under Chapter
43 of the Code or under ERISA Section 502 with respect to any ERISA Plan.
3.12 Product Liability. Seller has no liability (and to Seller's Knowledge,
-----------------
there is no threatened future action, suit, proceeding, claim or demand against
Seller giving rise to any liability) arising out of any injury to individuals or
property as a result of the ownership, possession or use of any goods or
products sold by Seller in the Business. Seller has not received any written
notices, citations or decisions by any governmental body that any goods or
products marketed or distributed at any time by Seller in the Business is
defective or fails to meet any applicable standards promulgated by any such
-10-
governmental body. Seller has complied with all laws, rules, regulations and
specifications with respect to the design, manufacturing, labeling, testing and
inspection of goods or products promulgated by the FDA with respect to such
goods or products. Seller has not received notice that there have been any
recalls, field notifications or seizures ordered or threatened by any such
governmental body with respect to any such goods or products. Seller has not
received any warning letters or Section 305 notices from the FDA.
3.13 Brokerage and Finder's Fees. Seller has not incurred any liability or
----------------------------
obligation to any finder or agent for any brokerage fees, finder's fees or
commissions with respect to the transactions contemplated by this Agreement.
3.14 Customers Accounts. Seller does not presently owe any customer or
-------------------
customer account of the Business any sum of money or other consideration
whatsoever to secure or retain the patronage of such customer or customer
account.
3.15 Transfer of Name; No Infringement. Seller has the right to use the
-------------------------------------
Name and to transfer the right to use the Name to Purchaser in accordance with
this Agreement free and clear of any Encumbrances. To Seller's Knowledge, no
one is infringing on the Seller's use of the Name. Seller has not received any
notice that Seller in the operation of the Business is infringing or violating
any patent, trademark, trade name, service mark, copyright or other intellectual
property right of any third party and, to Seller's Knowledge, there is no basis
for any such claim.
3.16 Consents and Approvals. Except for the Shareholder Vote, no consent,
------------------------
approval, waiver, authorization, registration or qualification is required to be
obtained by Seller from, and no notice or filing is required to be given by
Seller to or made by Seller with, any governmental authority or other
third-party in connection with the execution, delivery and performance by Seller
of the terms of this Agreement.
3.17 Full Disclosure. No representation or warranty of Seller contained in
----------------
this Agreement (including any Exhibit or Schedule attached hereto) contains or
will knowingly contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements contained in this
Agreement not misleading. In purchasing the Purchased Assets, Purchaser is
relying upon the truth and accuracy of each of the foregoing representations and
warranties, and as stated in this Article III, each of the same constitutes a
basic and bargained for consideration for such purchase by Purchaser.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
---------- -------------------------------------------
Purchaser represents and warrants to Seller as of the date hereof and as of the
Closing Date, as follows:
-11-
4.1 Power and Authority. Purchaser is a limited liability company duly
---------------------
organized, validly existing and in good standing under the laws of the State of
Ohio and is qualified to do business in the State of Florida.
4.2 Execution and Delivery. The execution, delivery and performance of this
----------------------
Agreement by Purchaser, and the consummation of the transactions contemplated by
this Agreement contemplated hereby, will not:
(a) violate, result in a breach of any of the terms or conditions of, or
constitute a default under, the Articles of Organization or Operating Agreement
of Purchaser, or under any contract, agreement, commitment, undertaking,
understanding, note, bond, license or other instrument or obligation to which
Purchaser is a party, or by which any of the properties or assets of Purchaser
may be bound or affected; or
(b) violate or conflict with any applicable law, judgment, order, writ,
injunction or decree of any court, administrative agency or governmental body
applicable to Purchaser.
4.3 Capacity and Authority. Purchaser has full capacity, power and
------------------------
authority to enter into this Agreement, and to carry out the transactions
contemplated by this Agreement. Purchaser has taken all necessary action to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement. The obligations of Purchaser
set forth in this Agreement are legal, valid and binding obligations of
Purchaser, enforceable in accordance with their terms.
4.4 Brokerage and Finder's Fees. Purchaser has not incurred any liability
-----------------------------
or obligation to any finder or agent for any brokerage fees, finder's fees or
commissions with respect to the transactions contemplated by this Agreement.
ARTICLE V. NO ASSUMPTION OF LIABILITIES BY PURCHASER; WAIVER OF BULK SALES.
--------- ---------------------------------------------------------------
5.1 No Assumption of Liabilities. Notwithstanding any other term or
-------------------------------
provision of this Agreement, Purchaser does not assume and shall not be
responsible for, any liability, commitment or obligation of Seller, including,
without in any way limiting the generality of the foregoing, (1) any employment
responsibilities or obligations of Seller, including but not limited to vacation
or sick pay, (2) any obligations and liabilities of Seller under any collective
bargaining or labor agreements, (3) any obligation or liability of Seller
arising out of the sponsorship or administration of any ERISA Plan, (4) any
accounts payable, loans or other liabilities or obligations, (5) any claims,
suits, actions or Litigation filed prior to the Closing Date, (6) liabilities or
obligations to be paid or performed prior to the Closing Date under the
Contracts, and/or (7) any product liability, breach of warranty or similar
liability. Seller shall be solely responsible for all liabilities and
obligations and arising out of the operation of the Business or the ownership,
lease or use of the Purchased Assets prior to the Closing Date.
-12-
5.2 Waiver of Bulk Transfers Law. The parties waive compliance with the
--------------------------------
provisions of the Bulk Sales Law of any state, and Seller and the Shareholders
warrant and agree to pay and discharge when due all claims of creditors which
could be asserted against Purchaser by reason of such noncompliance. Seller and
the Shareholders agree to pay at or within 30 days following the Closing all
trade payables pertaining to the Business and the Purchased Assets, or according
to terms if such terms extend beyond Closing, and all sales, withholding,
property and other taxes due to the State of Florida or any other taxing
jurisdiction.
ARTICLE VI. CONDITIONS PRECEDENT TO CLOSING BY PURCHASER
---------- --------------------------------------------
Subject to waiver by Purchaser, each of the agreements of Purchaser to be
performed by it at the Closing shall be subject to the fulfillment of each of
the following conditions precedent:
6.1 Representations and Warranties. Each of the representations and
--------------------------------
warranties of Seller set forth in this Agreement shall be true, correct and
complete in all material respects as of the Closing Date.
6.2 Agreements. Seller shall have performed and complied with all
----------
agreements, undertakings, obligations and covenants which are required to be
performed or complied with by it at or prior to the Closing Date.
6.3 Shareholder Vote. The Shareholder Vote shall have occurred.
-----------------
6.4 Litigation. No notice shall have been received as to Litigation being
----------
commenced or threatened against Seller or Purchaser by any governmental
authority or any other person or entity with regard to this Agreement or the
transactions contemplated by this Agreement.
6.5 Release of Encumbrances. All Encumbrances on any of the Purchased
-------------------------
Assets shall have been fully released.
6.6 Satisfaction with Legal Matters. All legal matters in connection with
---------------------------------
this Agreement and the transactions contemplated by this Agreement, and the form
and substance of all legal proceedings and papers, instruments and documents
used or delivered herewith or incident to this Agreement shall be reasonably
satisfactory to counsel for Purchaser.
6.7 Third-Party Consents and Approvals; Estoppel Certificates. Seller shall
---------------------------------------------------------
have obtained all third-party (including, but not limited to, governmental)
consents and approvals, if any, required for the transfer or continuance, as the
case may be, of the Permits and Contracts disclosed in Schedules 3.7 and 3.8.
---------------------
-13-
6.8 Minimum Wholesale Inventory. The Wholesale Inventory on the Closing
-----------------------------
Date shall be valued as set forth in Section 3.4(b) and shall consist of at
least $500,000 in value.
ARTICLE VII. CLOSING.
----------- -------
7.1 Time and Place. The Closing of the transactions contemplated by this
----------------
Agreement will take place as soon as practical (and no later than 30 days after)
the Shareholder Vote has been obtained, at a date, time and place as mutually
agreed by the parties.
7.2 Deliveries by Seller. At the Closing, Seller shall deliver to
----------------------
Purchaser:
(a) A Bill of Sale for the Purchased Assets;
(b) A certificate by the Secretary of Seller as set forth in Section 3.1(b)
with respect to the authorizations of this Agreement by Seller and its
shareholders.
(c) All other certificates, documents of title, bills of sale and other
instruments of conveyance and transfer, in form satisfactory to Purchaser and
Purchaser's counsel, as Purchaser's counsel shall reasonably deem necessary, to
vest in Purchaser good and marketable title to the Purchased Assets and to
assign the rights to the name to Purchaser.
7.3 Delivery by Purchaser. At the Closing, Purchaser shall deliver to
-----------------------
Seller the amounts set forth in Section 2.
7.4 Mutual Deliveries. At the Closing, Purchaser and Seller shall execute
------------------
and deliver a Transition Services Agreement in a mutually agreeable form under
which Seller shall provide certain transitional services (including, without
limitation, warehousing services) to Purchaser for a period of up to 90 days
after the Closing.
7.5 Termination of Supply Agreement. At the completion of the Closing, the
--------------------------------
Supply Agreement dated December 20, 1999 between Purchaser and Seller shall
terminate automatically, without further action by either party.
ARTICLE VIII. COVENANTS OF THE PARTIES.
------------ ------------------------
8.1 Meeting of Shareholders; Proxy Statement.
--------------------------------------------
(a) Seller shall take all action necessary in accordance with applicable law
and its Articles of Incorporation and By-Laws, including the timely mailing of a
proxy statement, to convene a special meeting of its shareholders to vote upon
the adoption of this Agreement and the approval of the transactions contemplated
hereby. The vote required to adopt this Agreement and to approve the
transactions contemplated hereby
-14-
(the "Shareholder Vote") shall be: (i) the affirmative vote of the holders of a
majority of the outstanding common shares of Seller, and (ii) the affirmative
vote of the holders of a majority of the common shares held by shareholders
other than Purchaser, Scott Siegel or any of their respective affiliates. The
Board of Directors of Seller has recommended (by vote of a majority of its whole
number and by a majority of the disinterested directors) such adoption and
approval by the shareholders (by affirmative vote of a majority of the entire
number of its directors and a majority of its disinterested directors), shall
not withdraw or modify such recommendation and shall take all lawful action to
solicit such adoption and approval. Seller will use its reasonable best efforts
to hold the shareholder meeting to obtain the Shareholder Vote as soon as
reasonably practicable after the date hereof.
(b) Seller shall file with the SEC as soon as reasonably practicable a proxy
statement with respect to the special meeting of the shareholders in connection
with the transaction contemplated by this Agreement (the "Proxy Statement"),
respond to comments of the staff of the SEC, clear the Proxy Statement with the
staff of the SEC and promptly thereafter mail the Proxy Statement to all
stockholders of record of Seller. Seller shall comply in all material respects
with the requirements of the Securities Exchange Act of 1934, as amended and the
rules and regulations of the SEC thereunder applicable to the Proxy Statement
and the solicitation of proxies for such special meeting (including any
requirement to amend or supplement the Proxy Statement). The Proxy Statement
shall include the recommendation of Seller's Board of Directors in favor of the
transaction contemplated by this Agreement.
8.2 Noncompetition Agreement.
-------------------------
(a) During the period of three years after the Closing Date, Seller shall
not, directly or indirectly, or as an agent, contractor, consultant, partner,
member, shareholder, owner, or otherwise:
(i) Own any interest (other than the ownership of less than 1% of the
outstanding stock of a publicly traded company) in, engage in or render any
service to, or otherwise participate, whether for compensation or not, in any
business or entity that, directly or indirectly, engages or is involved in the
business of distributing or selling first aid and/or safety supplies anywhere in
North America;
(ii) Advise any other person, firm, corporation or other entity or
enterprise to engage in the distribution or sale of first aid and/or safety
supplies anywhere in North America;
(iii) Request or advise any customer of the Purchaser to terminate or
alter its business relationship with Purchaser, or otherwise interfere with the
business operations of the Wholesale First Aid and Safety Supply Business by
Purchaser;
(iv) Induce or attempt to induce or influence any employee of Purchaser
to terminate employment with Purchaser; or
-15-
(v) Compete with Purchaser for sales to any customer listed on Schedule
--------
3.10.
- -----
Notwithstanding the foregoing, however, Seller shall not be prohibited from:
(i) continuing to distribute and sell sterile thermal blankets and burn
dressings in substantially the same manner as such products were being
distributed and sold by Seller through its Roehampton Product Line prior to the
date of this Agreement, and (ii) continuing to distribute and sell bulk first
aid kits, unitized first aid kits, custom first aid kits, specialty first aid
kits, tablets and other first aid and safety products to markets other than the
van distribution market in substantially the same manner as such products were
being distributed and sold by Seller through its Total First Aid Product Line
prior to the date of this Agreement.
(b) It is the intent of the parties that the provisions of this Section 8.2
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, to the extent that the noncompetition restrictions under this
Agreement shall be adjudicated to be invalid or unenforceable in any such
jurisdiction, the court making such determination shall have the power to limit,
construe or reduce the duration, scope, activity and/or area of such provision,
and/or delete specific words or phrases to the extent necessary to render such
provision enforceable to the maximum reasonable extent permitted by applicable
law, such limited form to apply only with respect to the operation of this
Section in the particular jurisdiction in which such adjudication is made.
(c) Seller acknowledges that its adherence to the terms of the covenants set
forth in this Section 8.2 is necessary to protect the value of the Purchased
Assets and Business to Purchaser, that a continuing breach of such covenants
will result in irreparable and continuing damage to the value of the Purchased
Assets and Business, and that money damages would not adequately compensate
Purchaser for any such breach and, therefore, that Purchaser would not have an
adequate remedy at law. In the event any action or proceeding shall be
instituted by Purchaser to enforce any provision of this Section 8.2, Seller
shall waive the claim or defenses in such action that (i) money damages are
adequate to compensate Purchaser for such breach and (ii) there is an adequate
remedy at law available to Purchaser, and shall not urge in any such action or
proceeding the claim or defense that such remedy at law exists. Purchaser shall
have, in addition to any and all remedies at law, the right to an injunction,
both temporary and permanent, specific performance and/or other equitable relief
to prevent the violation of any obligation under this Section 8.2. The parties
agree that the remedies of Purchaser for breach of this Section 8.2 by Seller
shall be cumulative, and seeking or obtaining injunctive or other equitable
relief shall not preclude the making of a claim for damages or other relief.
Seller also agrees that Purchaser shall be entitled to such damages as it can
show it has sustained by reason of such breach and shall not be limited in its
damages by any provision of, or to the consideration received by Seller pursuant
to, this Agreement. In any action brought to enforce the covenants set forth in
this Section 8.2, or to recover damages for breach thereof, the prevailing party
shall be entitled to recover reasonable attorneys' fees and other expenses of
litigation, together with such other and further relief as may be proper.
-16-
(d) This Section 8.2 shall be exclusively construed according to, and the
legal relations between the parties shall be exclusively governed in accordance
with, the laws of the State of Florida without regard to its conflict of laws
principles; the parties intend to and do hereby confer jurisdiction to enforce
the provisions of this Section 8.2 upon the courts of the State of Florida.
8.3 Access to Records. Purchaser shall retain the Records for at least six
------------------
years. Seller or its agents shall have access to the Records, upon reasonable
notice and during normal business hours, at the Purchaser's Ohio office for
legitimate business or tax purposes during such six-year period.
8.4 Change of Name. No later than 30 days after the Closing, Seller shall
----------------
change its name to a name that does not include the words "First Aid Direct" and
that is not similar to "First Aid Direct"; provided, however, that the foregoing
shall not prevent Seller from changing its name to "Total First Aid, Inc." or to
any other name which includes the words "First Aid" so long as it does not
include the word "Direct."
ARTICLE IX. INDEMNIFICATION.
---------- ---------------
9.1 Survival. All representations, warranties, covenants, obligations and
--------
undertakings made or contained in this Agreement shall survive the Closing and
shall survive any inspection, investigation or acceptance of possession or
delivery of the Purchased Assets made or done at any time by Purchaser.
9.2 Indemnification by Seller. Seller shall indemnify, defend and hold
---------------------------
Purchaser harmless from and against any and all loss, liability (including, but
not limited to, consequential damages), damage, deficiency, claim or expense,
including, but not limited to, reasonable attorneys' fees, arising out of or due
to: (a) a breach of or default under any representation, warranty, covenant,
agreement, obligation or undertaking of Seller contained in this Agreement; (b)
noncompliance with any laws of the State of Florida or any other state relating
to bulk sales or other laws for the protection of creditors; (c) the failure of
Seller to file any federal, state or local returns in connection with or pay any
Taxes due and payable, accrued, incurred or attributable to any event or
circumstance occurring or existing or applicable to any period ending on or
before the Closing Date; and (d) any claim, debt, liability, commitment or
obligation, of any nature, whether accrued, absolute, contingent or other and
whether due or to become due of Seller, or arising out of the operations of the
Business prior to the Closing Date or Seller's ownership or use of any of the
Purchased Assets prior to the Closing Date.
9.3 Indemnification by Purchaser. Purchaser shall indemnify, defend and
------------------------------
hold Seller harmless from and against any and all loss, liability (including,
but not limited, consequential damages), damage deficiency, clam, or expense,
including, but not limited to, reasonable attorneys' fees, arising out of or due
to: (a) a breach of or default under any representation, warranty, covenant,
obligation or undertaking of Purchaser contained in this Agreement; and (b) any
claim, debt, liability, commitment or obligation,
-17-
of any nature, whether accrued, absolute, contingent or other, and whether due
or to become due, of Purchaser, or arising out of the operations of the Business
after the Closing Date or Purchaser's ownership or use of any of the Purchased
Assets after the Closing Date.
9.4 Limit on Indemnification. No claim for indemnification may be made
--------------------------
under this Agreement for other than fraud or a breach of the representations and
warranties relating to Taxes as set forth in Section 3.5 unless the party from
who indemnification is sought ("Indemnifying Party") is given written notice of
such claim within two years after the Closing Date.
9.5 Maximum Aggregate Liability of Seller. Except with respect to fraud and
-------------------------------------
unpaid Taxes, pursuant to the maximum aggregate indemnification liability of
Seller pursuant to Section 9.2 shall not exceed the Purchase Price.
9.6 Threshold. No party shall be entitled to indemnification under this
---------
Agreement unless the aggregate amount of the damages incurred by it as a result
of the incorrectness or breach of the representations and warranties made by the
Indemnifying Party exceeds $10,000.
9.7 Notice and Defense of Claims. A party claiming indemnification under
-------------------------------
this Article VIII (the "Asserting Party") will give prompt written notice (the
"Claim Notice") of the nature and basis of the claim to the Indemnifying Party.
If the claim for indemnification arises out of a claim, action or proceeding by
a third party (a "Third Party Claim"), the Indemnifying Party may elect to
assume the defense of the Third Party Claim at its own expense with counsel
selected by the Indemnifying Party. If the Indemnifying Party assumes the
defense of the Third Party Claim, the Indemnifying Party will not be liable for
any fees or expenses of counsel for the Asserting Party incurred in connection
with the Third Party Claim. If the Indemnifying Party does not assume the
defense of the Third Party Claim, the Asserting Party will have the right to
defend and settle the Third Party Claim. The Asserting Party and the
Indemnifying Party will cooperate in the defense of any claim, action or
proceeding covered by this Section 9.7. The Asserting Party will make available
to the Indemnifying Party all records and other materials reasonably required by
the Indemnifying Party for use in contesting the Third Party Claim. Where a
third party in a Third Party Claim is a significant continuing supplier or
customer of the Asserting Party and the conduct of the Third Party Claim may
have a material adverse effect on the continued operation of the business of the
Asserting Party, the Indemnifying Party shall consult with the Asserting Party
in good faith with a view to reducing or eliminating the adverse effect of the
conduct of the Third Party Claim.
ARTICLE X. MISCELLANEOUS.
--------- -------------
10.1 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the successors and assigns of each party to this Agreement, but no
rights, obligations
-18-
or liabilities under this Agreement shall be assignable by any party without the
prior written consent of the other parties.
10.2 Third Parties. Nothing expressed or implied in this Agreement is
--------------
intended, or shall be construed, to confer upon or give any other person or
entity other than the parties to this Agreement any rights or remedies under or
by reason of this Agreement.
10.3 Complete Agreement. Except as expressly set forth in this Agreement or
------------------
in an instrument in writing signed by the party to be bound thereby which makes
specific reference to this Agreement, this Agreement sets forth the entire
understanding of the parties concerning the subject matter of this Agreement and
supersedes all prior contracts, arrangements, communications, negotiations,
discussions, representations and warranties, whether oral or written, between
the parties relating to the subject matter of this Agreement.
10.4 Expenses. Each of the parties to this Agreement shall pay all costs
--------
and expenses incurred or to be incurred by such party in negotiating and
preparing this Agreement, and in closing and carrying out the transactions
contemplated in this Agreement.
10.5 Amendment. This Agreement may be amended at any time by a writing
---------
which refers to this Agreement and is executed by Purchaser and Seller (and the
Shareholder if such amendment is applicable to him).
10.6 Further Assurances. Seller shall from time to time after the Closing
-------------------
upon the reasonable request of Purchaser, execute, acknowledge and deliver all
such further acts, deeds, assignments, transfers, conveyances and assurances as
may be reasonably required to transfer to and to vest in Purchaser all good,
valid, marketable and indefeasible right, title and interest of Seller to the
Purchased Assets, and to protect the right, title and interest of Purchaser in
and to all of the Purchased Assets.
10.7 Taxes. Seller shall pay all sales and use taxes and transfer taxes, if
-----
any, applicable to the transactions contemplated by this Agreement.
10.8 Notices. All notices, requests, demands and other communications
-------
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been given (a) when delivered personally, (b) when
transmitted by facsimile, (c) on the third business day after being deposited in
the U.S. mail, certified, postage prepaid, return receipt requested, or (d) on
the first business day after being sent by a nationally recognized overnight
express courier service, to a party addressed as follows:
If to Seller:
Scott Siegel, President
First Aid Direct, Inc.
5607 Hiatus Road
Suite 500
-19-
Tamarac, FL 33321-6408
Fax (954) 724-1117
If to Purchaser:
Daniel W. Crotty, President
VDC First Aid and Safety Supply LLC
3233 Newmark Drive
Miamisburg, OH 45342
Fax: (937) 435-8390
Any party may change the name, address and facsimile number to which such
communications are to be directed by giving notice to the other party of such
change in the manner provided above.
