SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period Ended March 31, 2002
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File No. 0-9407
REHABILICARE INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0985318
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1811 OLD HIGHWAY 8
NEW BRIGHTON, MINNESOTA 55112
(Address of principal executive offices)
(651) 631-0590
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of May 3, 2002 was:
COMMON STOCK, $.10 PAR VALUE 10,935,118 SHARES
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
The following Quarterly Report on Form 10-Q contains various "forward looking
statements" within the meaning of federal securities laws. These forward looking
statements represent management's expectations or beliefs concerning future
events, including statements regarding anticipated product introductions;
changes in markets, customers and customer order rates; changes in third party
reimbursement rates; expenditures for research and development; growth in
revenue; taxation levels; and the effects of pricing decisions. When used in
this 10-Q, the words "anticipate," "believe," "expect," "estimate" and similar
expressions are generally intended to identify forward-looking statements. These
and other forward looking statements made by the Company must be evaluated in
the context of a number of factors that may affect the Company's financial
condition and results of operations, including, but not limited to, the
following:
- Like many medical device companies, the Company has a large balance of
uncollected receivables. If it cannot collect an amount of receivables
that is consistent with historical collection rates, it might be
required to charge off a portion of uncollected receivables.
- In the United States, the Company's products are subject to
reimbursement by private and public healthcare reimbursement agencies
that impose limits on reimbursement and strict rules on applications
for reimbursement. Changes in the rates, eligibility or requirements
for reimbursement, or failure to comply with reimbursement
requirements, could cause a reduction in income from operations or
fines or both.
- The Company maintains significant amounts of inventory on consignment
at clinics for distribution to patients. It may not be able to
completely control losses of this inventory and, if inventory losses
are not consistent with historical experience, it might be required to
write off a portion of the carrying value of inventory.
- The clinical effectiveness of the Company's electrotherapy products has
periodically been challenged. Publicity about the effectiveness of
electrotherapy for pain relief or other clinical applications could
negatively impact revenue and income from operations.
- The Company has periodically been the subject of litigation that has
caused it additional expense, including a Medicare whistleblower suit
settled in 2000 for approximately $1.6 million and, currently, a $2.3
million product liability suit that proceeded to a default judgment
without the Company's knowledge. The costs of these actions, and other
actions that may arise, have negatively affected, and may continue to
negatively affect, the Company's operating results.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Included herein is the following unaudited condensed
financial information:
Consolidated Balance Sheets as of March 31, 2002 and
June 30, 2001
Consolidated Statements of Operations for the three
months and nine months ended March 31, 2002 and 2001
Consolidated Statements of Cash Flows for the nine months
ended March 31, 2002 and 2001
Notes to Consolidated Financial Statements
3
REHABILICARE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
2002 2001
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,067,383 $ 759,611
Receivables, less reserve for uncollectible accounts of $9,429,162
and $8,062,378 21,323,694 18,998,132
Inventories -
Raw materials 2,326,039 2,039,665
Work in process 55,654 55,895
Finished goods 6,437,562 6,552,155
Deferred tax assets 4,075,317 4,075,317
Prepaid expenses 1,339,218 2,156,646
------------ ------------
Total current assets 37,624,867 34,637,421
Property, plant and equipment, net 4,742,232 5,025,969
Intangible assets, net 11,050,497 11,250,761
Deferred tax assets 471,015 460,985
Other assets 119,675 120,735
------------ ------------
$ 54,008,286 $ 51,495,871
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable $ 400,000 $ --
Current maturities of long-term debt 2,491,870 2,430,173
Accounts payable 2,514,437 3,977,308
Accrued liabilities -
Payroll 564,656 787,314
Commissions 341,109 338,491
Income taxes 1,635,513 1,631,710
Other 4,760,685 3,080,551
------------ ------------
Total current liabilities 12,708,270 12,245,547
Long-Term Liabilities:
Long term-debt 7,881,322 10,433,542
Deferred tax liabilities 381,368 357,566
------------ ------------
Total liabilities 20,970,960 23,036,655
Stockholders' Equity:
Common stock, $.10 par value: 25,000,000 shares authorized;
issued and outstanding 10,927,618 and 10,792,060 shares,
respectively 1,092,762 1,079,206
Preferred stock, no par value; 5,000,000 shares authorized; none
issued and outstanding -- --
Additional paid-in capital 21,761,613 21,420,378
Less note receivable from officer/stockholder (168,417) (189,417)
Unearned compensation on restricted stock (105,000) (186,563)
Accumulated other non-owner changes in equity (180,421) (689,459)
Retained earnings 10,636,789 7,025,071
------------ ------------
Total stockholders' equity 33,037,326 28,459,216
------------ ------------
$ 54,008,286 $ 51,495,871
============ ============
4
REHABILICARE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
March 31 March 31
------------------------------- --------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net sales and rental revenue $ 17,777,430 $ 15,171,676 $ 51,409,302 $ 45,268,040
Cost of sales and rentals 5,703,410 4,822,818 16,880,368 14,219,015
------------ ------------ ------------ ------------
Gross profit 12,074,020 10,348,858 34,528,934 31,049,025
Operating expenses:
Selling, general and administrative 9,687,439 8,048,582 26,180,229 23,812,699
Research and development 473,381 493,643 1,575,644 1,333,549
------------ ------------ ------------ ------------
Total operating expenses 10,160,820 8,542,225 27,755,873 25,146,248
------------ ------------ ------------ ------------
Income from operations 1,913,200 1,806,633 6,773,061 5,902,777
Other income (expense):
Interest expense (144,380) (313,035) (559,580) (1,025,755)
Other 3,911 14,376 14,237 43,215
------------ ------------ ------------ ------------
Income before income taxes 1,772,731 1,507,974 6,227,718 4,920,237
Income tax provision 744,000 646,000 2,616,000 2,114,000
------------ ------------ ------------ ------------
Net income $ 1,028,731 $ 861,974 $ 3,611,718 $ 2,806,237
============ ============ ============ ============
Net income per common and
common equivalent share
Basic $ 0.09 $ 0.08 $ 0.33 $ 0.26
============ ============ ============ ============
Diluted $ 0.09 $ 0.08 $ 0.32 $ 0.26
============ ============ ============ ============
Weighted average number of shares
outstanding
Basic 10,907,755 10,788,277 10,849,310 10,758,451
============ ============ ============ ============
Diluted 11,307,273 10,844,363 11,189,131 10,786,763
============ ============ ============ ============
5
REHABILICARE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
March 31
-----------------------------------
2002 2001
------------ -----------
Operating Activities:
Net income $ 3,611,718 $ 2,806,237
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,208,951 1,708,614
Amortization of unearned compensation 81,563 --
Change in long-term portion of deferred taxes 13,769 178,119
Change in current assets and liabilities
Receivables (2,144,051) 1,672,919
Inventories (30,278) 277,415
Prepaid expenses 909,033 (647,969)
Accounts payable (1,634,172) (1,966,171)
Accrued liabilities 1,375,925 (1,578,100)
------------