10.9 Severability. Each Article, section, subsection, paragraph and lesser
------------
provision of this Agreement constitutes a separate and distinct undertaking and
covenant. In the event that any provision of this Agreement shall finally be
determined to be unlawful, such provision shall be limited by construction in
scope and effect to the minimum extent necessary to render the same lawful and
if such a limiting construction is not possible, such provision shall be deemed
severed from this Agreement, but in any event every other provision of this
Agreement shall remain in full force and effect.
10.10 Waivers. The failure of any party to insist in any one or more
-------
instances upon performance of any of the provisions of this Agreement or to take
advantage of any of its or his rights under this Agreement shall not be
construed as a waiver of any such provisions or the relinquishment of any such
rights, and the same shall continue and remain in full force and effect. No
single or partial exercise by any party of any right or remedy shall preclude
other or future exercise thereof or the exercise of any other right or remedy.
Waiver by any party of any breach of any provision of this Agreement shall not
constitute or be construed as a continuing waiver or as a waiver of any other
breach or breach of any other provision of this Agreement.
10.11 Exhibits. The Exhibits and Schedules attached to this Agreement
--------
and/or referred to in this Agreement are part of this Agreement for all
purposes.
10.12 Captions. The captions in this Agreement are intended solely for
--------
convenience of reference and shall not be given any effect in the construction,
meaning or interpretation of this Agreement.
-20-
10.13 Governing Law. Except as provided in Section 8.2, this Agreement
--------------
shall be exclusively construed according to, and the legal relations between the
parties shall be exclusively governed in accordance with, the laws of the State
of Ohio without regard to its conflict of laws principles.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FIRST AID DIRECT, INC.
By /s/ Scott Siegel
--------------------------
Scott Siegel, President
"Seller"
VDC FIRST AID AND SAFETY SUPPLY LLC
By /s/ David S. Senseman____________
------------------------
David S. Senseman, Vice President
and Treasurer
"Purchaser"
-21-
SCHEDULES
---------
NUMBER MATTER
- ------ ------
3.4 Title to and Condition of Properties
3.7 Permits
3.8 Litigation
3.9 Contracts
3.10 Customers
EXHIBITS
--------
LETTER MATTER
- ------ ------
A Form of Transition Services Agreement
APPENDIX B
July 3, 2003
Board of Directors
First Aid Direct, Inc.
5307 Hiatus Road, Suite 500
Tamarac, FL 33321
Attn: Kevin M. Crotty, Chairman
Members of the Board:
Re: Fairness Opinion
----------------------
You have requested our Opinion as independent business valuators as to the
fairness ("Opinion") of the consideration to be received by First Aid Direct,
Inc. for the assets comprising First Aid Direct, Inc.'s Principal Business
("FAD" or the "Company") at June 1, 2003 (the "Valuation Date"). FAD's
Principal Business consists of First Aid Direct Inc.'s total business with the
exception of revenues and expenses related to its Roehampton and Total First Aid
product lines. We have not been requested to opine as to, and our Opinion does
not in any manner address, the underlying business decision of the Company to
proceed with the contemplated sale of the assets of FAD's Principal Business
(the "Transaction"), or the fairness of the Transaction to First Aid Direct,
Inc.'s shareholders. In addition, we have not been requested to explore any
alternatives to the Transaction. The basis for our Opinion is supported by our
Valuation Report addressed to Mr. Scott Siegel, Chief Executive Officer of First
Aid Direct, Inc. dated July 3, 2003.
In arriving at our Opinion, we, among other things, included discussions,
meetings, reliance and review of the following:
a) Internally prepared financial statements for the five months ended May
31, 2003, Form 10Q for the quarter ended March 31, 2003 and Form 10K
for the year ended December 31, 2002;
b) Discussions with management and principals of FAD were undertaken;
c) Assumptions on FAD's market and competitive position and their outlook
as relayed by FAD management at the Valuation Date;
d) Relevant external and internal public information including economic,
investment, industry, public market and transaction data as a
background against which to assess findings specific to the business
were considered;
e) A draft of the asset purchase agreement under which FAD proposes to
sell the assets comprising its Principal Business (the "Asset Purchase
Agreement");
f) Major contracts both existing and anticipated in the very near future
for FAD, if any, were discussed with management, including any
features or factors that may have an influence on value;
g) Management's forecast financial statements for the Company; and,
h) Discussed with management of the Company the nature of the business,
past operating results, future prospects with respect to operations,
profitability and competition.
In arriving at our Opinion, we relied upon and assumed the accuracy and
completeness of all of the financial and other information that was used,
without assuming any responsibility for any independent verification of any such
information, and further relied upon the assurances of FAD's management that
they were not aware of any facts or circumstances that would make any such
information inaccurate or misleading. We have not audited this information as
part of our analysis and therefore, we do not express an opinion or other form
of assurance regarding the information. We also assumed that the Asset Purchase
Agreement was executed by the parties in substantially the form reviewed by us
and that the purchase consideration and assets to be sold did not change from
between the date of the draft that we reviewed and the date that the Asset
Purchase Agreement was executed.
We assumed that the Transaction will comply, in all respects, with the
securities laws, trade regulations and other applicable statutes and regulations
of the various foreign jurisdictions under which the Transaction may be
governed. Our Opinion was based upon market, economic and other conditions as
they existed on, and could be evaluated as of, June 1, 2003. Accordingly,
although subsequent developments may affect our Opinion, we do not assume any
obligation to update, review or reaffirm our Opinion.
In connection with our services, we received a fee for this engagement which was
in no way contingent upon the results of our analysis. In addition, the Company
has agreed to indemnify us for certain liabilities that may arise out of the
rendering of this Opinion. This Opinion is not intended to be and does not
constitute a recommendation to any shareholder of the Company as to how such
shareholder should vote, if required to, with respect to the Transaction.
Our Opinion is for the use and benefit of the Board of Directors of the Company
and is rendered to the Board of Directors in connection with its consideration
of the Transaction and may not be used by the Company for any other purpose or
reproduced, disseminated, quoted or referred to by the Company at any time, in
any manner or for any purpose, without the prior written consent of Stenton
Leigh Capital Corp., except that this Opinion may be reproduced in full in, and
references to the Opinion and to Stenton Leigh Capital Corp. and its
relationship with the Company may be included in any proxy statement relating to
the Transaction that the Company files with the U.S. Securities and Exchange
Commission and is distributed to holders of the Company's Common Stock in
connection with the Transaction.
Based upon and subject to the foregoing, it is our Opinion that, as of the date
of this letter, (a) the value of FAD's Business is approximately $1,200,000 at
June 1, 2003, the Valuation Date and (b) the consideration to be received by FAD
for the sale of the assets comprising FAD's Business, as described in the Asset
Purchase Agreement, is fair.
Very truly yours,
STENTON LEIGH CAPITAL CORP.
Milton H. Barbarosh, CPA, CA, MBA, CBV, ASA
President
[GRAPHIC OMITTED]
STENTON LEIGH
CAPITAL CORP.
July 3, 2003
PRIVATE AND CONFIDENTIAL
- --------------------------
Mr. Scott Siegel
Chief Executive Officer
First Aid Direct, Inc.
5607 Hiatus Road, Suite 500
Tamarac, Florida 33321
Dear Mr. Siegel:
RE: VALUATION OPINION OF THE VALUE OF FIRST AID DIRECT, INC.'S PRINCIPAL
------------------------------------------------------------------------
BUSINESS
--------
1.0 INTRODUCTION
- -----------------
You have requested Stenton Leigh Capital Corp. ("SL") to provide you with an
independent Valuation Opinion of the value of First Aid Direct, Inc.'s (the
"Company" or "First Aid") Principal Business ("FAD"), at June 1, 2003 (the
"Valuation Date"). FAD's business consists of First Aid Direct's total business
with the exception of revenues and expenses related to its Roehampton and Total
First Aid product lines.
This Valuation Opinion Report ("Report") is to be used only for the purpose of
being used by the Board of Directors as background in their decision to sell
FAD. This Report should not otherwise be reproduced without the prior written
consent of SL, except for distribution to your staff, counsel, or limited
interested parties.
1.1 FAIR MARKET VALUE
- ------------------------
For the purposes herein, we define fair market value based on the definition
prescribed under Internal Revenue Service ("IRS") Revenue Ruling 59-60, as
follows:
The price at which the property would change hands between a willing
buyer and a willing seller when the former is not under any compulsion
to buy and the latter is not under any compulsion to sell, both
parties having reasonable knowledge of all relevant facts.
2.0 SUMMARY
- ------------
According to the information and documents reviewed, the explanations and
projections provided to us, the assumptions on FAD's business at the Valuation
Date, the other assumptions set out below, and subject to the restrictions and
qualifications noted herein, in our Opinion the value of FAD's business was
$1,238,413 at the Valuation Date.
- ----------
________________________________________________________________________________
1900 CORPORATE BLVD., SUITE 305 WEST
BOCA RATON, FLORIDA 33431
TELEPHONE (561) 241-9921 FAX (561) 241-7011
www.stentonleighgroup.com
-------------------------
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 2
________________________________________________________________________________
3.0 RESTRICTION AND DISCLAIMER
- ---------------------------------
This Valuation Opinion Report is not intended for general circulation or
publication, nor is it to be reproduced or used for any purpose other than that
defined above without our written permission in each specific instance. We do
not assume any responsibility or liability for losses occasioned users of this
Valuation Opinion Report, other than those responsibilities or liabilities
outlined in our engagement letter. We reserve the right to review all
calculations included or referred to in this Valuation Opinion Report and, if we
consider it necessary, to revise our estimate in light of any new facts, trends
or changing conditions existing at any date prior to or at the Valuation Date
which become apparent to us subsequent to the date of this Valuation Opinion
Report.
4.0 UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE
- --------------------------------------------------------------
Standards have established the minimum basis for the development of and the
reporting of an appraisal. The standards are intended to aid users of appraisal
services as well as set minimum requirements for appraisal practitioners.
These standards are based on the original Uniform Standards of Professional
Appraisal Practice ("USPAP") developed in 1986-87 by the Ad Hoc Committee on
Uniform Standards and copyrighted in 1987 by The Appraisal Foundation. Prior to
the establishment of the Appraisal Standards Board in 1989, the USPAP had been
adopted by major appraisal organizations in North America and became recognized
as the generally accepted standards of appraisal practice.
Uniform Standards are the rules under which professional appraisers will work.
The Standards are contained in a living document and, therefore, are subject to
continual updating and change. The appraisers are required to keep current with
the changes. A synopsis, brief reading or review of the standards will not
suffice, and an appraiser must study, understand, obtain clarification of,
comply and keep current with, and incorporate the standards into all appraisal
practice.
The Appraisal Qualification Board ("AQB") has the function of establishing
minimum qualifications for appraisers for state licensing and certification.
The AQB establishes educational testing standards.
The Appraisal Standard Board ("ASB") has the function of promoting the
acceptance and implementation of the Uniform Standards of Professional Appraisal
Practice. The ASB sets the rules for developing an appraisal and communicating
its results. USPAP sets the professional standards for all appraisals and all
disciplines.
Standards 9 and 10 pertain to business valuations. Standards Rule 9-4 specifies
the major requirements of a business appraisal. This Report analyzes the
appropriate approach to value and as set out herein is the background
information as required under USPAP.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 3
________________________________________________________________________________
5.0 SCOPE OF REVIEW
- ----------------------
The scope of our assignment included discussions, reliance and review of the
following:
a) Internally prepared financial statements for the five months ended May
31, 2003 , Form 10Q for the quarter ended March 31, 2003 and Form 10K
for the year ended December 31, 2002, included in Appendix I;
b) Discussions with management and principals of FAD were undertaken;
c) Assumptions on FAD's market and competitive position and their outlook
as relayed by FAD management at the Valuation Date;
d) Relevant external and internal public information including economic,
investment, industry, public market and transaction data as a
background against which to assess findings specific to the business
were considered, and included in Appendices II and III;
e) Major contracts both existing and anticipated in the very near future
for FAD, if any, were discussed with management, including any
features or factors that may have an influence on value;
f) Management's forecast financial statements for the Company is included
in Appendix IV;
g) Discussed with management of the Company the nature of the business,
past operating results, future prospects with respect to operations,
profitability and competition.
6.0 BACKGROUND
- ---------------
6.1 HISTORY
- ------------
6.1.1 THE COMPANY
- -------------------
First Aid Direct, Inc. was organized in July 1977 in the State of Florida under
the name of Rehabilitation Institute of South Florida, Inc. It remained dormant
until it began active operations in September 1997. First Aid is a national
distribution business that wholesales first aid products to first aid
distributors across the nation. Most of the distributors operate mobile first
aid van services that sell and service the industrial first aid kits, mandated
by OSHA regulations. These kits are placed in many different types of businesses
and industrial locations such as factories, distribution warehouses, offices,
auto repair shops and dealerships, hotels and retail stores. The Company
currently has approximately 158 distributors located in 31 states throughout the
United States. These states include Alabama, Arkansas, Arizona, California,
Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky,
Louisiana, Massachusetts, Michigan, Minnesota, Missouri, Montana, North
Carolina, Nevada, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon,
Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia,
and Washington.
A distributor typically operates a number of routes. Each route consists of
several hundred locations that are visited by the route driver/salesman at least
once a month. The driver/salesperson will typically visit as many as 20
locations each day. The driver/salesperson operates a van stocked with first aid
supplies and uses the inventory to refill the kits that are placed in each
location. The kits contain a mix of first aid products
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 4
________________________________________________________________________________
designed and packaged for industrial use, including bandages, tapes, gauze,
antiseptics, ointments and over-the-counter medications such as aspirin, cough
medications, etc. First Aid has specialized packaging that lends itself to the
workplace. All items are packed in multilingual boxes that wherever possible are
dispenser packs that offer each individual product in a sanitary sealed package
as part of a tear off strip.
In addition, First Aid provides a business-to-business program called "Direct
Ship". This program involves direct shipments of first aid and safety products
to businesses. Distributors typically do not service direct ship customers
because their product usage is too limited for a driver/salesman to service
monthly or they need centralized billing, control and pricing. First Aid offers
these customers a direct order system using phone, fax or the First Aid Internet
web site. Approximately two percent (2%) of FAD's business is based upon the
"Direct Ship" program and approximately ninety-eight percent (98%) is based upon
independent distributorship, hospitals and emergency service agencies.
In 2003 the Company launched its new Total First Aid line. There is a large
market not currently available through the mobile first aid industry. This
market includes workplaces supplied by Industrial Supply Houses. Safety
Distributors, Catalog Companies, School Bus and Transportation Van manufacturers
and Distributors, Fire Extinguisher Service Companies, Janitorial Supply
Companies, and Office Coffee Companies. We will approach these markets with Bulk
kits, Unitized kits, Custom unitized kits, and Specialty kits. The Company will
also offer a custom filled kit and custom screen printed kit programs.
6.2 INDUSTRY BACKGROUND
- -------------------------
The first aid business is comprised of many independent distributors of first
aid and safety products provided to the workplace via mobile van services.
Products and services include first aid cabinets, over-the-counter medications
and general first aid supplies. Certain distributors also offer safety products
and a variety of related training programs.
These independent distributors purchase their products through value-added
wholesale distribution companies. There are approximately 12 such companies
operating in the United States. Typically, a wholesale company will recruit
distributors within the industry to distribute products under the wholesaler's
names. The typical business relationship between wholesaler and distributor
features restrictions such as limited territories, non-compete agreements and
agreements to use the wholesale company's name as the distributor's product
line.
Today, the potential market for these distributors is virtually any business
with employees. The reason is that the Federal Occupational Safety & Health
Administration ("OSHA") has a regulation (29 CFR 1910.151(b)) that requires that
First Aid supplies be readily available in the workplace. It is more convenient
for the business operator to use the services of the first aid distributor to
supply the correct product mix of required first aid supplies that are not only
designed for use in the workplace, but are refilled and kept current each month.
A consolidation has taken place in the first aid distribution industry. Zee
Medical, a subsidiary of wholesale distributor McKesson HBOC, Inc., currently is
one of the oldest companies in the industry and also has a large market share.
Cintas Corp. decided to penetrate this market quickly, and therefore adopted an
acquisition strategy. The first acquisition was in February 1997, which was
followed by three additional acquisitions, another in 1997 and two in 1998. Zee
Medical and Cintas Corp. represent our major competition and they each place
broad restrictions on their distributors, including geographical restraints on
distribution.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 5
________________________________________________________________________________
As a result of the consolidation of some of the major distributors in the first
aid supply business, distributors working within the same territory that
previously bought from competing companies are now being supplied by the same
parent company. First Aid believes that many of these distributors desire more
independence and choice than the new consolidated entities can offer. We believe
these market conditions provide an opportunity for First Aid to emerge and
compete for the business of the first aid distributors dissatisfied with the new
corporate structure brought on by the consolidation in the industry.
6.3 VAN DYNE-CROTTY TRANSACTIONS
- -----------------------------------
On December 20, 1999, Van Dyne-Crotty, Inc. purchased 1,400,000 shares of the
Company's stock from previously major stockholders, Scott Siegel (currently the
CEO) and Robert Sussman (formerly the CEO). In conjunction with the share
purchase, Van Dyne-Crotty and First Aid entered into an Asset Purchase Agreement
which transferred all of the assets of its van distribution business to Van
Dyne-Crotty, consisting of motor vehicles, accounts receivable, inventory, and
various permits. The parties simultaneously entered into a Supply Agreement
under which Van Dyne-Crotty agreed to purchase all of its requirements for first
aid products and supplies from First Aid for a five-year term, unless First Aid
were sold to a competitor of Van Dyne-Crotty. Under the terms of this supply
agreement, First Aid is required to sell the products at the lowest of the
prevailing market price for the best grade for each type of item covered. First
Aid may alter the price of any item upon notice, but Van Dyne-Crotty may
discontinue purchasing its total requirements of any item if the price is not
comparable or the quality of the item is not competitive with similar types of
products. The determination of whether our pricing is not competitive is made by
price comparison with other wholesalers of first aid products. In February 2002
the Company granted and continues to grant Van Dyne-Crotty a five percent
discount from previous price levels due to competitive market prices and the
volume of purchases made by Van Dyne-Crotty.
For the year ended December 31, 2002, Van Dyne-Crotty accounted for 32% of the
Company's revenues as it did for the year ended December 31, 2001.
Following the December 16, 1999 Asset Purchase Agreement, the Company changed
its name from First Aid Select, Inc. to First Aid Direct, Inc. Van Dyne-Crotty's
newly formed first aid supply van division began operating under the name First
Aid Select. Subsequently, in calendar 2001, Van Dyne-Crotty began operating
under the name Select First Aid.
On March 16, 2000, the Company entered into an Asset Purchase Agreement to buy
certain assets from Van Dyne-Crotty, which Van Dyne-Crotty acquired from
Roehampton Supply, Inc. As was the case with the Asset Purchase Agreement
between Van Dyne-Crotty and First Aid that occurred on December 16, 1999, Van
Dyne-Crotty retained equipment, product and marketing information from
Roehampton Supply associated with its van distribution business. It assigned and
sold to First Aid those products, assets and marketing information consistent
with First Aid's wholesale distribution operations. The Roehampton products sold
to First Aid have a similar customer base to First Aid and complement its
product offering. They are marketed to first aid distributors, hospitals, and
emergency response teams.
Included in the total assets acquired by Van Dyne-Crotty were accounts
receivable, inventory and the customer list related to certain products
associated with Roehampton Supply's line of first aid products. First Aid
acquired the accounts receivable, inventory and the customer listings from Van
Dyne-Crotty at Van Dyne-Crotty's cost at the time of the Roehampton transaction.
The purchase price of $200,000 has been paid.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 6
________________________________________________________________________________
On March 20, 2000, First Aid entered into a non-competition agreement and a
consulting agreement with the original owner of the Roehampton assets. The
covenant not to compete is for a five-year term and provides for a total payment
of $75,000 to be paid in thirty-six equal installments. The consulting agreement
is for a three-year term and provides for payment of $75,000 to the consultant
in thirty-six equal installments.
6.4 STRATEGY
- -------------
FAD's strategy is to offer existing distributors that are dissatisfied with the
consolidation of the first aid products industry an alternative source of
supply. By seeking federal trademark protection of FAD brand names and
innovating the package design for the Company's products, FAD's goal is to offer
new entrants into the first aid business a national brand of products and
support. First Aid places no territorial restrictions on its distributors,
giving existing operators the opportunity to expand regionally. Without
territory agreements and based upon its "Direct Ship" program, FAD believes it
twill be able to offer large national companies a centralized and uniform direct
buying program.
6.5 PRODUCTS AND SERVICES
- ----------------------------
FAD's product line and services include the following type of items and
services: cabinets and first aid kits, first aid treatments, first aid tablets,
safety equipment, training and compliance and distributor services.
The Company is in the process of launching its new Total First Aid Line. There
is a large market not currently available through the mobile first aid industry.
This market includes workplaces supplied by Industrial Supply Houses, Safety
Distributors, Catalog Companies, School Bus and Transportation Van Manufacturers
and Distributors, Fire Extinguisher Service Companies, Janitorial Supply
Companies, and Office Coffee Companies. FAD will approach these markets with
Bulk kits, Unitized kits, Custom unitized kits, and Specialty kits. The Company
will also offer a custom filled kit and custom screen printed kit program.
6.6 PRODUCT LIABILITY
- -----------------------
FAD maintains product liability insurance in the amount of $6,000,000. Suppliers
also maintain product liability insurance. Purchase orders with suppliers do not
limit or allocate liability between the parties.
6.7 MARKETING AND SALES
- --------------------------
FAD's sales team, which currently consists of two sales representatives, is
responsible for developing new business. The team solicits distributor and
direct ship customers by telephone and in-person sales calls. FAD also
participates in the national safety trade show to develop new customers and to
meet with existing ones.
Management believes that three criteria drive the purchase of first aid
products. They are quality, service and price. FAD believes it is offering
pricing and quality comparable to its competitors. First Aid has established a
number of services such as a fully interactive web site allowing for direct
purchases online for both distributor and direct ship customers. In addition,
FAD works with its distributors through virtually every aspect of starting,
managing and maintaining a productive operation, offering a variety of classroom
and field training sessions.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 7
________________________________________________________________________________
6.8 COMPETITION
- ----------------
Because of industry consolidations, two companies, Zee and Cintas, dominate the
market. There are many independent distributors who view this consolidation as
detrimental to their business. Management believes they will prefer to do
business with independently owned and operated wholesale companies such as First
Aid.
6.9 EMPLOYEES
- --------------
Effective January 1, 2003, the Company entered into an employee leasing
agreement with Paychex. The leasing agreement provides the Company with
decreased costs for medical and Workers Compensation Insurance.
First Aid, through its leasing agreement, currently employs fourteen persons,
thirteen of whom are full-time employees, in the following capacities: one
administrator, two in sales and marketing, one controller, one office manager,
one office staff and eight in warehouse and assembly. The Company's employees
are not represented by a collective bargaining agreement, and the Company
considers its relations with its employees to be good.
6.10 DESCRIPTION OF PROPERTY
- -------------------------------
First Aid Direct's corporate headquarters and distribution center is located at
5607 Hiatus Road Suite 500, Tamarac, Florida, 33321. The business relocated to
this location on December 5, 2002. The Company does approximately 20% of its
packaging at its facility. The operation is located in a modern warehouse
complex and currently occupies 16,500 square feet consisting of 4,000 square
feet of air-conditioned office space, a 2000 square foot air-conditioned
assembly area and 10,500 square feet of warehouse space. We lease the facility
through January 31, 2008 from Westpoint Center, Ltd.
6.11 MARKET FOR COMMON EQUITY AND OTHER RELATED STOCKHOLDER MATTERS
- ----------------------------------------------------------------------------
First Aid's common stock currently trades on the Over-The-Counter Bulletin Board
under the symbol "FADI" (the ticker symbol was changed to "FADI" from "FASL" on
February 12, 2001). As of December 31, 2002 there were 55 stockholders of
record. Our common stock traded on the Over-The-Counter Bulletin Board under the
symbol "FASL" from May 1998 to November 1999. On November 18, 1999, FAD's common
stock was de-listed from the Over-the-Counter Bulletin Board of the National
Association of Securities Dealers, Inc. for failure to comply with the phase-in
provisions of the OTC Bulletin Board Eligibility Rule, which required all
companies whose securities are quoted on the OTC Bulletin Board to become
reporting companies with the Securities and Exchange Commission. In December
2000 First Aid became a fully reporting company with the Securities and Exchange
Commission. In February 2001 First Aid common stock again began trading on the
Over-The-Counter Bulletin Board.
The following table sets forth the high and low sales prices for the common
stock for the periods indicated. These quotations reflect prices between
dealers, do not include retail mark-ups, markdowns, and commissions and may not
necessarily represent actual transactions.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 8
________________________________________________________________________________
PERIOD HIGH LOW
------ ----- -----
Quarter ended 03/31/01 $2.31 $0.40
Quarter ended 06/30/01 $1.25 $0.45
Quarter ended 09/30/01 $0.77 $0.25
Quarter ended 12/31/01 $0.51 $0.11
Quarter ended 03/31/02 $0.33 $0.11
Quarter ended 06/30/02 $0.33 $0.14
Quarter ended 09/30/02 $0.25 $0.04
Quarter ended 12/31/02 $0.14 $0.06
Quarter ended 3/31/03 $0.14 $0.10
FAD's transfer agent is Florida Atlantic Stock Transfer, Inc., 7130 Nob Hill
Road, Tamarac, Florida 33321.
The Company has never paid cash dividends on its common stock. The Company
intends to retain future earnings, if any, to finance the expansion of its
business and does not anticipate that any cash dividends will be paid in the
foreseeable future. The future dividend policy will depend on earnings, capital
requirements, expansion plans, financial condition and other relevant factors.
Declaration and payment of future dividends, if any, will be at the sole
discretion of the board of directors.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 9
________________________________________________________________________________
FIRST AID DIRECT, INC.
CONDENSED BALANCE SHEET
MARCH 31, 2003
(UNAUDITED)
ASSETS
Current assets:
Cash $ 3,139
Accounts receivable, stockholder 65,888
Accounts receivable, net 228,516
Note receivable, employee 7,000
Inventories 768,062
Prepaid expense 83,242
-----------
Total current assets 1,155,847
-----------
Property and equipment, net 156,571
Intangible asset, net 109,475
-----------
$1,421,893
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 310,218
Line of Credit 200,000
-----------
Total current liabilities 510,218
-----------
Stockholders' equity:
Common stock 3,985
Additional paid-in capital 1,604,127
Deficit (696,437)
-----------
911,675
-----------
$1,421,893
===========
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 10
________________________________________________________________________________
FIRST AID DIRECT, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
2003 2002
----------- ----------
Net sales $ 794,177 $ 886,933
Cost of sales 551,931 601,574
Gross profit 242,246 285,359
General and administrative expenses 298,958 204,661
----------- ----------
Income (Loss) before income taxes (56,712) 80,698
Provision for income taxes - -
----------- ----------
Net Income (Loss) $ (56,712) $ 80,698
=========== ==========
Net income per share information:
Basic:
Net income (loss) per share $ (.01) $ .02
=========== ==========
Weighted average number
of common shares 3,985,000 3,985,000
=========== ==========
Diluted:
Net income per share $ (.01) $ .02
=========== ==========
Weighted average number
of common shares 3,985,000 3,985,000
=========== ==========
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 11
________________________________________________________________________________
FIRST AID DIRECT, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
2003 2002
---------- ----------
Cash flows from operating activities:
Net income (loss) $ (56,712) $ 80,698
Depreciation and amortization 8,346 8,555
Changes in assets and liabilities (118,035) (156,794)
---------- ----------
Net cash provided by (used in)
operating activities (166,401) (67,541)
---------- ----------
Cash flows from investing activities:
Purchase of equipment (36,531) (4,376)
---------- ----------
Net cash used in investing activities (36,531) (4,376)
---------- ----------
Cash flows from financing activities:
Borrowing on line of credit 200,000 -
---------- ----------
Net cash (used in) provided
by financing activities 200,000 -
---------- ----------
Net increase (decrease) in cash (2,932) (71,917)
Cash, beginning of period 6,071 123,297
---------- ----------
Cash, end of period $ 3,139 $ 51,380
========== ==========
Supplemental Disclosure of Cash Paid:
Interest $ 920 $ -
========== ==========
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 12
________________________________________________________________________________
6.12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------------
OPERATIONS
- ----------
6.12.1 RESULT OF OPERATIONS
- ------------------------------
THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2002.
SALES. Total revenues decreased 10% in the first quarter of 2003 as against the
same period in 2002. Revenue decreased $92,756 from $886,933 to $794,177 in the
three months ended March 31, 2003 as compared to March 31, 2002. The decrease in
sales is attributable to the general state of the economy. However, the Company
has released a new line under the name "Total First Aid" and expects results in
the second quarter 2003. In addition, the Company has added additional products
to its' First Aid Direct line which will produce additional revenues.
COSTS AND EXPENSES. The cost of sales for the quarter decreased $49,643 from
$601,574 in the first quarter of fiscal 2002 to $ 551,931 in the first quarter
of fiscal 2003. When combined with the decrease in net sales, the result was a
15% decrease in the gross profit of $43,113, from $285,359 in the first quarter
of fiscal 2002 to $ 242,246 in the first quarter of fiscal 2003. As a
percentage, the gross margin decreased from 32% in fiscal 2002 to 31% in fiscal
2003. The decrease primarily resulted from reduced sales, although the Company
spent an additional $9,000 on putting in the new Total First Aid line and if we
adjust the numbers to reflect this expenditure, then the Gross Margin rate was
essentially the same from year to year.
General and administrative expenses increased $94,297 from $204,661 in the first
quarter of fiscal 2002 to $ 298,598 in the first quarter of fiscal 2003. Also,
general and administrative expenses increased as a percent of revenue from 23%
in 2002 to 38% in 2003. A substantial portion of increase in General and
administrative expenses are attributable to increased rental costs of $36,000
(new facility)and $39,000 additional costs incurred in setting up the new Total
First Aid line for a total of $75,000 of the $94,297 increase.
INCOME BEFORE INCOME TAXES. The Company had a loss of $56,712 before income
taxes as compared to a $80,698 profit during the first quarter of fiscal 2002.
The decrease was primarily a result of the decreased sales coupled with
additional operating expenses.
OTHER. No income tax expense or benefit is recorded in the three-month periods
ended March 31, 2003 and 2002.
6.12.2 LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------------
The primary source of the Company's liquidity is from a line of credit obtained
from a bank. The Company established, in May 2001 a $250,000 line of credit with
a bank that matures in February 2004. The line requires monthly interest
payments and bears interest at the prime rate of interest (4.25% at March 31,
2003). As of March 31, 2003, there was $200,000 outstanding on the line of
credit. The line is collateralized by the Company's accounts receivable and
inventory. We cannot assure you that this credit facility will be renewed at
maturity.
Declining sales and increased expenses have had a negative impact on the
Company's cash position. This is evidenced by the decrease in working capital
from 4.58 to 1 (December 31, 2002) to 2.7 to 1 (March 31, 2003). The Company has
already addressed expenses by reducing Company payroll, and has reduced rental
obligations on old leases by 50%. The Company has developed added product lines
that will enable it to open
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 13
________________________________________________________________________________
new market segments and attain additional avenues of distribution. It is,
however, apparent that a continued decline in sales will significantly impact
the Company's ability to operate and grow as planned.
FIRST AID DIRECT, INC.
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
2002 2001
----------- -----------
Current assets:
Cash $ 6,072 $ 123,297
Accounts receivable - stockholder 54,226 36,093
Accounts receivable, net of allowance for doubtful
accounts of $12,000 and $20,000, respectively 230,504 206,790
Note receivable - employee 8,000 12,000
Inventories 543,279 507,371
Prepaid expense 92,438 40,662
----------- -----------
Total current assets 934,519 926,213
----------- -----------
Property and equipment, net 128,387 54,329
Customer lists, net 109,475 109,475
----------- -----------
$1,172,381 $1,090,017
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 142,575 $ 224,533
Accrued expenses 61,419 31,106
----------- -----------
Total current liabilities 203,994 255,639
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value; 50,000,000 shares
authorized; 3,985,000 issued and outstanding 3,985 3,985
Additional paid-in capital 1,604,127 1,604,127
Retained (deficit) (639,725) (773,734)
----------- -----------
Total stockholders' equity 968,387 834,378
----------- -----------
$1,172,381 $1,090,017
=========== ===========
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 14
________________________________________________________________________________
FIRST AID DIRECT, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
Net sales $3,343,198 $3,227,544
Cost of sales 2,278,897 2,272,606
---------- ----------
Gross profit 1,064,301 954,938
General and administrative expenses 930,292 864,563
---------- ----------
Income before income taxes 134,009 90,375
Provision for income taxes - -
---------- ----------
Net income $ 134,009 $ 90,375
========== ==========
Net income per common share:
Basic:
Net income per common share $ .03 $ .02
========== ==========
Weighted average number of shares 3,985,000 3,967,247
========== ==========
Diluted:
Net income per common share $ .03 $ .02
========== ==========
Weighted average number of shares 3,985,000 3,985,000
========== ==========
FIRST AID DIRECT, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2002 AND 2001
Additional Total
Number of Common Paid-in Retained Stockholders'
Shares Stock Capital (Deficit) Equity
Balance, January 1, 2001 3,905,000 $ 3,905 $1,596,207 $(864,109) $ 736,003
Exercise of stock option 80,000 80 7,920 8,000
Net income 90,375 90,375
----------- ---------- ----------- ---------- --------------
Balance, December 31, 2001 3,985,000 3,985 1,604,127 (773,734) 834,378
Net income 134,009 134,009
----------- ---------- ----------- ---------- --------------
Balance, December 31, 2002 3,985,000 $ 3,985 $1,604,127 $ (639,725) $ 968,387
=========== ========== =========== ========== ==============
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 15
________________________________________________________________________________
FIRST AID DIRECT, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
Cash flows from operating activities:
Net income $ 134,009 $ 90,375
---------- ----------
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation and amortization 27,429 33,819
Provision for doubtful accounts (8,000) 1,702
Inventory valuation allowance (11,000) 20,000
Decrease (increase) in accounts receivable (29,847) 146,738
Increase in inventories (24,908) (36,626)
Decrease (increase) in prepaid expenses (51,776) 33,862
(Decrease) increase in accounts payable & accrued expenses (51,645) (34,810)
---------- ----------
Total adjustments (149,747) 164,685
---------- ----------
Net cash provided by (used for) operating activities (15,738) 255,060
---------- ----------
Cash flows from investing activities:
Purchase of equipment (101,487) (1,999)
---------- ----------
Net cash used for investing activities (101,487) (1,999)
---------- ----------
Cash flows from financing activities:
Borrowings on line of credit 50,000 -
Repayment of line of credit (50,000) (138,000)
Proceeds from exercise of stock option - 8,000
Payment of stock subscription receivable - -
---------- ----------
Net cash used for financing activities - (130,000)
---------- ----------
Net increase (decrease) in cash (117,225) 123,061
Cash at beginning of period 123,297 236
---------- ----------
Cash at end of period $ 6,027 $ 123,297
========== ==========
Supplement disclosures of cash flow information:
Cash paid for interest $ 331 $ 7,008
========== ==========
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 16
________________________________________________________________________________
6.13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ----------------------------------------------------------------------------
RESULTS OF OPERATIONS
- -----------------------
First Aid's operations consist of the wholesale distribution of first aid and
safety products to retail van distributors and the direct sale of those products
to end users through a direct ship operation.
6.13.1 RESULTS OF OPERATIONS
- -------------------------------
YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001
SALES. Company net sales increased $115,000 (4%) from $3,228,000 in fiscal 2001
to $3,343,000 in 2002. Twenty-five percent (25%) of the total $115,000 increase
was from sales under the supplier agreement with Van Dyne Crotty, Inc., to be
the primary supplier for its retail first aid distribution business. The balance
of the sales increase, amounting to 75%, was primarily due to the addition of
new distributors.
COSTS OF SALES. Cost of sales increased $6,000 (.3%) from $2,273,000 in 2001 to
$2,279,000 in 2002. The increase in cost of sales was due to increased sales.
GROSS PROFIT. Gross profit increased $109,000 from $955,000 during 2001 to
$1,064,000 for 2001. As a percentage, the Company's gross margin increased from
30% in 2001 to 32% in 2002. The gross margin improvement resulted from the
Company's ability to negotiate better pricing agreements from its vendors.
GENERAL AND ADMINISTRATIVE EXPENSE. Expenses increased $65,000 from $865,000 in
2001 to $930,000 during 2002. General and administrative expenses increased as a
percent of sales from 27% in 2001 to 28% in 2002. The increase resulted from
office relocation costs, additional rent expense and staff restructuring.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations improved
$44,000 during 2002 to an income from operations of $134,000 compared to $90,000
in 2001. The improvement primarily resulted from efficiencies generated from
increased sales, and savings generated in decreased purchasing costs.
6.13.2 LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------------
The primary ongoing sources of the Company's cash are net cash flows from
operating activities. The Company established a $250,000 line of credit with a
bank that matures in February 2004 to fund cash requirements as needed. The line
requires monthly interest payments and bears interest at the prime rate of
interest (4.25% at December 31, 2002). As of December 31, 2002, there was no
outstanding balance on the line of credit. The line is collateralized by the
Company's accounts receivable and inventory.
The Company believes its current cash position as well as its unused borrowing
capacity on the line of credit, coupled with its cash flow forecast for the year
and periods beyond, will be sufficient to meet its cash needs on both a
short-term and long-term basis. The balance sheet has a strong working capital
ratio (4.58 to 1) and management is not aware of any known trends or demands,
commitments, events, or uncertainties, as they relate to liquidity which could
negatively affect the Company's ability to operate and grow as planned.
Net cash provided by operations was offset by increases in accounts receivable,
merchandise inventories, prepaid expenses and decreases in accounts payable.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 17
________________________________________________________________________________
Net cash flows used for investing activities resulted from the purchase of
capital assets. The Company has no significant plans for additional capital
expenditures at this time.
6.14 DIRECTORS AND EXECUTIVE OFFICERS
- -----------------------------------------
Set forth below are the names, ages and business experience of the executive
officers and directors of the Company. All the information is as of March 1,
2003. Directors are elected at the Company's annual meeting of stockholders and
serve for one year or until their successors are elected and qualify. The Board
elects officers and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board.
NAME AGE POSITION
-------------------- --- --------
Scott Siegel 49 Chief Executive Officer and Director
Kevin M. Crotty 47 Director and Chairman of the Board
Stephen D. Smiley 49 Director
Bruce A Widnes 54 Director
James M Striplin III 47 Director
SCOTT SIEGEL - Mr. Siegel assumed the office of interim acting Chief Executive
Officer, of the Company on August 22, 2000, following the resignation of Robert
Sussman. Mr. Siegel has since been installed as the Chief Executive Officer,
Secretary and Treasurer effective January 1, 2001. From August 1997 to December
1999, Mr. Siegel served as Chairman and Secretary of the Company. From December
1999 to the August 2000, Mr. Siegel served as a Group Manager at First Aid
Select, a business division of Van Dyne-Crotty, Inc. From 1991 to 1997, Mr.
Siegel was President of Affirmed Medical of Florida, Inc., a first aid van
service distributorship with revenues of approximately $600,000 during its last
full year of operations in 1996 and generally employed between 6 to 7 full time
employees.
KEVIN M. CROTTY - Mr. Crotty has served as a director of First Aid since January
2000. Mr. Crotty currently serves as Executive Vice President of Van
Dyne-Crotty, Inc. a company engaged in uniform distribution and textile services
and headquartered in Dayton, Ohio. Van Dyne-Crotty, Inc. is a privately owned
company that currently has annual revenues of approximately $100 million and
approximately 1,200 employees. Mr. Crotty has been employed by Van Dyne-Crotty
for 27 years and has served in a range of capacities involving service,
distribution, production and sales. Mr. Crotty is Chairman of the Board of
Directors of Van Dyne-Crotty.
STEPHEN D. SMILEY - Mr. Smiley has served as a director of First Aid since
January 2000. Since 1996, Mr. Smiley has served as Vice President of
Administration for Van Dyne-Crotty, Inc. Mr. Smiley has been employed with Van
Dyne-Crotty for the past 23 years, acting in various capacities including
District and General Management, Manager and Regional Manager for several of the
company's textile rental district operations.
BRUCE A. WIDNES - Mr. Widnes is President/CEO of The Recruiting Group, Inc.,
located in Atlanta Ga., a nationally recognized search firm specializing in
recruiting and placing Sales and Sales Management professionals throughout the
United States. Previously, Mr. Widnes was President of Quick-Aid, Inc, a leading
southeastern based first aid, medical and safety supply distributor. During his
15-year tenure, Mr. Widnes developed and guided the growth of the company to
become one of the most recognized names in the industry. In the late 90's, Mr.
Widnes sold the company. Additionally, Mr. Widnes has held various corporate
Human Resources positions with a large teaching hospital and a Fortune 100
Corporation.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 18
________________________________________________________________________________
JAMES M. STRIPLIN III - Mr. Striplin is currently the owner of QuestCare Therapy
Center, a comprehensive outpatient rehabilitation facility located in Dayton
Ohio. Jim has more than twenty-five years of experience in the publishing
industry and other entrepreneurial ventures. From 1984 through 2001 he was
President of 4 publishing companies where he grew combined sales from
approximately $3 million to $26 million. He was also instrumental in the sales
of these companies to larger publishing houses. From 1980 to 1984 he held
various management positions in mid-western newspapers.
6.15 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ---------------------------------------------------------------------------
As of December 31, 2002, there were 3,985,000 shares of common stock issued and
outstanding. The following table sets forth, as of December 31, 2002,
information with respect to the beneficial ownership of the Company's common
stock by (i) persons known by First Aid to beneficially own more than 5% of the
outstanding shares of common stock, (ii) each director and officer of First Aid
and (iii) all directors and officers and Van Dyne-Crotty as a group.
COMMON STOCK BENEFICIALLY OWNED
-------------------------------
Name and Address Percentage of
of Beneficial Owner Shares Class
- ------------------- ------ -----
Scott Siegel 300,000 7.53%
10211 Northeast 53rd Street
Sunrise, Florida 33351
Kevin M. Crotty 1,000 0.02%
3233 Newmark Drive
Miamisburg, OH 45342
Daniel W. Crotty, as trustee 2,000,000 50.19%
3233 Newmark Drive
Miamisburg, OH 45342
Stephen D. Smiley 7,200 0.18%
3233 Newmark Drive
Miamisburg, OH 45342
Van Dyne-Crotty, Inc. 1,631,000 40.90%
3233 Newmark Drive
Miamisburg, OH 45342
All officers, directors and
Van Dyne-Crotty as a group 1,939,200 48.48%
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 19
________________________________________________________________________________
6.16 INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
- -----------------------------------------------------------------------
Van Dyne-Crotty and First Aid operate under a Supply Agreement wherein Van
Dyne-Crotty agreed to purchase its total requirements for first aid products for
a period of five years. However, the supply agreement will terminate in the
event First Aid's shares are sold to a competitor of Van Dyne-Crotty in the same
business. The agreement further provides that the prices for the products to be
sold will be no higher than the lowest of the prevailing market prices for the
best grade of comparable products in the marketplace compared to our lowest
available distributor pricing. First Aid may revise the price on written notice
for supplied items under the same condition that they represent the lowest of
the prevailing market for the best grade of these products. Effective in
February 2002, First Aid granted and continues to grant Van Dyne-Crotty an
additional 5% price reduction due to a review of current competitive market
prices and Van Dyne-Crotty's purchase volume. During the fiscal year 2002 Van
Dyne-Crotty purchased $1,071,000 of our products, which represented
approximately 32% of our total revenues for the 2002 fiscal year as compared to
purchases of $1,042,000 of our products, representing 32% of total revenues in
2001. On March 16, 2000, First Aid entered into an asset purchase agreement to
buy certain assets from Van Dyne-Crotty, Inc. The Company purchased accounts
receivable, inventory and customer lists for the Roehampton Supply, Inc. line of
first aid products. As of December 31, 2000, the full purchase price of $200,000
has been paid. On March 20, 2000, First Aid entered into a non-competition
agreement and a consulting agreement with the original owner of Roehampton
Supply, Inc. above. The former owner's covenant not to compete is for a
five-year term and provides for a total payment of $75,000 to be paid in
thirty-six equal installments. The consulting agreement is for a three-year term
and provides for payment of $75,000 to the consultant in thirty-six equal
installments.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 20
________________________________________________________________________________
7.0 VALUATION APPROACH
- ------------------------
Having considered the generally accepted valuation methods and the particular
attributes of the Company, we are of the opinion that in order to determine the
value range of the Common Shares of the Company it is necessary to analyze
various methods of valuing Common Shares as discussed extensively in valuation
literature.
This section outlines the concept of fair market value and identifies the
criteria which we have applied in developing the Valuation Opinion.
7.1 FAIR MARKET VALUE
- ------------------------
The term "fair market value," is based on the definition prescribed under
Internal Revenue Service ("IRS") Revenue Ruling 59-60, as follows:
The price at which the property would change hands between a willing
buyer and a willing seller when the former is not under any compulsion
to buy and the latter is not under any compulsion to sell, both
parties having reasonable knowledge of all relevant facts.
7.2 VALUATION PRINCIPLES
- --------------------------
The fair market value of a going concern business is generally a function of the
income and capital recovery returns that are expected in light of the risks
associated with the realization of these future returns and the prospects for
growth in the expected returns. In most going-concern situations the worth of a
business is expressed as a capital sum through the application of a
capitalization factor or multiple to an estimate of current or expected future
earnings or cash flows, or through application of a discount rate to expected
future cash flows.
Asset values will constitute the prime determinant of corporate worth where
operations have historically been unprofitable or earnings marginal in relation
to invested capital and the company may not be a going concern. In the case of
a company which does not possess sufficient earnings potential to warrant
treatment as a going-concern, assets are stated at their liquidation values.
Due to FAD's history of profits and positive future outlook as presented to us
by FAD management at the Valuation Date, we believe that Market, Asset and
Income approaches to values for the Company are appropriate approaches to value
determination.
There is no single correct method or approach to valuation, and a comprehensive
valuation report will usually consider at least one method from each of the
three broad valuation approaches - the market approach, the asset approach and
the income approach. In some instances, one or more approaches to value may be
either inappropriate or not applicable because of the purpose of the appraisal,
the type of business or interest being appraised, or the lack of adequate
information available to the appraiser.
The various methods often arrive at value estimates based on different levels of
control and marketability. Therefore, the value estimates derived from the
different methods must be adjusted to a consistent level (i.e., marketable
majority, non-marketable majority, marketable minority, or non-marketable
minority). Finally, these results are then reconciled to determine a final
opinion of value for the entity being appraised.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 21
________________________________________________________________________________
During the course of this appraisal, we considered various valuation
methodologies, and have relied on the chosen methods as being that most likely
to be considered by the hypothetical willing buyer and willing seller and hence,
"mirror the market." The chosen valuation method was also considered for its
applicability in this particular appraisal. All relevant valuation approaches
and methods were considered in performing the valuation of the subject equity
interest. The basic approaches to valuing business interests and their
consideration in this appraisal are discussed below.
APPROACHES CONSIDERED
- ----------------------
It is widely recognized that there is no one correct method of valuation, and
that any valuation depends upon an analysis of the relevant facts, common sense,
and the informed judgment of the appraiser. A full and complete appraisal
requires the analyst to implement all relevant valuation methods that are
appropriate to the particular valuation assignment. For this valuation, the
appraiser has considered at least one method under each approach.
MARKET APPROACH
- ----------------
The market approach suggests that the value of the entity can be determined by
examining the "market" that has been established by historical experience. This
approach is a general way of determining a value indication for a business
interest by using one or more methods that compare the subject to similar
businesses, or partial interests in similar businesses, that have been sold.
Examples of market approach methods include the guideline company method and the
analysis of prior transactions in the ownership of the subject business. The
business used for comparison must serve as a reasonable basis for such
comparison. In searching for guideline companies, factors to be considered in
judging whether a reasonable basis for comparison exists include:
- A sufficient similarity of qualitative and quantitative investment
characteristics.
- The amount and verifiability of data known about the similar
investment.
- Whether or not the price of the similar investment was obtained in an
arm's length transaction or was instead purchased in a forced or
distressed sale.
Should comparable market transaction data be located that is deemed to be
reasonably similar, comparisons are normally made through the use of valuation
ratios. The computation and use of these ratios should provide meaningful
insight and guidance about the subject, considering all relevant factors.
Therefore, care should be exercised with respect to issues such as:
- The selection of the underlying data used to compute the valuation
ratios.
- The selection of the time periods and/or the averaging methods used
for the underlying data.
- The computation of the valuation ratios.
- The timing of the price data used in the valuation ratios.
- How the valuation ratios were selected and applied to the subject
entity's underlying data.
Finally, comparisons should be made by using comparable definitions of the
components of the valuation ratios, such as earnings and cash flow.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 22
________________________________________________________________________________
ASSET APPROACH
- ---------------
The asset approach, sometimes referred to as the cost approach, is conceptually
the least complex of all approaches to consider and use as an appraisal
guideline. The asset-based approach is a general way of determining a value
indication of a business interest using one or more methods based directly on
the value of the assets owned by the business less the business's liabilities.
In theory, a buyer would not pay more than it would cost to create an entity of
equivalent economic utility. Therefore, the concept is to adjust all assets and
liabilities, whether or not recorded on the entity's balance sheet, to market
value. Generally, the entity is presumed to be a going concern and the
adjustments will reflect that premise. The asset approach typically does not
take into consideration the "intangible" value of the enterprise, unless these
assets are specifically identified and valued. The asset-based approach should
be considered in valuations conducted at the total entity level or involving a
business appraised on a basis other than a going concern. Valuations of
particular ownership interests in an entity may or may not require the use of
the asset-based approach.
INCOME APPROACH
- ----------------
The income approach develops a value that arises from the presumed ability of
the entity to produce a profit or return on investment ("ROI") for its owner.
This approach is a general way of determining a value indication of a business
by using one or more methods through which anticipated benefits are converted
into value as of the valuation date. Anticipated benefits are expressed in
monetary terms and may be reasonably represented by such items as dividends or
various forms of earnings cash flow.
Both capitalization of benefits method and discounted future benefits methods
are acceptable. In capitalization of benefits methods, a representative benefit
level is divided or multiplied by an appropriate capitalization factor to
convert the benefit of value. In discounted future benefits methods, benefits
are estimated for each of several future periods. These benefits are converted
to value by applying an appropriate discount rate and using present value
procedures.
Anticipated benefits are converted to value by using procedures that consider
the expected growth and timing of benefits, the risk profile of the benefits
stream, and the time value of money7.
The conversion of anticipated benefits to value normally requires the
determination of a capitalization factor or discount rate. In that
determination, the appraiser should consider such factors as the level of
interest rates, the rates of return expected by investors on alternative
investments, and the specific risk characteristics of the anticipated benefits.
Therefore, the two basic components of the income approach are the measure of
income and the required rate of return.
In capitalization of benefits methods, expected growth is incorporated in the
capitalization factor. In discounted future benefits methods, expected growth
is considered in estimated in the future stream of benefits.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 23
________________________________________________________________________________
MARKET APPROACH
---------------
7.3 MARKET APPROACH
- ---------------------
7.3.1 PUBLICLY TRADED GUIDELINE COMPANIES
- ---------------------------------------------
One method within the market approach is to search for transaction data for
similar and relevant "guideline" Companys. The appraiser must locate publicly
traded companies that are similar in nature and operations to the company being
valued. When guideline companies can be identified and are deemed to be
applicable, the appraiser may form comparisons between the performance of the
group of guideline companies and the subject business. These comparisons are
known as indicators of value or price multiples and may include Tangible Book
Value Multiple, Price/Earnings, TIC/Cash Flow, and TIC/Sales.
We conducted a search of public companies operating in the same industry as FAD.
7.3.2 SELECTION OF GUIDELINE COMPARABLE COMPANIES
- ------------------------------------------------------
In order to select the appropriate multiples to be applied in this Valuation
Report, we analyzed four principal approaches:
1. Reviewed companies in the Healthcare Sector;
2. Reviewed companies in the Medical Equipment and Supplies Industry
(listed in Appendix III);
3. Compared the results of numbers 1 and 2 above to the Company's
historical results and to the S&P 500;
4. Reviewed transactional data for companies' SIC codes similar to FAD;
and,
5. Selected a short list of "guideline" companies being the closest in
comparability to FAD.
The results of the findings for numbers 1, 2, and 3 above are set out in the
Ratio Comparison table later in this report.
The first step in applying the market approach to valuing a Company is to
identify publicly traded companies that are comparable. Analysts who regularly
value companies indifferent industries have well-defined methods for determining
which companies are comparable to the subject company. The procedure used to
develop the group of public companies includes the following steps, which may or
may not be obvious depending on the situation:
- The industry or industries in which the Company operates are
identified;
- Various databases are searched for a group of companies in a line of
business similar to that of the Company;
- Detailed descriptions and business segment data for the potential
guideline companies are reviewed to eliminate those with products or
services that differ from the subject Company;
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 24
________________________________________________________________________________
- Companies whose stock is thinly traded are typically eliminated, as
such companies' transactions data is less meaningful; and,
- The remaining companies are further analyzed in terms of operating,
financial, geographical, industry, and/or market characteristics to
insure that they are reasonable for inclusion in the guideline company
group.
The last step in this process is the most subjective. A thorough understanding
of the financial standing and the operating performance of the subject Company
is essential to establishing the parameters by which to screen guideline data.
Screens should include revenue mix, market, products, size of company, revenue,
margins, capital structure, and growth - both historical and estimated. While
an optimal guideline group will contain numerous companies, the number of
companies included will depend on the similarity to the Company, trading
activity, and the financial information available.
A perfect guideline company is identical to the Company with regard to business
type, capital structure, size, and primary market. It has similar management
dynamics, has a stock that is widely traded, encounters the same risks and
opportunities, and, importantly, has the same prospects for growth in the near
term, immediate term, and long term. Because it is in essence a mirror image of
the subject Company, a perfect market comparable provides a whole range of
meaningful valuation multiples which can be applied to reported and/or
prospective operating results and provide a meaningful and defensible valuation.
Of course, perfect guideline companies rarely exist, and finding an entire group
of, say, five to eight perfect guideline companies is almost unheard of. As a
result, it is often necessary to make some adjustment to the multiples derived
from the group.
Once the group of guideline companies is identified, critical valuation data
about each company should be assembled into a table. This table includes
critical balance sheet and income statement data, trading information about the
guideline companies, and, of course, an array of valuation multiples implied by
public market pricing.
We have selected a number of companies we see comparable to FAD. Although none
of the selected companies are "exact", they represent companies in similar
businesses.
To apply the market approach, we performed a computerized database search for
guideline companies that could be considered "comparable" to FAD. This search
revealed the following companies:
----------------------------------
HSIC = Henry Schein, Inc.
APOAE = Apo Health, Inc.
NYER = Nyer Medical Group, Inc.
----------------------------------
Set out on the following page is a summary of the selected company analysis.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 25
________________________________________________________________________________
- -------------------------------------------------------------------------------------
Valuation
- -------------------------------------------------------------------------------------
P/E TIC* Price to Price to TIC* Market
(TTM) to Book Tangible to Cash Cap.
Sales (MRQ) Book Flow (millions)
(TTM) (MRQ) (TTM)
- ----------------------------- ------ ----- --------- -------- ---------- ------
- ----------------------------- ------ ----- --------- -------- ---------- ------
HSIC 19.20 0.90 2.60 4.02 16.76 2,322
- ----------------------------- ------ ----- --------- -------- ---------- ------
APOAE NM 0.05 0.75 0.75 NM 1
- ----------------------------- ------ ----- --------- -------- ---------- ------
NYER 26.92 0.10 0.75 0.80 9.49 5
- ----------------------------- ------ ----- --------- -------- ---------- ------
- ----------------------------- ------ ----- --------- -------- ---------- ------
FAD NM 0.30 0.87 0.99 6.27 1
- ----------------------------- ------ ----- --------- -------- ---------- ------
- ----------------------------- ------ ----- --------- -------- ---------- ------
TOTAL 46.12 1.05 4.10 5.57 26.25 2,328
- ----------------------------- ------ ----- --------- -------- ---------- ------
- ----------------------------- ------ ----- --------- -------- ---------- ------
AVG 15.37 0.35 1.37 1.86 8.75 776
- ----------------------------- ------ ----- --------- -------- ---------- ------
- ----------------------------- ------ ----- --------- -------- ---------- ------
MEDIAN 15.37 0.10 0.75 0.80 8.75 5
- -------------------------------------------------------------------------------------
*TIC = Total invested capital
7.3.3 COMPARABLE ANALYSIS SUMMARY
- ------------------------------------
VALUATION INDICATORS :
- ------------------------
Appendix III includes data on the general stock market as well as companies in
similar businesses to the Company. In most cases these companies are
significantly larger than the Company, but do provide a basis for determining
value, however, we also performed a search of transaction data of companies in a
size range similar to FAD as included in Appendix III, the general results of
which are set out below.
RATIO COMPARISON
Guideline (1)
Valuation Ratios Company Industry* Sector** S&P 500 Companies
- ---------------------------- ------------- --------- -------- ------- ---------
P/E Ratio (TTM) N/M 34.60 25.74 23.80 15.37
TIC to Sales (TTM) 0.30 5.26 6.12 3.27 0.35
Price to Book (MRQ) 0.87 6.80 6.67 4.47 1.37
Price to Tangible Book (MRQ) 0.99 14.96 11.79 7.49 1.63
TIC to Cash Flow (TTM) 6.27 27.81 23.48 17.49 8.75
% Owned Institutions N/A 28.24 47.81 63.07 N/A
* Industry is Medical Equipment and Supplies(1)
** Sector is Healthcare(1)
(1) Data taken from "MultexInvestor", produced by Multex.com, Inc.
NET BOOK VALUE MULTIPLE ANALYSIS
- ------------------------------------
As of May 31, 2003, the date with the most current available financial
information, FAD's combined book value was approximately $781,120.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 26
________________________________________________________________________________
We applied a book value multiple of 1.50 compared to the Industry, Sector, S&P
500, and Guideline Company Data, which were in the range of 0.75 to 6.80 as set
out in the table above. The multiple selection is slightly higher than the
average guideline company multiple of 1.37.
Applying the multiple to the net book value equals $.78 million as set out
------------
below.
Net Book Value $ 781,120
==========
Multiples 1.50
==========
Total Value Range $1,171,680
==========
NET TANGIBLE BOOK VALUE MULTIPLE ANALYSIS
- ----------------------------------------------
As of May 31, 2003, the date with the most current available financial
information, FAD's combined net tangible book value was approximately $671,645.
We applied a tangible book value multiple of 1.50 compared to the Industry,
Sector, S&P 500, and Guideline Company Data, which were in the range of 0.75 to
14.96 as set out in the table above. The multiple selection is slightly lower
than the average guideline company multiple of 1.63.
Applying the multiple to the net tangible book value results in values for the
Company as set out below:
Net Tangible Book Value $ 671,645
==========
Multiples 1.50
==========
Total Value Range $1,007,468
==========
PRICE TO EARNINGS MULTIPLE ("P/E") ANALYSIS:
- ------------------------------------------------
We selected a multiple of 7.50 times compared to the Industry, Sector, S&P 500,
and Guideline Company Data, which were in the range of Nil to 34.60 as set out
in the table above. The multiple selection is lower than the average guideline
company multiple due to FAD's smaller size.
Applying this multiple to 2002 net income results in values for the Company as
set out below:
2002 Net Income* $ 176,490
==========
Multiple 7.50
==========
Total Value $1,323,675
==========
* - After deducting income taxes at an estimated rate of 38.5 % (FAD is not
separately taxed) from net income of $286,976.
TIC TO CASH FLOW:
- --------------------
We selected a multiple of 6.0 times compared to the Industry, Sector, S&P 500,
and Guideline Company Data, which were in the range of Nil to 27.81 as set out
in the table above. The multiple selection is lower than the average guideline
company multiple of 8.75 due to FAD's smaller size.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 27
________________________________________________________________________________
Applying this multiple to 2002 cash flow results in values for the Company as
set out below:
2002 Cash Flow $ 201,176
==========
Multiple 6.0
==========
Total Value $1,207,056
==========
TIC TO SALES MULTIPLE ANALYSIS:
- ----------------------------------
We selected a multiple of 0.35 times compared to the Industry, Sector, S&P 500,
and Guideline Company Data, which were in the range of 0.10 to 0.90 as set out
in the table above. The multiple selection is equivalent to the average
guideline company multiple of 0.35.
Applying this sales multiple to 2002 revenues results in values for the Company
as set out on the following page:
TIC TO SALES MULTIPLE ANALYSIS
------------------------------
2002 Revenue $3,077,935
==========
Multiple 0.35
==========
Total Value $1,077,277
==========
PRIOR TRANSACTION ANALYSIS
- ----------------------------
The market approach suggests that the value of the entity can be determined by
examining the "market" that has been established by historical experience. One
method, usually applicable to larger, publicly held corporations, is to refer to
the value set by the most recent trading of the stock by private and public
investors who have made their own determination as to value. FAD is a publicly
traded company and did not have any private common stock transactions during the
past twelve months.
MERGERS AND ACQUISITIONS GUIDELINE COMPANY METHODOLOGY
- -----------------------------------------------------------
This market approach obtains and analyzes information from mergers and
acquisitions of entire guideline companies, both public and privately held. The
sales and pricing information is then applied to the subject company to
determine its value. We performed a search of the Pratt's Stats, Mergerstat,
Bizcomps, Public Company and Institute of Business Appraisers ("IBA")
transaction databases. The following page details the results of the search:
- -----------------------------------------------------------------------------------------
SIC Pratt's Stats Mergerstat Bizcomps Public IBA
Code Company
--------------- --------------- --------------- --------------- --------------- ---------------
Total Selected Total Selected Total Selected Total Selected Total Selected Total Selected
- ---- ----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- --------
3842 10 0 18 0 4 0 0 0 10 0 42 0
- ---- ----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- --------
The transactions listed above were eliminated because their lines of business
were materially different, the transactions were outdated, or there was not
sufficient data to support the associated ratios.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 28
________________________________________________________________________________
MARKET CAPITALIZATION
- ----------------------
The market capitalization for FAD as of June 1, 2003 is approximately $797,000
based on a total of 3,985,000 common shares outstanding at $.20 per share.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 29
________________________________________________________________________________
ASSET APPROACH
--------------
7.4 ASSET APPROACH
- --------------------
7.4.1 NET BOOK VALUE METHODOLOGY
- ------------------------------------
The net book value ("NBV") of a business is the historical value of that
entity's assets less the value of its liabilities.
To calculate the net book value of FAD, we referred to the internally prepared
financial statements for May 31, 2003.
FAD's current assets consist primarily of cash, accounts receivable and
inventories. FAD's property and equipment is primarily comprised of office and
warehouse equipment, furniture and leasehold improvements.
Management has indicated that all liabilities are supported by adequate
documentation to reflect evidence of an obligation of the Company.
As at May 31, 2003 the net book value for FAD is approximately $781,120
7.4.2 NET TANGIBLE BOOK VALUE METHODOLOGY
- ----------------------------------------------
The net tangible book value ("NBV") of a business is the historical value of
that entity's assets less the value of its intangible assets and liabilities.
To calculate the net tangible book value of FAD, we referred to the internally
prepared financial statements for May 31, 2003.
FAD's current assets consist primarily of cash, accounts receivable and
inventories. FAD's property and equipment is primarily comprised of office and
warehouse equipment, furniture and leasehold improvements.
Management has indicated that all liabilities are supported by adequate
documentation to reflect evidence of an obligation of the Company.
FAD's intangible assets consist of a customer list. At May 31, 2003 the net
tangible book value for FAD is approximately $671,645.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 30
________________________________________________________________________________
INCOME APPROACH
---------------
7.5 INCOME APPROACH
- ---------------------
CAPITALIZED RETURNS (SINGLE -PERIOD MODEL)
- ----------------------------------------------
Under the capitalized benefits method the normalized earnings or net cash flow
for a single period are capitalized by applying a formulated capitalization
rate, calculated from an appropriate discount rate, to arrive at the value of
the business.
In valuation theory a discount rate represents the total expected rate of
return, stated as a percentage, that a buyer or investor would demand on the
purchase of an asset given the level of inherent risk in the asset. The
discount rate is not utilized as a divisor or multiplier; instead, it is used to
determine present value factors that discount a future benefit stream to a
present value.
The capitalized returns appraisal method determines the value of a company based
on the availability of a stabilized stream of benefits to equity holders, or
dividend paying capacity and therefore results in a going concern value. The
value is obtained by measuring an anticipated income or cash flow level and then
determining its worth by using a rate of return which reflects the annual return
an equity investor should require for an investment in a business of the risk
level of FAD. This required return, or discount rate, is adjusted for the
expected long-term growth of the benefit stream.
The capitalized benefits methodology is generally used when income is normal and
recurring and the company's future operations are not expected to change
significantly from its current normalized operations.
7.5.1 SELECTION OF APPROPRIATE CAPITALIZATION AND DISCOUNT RATES
- -----------------------------------------------------------------------
The cost of capital is the total rate of return that a buyer or investor would
demand from an ownership interest in a company. This rate is either applied to
the company's expected future earnings (discount rate) or is applied to the
current or representative earnings of the company (capitalization rate). The
capitalization rate is derived from the discount rate by subtracting a company's
expected long-term average annual compound growth rate from its discount rate.
It is used directly in the value computation as a divisor, and it is applied to
a single year benefit stream. This single year benefit stream represents what
the company can be expected to generate in the future, based on historical
normalized cash flows. Determining a required rate of return on a closely held
business is perhaps the single most difficult step in the appraisal process.
The discount rate represents the rate that would be required by an investor
considering the inherent risks of a particular company, as well as the rate of
return available for investments with similar risks in the marketplace. In
other words, the discount rate is the required rate of return an investor would
consider necessary to invest in an asset with the amount of risk comparable to
that associated with the company being valued.
Consistent with the risk/reward relationship in almost any investment, the
greater the investment risk, the greater the required reward. The discount rate
uses the risk/reward relationship to convert sums of cash to be received in the
future into a present value.
In many cases, appraisers use a build-up approach to arrive at an appropriate
discount rate. The build-up approach is based on the principle that each
investment has various levels or types of risk characteristic of
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 31
________________________________________________________________________________
other investments in the financial markets. These components are added together
to arrive at a "built-up" discount rate, which is then used to compute the cost
of the capital.
COMPONENTS OF THE COST OF CAPITAL
- --------------------------------------
Risk Free Rate: The risk free rate of return an investor could obtain from a
- -----------------
low risk guaranteed investment. Such a return is assumed to be approximately
equal to the yield to maturity of long-term Treasury bonds even though this
investment is not completely risk free. The rate of return on long-term U.S.
Government bonds is considered a good proxy for the risk-free rate of return.
At May 31, 2003, the rate of return on a twenty year U.S. Government Treasury
Bond was 4.4%.
----
Long-Horizon Equity Risk Premium: The equity risk premium is the extra return
- ----------------------------------
earned by an average equity investor in excess of the return on long-term
Treasury securities and was 7.0% through 2002. The source of this information
- - ----
is the Ibbotson Associates Stocks, Bonds, Bills, and Inflation Yearbook for 2002
(the 2003 Yearbook). The sum of the risk-free rate and the equity risk premium
results in the average market return for publicly traded stocks.
Expected Micro-Capitalization Equity Size Premium: Historically, more risk has
- --------------------------------------------------
been associated with the typical small company than with a large, publicly
traded company; therefore, investors in a typical small business will demand a
higher rate of return. The Ibbotson Yearbook indicates that the difference
between the total returns on large stocks and small stocks was 3.5% through
----
2002. The average small company in this study was listed on the New York Stock
Exchange and has a market capitalization of less than $192 million.
Specific Company Risk Premium: Other risk factors that must be analyzed include
- -----------------------------
the Company's industry, the Company's financial risk, the diversification of the
Company's operations, depth and quality of management and other operational
characteristics of the Company as denoted below.
RISK FACTORS
- -------------
COMPETITION
- -----------
FAD faces competition from manufacturers and distributors that are much larger
and better capitalized. Further, there has been a consolidation of some of the
major distributors in the first aid supply business. The failure of FAD to
successfully compete against these competitors could have a material adverse
affect on its business.
We have assigned an increase of 5% for this risk factor.
--
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 32
________________________________________________________________________________
DETERMINATION OF COST OF CAPITAL
- ------------------------------------
The calculation of this "build up" rate resulted in an estimated discount rate
of approximately 25%, and a rate of 21% after adjusting for long-term growth, to
be used in our discounted cash flow analysis.
--------------------------------------------------------------
Risk Free rate as of May 31, 2003 4.4%
Plus equity risk premium 7.0%
Plus small stock risk premium 3.5%
Plus company specific risk premium 10.0%
-------
Equals discount rate (cost of capital) 24.9%
Rounded to 25.0%
Adjustment for estimated growth rate 4.0%
-------
Capitalization rate to determine terminal value 21.0%
=======
--------------------------------------------------------------
THE INCOME THAT IS TO BE CAPITALIZED IS SUPPOSED TO BE NORMAL AND RECURRING,
THEREFORE, THE FOLLOWING ANALYSIS WAS PERFORMED:
Period Pre-tax (1) Income (2) Post-tax Capitalization (3) Value
Ended Income Tax Income Rate (000's)
(000's) (000's) (000's)
12-31-02 287 110 177 21% 843
(1) Per management's internally prepared financial statements.
(2) Since FAD is not separately taxed, this calculation is being performed
assuming a 38.5% normalized income tax rate.
(3) Capitalization rate computed above.
7.6 DISCOUNTED CASH FLOW ANALYSIS
- -------------------------------------
The discounted cash flow approach is favored by those involved in the commitment
of capital to fixed assets where reasonably reliable cash flow forecasts can be
made. However, future business cash flows are often difficult to project
accurately. Discounted cash flows are normally applied where future cash flows
can be reasonably and consistently forecasted. Historically, the discounted cash
flow approach to value has been used extensively on capital budgeting decisions.
The discounted cash flow approach is simply the present value of future cash
flows. Although the Company has a reasonably predictable stream of earnings, our
value conclusion is based upon management's forecasts. Taking into
consideration the factors set out above and the returns realized for various
investments, we selected a discount rate of 25% as reflective of investor
expectations for an investment into the Company at the Valuation Date. Those
rates take into account the capitalization rates as set out above plus various
risk factors for the Company. Further, we examined interest rates and investor
returns and selected those rates as representative.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 33
________________________________________________________________________________
When computing present value, it is appropriate to calculate a terminal value
based on the final year of the forecast to reflect the future cash flows to be
realized.
First Aid Direct
Discounted Cash flow
Analysis
Less: Depr. Add: Application Add: Depr.
Fiscal Year (5) (2) Less: (1) (4) (2)
Ended EBITDA & Non- EBIT Taxes Of Loss Carry. EBI & Non-Cash
Cash
- ------------ -------------- ---------------- ------------- ---------------- ---------------- -------- -----------
2003 (E) $ 425,862 $ 67,500 $ 358,362 $ 137,969 $ 26,950 $247,343 $ 67,500
- ------------ -------------- ---------------- ------------- ---------------- ---------------- -------- -----------
2004 (E) $ 478,899 $ 67,500 $ 411,399 $ 158,389 $ - $253,010 $ 67,500
- ------------ -------------- ---------------- ------------- ---------------- ---------------- -------- -----------
2005 (E) $ 497,136 $ 67,500 $ 429,636 $ 165,410 $ - $264,226 $ 67,500
- ------------ -------------- ---------------- ------------- ---------------- ---------------- -------- -----------
2006 (E) $ 515,789 $ 67,500 $ 448,289 $ 172,591 $ - $275,698 $ 67,500
- ------------ -------------- ---------------- ------------- ---------------- ---------------- -------- -----------
2007 (E) $ 534,867 $ 67,500 $ 467,367 $ 179,936 $ - $287,431 $ 67,500
- ------------ -------------- ---------------- ------------- ---------------- ---------------- -------- -----------
2008 (E) $ 554,377 $ 67,500 $ 486,877 $ 187,448 $ - $299,429 $ 67,500
- ------------ -------------- ---------------- ------------- ---------------- ---------------- -------- -----------
2009 (E) $ 574,330 $ 67,500 $ 506,830 $ 195,130 $ - $311,700 $ 67,500
- ------------ -------------- ---------------- ------------- ---------------- ---------------- -------- -----------
Less: (6) Present (3)
Less: (6) Working Net Post Tax (8) Total
Fiscal Year Capital Cap Cash Flow Value Present
Ended Expend. Needs @ 25% Value
- ------------ ------------- ------- ------------- --------- --------
2003 (E) $ - $ - $ 314,843 0.8944 $281,596
- ------------ ------------- ------- ------------- --------- --------
2004 (E) $ - $ - $ 320,510 0.7155 229,325
- ------------ ------------- ------- ------------- --------- --------
2005 (E) $ - $ - $ 331,726 0.5724 189,880
- ------------ ------------- ------- ------------- --------- --------
2006 (E) $ - $ - $ 343,198 0.4579 157,150
- ------------ ------------- ------- ------------- --------- --------
2007 (E) $ - $ - $ 354,934 0.3664 130,047
- ------------ ------------- ------- ------------- --------- --------
2008 (E) $ - $ - $ 366,929 0.2931 107,547
- ------------ ------------- ------- ------------- --------- --------
2009 (E) $ - $ - $ 379,200 0.2345 88,922
- ------------ ------------- ------- ------------- --------- --------
Terminal Value of future cash flows: (7)
- ----------------------------------------
$379,200*1.04/.21 = $ 2,464,800 0.2345 440,378
----------
$1,624,845
==========
(1) Taxes at 38.5%
(2) Includes depreciation
(3) Utilizes mid-year discount rate
(4) Based on carryforward of pre-2003 losses. Losses are not subject to IRC
Section 382 limitation
(5) The Forecast EBITDA was determined by taking management's forecasts as
included in Appendix IV and adding back applicable interest, taxes and
depreciation to net income.
(6) Net Capital Expenditures and working capital were estimated by FAD
management.
(7) For the Terminal Value, a 4% long-term growth rate was selected.
(8) The Discount Rate was selected based upon determination of a Capitalization
Rate described earlier in this Report, which equaled 25.0%.
THIS RESULTS IN A VALUE OF $1.62 MILLION.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 34
________________________________________________________________________________
8.0 DETERMINATION OF VALUE
- -----------------------------
In determining the final Business Enterprise Value ("BEV") of the Company, we
analyzed the results of the various approaches to value. To arrive at the final
BEV we add to our Value Conclusion any preferred equity and long-term and
short-term debt at the Valuation Dates and subtract cash and cash equivalents.
The rationale is that, in buying a business, its current owners, the
shareholders, and its creditors must be repaid. These costs become obligations
of a prospective purchaser. The Company's cash, on the other hand, is a liquid
asset than can be used at the prospective purchaser's discretion.
Set out below is a summary of the findings of the various approaches to value
which we have examined to determine the value of FAD's business:
VALUE WEIGHTING TOTAL
----------- ------------ --------
I. MARKET
- ----------
Publicly Traded Guideline Companies:
Price/Earnings $1,323,675 .1000 $132,368
TIC/Sales $1,077,277 .1000 107,728
TIC/Cash Flow $1,207,056 .1000 120,706
Net Book Value $1,171,680 .1000 117,168
Net Tangible Book Value $1,007,468 .1000 100,747
Prior Transactions N/A N/A 0
Mergers & Acquisitions N/A N/A 0
Market Capitalization $ 797,000 .1000 79,700
II. ASSET
Net Book Value $ 781,120 .1000 78,112
Net Tangible Book Value $ 671,645 .1000 67,165
III. INCOME
Capitalized Returns $ 843,000 .1000 84,300
Discounted Cash Flow $1,624,845 .1000 162,485
---------- ----------
100.0% 1,050,479
==========
Add: Short-term and long-term debt 215,000
Less: Debt applicable to Total First Aid 25,000
Less: Cash and cash equivalents 2,066
----------
Total Value $1,238,413
==========
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 35
________________________________________________________________________________
Based upon the foregoing, and the various factors and assumptions considered
necessary to the development of our valuation conclusion, in our Opinion the
fair market value of First Aid Direct's business is $1,238,413.
Very truly yours,
STENTON LEIGH CAPITAL CORP.
Milton H. Barbarosh, CPA, CA, MBA, CBV, ASA
President
MHB/bc
FIRST AID DIRECT, INC.
VALUSTION OF FIRST AID DIRECT BUSINESS PAGE 36
________________________________________________________________________________
First Aid Direct, Inc.
ASSUMPTIONS AND LIMITING CONDITIONS
-----------------------------------
This appraisal incorporated the following assumptions and limiting conditions:
1. This appraisal was made, and this Report has been prepared, for the
purposes stated in the letter section, "RESTRICTION AND DISCLAIMER".
Neither the Report nor the information that it contains should be used for
any other purpose, and they are invalid if so used.
2. This appraisal is based upon information obtained from sources that, with
exceptions as noted herein, the appraiser believes to be reliable.
However, the appraiser has not had the opportunity to confirm the validity
of all information obtained. This includes technical information,
competition analysis, market size and penetration which were provided by
the Company management.
3. The appraiser assumes no responsibility for matters of a legal nature
affecting the Company Common Shares appraised.
4. The distribution of total value of the Common Shares applies only for the
purposes of this appraisal, and the separate value estimates for the
Common Shares should not be used for any other purpose, and are invalid if
so used.
5. Neither this appraisal nor any part of it shall be used in connection with
any other appraisal.
6. The appraiser, by reason of performing this appraisal and preparing this
letter, is not to be required to give testimony, nor to be in attendance
in court or at any governmental hearing, with reference to the matters
herein, unless prior arrangements have been made with the appraiser
relative to such additional employment.
7. There were no significant undisclosed liabilities, contingent liabilities,
contractual obligations, commitments or litigation pending or threatened
except as disclosed in the Company's financial statements or reflected in
our Valuation Opinion Report.
8. There were no material, unusual or non-recurring expense or revenue items
during the five-year period prior to the Valuation Date other than those
reflected in this Valuation Opinion Report.
9. There were no redundant assets which were not necessary for day-to-day
operations other than those discussed in this Valuation Opinion Report.
10. It is appropriate for us to use and rely upon the various information
prepared by management as detailed in the scope section of this Valuation
Opinion Report.
11. The financial statements are accurate and can be relied on.
12. This Valuation has been performed based on a going concern for the
Company, therefore assuming it will obtain sufficient capital to continue
operations.
The Fair Market Value for any specific security changes from time-to-time as a
result of possible changes in internal and external conditions affecting the
Company's business and future prospects. It should be appreciated that in
accordance with the terms of our engagement, a valuation determination for the
all of the Common Shares of FAD relates to a specific point in time, June 1,
2003. For purposes of our Valuation Opinion, our review has not taken into
account transactions or events that have taken place subsequent thereto.
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 37
________________________________________________________________________________
First Aid Direct, Inc.
APPRAISER'S CERTIFICATION
-------------------------
I certify that, to the best of my knowledge and belief:
1. That the statements and opinions expressed in this Valuation Opinion
Report are correct to the best of my knowledge and belief, subject to the
assumptions and conditions stated and are my personal, unbiased
professional analyses, opinions, and conclusions.
2. That my engagement to perform this appraisal, and my compensation
therefore, are independent of the value conclusion.
3. That I have no present ownership interest in the Company appraised.
4. That this appraisal has been performed in accordance with the Code of
Ethics of The American Society of Appraisers my analyses, opinions, and
conclusions were developed, and this Report has been prepared, in
conformity with the Uniform Standards of Professional Appraisal Practice.
5. That it is my Opinion that the value of the Common Shares appraised is as
stated in this Valuation Opinion Report and no one provided significant
professional assistance to the person signing this Valuation Opinion
Report.
_______________________________________
Milton H. Barbarosh, ASA, CPA
FIRST AID DIRECT, INC.
VALUATION OF FIRST AID DIRECT BUSINESS PAGE 38
________________________________________________________________________________
APPRAISER'S QUALIFICATIONS
--------------------------
Milton H. Barbarosh is a business appraiser and consultant specializing in
business valuations and appraisals, business acquisitions and divestitures, and
transactions in the public marketplace.
His formal education and business experience is outlined in the attached resume.
He is a member of The Institute of Business Appraisers, a Senior Member of the
American Society of Appraisers - Business Valuations and a member of the
Canadian Association of Chartered Business Valuators, a Chartered Accountant
with a Business Valuations designation, and a member of the National Association
of Certified Valuators.
MILTON H. BARBAROSH
_______________________________________________________________________________
PROFESSIONAL EXPERIENCE
- -----------------------
1989 to present Chief Executive Officer
STENTON LEIGH GROUP, INC.
Full service financial advisory company with merchant banking
capability. Activities include advising on mergers,
acquisitions, divestitures, public offerings, performing
business valuations and fairness opinions, and implementing
turnarounds, in addition to making select principal
investments. Also, act as Director and Officer to various
private and public companies.
1987 to 1989 Chief Executive Officer
JW CHARLES GROUP, INC.
This Company was a holding company which included a 200 person
New York Stock Exchange securities brokerage company (JW
Charles Securities, Inc.) an investment banking company (JW
Charles Capital Corp.), a 200 person real estate brokerage
company (JW Charles Realty, Inc.), a mortgage insurance
company, a residential development company, combined annual
gross transactions of over $1.75 billion.
As CEO, a major restructuring was performed which involved
selling core businesses, reducing staff, closing offices and
enhancing revenues.
1986 to 1989 President
JW CHARLES CAPITAL CORP.
Commenced employment to establish a full service Investment
Banking group providing acquisition, divestiture, valuation,
corporate finance and financial restructuring services, and
continued to oversee this area after becoming CEO of JW
Charles Group in 1987.
1983 to 1986 Manager: Mergers & Acquisitions - Merchant Banking (Canada)
THE ROYAL BANK OF CANADA
Commenced employment as Assistant Manager and was promoted to
Manager in early 1985 as a result of achievements and the
comprehensive nature of duties performed. Instrumental in
establishing The Royal Bank's Canadian M&A Group by applying
professional and technical M&A expertise not previously
available in this newly formed department.
As Manager, responsible for conducting and directing all
aspects of M&A assignment including acquisitions,
divestitures, valuations, financing, leveraged buyouts,
strategic planning, etc., for assignments in numerous
industries with transaction values ranging from millions to
billions of dollars, and being both domestic and international
in nature.
1980 to 1983 Manager: Mergers and Acquisitions Services
ERNST & YOUNG (FORMERLY CLARKSON GORDON)
Commenced employment as Senior Staff Member and was promoted
to Manager in June, 1981 in recognition of outstanding
performance. This included handling numerous high profile
mergers and acquisitions and business valuations assignments.
Part of the founding team of Clarkson Gordon/Woods, Gordon
Mergers and Acquisitions Services Group. Responsible for
conducting and directing all aspects of business valuation
acquisitions, divestitures, financing and Foreign Investment
Review Act assignments in various industries, including: oil &
gas; manufacturing; securities brokerage; and high technology.
1976 to 1979 Audit Senior Accountant
KPMG PEAT MARWICK (FORMERLY THORNE RIDDELL AND CO.)
Responsible for the completion of all aspects of audits in a
diverse number of industries. Given special assignment to the
Bankruptcy & Insolvency Department receiving exposure to a
large variety of clients and receivership and insolvency
matters.
EDUCATIONAL/PROFESSIONAL DESIGNATIONS
2003 Certified Public Accountant (CPA)
2002 Canadian Chartered Accountant - Expert in Business Valuations
(CA-CBV)
1995 National Association of Certified Valuators
1989 National Association of Real Estate Appraisers (RPM)
1989 Certified Real Estate Appraiser (CREA)
1989 Florida Real Estate Commission Salesman's License
1987 The Institute of Business Appraisers, Inc., Member (IBA)
1987 Securities Licenses: (Inactive)
Series 7 - General license
Series 63 - State license
Series 24 - General principal
1987 American Society of Appraisers
Senior Member of American Society of Appraisers
Business Valuations (ASA)
1985 York University, Fellow Canadian Institute of Chartered Bankers
(FICB)
1983 University of Toronto, Member Canadian Association of Chartered
Business Valuators (CBV)
1980 York University, Masters in Business Administration (MBA)
Major in International Finance, with Distinction
1978 Canadian Chartered Accountant Member in Ontario and Quebec (CA)
1977 McGill University, Graduate Diploma in Public Accounting (DPA)
1976 Concordia University, Bachelor of Commerce (B. Comm.)
Honors in Accountancy, with Distinction Gold Medal in Accountancy
Program completed on full tuition scholarship on accelerated
basis.
1974 Vanier College, Diploma in Business (CEGEP), Scholarship Winner
MEMBERSHIPS & AFFILIATIONS
The National Center for Employee Ownership - Consultant Member
The ESOP Association
Presidential Business Commission - State of Florida (Congressional
Committee)
Honorary Chairman - Republican Party Business Advisory Council
International Association of Consultants, Valuers and Analysts (IACVA)
Fleet Bank - Director on Florida Advisory Board
National Association of Certified Valuators
Young Presidents' Organization
Chairman, International Mergers & Acquisitions Forum, Young Presidents'
Organization
Association for Corporate Growth
International Business Brokers Association
Florida Business Brokers Association
American Society of Appraisers
The Institute of Business Appraisers
Florida Real Estate Association
York University Alumni
Concordia University Alumni
McGill University Alumni
University of Toronto Alumni
Institute of Canadian Bankers
Boca Raton Golf Club & Resort
National Association of Securities Dealers (NASD) - Membership Committee -
Former Member
Treasurer and Board Member of Charitable and Religious Institutions
PUBLICATIONS
- HARRIS-BENTLEY LIMITED, MERGERS AND ACQUISITIONS IN CANADA, founder
and former editor
- THE ACQUISITION DECISION, book published February, 1985 by The
National Association of Accountants (United States) and the Society
of Management Accountants of Canada (co-authored).
- Author of numerous other short articles and frequent lecturer.
================================================================================
APPENDIX I
FINANCIAL STATEMENTS
FOR THE FIVE MONTHS ENDED MAY 31, 2003
FORM 10Q FOR THE QUARTER ENDED
MARCH 31, 2003
FORM 10K FOR THE YEAR ENDED
DECEMBER 31, 2003
================================================================================
================================================================================
APPENDIX II
INDUSTRY AND ECONOMIC DATA
================================================================================
================================================================================
APPENDIX III
PUBLIC MARKET AND TRANSACTION DATA
================================================================================
================================================================================
APPENDIX IV
FORECAST FINANCIALS
FOR THE SEVEN YEARS ENDED DECEMBER, 2009
================================================================================
================================================================================
Valuation Opinion of
FIRST AID DIRECT, INC.'S PRINCIPAL BUSINESS
Valuation Date: June 1, 2003
Report Date: July 3, 2003
________________________________________
Report by:
[GRAPHIC OMITED]
STENTON LEIGH
CAPITAL CORP.
1900 NW Corporate Blvd., #305-W
Boca Raton, FL 33431
(561) 241-9921
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TABLE OF CONTENTS
1.0 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.0 SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.0 RESTRICTION AND DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.0 UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE . . . . . . . . . . . . . . . . . . . 2
5.0 SCOPE OF REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.0 BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.1 History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.1.1 The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.2 Industry Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.3 Van Dyne-Crotty Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.4 Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.5 Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.6 Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.7 Marketing and Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.8 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.9 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.10 Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.11 Market for Common Equity and Other Related Stockholder Matters . . . . . . . . . . . 7
6.12 Management's Discussion & Analysis of Financial Condition, Results of Operations . . 12
6.12.1 Result of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.12.2 Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . 12
6.13 Management's Discussion & Analysis of Financial Condition, Results of Operations 16
6.13.1 Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.13.2 Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . 16
6.14 Directors and Executive Officers. . . . . . . . . . . . . . . . . . . . . . . . . 17
6.15 Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . 18
6.16 Interests of Management and Others in Certain Transactions. . . . . . . . . . 19
7.0 VALUATION APPROACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Valuation Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 Market Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3.1 Publicly Traded Guideline Companies . . . . . . . . . . . . . . . . . . . . . . 23
7.3.2 Selection of Guideline Comparable Companies. . . . . . . . . . . . . . . . . . 23
7.3.3 Comparable Analysis Summary. . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Asset Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4.1 Net Book Value Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4.2 Net Tangible Book Value Methodology. . . . . . . . . . . . . . . . . . . . . . 29
7.5 Income Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.6.1 Selection of Appropriate Capitalization and Discount Rates . . . . . . . . . . 30
7.6 Discounted Cash Flow Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.0 DETERMINATION OF VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ASSUMPTIONS AND LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
APPRAISER'S CERTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
APPRAISER'S QUALIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
APPENDIX I: FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MAY 31,
2003FORM 10Q FOR THE QUARTER ENDED MARCH 31, 2003FORM 10K FOR THE YEAR
ENDED DECEMBER 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
APPENDIX II: INDUSTRY AND ECONOMIC DATA
APPENDIX III: PUBLIC MARKET AND TRANSACTION DATA
APPENDIX IV: FORECAST FINANCIALSFOR THE SEVEN YEARS ENDED DECEMBER, 2009
APPENDIX C
FORM OF
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FIRST AID DIRECT, INC.
----------------------
Pursuant to the Business Corporation Act of the State of Florida, the
undersigned President of First Aid Direct, Inc. (the "Corporation"), a
corporation organized and existing under and by virtue of the Business
Corporation Act of the State of Florida ("FBCA") bearing Document _________ does
hereby certify:
FIRST: That at a meeting of the Board of Directors of the Corporation held
on August 28, 2003, the Board of Directors approved the following amendment to
the Corporation's Articles of Incorporation effecting a change in the name of
the Corporation.
SECOND: Article 1 of the Articles of Incorporation of the Corporation shall
be deleted in its entirety and replaced with the following:
ARTICLE I - NAME
----------------
The name of the Corporation shall be "Total First Aid, Inc.".
The foregoing amendment was adopted, pursuant to the FBCA, by a majority of
the Corporation's Directors and holders of the Corporation's Common Stock
evidencing in excess of a majority of the total issued and outstanding capital
stock of the Corporation entitled to vote, at a meeting held on _______, 2003.
Therefore, the number of votes cast by the Shareholders of the Corporation for
the amendment to the Corporation's Articles of Incorporation was sufficient for
approval.
IN WITNESS WHEREOF, said Corporation has caused these Articles of Amendment
to be signed in its name by its President on ____, 2003.
______________________________
Scott Siegel, President
APPENDIX D
607.1301 DISSENTER'S RIGHTS; DEFINITIONS. The following definitions apply to
sec. sec. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value of
the shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to sec. 607.1104, the day prior to the date on which a copy of
the plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT.
(1) Any shareholder has the right to dissent from, and obtain payment of
the fair value of his shares in the event of, any of the following corporate
actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under sec. 607.1104, and the shareholders would have been
entitled to vote on action taken, except for the applicability of sec.
607.1104;
(b) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation, other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or exchange
pursuant to sec. 607.1202, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to the
shareholders within 1 year after the date of sale;
(c) As provided in sec. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation
is a party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any
of his or her shares;
2. Altering or abolishing the voting rights pertaining to any
of his or her shares, except as such rights may be affected by the voting
rights of new shares then being authorized of any existing or new class or
series of shares;
3. Effecting an exchange, cancellation, or reclassification of
any of his or her shares, when such exchange, cancellation, or
reclassification would alter or abolish the shareholder's voting rights or
alter his percentage of equity in the corporation, or effecting a reduction
or cancellation of accrued dividends or other arrearages in respect to such
shares;
4. Reducing the stated redemption price of any of the
shareholder's redeemable shares, altering or abolishing any provision
relating to any sinking fund for the redemption or purchase of any of his
shares, or making any of his shares subject to redemption when they are not
otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any
of the shareholder's preferred shares which had theretofore been
cumulative;
6. Reducing the stated dividend preference of any of the
shareholder's preferred shares; or
7. Reducing any stated preferential amount payable on any of
the shareholder's preferred shares upon voluntary or involuntary
liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his or her shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his or her shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in
his or her name. In that event, his rights shall be determined as if the shares
as to which he or she has dissented and his or her other shares were registered
in the names of different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a proposed
sale or exchange of property, to the holders of shares of any class or series
which, on the record date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which such action is to be acted upon or to
consent to any such action without a meeting, were either registered on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or held of record by not fewer than
2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his or her
shares under this section may not challenge the corporate action creating his or
her entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
(1)(a) If a proposed corporate action creating dissenters' rights under
sec. 607.1320 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights and be accompanied by a copy of sec.sec. 607.1301, 607.1302,
and 607.1320. A shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for his or her shares
if the proposed action is effectuated, and
2. Not vote his or her shares in favor of the proposed action.
A proxy or vote against the proposed action does not constitute such a
notice of intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under
sec. 607.1302 is effectuated by written consent without a meeting, the
corporation shall deliver a copy of sec.sec. 607.1301, 607.1302, and 607.1320 to
each shareholder simultaneously with any request for the shareholder's written
consent or, if such a request is not made, within 10 days after the date the
corporation received written consents without a meeting from the requisite
number of shareholders necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his or her shares pursuant to
paragraph (1)(a) or, in the case of action authorized by written consent, to
each shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him or her, any
shareholder who elects to dissent shall file with the corporation a notice of
such election, stating the shareholder's name and address, the number, classes,
and series of shares as to which he or she dissents, and a demand for payment of
the fair value of his or her shares. Any shareholder failing to file such
election to dissent within the period set forth shall be bound by the terms of
the proposed corporate action. Any shareholder filing an election to dissent
shall deposit his or her certificates for certificated shares with the
corporation simultaneously with the filing of the election to dissent. The
corporation may restrict the transfer of uncertificated shares from the date the
shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A
notice of election may be withdrawn in writing by the shareholder at any time
before an offer is made by the corporation, as provided in subsection (5), to
pay for his or her shares. After such offer, no such notice of election may be
withdrawn unless the corporation consents thereto. However, the right of such
shareholder to be paid the fair value of his or her shares shall cease, and the
shareholder shall be reinstated to have all his or her rights as a shareholder
as of the filing of his or her notice of election, including any intervening
preemptive rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have been completed, in lieu thereof, at the
expired or any such dividend or distribution other than in case election of the
corporation, the fair value thereof in cash as determined by the board
as of the time of such expiration or completion, but without prejudice otherwise
to any corporate proceedings that may have been taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder
is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more than
12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was not in
existence throughout such 12-month period, for the portion thereof during which
it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any
dissenting shareholder or shareholders fail to accept the same within the period
of 30 days thereafter, then the corporation, within 30 days after receipt of
written demand from any dissenting shareholder given within 60 days after the
date on which such corporate action was effected, shall, or at its election at
any time within such period of 60 days may, file an action in any court of
competent jurisdiction in the country in this state where the registered office
of the corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay
each dissenting shareholder the amount found to be due him or her within 10 days
after final determination of the proceedings. Upon payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case
of a merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
APPENDIX E
ANNUAL REPORT ON FORM 10-KSB FOR THE
YEAR ENDED DECEMBER 31, 2002
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2002
FIRST AID DIRECT, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0729332
- --------------------------------------------------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
5607 HIATUS ROAD SUITE 500 TAMARAC, FLORIDA 3331-6408
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number (954) 724-2929
- --------------------------------------------------------------------------------
Securities to be registered pursuant to 12(b) of the Act: NONE
- --------------------------------------------------------------------------------
Securities to be registered pursuant to 12(g) of the Act:
COMMON STOCK $.001 PAR VALUE
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Exchange Act of 1934 during the
preceding twelve (12) months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past ninety (90) days.
YES X NO
--- ---
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB: X
-----
State registrant's revenues for its most recent fiscal year. $3,343,000
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing bid price of such stock as of March 14, 2003,
amounted to $478,200.
The number of shares outstanding of the registrant's common stock as of March
14, 2003 was 3,985,000 common shares.
FIRST AID DIRECT, INC.
INDEX
PAGE
----
ITEM 1 - DESCRIPTION OF BUSINESS 2
ITEM 2 - DESCRIPTION OF PROPERTY 6
ITEM 3 - LEGAL PROCEEDINGS 6
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY 6
ITEM 5 - MARKET FOR COMMON EQUITY AND OTHER RELATED 7
STOCKHOLDER MATTERS
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 8
CONDITION AND RESULTS OF OPERATIONS
ITEM 7 - FINANCIAL STATEMENTS 10
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 10
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 10
ITEM 10 - REMUNERATION OF DIRECTORS AND OFFICERS 12
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 13
MANAGEMENT
ITEM 12 - INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS 14
ITEM 13 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS 16
ON FORM 8-K
ITEM 14 - CONTROLS AND PROCEDURES 16
SIGNATURES 17
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
First Aid Direct, Inc. ("First Aid" or the "Company") was organized in July 1977
in the State of Florida under the name of Rehabilitation Institute of South
Florida, Inc. It remained dormant until it began active operations in September
1997. First Aid is a national distribution business that wholesales first aid
products to first aid distributors across the nation. Most of the distributors
operate mobile first aid van services that sell and service the industrial first
aid kits, mandated by OSHA regulations. These kits are placed in many different
types of businesses and industrial locations such as factories, distribution
warehouses, offices, auto repair shops and dealerships, hotels and retail
stores. The Company currently has approximately 158 distributors located in 31
states throughout the United States. These states include Alabama, Arkansas,
Arizona, California, Colorado, Delaware, Florida, Georgia, Illinois, Indiana,
Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Missouri,
Montana, North Carolina, Nevada, New Jersey, New Mexico, Nevada, New York, Ohio,
Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah,
Virginia, and Washington.
A distributor typically operates a number of routes. Each route consists of
several hundred locations that are visited by the route driver/salesman at least
once a month. The driver/salesperson will typically visit as many as 20
locations each day. The driver/salesperson operates a van stocked with first aid
supplies and uses the inventory to refill the kits that are placed in each
location. The kits contain a mix of first aid products designed and packaged for
industrial use, including bandages, tapes, gauze, antiseptics, ointments and
over-the-counter medications such as aspirin, cough medications, etc. First Aid
has specialized packaging that lends itself to the workplace. All items are
packed in multilingual boxes that wherever possible are dispenser packs that
offer each individual product in a sanitary sealed package as part of a tear off
strip.
In addition, First Aid provides a business-to-business program called "Direct
Ship". This program involves direct shipments of first aid and safety products
to businesses. Distributors typically do not service direct ship customers
because their product usage is too limited for a driver/salesman to service
monthly or they need centralized billing, control and pricing. First Aid offers
these customers a direct order system using phone, fax or the First Aid Internet
web site. Approximately two percent (2%) of our business is based upon the
"Direct Ship" program and approximately ninety-eight percent (98%) of our
business is based upon independent distributorship, hospitals and emergency
service agencies.
In 2003 the Company will launch its new Total First Aid line. There is a large
market not currently available through the mobile first aid industry. This
market includes workplaces supplied by Industrial Supply Houses. Safety
Distributors, Catalog Companies, School Bus and Transportation Van manufacturers
and Distributors, Fire Extinguisher Service Companies, Janitorial Supply
Companies, and Office Coffee Companies. We will approach these markets with Bulk
kits, Unitized kits, Custom unitized kits, and Specialty kits. The Company will
also offer a custom filled kit and custom screen printed kit programs.
INDUSTRY BACKGROUND
The first aid business is comprised of many independent distributors of first
aid and safety products provided to the workplace via mobile van services.
2
Products and services include first aid cabinets, over-the-counter medications
and general first aid supplies. Certain distributors also offer safety products
and a variety of related training programs.
These independent distributors purchase their products through value-added
wholesale distribution companies. There are approximately 12 such companies
operating in the United States. Typically, a wholesale company will recruit
distributors within the industry to distribute products under the wholesaler's
names. The typical business relationship between wholesaler and distributor
features restrictions such as limited territories, non-compete agreements and
agreements to use the wholesale company's name as the distributor's product
line.
Today, the potential market for these distributors is virtually any business
with employees. The reason is that the Federal Occupational Safety & Health
Administration (OSHA) has a regulation (29 CFR 1910.151(b)) that requires that
First Aid supplies be readily available in the workplace. It is more convenient
for the business operator to use the services of the first aid distributor to
supply the correct product mix of required first aid supplies that are not only
designed for use in the workplace, but are refilled and kept current each month.
A consolidation has taken place in the first aid distribution industry. Zee
Medical, a subsidiary of wholesale distributor McKesson HBOC, Inc., currently is
one of the oldest companies in the industry and also has a large market share.
Cintas Corp. decided to penetrate this market quickly, and therefore adopted an
acquisition strategy. The first acquisition was in February 1997, which was
followed by three additional acquisitions, another in 1997 and two in 1998. Zee
Medical and Cintas Corp. represent our major competition and they each place
broad restrictions on their distributors, including geographical restraints on
distribution.
As a result of the consolidation of some of the major distributors in the first
aid supply business, distributors working within the same territory that
previously bought from competing companies are now being supplied by the same
parent company. First Aid believes that many of these distributors desire more
independence and choice than the new consolidated entities can offer. We believe
these market conditions provide an opportunity for First Aid to emerge and
compete for the business of the first aid distributors dissatisfied with the new
corporate structure brought on by the consolidation in the industry.
VAN DYNE-CROTTY TRANSACTIONS
On December 20, 1999, Van Dyne-Crotty, Inc. purchased 1,400,000 shares of the
Company's stock from previously major stockholders, Scott Siegel (currently the
CEO) and Robert Sussman (formerly the CEO). In conjunction with the share
purchase, Van Dyne-Crotty and First Aid entered into an Asset Purchase Agreement
which transferred all of the assets of its van distribution business to Van
Dyne-Crotty, consisting of motor vehicles, accounts receivable, inventory, and
various permits. The parties simultaneously entered into a Supply Agreement
under which Van Dyne-Crotty agreed to purchase all of its requirements for first
3
aid products and supplies from First Aid for a five-year term, unless First Aid
were sold to a competitor of Van Dyne-Crotty. Under the terms of this supply
agreement, First Aid is required to sell the products at the lowest of the
prevailing market price for the best grade for each type of item covered. First
Aid may alter the price of any item upon notice, but Van Dyne-Crotty may
discontinue purchasing its total requirements of any item if the price is not
comparable or the quality of the item is not competitive with similar types of
products. The determination of whether our pricing is not competitive is made by
price comparison with other wholesalers of first aid products. In February 2002
the Company granted and continues to grant Van Dyne-Crotty a five percent
discount from previous price levels due to competitive market prices and the
volume of purchases made by Van Dyne-Crotty.
For the year ended December 31, 2002, Van Dyne-Crotty accounted for 32% of the
Company's revenues as it did for the year ended December 31, 2001.
Following the December 16, 1999 Asset Purchase Agreement, the Company changed
our name from First Aid Select, Inc. to First Aid Direct, Inc. Van Dyne-Crotty's
newly formed first aid supply van division began operating under the name First
Aid Select. Subsequently, in calendar 2001, Van Dyne-Crotty began operating
under the name Select First Aid.
On March 16, 2000, the Company entered into an Asset Purchase Agreement to buy
certain assets from Van Dyne-Crotty, which Van Dyne-Crotty acquired from
Roehampton Supply, Inc. As was the case with the Asset Purchase Agreement
between Van Dyne-Crotty and First Aid that occurred on December 16, 1999, Van
Dyne-Crotty retained equipment, product and marketing information from
Roehampton Supply associated with its van distribution business. It assigned and
sold to First Aid those products, assets and marketing information consistent
with First Aid's wholesale distribution operations. The Roehampton products sold
to First Aid have a similar customer base to First Aid and complement its
product offering. They are marketed to first aid distributors, hospitals, and
emergency response teams.
Included in the total assets acquired by Van Dyne-Crotty were accounts
receivable, inventory and the customer list related to certain products
associated with Roehampton Supply's line of first aid products. First Aid
acquired the accounts receivable, inventory and the customer listings from Van
Dyne-Crotty at Van Dyne-Crotty's cost at the time of the Roehampton transaction.
The purchase price of $200,000 has been paid.
On March 20, 2000, First Aid entered into a non-competition agreement and a
consulting agreement with the original owner of the Roehampton assets. The
covenant not to compete is for a five-year term and provides for a total payment
of $75,000 to be paid in thirty-six equal installments. The consulting agreement
is for a three-year term and provides for payment of $75,000 to the consultant
in thirty-six equal installments.
STRATEGY
4
Our strategy is to offer existing distributors that are dissatisfied with the
consolidation of the first aid products industry an alternative source of
supply. By seeking federal trademark protection of our brand names and
innovating the package design for our products, our goal is to offer new
entrants into the first aid business a national brand of products and support.
First Aid places no territorial restrictions on its distributors, giving
existing operators the opportunity to expand regionally. Without territory
agreements and based upon our "Direct Ship" program, we believe that First Aid
will be able to offer large national companies a centralized and uniform direct
buying program.
PRODUCTS AND SERVICES
Our product line and services include the following type of items and services:
cabinets and first aid kits, first aid treatments, first aid tablets, safety
equipment, training and compliance and distributor services.
In 2003 the Company will launch its new Total First Aid Line. There is a large
market not currently available through the mobile first aid industry. This
market includes workplaces supplied by Industrial Supply Houses, Safety
Distributors, Catalog Companies, School Bus and Transportation Van Manufacturers
and Distributors, Fire Extinguisher Service Companies, Janitorial Supply
Companies, and Office Coffee Companies. We will approach these markets with
Bulk kits, Unitized kits, Custom unitized kits, and Specialty kits. The company
will also offer a custom filled kit and custom screen printed kit program.
PRODUCT LIABILITY
We maintain product liability insurance in the amount of $6,000,000. Our
suppliers also maintain product liability insurance. Our purchase orders with
our suppliers do not limit or allocate liability between the parties.
MARKETING AND SALES
Our sales team, which currently consists of two sales representatives, is
responsible for developing new business. The team solicits distributor and
direct ship customers by telephone and in-person sales calls. We also
participate in the national safety trade show to develop new customers and to
meet with existing ones.
Management believes that three criteria drive the purchase of first aid
products. They are quality, service and price. We believe we are offering
pricing and quality comparable to our competitors. First Aid has established a
number of services like a fully interactive web site allowing for direct
purchases online for both distributor and direct ship customers. In addition, we
work with our distributors through virtually every aspect of starting, managing
and maintaining a productive operation, offering a variety of classroom and
field training sessions.
5
COMPETITION
Because of industry consolidations, two companies, Zee and Cintas, dominate the
market. There are many independent distributors who view this consolidation as
detrimental to their business. We believe they will prefer to do business with
independently owned and operated wholesale companies such as First Aid.
EMPLOYEES
Effective January 1, 2003, the Company entered into an employee leasing
agreement with Paychex. The leasing agreement provides the Company with
decreased costs for medical and Workers Compensation Insurance.
First Aid, through its leasing agreement, currently employs fourteen persons,
thirteen of whom are full-time employees, in the following capacities: one
administrator, two in sales and marketing, one controller, one office manager,
one office staff and eight in warehouse and assembly. The Company's employees
are not represented by a collective bargaining agreement, and the Company
considers its relations with its employees to be good.
ITEM 2. DESCRIPTION OF PROPERTY
First Aid Direct's corporate headquarters and distribution center is located at
5607 Hiatus Road Suite 500, Tamarac, Florida, 33321. The business relocated to
this location on December 5, 2002. We do approximately 20% of packaging at our
own facility. The operation is located in a modern warehouse complex and
currently occupies 16,500 square feet consisting of 4,000 square feet of
air-conditioned office space, a 2000 square foot air-conditioned assembly area
and 10,500 square feet of warehouse space. We lease the facility through January
31, 2008 from Westpoint Center, Ltd.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND OTHER RELATED STOCKHOLDER MATTERS.
First Aid's common stock currently trades on the Over-The-Counter Bulletin Board
under the symbol "FADI" (the ticker symbol was changed to "FADI" from "FASL" on
February 12, 2001). As of December 31, 2002 there were 55 stockholders of record
of our common stock. Our common stock traded on the Over-The-Counter Bulletin
Board under the symbol "FASL" from May 1998 to November 1999. On November 18,
1999, our common stock was de-listed from the Over-the-Counter Bulletin Board of
6
the National Association of Securities Dealers, Inc. for failure to comply with
the phase-in provisions of the OTC Bulletin Board Eligibility Rule, which
required all companies whose securities are quoted on the OTC Bulletin Board to
become reporting companies with the Securities and Exchange Commission. In
December 2000 First Aid became a fully reporting company with the Securities and
Exchange Commission. In February 2001 First Aid common stock again began trading
on the Over-The-Counter Bulletin Board.
The following table sets forth the high and low sales prices for the common
stock for the periods indicated. These quotations reflect prices between
dealers, do not include retail mark-ups, markdowns, and commissions and may not
necessarily represent actual transactions.
PERIOD HIGH LOW
- ---------------------- ----- -----
Quarter ended 03/31/01 $2.31 $0.40
Quarter ended 06/30/01 $1.25 $0.45
Quarter ended 09/30/01 $0.77 $0.25
Quarter ended 12/31/01 $0.51 $0.11
Quarter ended 03/31/02 $0.33 $0.11
Quarter ended 06/30/02 $0.33 $0.14
Quarter ended 09/30/02 $0.25 $0.04
Quarter ended 12/31/02 $0.14 $0.06
Quarter ended 3/31/03 $0.14 $0.10
Our transfer agent is Florida Atlantic Stock Transfer, Inc., 7130 Nob Hill Road,
Tamarac, Florida 33321.
We have never paid cash dividends on our common stock. We presently intend to
retain future earnings, if any, to finance the expansion of our business and we
do not anticipate that any cash dividends will be paid in the foreseeable
future. The future dividend policy will depend on our earnings, capital
requirements, expansion plans, financial condition and other relevant factors.
Declaration and payment of future dividends, if any, will be at the sole
discretion of the board of directors.
PENNY STOCK
Until our shares qualify for inclusion in the NASDAQ system, the trading of
securities will continue to be in the over-the-counter markets, commonly
referred to as the pink sheets or on the OTC Bulletin Board. As a result, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the price of the securities offered.
7
Effective August 11, 1993, the Securities and Exchange Commission adopted Rule
15g-9, which established the definition of a penny stock, for purposes relevant
to us, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require: (i) that a broker or dealer approve a person's account for
transactions in penny stocks; and (ii) the broker or dealer receive from the
investor a written agreement regarding the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience, and objectives of the
person; and (ii) make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stock in both public offerings and in
secondary trading, and about commissions payable to both the broker-dealer and
the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
To understand the following discussion of First Aid's performance, the following
discussion should be read in conjunction with the financial statements,
including the related notes and other information appearing elsewhere in this
report.
First Aid's operations consist of the wholesale distribution of first aid and
safety products to retail van distributors and the direct sale of those products
to end users through a direct ship operation.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001
SALES. Company net sales increased $115,000 (4%) from $3,228,000 in fiscal 2001
to $3,343,000 in 2002. Twenty-five percent (25%) of the total $115,000 increase
was from sales under the supplier agreement with Van Dyne Crotty, Inc., to be
the primary supplier for its retail first aid distribution business. The balance
of the sales increase, amounting to 75%, was primarily due to the addition of
new distributors.
8
COSTS OF SALES. Cost of sales increased $6,000 (.3%) from $2,273,000 in 2001 to
$2,279,000 in 2002. The increase in cost of sales was due to increased sales.
GROSS PROFIT. Gross profit increased $109,000 from $955,000 during 2001 to
$1,064,000 for 2001. As a percentage, the Company's gross margin increased from
30% in 2001 to 32% in 2002. The gross margin improvement resulted from the
Company's ability to negotiate better pricing agreements from its vendors.
GENERAL AND ADMINISTRATIVE EXPENSE. Expenses increased $65,000 from $865,000 in
2001 to $930,000 during 2002. General and administrative expenses increased as a
percent of sales from 27% in 2001 to 28% in 2002. The increase resulted from
office relocation costs, additional rent expense and staff restructuring.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations improved
$44,000 during 2002 to an income from operations of $134,000 compared to
$90,000 in 2001. The improvement primarily resulted from efficiencies generated
from increased sales, and savings generated in decreased purchasing costs.
LIQUIDITY AND CAPITAL RESOURCES
The primary ongoing sources of the Company's cash are net cash flows from
operating activities. The Company established a $250,000 line of credit with a
bank that matures in February 2004 to fund cash requirements as needed. The line
requires monthly interest payments and bears interest at the prime rate of
interest (4.25% at December 31, 2002). As of December 31, 2002, there was no
outstanding balance on the line of credit. The line is collateralized by the
Company's accounts receivable and inventory.
The Company believes its current cash position as well as its unused borrowing
capacity on the line of credit, coupled with its cash flow forecast for the year
and periods beyond, will be sufficient to meet its cash needs on both a
short-term and long-term basis. The balance sheet has a strong working capital
ratio (4.58 to 1) and management is not aware of any known trends or demands,
commitments, events, or uncertainties, as they relate to liquidity which could
negatively affect the Company's ability to operate and grow as planned.
Net cash provided by operations was offset by increases in accounts receivable,
merchandise inventories, prepaid expenses and decreases in accounts payable.
Net cash flows used for investing activities resulted from the purchase of
capital assets. The Company has no significant plans for additional capital
expenditures at this time.
9
FORWARD LOOKING STATEMENTS
Certain statements made within this report are forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose, any statements contained herein that are not statements of historical
fact should be regarded as forward-looking statements. These statements are
based on managements' beliefs and assumptions and on information currently
available. These statements are subject to risks and uncertainties that could
cause actual results to differ materially from those contemplated in such
forward looking statements.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements as of December 31, 2002 and 2001 and the
related statements of income, changes in stockholders' equity and cash flows for
each of the two years in the period then ended are attached hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On June 12, 2001, the Company filed a Form 8-K reporting on the change in
certifying accountants and containing the following information:
At a meeting held on June 7, 2001, the Board of Directors of First Aid Direct,
Inc. (the Company") approved the engagement of Margolies, Fink and Wichrowski as
independent auditors of the Company for the fiscal year ended December 31, 2001,
to replace the firm of Rachlin Cohen Holtz LLP ("RCH"), who were dismissed as
the Company's auditors, effective June 12, 2001. In connection with the audits
of the Company's financial statements for each of the two fiscal years ended
December 31, 2000, and in the subsequent unaudited interim period through June
12, 2001 (date of dismissal), there were no disagreements with RCH on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction of
RCH, would have caused RCH to make reference to the subject matter in their
report.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGIS-TRANT
Set forth below are the names, ages and business experience of the executive
officers and directors of the Company. All the information is as of March 1,
2003. Directors are elected at the Company's annual meeting of stockholders and
serve for one year or until their successors are elected and qualify. The Board
elects officers and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board.
10
NAME AGE POSITION
---- --- --------
Scott Siegel 49 Chief Executive Officer and Director
Kevin M. Crotty 47 Director and Chairman of the Board
Stephen D. Smiley 49 Director
Bruce A Widnes 54 Director
James M Striplen III 47 Director
SCOTT SIEGEL - Mr. Siegel assumed the office of interim acting Chief Executive
Officer, of the Company on August 22, 2000, following the resignation of Robert
Sussman. Mr. Siegel has since been installed as the Chief Executive Office,
Secretary and Treasurer effective January 1, 2001. From August 1997 to December
1999, Mr. Siegel served as Chairman and Secretary of the Company. From December
1999 to the August 2000, Mr. Siegel served as a Group Manager at First Aid
Select, a business division of Van Dyne-Crotty, Inc. From 1991 to 1997, Mr.
Siegel was President of Affirmed Medical of Florida, Inc., a first aid van
service distributorship with revenues of approximately $600,000 during its last
full year of operations in 1996 and generally employed between 6 to 7 full time
employees.
KEVIN M. CROTTY - Mr. Crotty has served as a director of First Aid since January
2000. Mr. Crotty currently serves as Executive Vice President of Van
Dyne-Crotty, Inc. a company engaged in uniform distribution and textile services
and headquartered in Dayton, Ohio. Van Dyne-Crotty, Inc. is a privately owned
company that currently has annual revenues of approximately $100 million and
approximately 1,200 employees. Mr. Crotty has been employed by Van Dyne-Crotty
for 27 years and has served in a range of capacities involving service,
distribution, production and sales. Mr. Crotty is Chairman of the Board of
Directors of Van Dyne-Crotty.
STEPHEN D. SMILEY - Mr. Smiley has served as a director of First Aid since
January 2000. Since 1996, Mr. Smiley has served as Vice President of
Administration for Van Dyne-Crotty, Inc. Mr. Smiley has been employed with Van
Dyne-Crotty for the past 23 years, acting in various capacities including
District and General Management, Manager and Regional Manager for several of the
company's textile rental district operations.
BRUCE A. WIDNES - Mr. Widnes is President/CEO of The Recruiting Group, Inc.,
located in Atlanta Ga., a nationally recognized search firm specializing in
recruiting and placing Sales and Sales Management professionals throughout the
United States. Previously, Mr. Widnes was President of Quick-Aid, Inc, a leading
southeastern based first aid, medical and safety supply distributor. During his
15-year tenure, Mr. Widnes developed and guided the growth of the company to
become one of the most recognized names in the industry. In the late 90's, Mr.
Widnes sold the company. Additionally, Mr. Widnes has held various corporate
Human Resources positions with a large teaching hospital and a Fortune 100
Corporation.
11
JAMES M. STRIPLEN III - Mr. Striplin is currently the owner of QuestCare Therapy
Center, a comprehensive outpatient rehabilitation facility located in Dayton
Ohio. Jim has more than twenty-five years of experience in the publishing
industry and other entrepreneurial ventures. From 1984 through 2001 he was
President of 4 publishing companies where he grew combined sales from
approximately $3 million to $26 million. He was also instrumental in the sales
of these companies to larger publishing houses. From 1980 to 1984 he held
various management positions in mid-western newspapers.
During the fiscal year 2002, the Board of Directors acted by unanimous consent
on two occasions.
AUDIT FEES
The independent auditors of the Company for the year ended December 31, 2002
were Margolies, Fink & Wichrowski. The aggregate fees, including expenses
billed by Margolies, Fink & Wichrowski, in connection with the audit of the
Company's annual financial statements for the most recent fiscal year and for
the review of the Company's financial information included in its annual report
on Form 10-KSB and its quarterly reports on Form 10-QSB were $25,338.
ALL OTHER FEES
The aggregate fees, including expenses billed for other services rendered to the
Company by Margolies, Fink & Wichrowski during the year ended December 31, 2002
were $2,000. Such other services consisted of the preparation of Corporation
income tax returns.
ITEM 10. REMUNERATION OF DIRECTORS AND OFFICERS.
SUMMARY COMPENSATION TABLE
The following table sets forth information relating to the compensation paid by
First Aid in each of the last three fiscal years to: (i) its Chief Executive
Officer; and (ii) each of its executive officers whose annual compensation
exceeded $100,000 during this period.
FISCAL OTHER ANNUAL LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/ PAYOUTS COMPENSATION
(#)
- ---------------------------------------------------------------------------------------------------
Scott Siegel 2002 150,000 0 6,000 0 0 0
Chief Executive Officer 2001 150,000 0 6,000 0 0 0
Secretary and Treasurer 2000 0 0 0 0 0 0
Robert Sussman 2000 65,200 0 0 0 0 0
Chief Executive Officer
Mr. Siegel received no compensation directly from First Aid in 2000. After he
assumed the role of Acting Chief Executive Officer a cost sharing arrangement
with Van Dyne Crotty was created. For the period from August 22 to December 31,
2000 a total of $30,000 was incurred by First Aid for Mr. Siegel's services.
There were no stock options granted during the year ended December 31, 2002, and
Mr. Siegel holds no options as of December 31, 2002 or during the previous
periods.
12
EMPLOYMENT AGREEMENTS
Effective January 1, 2001, the Company entered into a three-year employment
agreement with Mr. Siegel. The base compensation under this agreement is
$150,000 per year with the possibility of bonuses as determined by the
independent members of the Board of Directors not employed by First Aid.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 2002, there were 3,985,000 shares of common stock issued and
outstanding. The following table sets forth, as of December 31, 2002,
information with respect to the beneficial ownership of the Company's common
stock by (i) persons known by First Aid to beneficially own more than 5% of the
outstanding shares of common stock, (ii) each director and officer of First Aid
and (iii) all directors and officers and Van Dyne-Crotty as a group.
COMMON STOCK BENEFICIALLY OWNED
-------------------------------
Name and Address Percentage of
of Beneficial Owner Shares Class
- ---------------------------- --------- --------------
Scott Siegel 300,000 7.53%
10211 Northeast 53rd Street
Sunrise, Florida 33351
Kevin M. Crotty 1,000 0.02%
3233 Newmark Drive
Miamisburg, OH 45342
Daniel W. Crotty, as trustee 2,000,000 50.19%
3233 Newmark Drive
Miamisburg, OH 45342
Stephen D. Smiley 7,200 0.18%
3233 Newmark Drive
Miamisburg, OH 45342
Van Dyne-Crotty, Inc. 1,631,000 40.90%
3233 Newmark Drive
Miamisburg, OH 45342
All officers, directors and
Van Dyne-Crotty as a group 1,939,200 48.48%
13
Scott Siegel is the former Chairman of the Board of First Aid and was an
executive with First Aid Select, which is a division of Van Dyne-Crotty from
December 1999 to December 2000. Effective August 16, 2000, Mr. Siegel began
acting as Interim Chief Executive Officer of First Aid, and effective, January
1, 2001, Mr. Siegel became the Chief Executive Officer of First Aid as well as
its Secretary and Treasurer.
Kevin Crotty and Stephen D. Smiley are directors of First Aid and also executive
officers and members of management of Van Dyne-Crotty. Van Dyne-Crotty acquired
an additional 200,000 shares at $1.50 per share from a non-affiliate of First
Aid at the time of its transaction with First Aid and 31,000 shares in April
2000. The principal stockholders of Van Dyne-Crotty are L. William Crotty, Dan
Crotty, Kevin Crotty, Robert Crotty, Brian Crotty and Shane Crotty. These
individuals in their management capacity have the right to voting and
dispositive power for the Van Dyne-Crotty holdings.
Daniel Crotty is voting trustee under a voting trust agreement executed in
connection with the Van Dyne-Crotty transaction. He has the right to vote Mr.
Siegel's shares and the shares acquired by members of Van Dyne-Crotty's
management.
As indicated above, Scott Siegel and certain of his relatives and Van
Dyne-Crotty entered into a voting trust agreement with Daniel W. Crotty serving
as voting trustee where 1,800,000 shares were transferred to Mr. Crotty,
pursuant to the Voting Trust Agreement dated December 16, 1999. The voting trust
agreement has a term of 10 years. The voting trust covers all existing
securities as well as any shares of common stock received upon exercise of stock
options or warrants. The agreement also provides that the parties to the voting
trust agreement other than Van Dyne-Crotty may not transfer their shares over a
five-year period without giving Van Dyne-Crotty an opportunity to purchase the
shares at the same price that the shares could be sold to the third party
included in the notice of the transaction.
ITEM 12. INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
Van Dyne-Crotty and First Aid operate under a Supply Agreement wherein Van
Dyne-Crotty agreed to purchase its total requirements for first aid products for
a period of five years. However, the supply agreement will terminate in the
event First Aid's shares are sold to a competitor of Van Dyne-Crotty in the same
business. The agreement further provides that the prices for the products to be
sold will be no higher than the lowest of the prevailing market prices for the
best grade of comparable products in the marketplace compared to our lowest
available distributor pricing. First Aid may revise the price on written notice
for supplied items under the same condition that they represent the lowest of
the prevailing market for the best grade of these products. Effective in
February 2002, First Aid granted and continues to grant Van Dyne-Crotty an
additional 5% price reduction due to a review of current competitive market
prices and Van Dyne-Crotty's purchase volume. During the fiscal year 2002 Van
Dyne-Crotty purchased $1,071,000 of our products, which represented
approximately 32% of our total revenues for the 2002 fiscal year as compared to
purchases of $1,042,000 of our products, representing 32% of total revenues in
2001.
14
On March 16, 2000, First Aid entered into an asset purchase agreement to buy
certain assets from Van Dyne-Crotty, Inc. The Company purchased accounts
receivable, inventory and customer lists for the Roehampton Supply, Inc. line of
first aid products. As of December 31, 2000, the full purchase price of $200,000
has been paid. On March 20, 2000, First Aid entered into a non-competition
agreement and a consulting agreement with the original owner of Roehampton
Supply, Inc. above. The former owner's covenant not to compete is for a
five-year term and provides for a total payment of $75,000 to be paid in
thirty-six equal installments. The consulting agreement is for a three-year term
and provides for payment of $75,000 to the consultant in thirty-six equal
installments.
15
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report.
(1) Financial Statements:
Report of Independent Certified Public Accountants F-1
Balance Sheets F-2
Statements of Income F-3
Statements of Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
First Aid Direct, Inc.
Sunrise, Florida
We have audited the accompanying balance sheets of First Aid Direct, Inc. as of
December 31, 2002 and 2001 and the related statements of income, stockholders'
equity and cash flows for the two years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 First Aid Direct, Inc. as of
December 31, 2002 and 2001, and the results of its operations and its cash flows
for the two years then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/
Margolies, Fink & Wichrowski
Pompano Beach, Florida
January 28, 2003
F-1
FIRST AID DIRECT, INC.
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
2002 2001
----------- -----------
Current assets:
Cash $ 6,072 $ 123,297
Accounts receivable - stockholder 54,226 36,093
Accounts receivable, net of allowance for doubtful
accounts of $12,000 and $20,000, respectively 230,504 206,790
Note receivable - employee 8,000 12,000
Inventories 543,279 507,371
Prepaid expense 92,438 40,662
----------- -----------
Total current assets 934,519 926,213
----------- -----------
Property and equipment, net 128,387 54,329
Customer lists, net 109,475 109,475
----------- -----------
$1,172,381 $1,090,017
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 142,575 $ 224,533
Accrued expenses 61,419 31,106
----------- -----------
Total current liabilities 203,994 255,639
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value; 50,000,000 shares
authorized; 3,985,000 issued and outstanding 3,985 3,985
Additional paid-in capital 1,604,127 1,604,127
Retained (deficit) (639,725) (773,734)
----------- -----------
Total stockholders' equity 968,387 834,378
----------- -----------
$1,172,381 $1,090,017
=========== ===========
See accompanying notes to financial statements.
F-2
FIRST AID DIRECT, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
Net sales $3,343,198 $3,227,544
Cost of sales 2,278,897 2,272,606
---------- ----------
Gross profit 1,064,301 954,938
General and administrative expenses 930,292 864,563
---------- ----------
Income before income taxes 134,009 90,375
Provision for income taxes - -
---------- ----------
Net income $ 134,009 $ 90,375
========== ==========
Net income per common share:
Basic:
Net income per common share $ .03 $ .02
========== ==========
Weighted average number of shares 3,985,000 3,967,247
========== ==========
Diluted:
Net income per common share $ .03 $ .02
========== ==========
Weighted average number of shares 3,985,000 3,985,000
========== ==========
See accompanying notes to financial statements.
F-3
FIRST AID DIRECT, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2002 AND 2001
Additional Total
Number of Common Paid-in Retained Stockholders'
Shares Stock Capital (Deficit) Equity
--------- ------- ----------- ---------- --------------
Balance, January 1, 2001 3,905,000 $ 3,905 $ 1,596,207 $(864,109) $ 736,003
Exercise of stock option 80,000 80 7,920 8,000
Net income 90,375 90,375
--------- ------- ----------- ---------- --------------
Balance, December 31, 2001 3,985,000 3,985 1,604,127 (773,734) 834,378
Net income 134,009 134,009
--------- ------- ----------- ---------- --------------
Balance, December 31, 2002 3,985,000 $ 3,985 $ 1,604,127 $(639,725) $ 968,387
========= ======= =========== ========== ==============
See accompanying notes to financial statements.
F-4
FIRST AID DIRECT, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
Cash flows from operating activities:
Net income $ 134,009 $ 90,375
---------- ----------
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation and amortization 27,429 33,819
Provision for doubtful accounts (8,000) 1,702
Inventory valuation allowance (11,000) 20,000
Decrease (increase) in accounts receivable (29,847) 146,738
Increase in inventories (24,908) (36,626)
Decrease (increase) in prepaid expenses (51,776) 33,862
(Decrease) increase in accounts payable and accrued expenses (51,645) (34,810)
---------- ----------
Total adjustments (149,747) 164,685
---------- ----------
Net cash provided by (used for) operating activities (15,738) 255,060
---------- ----------
Cash flows from investing activities:
Purchase of equipment (101,487) (1,999)
---------- ----------
Net cash used for investing activities (101,487) (1,999)
---------- ----------
Cash flows from financing activities:
Borrowings on line of credit 50,000 -
Repayment of line of credit (50,000) (138,000)
Proceeds from exercise of stock option - 8,000
Payment of stock subscription receivable - -
---------- ----------
Net cash used for financing activities - (130,000)
---------- ----------
Net increase (decrease) in cash (117,225) 123,061
Cash at beginning of period 123,297 236
---------- ----------
Cash at end of period $ 6,027 $ 123,297
========== ==========
Supplement disclosures of cash flow information:
Cash paid for interest $ 331 $ 7,008
========== ==========
F-5
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Capitalization
First Aid Direct, Inc. (the "Company") was incorporated in the State of
Florida during July 1977 as Rehabilitation Institute of South Florida, Inc.
The Articles of Incorporation, as amended on December 5, 1997, authorize
the Company to issue, and have outstanding, at any one time 50,000,000
shares of common stock with a par value of $.001. A second amendment to the
Articles of Incorporation, on December 22, 1999, ratified the name change
from First Aid Select, Inc. to First Aid Direct, Inc.
(b) Business
The Company distributes on a national level wholesale first aid products to
first aid distributors and also provides a business to business program
called "Direct Ship".
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying disclosures. Although these estimates are based on
management's knowledge of current events and actions it may undertake in
the future, they may ultimately differ from actual results.
(d) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(e) Inventories
Inventories, which are comprised of first aid products held for sale, are
stated at the lower of cost or market, and net of a $9,000 valuation
allowance as of December 31, 2002. Cost is determined on the first-in,
first-out (FIFO) method. The change in the valuation allowance (reserve for
obsolescence) was included in cost of goods sold for the year ended
December 31, 2002.
F-6
(CONTINUED)
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Accounts Receivable
The Company generally sells product to a wide variety of customers without
requiring collateral. The Company monitors their exposure to credit losses
and maintains allowances for anticipated losses considered necessary under
the circumstances.
(g) Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Gain or loss on disposition of assets is recognized currently. Repairs and
maintenance which do not extend the lives of the respective assets are
charged to expense as incurred. Major replacements or betterments are
capitalized and depreciated over the remaining useful lives of the assets.
(h) Customer Lists
The Company purchased customer lists from a stockholder (see Note 10),
which were being amortized using the straight-line method over an estimated
useful life of ten years. Effective, January 1, 2002, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 142, ("Goodwill and
Other Intangibles"). With the adoption of SFAS No. 142, the customer list
is no longer subject to amortization, instead it is subject to at least an
annual assessment for impairment by applying a fair-value based test. The
Company determined that there was no impairment loss to be recorded for the
year ended December 31, 2002.
(i) Revenue Recognition
The Company recognizes revenue, including shipping and handling fees, when
the merchandise is shipped to customers. Allowances for estimated returns
are provided when sales are recorded. All costs related to shipping and
handling are included in cost of sales.
(j) Advertising
Advertising costs are expensed as incurred. Advertising costs incurred for
the years ended December 31, 2002 and 2001 were approximately $22,000 and
$67,000, respectively.
(k) Non-competition Agreement
The Company is amortizing the payments made pursuant to a non-competition
agreement over the five-year term of the agreement (see Note 10).
F-7
(CONTINUED)
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Long-lived assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may
not be recoverable. In performing the review of recoverability the Company
estimates the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future cash
flows is less than the carrying amount of the assets, an impairment loss is
recognized by comparing the fair value of assets to their carrying value.
Long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value, less costs to sell. The Company has determined that
no impairment losses need to be recognized through the fiscal year ended
December 31, 2002.
(m) Income Taxes
The Company accounts for its income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, ("Accounting For Income Taxes"), which
requires the recognition of deferred tax liabilities and assets for
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
(n) Stock-based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, ("Accounting For Stock Issued to Employees") ("APB No. 25"), and
related interpretations, in accounting for its employee stock based
compensation rather than the alternative fair value accounting allowed by
SFAS No. 123, ("Accounting for Stock-based Compensation"). APB No. 25
provides that the compensation expense relative to the Company's employee
stock options is measured based on the intrinsic value of the stock option.
SFAS No. 123 requires companies that continue to follow APB No. 25 to
provide a pro-forma disclosure of the impact of applying the fair value
method of SFAS No. 123.
The Company follows SFAS No. 123 in accounting for stock based compensation
issued to non-employees.
(o) Employee benefits
The Company provides their employees with a 401(K) plan. The employees are
eligible to participate upon their hiring, and the Company does not
contribute to the plan.
F-8
(CONTINUED)
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Net Income Per Common Share
The Company has adopted SFAS No. 128, ("Earnings Per Share"), which
requires the reporting of both basic and diluted earnings per share. Basic
net loss per share is determined by dividing loss available to common
shareholders by the weighted average number of common shares outstanding
for the period. Diluted loss per share reflects the potential dilution that
could occur if options or other contracts to issue common stock were
exercised or converted into common stock, as long as the effect of their
inclusion is not anti-dilutive.
(q) Recent Accounting Pronouncements
Effective, January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142, ("Goodwill and Other Intangibles").
With the adoption of SFAS No. 142, the customer list is no longer subject
to amortization. Rather, the customer list will be subject to at least an
annual assessment for impairment by applying a fair-value based test. The
impairment loss is the amount, if any, by which the implied fair value of
the customer list is less than carrying or book value. Any impairment loss
arising from the initial application of SFAS No. 142 is to be reported as
resulting from a change in accounting principle.
(2) PROPERTY AND EQUIPMENT
The following is a summary of property and equipment, less accumulated
depreciation as of December 31, 2002 and 2001:
Estimated
Useful
2002 2001 Lives
--------- --------- ---------
Furniture and equipment $192,237 $ 94,735 5 years
Leasehold improvements 3,985 20,584 5 years
--------- ---------
196,222 115,319
Less accumulated depreciation (67,835) (60,990)
--------- ---------
$128,387 $ 54,329
========= =========
Depreciation expense for the years ended December 31, 2002 and 2001 was $27,429
and $20,486, respectively.
F-9
(CONTINUED)
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) LINE OF CREDIT
The Company has a $250,000 line of credit with a bank, with interest at prime
rate (4.25% at December 31, 2002). The line matured February 1, 2002 and was
renewed through February 1, 2004, and is collateralized by the Company's
accounts receivable and inventory. At December 31, 2002, the Company had repaid
the outstanding balance on the line of credit during the year 2002.
(4) COMMITMENTS AND CONTINGENCIES
Leases
- ------
On July 25, 2002, the Company entered into a new lease for its corporate
office and warehouse facility. The commencement date of the lease is December 1,
2002. The lease term is for sixty-two months, with one five year extension. The
rent expense for the new facility was $11,636 for 2002.
The Company continues to carry the lease for its previous corporate facility.
The lease is with the prior CEO and expires July 31, 2004. The total rent
expense was $61,450 and $57,400 for 2002 and 2001, respectively.
In December 1999, the Company leased telephone equipment under a non-cancelable
operating lease, which expires in December 2003. Rent expense $3,109 and $3,000
for 2002 and 2001, respectively. During October 2002, the Company leased office
equipment under a non-cancelable operating lease, which expires in October 2007.
Rent expense was $1,005 for 2002.
The Company's future minimum rental commitments are as follows:
Ending
December 31:
------------
2003 $ 209,158
2004 186,856
2005 158,172
2006 163,104
2007 167,073
-------------
$ 884,363
=============
F-10
(CONTINUED)
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(5) RELATED PARTY TRANSACTIONS
Employment Agreements
- ----------------------
Effective January 1, 2001, the current Chief Executive Officer of the Company
entered into a three-year employment agreement with the Company providing for an
annual base compensation of $150,000 plus an annual discretionary bonus to be
determined by the Board of Directors. The agreement also provided for the
employee to receive certain fringe benefits.
Sales to Stockholder
- ----------------------
During the year ended December 31, 2002 and 2001, approximately $1,071,000 and
$1,042,000 or 32% and 32%, respectively, of revenue was derived from sales to
the majority stockholder which acquired the retail operations on December 16,
1999, and maintains a five year product supply agreement with the majority
stockholder. In February 2002, the Company granted, and continues to grant the
stockholder a five percent discount from previous price levels to meet
competitive market prices and the increasing volume of purchases being made by
the stockholder.
(6) INCOME TAXES
A reconciliation of income tax computed at the statutory federal rate to income
tax expense (benefit) is as follows:
2002 2001
--------- ---------
Tax provision at the statutory rate of 34% $ 45,000 $ 31,000
State income taxes, net of federal income tax 7,000 5,000
Benefit of net operating loss carryforward (28,000) (34,000)
Other (24,000) (2,000)
--------- ---------
$ - $ -
========= =========
The net tax effects of temporary differences between the carrying amount of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes are reflected in deferred income taxes. Significant
components of the Company's deferred tax assets as of December 31, 2002 and 2001
are as follows:
F-11
(CONTINUED)
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) INCOME TAXES (CONTINUED)
2002 2001
--------- ---------
Net operating loss carryforward $ 24,000 $ 52,000
Accounts receivable allowance 3,000 7,000
Inventory valuation allowance 3,000 8,000
Start-up costs (18,000) (21,000)
Depreciation and amortization (9,000) (4,000)
Less valuation allowance (3,000) (42,000)
--------- ---------
Net deferred tax asset $ - $ -
========= =========
As of December 31, 2002, sufficient uncertainty exists regarding the
realizability of these deferred tax assets and, accordingly, a 100% valuation
allowance has been established. The net change in the valuation allowance for
the years ended December 31, 2002 and 2001 was $39,000 and $32,000,
respectively.
At December 31, 2002, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $70,000, which are available to
offset future taxable income, if any, through 2020.
(7) STOCK OPTIONS
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123. As permitted by SFAS No. 123, the Company
continues to apply the recognition and measurement provisions of APB 25. The
differences between the recognition and measurement provisions of SFAS No. 123
and APB 25 had no material effect on the Company's results of operations for
2002 and 2001.
During the year ended December 31, 2001, the balance of 80,000 options were
exercised. There were no additional options granted, exercised or expired
during the years ended December 2002 and 2001, and there are no options
outstanding as of December 31, 2002.
F-12
(CONTINUED)
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(8) CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk are cash and accounts receivable.
The Company maintains deposit balances at financial institutions that, from time
to time during the year, may exceed federally insured limits. At December 31,
2002 and 2001, the Company had deposits of approximately $63,500 and $123,000,
respectively, of which the 2001 balance was in excess of federally insured
limits. The Company maintains its cash with high quality financial institutions
which the Company believes limits these risks.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, receivables, accounts payable
and accrued liabilities approximated their fair values due to the short maturity
of these instruments as of December 31, 2002.
(10) ACQUISITION OF ASSETS
Purchase
- --------
On March 16, 2000, the Company entered into an asset purchase agreement to buy
certain assets from a major stockholder. The Company purchased accounts
receivable, inventory and customer lists for $200,000, as noted below, to be
paid in cash. The $200,000 represents the historical cost of these assets to
the stockholder as reflected in the stockholder's accounting books and records.
Accounts receivable $ 25,264
Inventories 41,374
Customer lists 133,362
-----------
$ 200,000
===========
Commitments
- -----------
The Company entered into a non-competition agreement and a consulting agreement
with the original owner of the assets purchased above. The covenant not to
compete is for a five-year term and provides for a total payment of $75,000 to
be paid in thirty-six equal installments. The consulting agreement is for a
three-year term and provides for thirty-six equal installments totaling $75,000.
F-13
(b) EXHIBITS
Exhibit Description of Documents
------- --------------------------
2.1* Asset Purchase Agreement between, dated December 16,
1999, between Van Dyne-Crotty, Inc. as Purchaser and
First Aid Select, Inc. as Seller.
2.2* Asset Purchase Agreement, dated March 18, 2000, between
Van Dyne-Crotty, Inc. as Seller and First Aid Direct,
Inc. as Purchaser.
3.1* Articles of Incorporation, as amended.
3.2* By-Laws.
9.1* Voting Trust Agreement.
10.2* Share Purchase Agreement between Van Dyne-Crotty, Inc.,
Scott Siegel and Robert Sussman.
10.3* Supply Agreement between Van Dyne-Crotty, Inc. and
First Aid Select, Inc.
17.3*** Employment contract with Scott Siegel.
99.1 Certification of Chief Executive Officer
* Previously filed with the Company's Form 10SB
*** Previously filed with the Company's Form 10-KSB for the year ended December
31, 2001
ITEM 14. CONTROLS AND PROCEDURES
An evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of March 14, 2003 was conducted by our chief
executive officer. Based on that evaluation, our chief executive officer
concluded that our disclosure controls and procedures were effective as of such
date. There have been no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of such evaluation.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIRST AID DIRECT, INC.
Date: March 14, 2003 By: /s/ Kevin M. Crotty
-----------------------------
Kevin M. Crotty, Chairman,
Date: March 14, 2003 By: /s/ Scott Siegel
-----------------------------
Scott Siegel, Chief Executive Officer,
Secretary and Treasurer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: March 14, 2003 By: /s/ Scott Siegel
-----------------------------
Scott Siegel, Director
Date: March 14, 2003 By: /s/ Kevin M. Crotty
-----------------------------
Kevin M. Crotty, Director
Date: March 14, 2003 By: /s/ Stephen D. Smiley
-----------------------------
Stephen D. Smiley, Director
Date: March 14, 2003 By: /s/ Bruce A. Widnes
-----------------------------
Bruce A. Widnes, Director
Date: March 14, 2003 By: /s/ James M. Striplen III
-----------------------------
James M. Striplen III, Director
17
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott Siegel, Chief Executive Officer of First Aid Direct, Inc., certify
that:
1. I have reviewed the annual report on Form 10-KSB of First Aid Direct,
Inc.:
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report.
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared.
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. I have indicated in this annual report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Date: March 14, 2003 /s/ Scott Siegel
-----------------------
Scott Siegel
Chief Executive Officer
18
EXHIBIT 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Scott Siegel, Chief Executive Officer of First Aid Direct, Inc., certify
that:
1. The periodic report fully complies with the requirements of
Sections 13(a) or 15(d); and
2. Information contained in the report fairly presents, in all
material respects, the financial condition and results of
operations of the issuer.
Date: March 14, 2003
/s/ Scott Siegel
-----------------------
Scott Siegel
Chief Executive Officer
19
APPENDIX F
QUARTERLY REPORT ON FORM 10-QSB FOR THE
QUARTER ENDED JUNE 30, 2003
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended: June 30, 2003
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _____to______
Commission file number: 0-30629
-------
FIRST AID DIRECT, INC.
(Name of small business issuer in its charter)
Florida 59-1796257
------- ----------
(State of incorporation) (IRS employer Ident. No.)
5706 Hiatus Road Suite 500 33321
------------------------------ ---------
(address of principal office) (Zip Code)
Registrant's telephone number: (954) 724-2929
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes No X
--- ---
The number of shares outstanding of each of the issuer's classes of equity as of
June 30, 2003: 3,985,000 shares of Common Stock, $.001 par value.
FIRST AID DIRECT, INC.
TABLE OF CONTENTS
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2003
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Balance Sheet (Unaudited) as of June 30, 2003 Page 3
Condensed Statements of Income (Unaudited) for the
six months ended June 30, 2003 and 2002 and the
three months ended June 30, 2003 and 2002 Page 4
Condensed Statements of Cash Flows (Unaudited) for the
six months ended June 30, 2003 and 2002 Page 5
Notes to Financial Statements . Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
FIRST AID DIRECT, INC.
CONDENSED BALANCE SHEET
JUNE 30, 2003
(UNAUDITED)
ASSETS
------
Current assets:
Cash $ 2,251
Accounts receivable 314,890
Note receivable, employee 6,000
Inventories 741,223
Prepaid expenses 96,031
-----------
Total current assets 1,160,395
-----------
Property and equipment, net 152,950
Intangible asset, net 109,475
-----------
Total assets $1,422,820
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued expenses $ 310,332
Obligations under line of credit 215,000
-----------
Total current liabilities 525,332
-----------
Stockholders' equity:
Common stock, $.01 par value; 50,000,000 shares authorized;
3,985,000 issued and outstanding 3,985
Additional paid-in capital 1,604,127
Deficit (710,624)
-----------
Total stockholders' equity 897,488
-----------
Total liabilities and stockholders' equity $1,422,820
===========
The accompanying notes are an integral part of these condensed financial
statements.
Page 3
FIRST AID DIRECT, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
2003 2002 2003 2002
----------- ---------- ----------- ----------
Net sales $1,660,905 $1,709,682 $ 866,728 $ 822,749
Cost of sales 1,152,515 1,196,085 600,584 594,511
----------- ---------- ----------- ----------
Gross margin 508,390 513,597 266,144 228,238
General and administrative expenses 579,288 408,969 280,330 204,308
----------- ---------- ----------- ----------
Income before income taxes (70,898) 104,628 (14,186) 23,930
Provision for income taxes - - - -
----------- ---------- ----------- ----------
Net income $ (70,898) $ 104,628 $ (14,186) $ 23,930
=========== ========== =========== ==========
Net income per share information:
Basic:
Net income per share $ (.02) $ .03 $ (.01) $ .01
----------- ---------- ----------- ----------
Weighted average number of common shares 3,985,000 3,985,000 3,985,000 3,985,000
=========== ========== =========== ==========
Diluted:
Net income per share $ (.02) $ .03 $ (.01) $ .01
----------- ========== =========== ==========
Weighted average number of common shares 3,985,000 3,985,000 3,985,000 3,985,000
=========== ========== =========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
Page 4
FIRST AID DIRECT, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
2003 2002
---------- ----------
Cash flows from operating activities:
Net income (loss) $ (70,898) $ 104,628
Depreciation 16,693 10,443
---------- ----------
Changes in assets and liabilities (123,359) (260,463)
---------- ----------
Net cash used in operating activities (177,564) (145,392)
---------- ----------
Cash flows from investing activities:
Purchase of equipment (41,256) (13,684)
---------- ----------
Net cash used in investing activities (41,256) (13,684)
---------- ----------
Cash flows from financing activities:
Borrowings on line of credit 215,000 45,000
---------- ----------
Net cash provided by (used for) financing activities 215,000 45,000
---------- ----------
Net increase (decrease) in cash and cash equivalents (3,820) (114,076)
Cash and cash equivalents, beginning of period 6,071 123,297
---------- ----------
Cash and cash equivalents, end of period $ 2,251 $ 9,221
========== ==========
Supplemental Disclosure of Cash Paid:
Interest $ 3,212 $ -
========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
Page 5
FIRST AID DIRECT, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of First Aid Direct,
Inc. (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Regulation S-B. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
six month periods ended June 30, 2003 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2003. For further
information, refer to the financial statements and footnotes for the year ended
December 31, 2002 found in the Company's Form 10-KSB.
The fiscal years ended December 31, 2003 and December 31, 2002 are herein
referred to as "fiscal 2003" and "fiscal 2002", respectively.
2. INVENTORIES
Inventories are comprised primarily of first aid products held for sale, and are
stated at the lower of cost or market, determined on the FIFO method.
3. SALES TO STOCKHOLDER
During the six months ended June 30, 2003 and 2002, 32% and 33%, respectively,
of revenue was derived from sales to a stockholder.
Page 6
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES OR OTHER FACTORS,
WHICH MAY CAUSE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS TO VARY FROM THOSE PREDICATED OR IMPLIED IN THIS
REPORT. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, WITHOUT LIMITATION,
DECLINE IN DEMAND FOR THE COMPANY'S PRODUCTS OR SERVICES, AND THE EFFECT OF
GENERAL ECONOMIC CONDITIONS AND FACTORS AFFECTING THE WHOLESALE DISTRIBUTION
INDUSTRY. FURTHER INFORMATION ON THE FACTORS AND RISKS THAT COULD AFFECT FIRST
AID DIRECT'S BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS ARE
INCLUDED UNDER THE "RISK FACTORS" SECTIONS OF FIRST AID DIRECT'S PUBLIC FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULT OF OPERATIONS
Three months ended June 30, 2003 compared to the three months ended June 30,
2002.
Sales Total revenue increased 5% or $43,979 in the second quarter from
- -----
$822,749 in fiscal 2002 to $866,728 in the three months ended June 30, 2003.
The increase in sales resulted primarily from sales to new distributors.
Costs and Expenses The cost of sales for the second quarter increased $6,073
- ------------------
from $594,511 in the second quarter of fiscal 2002 to $600,584 in the second
quarter of fiscal 2003. When combined with the increase in net sales, the
result was a 17% increase in the gross profit of $37,906, from $228,238 in the
second quarter of fiscal 2002 to $266,144 in the second quarter of fiscal 2003.
As a percentage, the gross margin increased from 28% in fiscal 2002 to 31% in
fiscal 2003. The improvement in gross margin results from the Company's
decision to acquire more bulk product and assemble it into finished goods rather
than purchase finished goods for sale. The cost of the bulk product coupled
with the cost to assemble it resulted in lower cost of goods sold.
General and administrative expenses increased 37% or $76,022 from $204,308 in
the second quarter of fiscal 2002 to $280,330 in the second quarter of fiscal
2003. Also, general and administrative expenses increased as a percent of
revenue from 25% for the quarter ended June 30, 2002 to 32% for the quarter
ended June 30, 2003. The increase in general and administrative expenses is
directly attributable to the Company's decision to develop a new product line -
Total First Aid - which will enable the Company to effectively penetrate new
market segments.
Income before income taxes The Company's income before income taxes
- -----------------------------
decreased $38,116 from a profit of $23,930 for the quarter ended June 30, 2002
to a (loss) of $14,186 during the second quarter of fiscal 2003. The decrease
results from the increase in general and administrative costs.
Other. No income tax expense or benefit is recorded in the three-month periods
- -----
ended June 30, 2003 and 2002.
Page 7
Six months ended June 30, 2003 compared to the six months ended June 30, 2002.
Sales Total revenue decreased 3% through the second quarter of fiscal 2003
- -----
over the same period in fiscal 2002. The revenues decreased $48,777 from
$1,709,682 to 1,660,905 in the six months ended June 30, 2003 over the same
period in the prior fiscal year. The decrease in sales resulted primarily from
decreases in sales to existing distributors.
Costs and Expenses The cost of sales through the second quarter decreased
- --------------------
$43,570 from $1,196,085 for the six months of fiscal 2002 to $1,152,515 for the
six months of fiscal 2003. When combined with the decrease in net sales, the
result was a 1% decrease in the gross profit of $5,207 from $513,597 for the six
months of fiscal 2002 to $508,390 for the six months of fiscal 2003. As a
percentage, the gross margin increased from 30% in fiscal 2002 to 31% in fiscal
2003. The improvement in gross margin results from the Company's decision to
acquire more bulk product and assemble it into finished goods rather than
purchase finished goods for sale. The cost of the bulk product coupled with the
cost to assemble it resulted in lower cost of goods sold.
General and administrative expenses increased 42% or $170,319 from $408,969 for
the six months of fiscal 2002 to $579,288 for the six months of fiscal 2003.
Also, general and administrative expenses increased as a percent of revenue from
24% in 2002 to 35% in 2003. The increase in general and administrative expenses
is primarily attributable to the Company's decision to develop a new product
line - Total First Aid - which will enable the Company to effectively penetrate
new market segments.
Income before income taxes The Company incurred a loss of $70,898 before
- -----------------------------
income taxes for the six months ended June 30, 2003 as compared with a profit of
$104,628 for fiscal 2002. This resulted in a negative swing of $175,526 which
is directly attributable to the increase in general and administrative expenses.
Other. No income tax expense or benefit is recorded in the six-month periods
- -----
ended June 30, 2003 and 2002.
LIQUIDITY AND CAPITAL RESOURCES
The primary source of the Company's liquidity is from a line of credit obtained
from a bank. The Company established, in May 2001 a $250,000 line of credit with
a bank that matures in February 2004. The line requires monthly interest
payments and bears interest at the prime rate of interest (4.25% at June 30,
2003). As of June 30, 2003, there was $215,000 outstanding on the line of
credit. The line is collateralized by the Company's accounts receivable and
inventory. We cannot assure you that this credit facility will be renewed at
maturity.
Declining sales and increased expenses have had a negative impact on the
Company's cash position. This is evidenced by the decrease in working capital
from 4.58 to 1 (December 31, 2002) to 2.21 to 1 (June 30, 2003). The Company
has already addressed expenses by reducing Company payroll, and has reduced
rental obligations on old leases by 50%. The Company is developing additional
product lines that will enable it to open new market segments and attain
additional avenues of distribution. It is, however, apparent that a continued
decline in sales coupled with rising costs will significantly impact the
Company's ability to operate and grow as planned.
Page 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS:
(a) Exhibits furnished
99.1 Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
None
Page 9
CERTIFCATION BY CHIEF EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT SECTIONS 13(a) & 15(d)
AS REQUIRED BY
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott Siegel, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of first Aid Direct,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: July 15, 2003 /s/ Scott Siegel
Scott Siegel
Chief Executive Officer
CERTIFCATION BY CHIEF FINANCIAL OFFICER
PURSUANT TO EXCHANGE ACT SECTIONS 13(a) & 15(d)
AS REQUIRED BY
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey N. Tabin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of first Aid Direct,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: July 15, 2003 /s/ Jeffrey N. Tabin
Jeffrey N. Tabin
Controller
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST AID DIRECT, INC., A FLORIDA CORPORATION
Date: July 15, 2003 By /s/ Scott Siegel
----------------
Scott Siegel, President and CEO
(Principal Executive Officer)
Exhibit 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Scott Siegel, Chief Executive Officer of First Aid Direct, Inc., certify
that:
1. The periodic report fully complies with the requirements of Sections 13(a)
or 15(d); and
2. Information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the issuer.
Date: July 15, 2003
/s/ Scott Siegel
-----------------
Scott Siegel
Chief Executive Officer
Exhibit 99.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Jeffrey N. Tabin, Controller of First Aid Direct, Inc., certify that:
1. The periodic report fully complies with the requirements of Sections 13(a)
or 15(d); and
2. Information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the issuer.
Date: July 15, 2003
/s/ Jeffrey N. Tabin
---------------------
Jeffrey N. Tabin
Controller
APPENDIX G
First Aid Direct, Inc
Pro Forma Statement of Earnings
For Period Ended December 31, 2002
Elimination
Net Sales $ 276,142 $0.92 $3,343,198.00 3,067,056
Cost of goods sold 94,465 2,278,897.00 2,184,432
----------- ------------------------
Gross Profit 181,677 1,064,301.00 882,624
Selling, general and administrative expenses 337,387 930,292.00 592,905
----------- ------------------------
(Loss) from operations (155,710) 134,009.00 289,719
Net income from discontinued operations 289,719
--------------
-----------
Net income from operations $ 134,009
===========
Earnings per share $ 0.03
=========== ==============
----------- --------------
Weighted average number of shares 3,985,000 3,985,000
=========== ==============
First Aid Direct, Inc
Balnace Sheet
As Of December 31, 2002
Current assets:
Cash $ 6,072
Accounts receivable - stockholder 54,226
Accounts receivable, net of allowance for doubtful
accounts of $12,000 and $20,000, respectively 230,504
Note receivable - employee 8,000
Inventories 543,279
Prepaid expense 92,438
-----------
Total current assets 934,519
-----------
Property and equipment, net 128,387
Customer lists, net 109,475
-----------
Total assets $1,172,381
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 142,575
Accrued expenses 61,419
-----------
Total current liabilities 203,994
-----------
Stockholders' equity:
Common stock, $.001 par value; 50,000,000 shares
authorized; 3,985,000 issued and outstanding 3,985
Additional paid-in capital 1,604,127
Retained (deficit) (639,725)
-----------
Total stockholders' equity 968,387
-----------
-----------
Total liabilities and stockholders' equity $1,172,381
===========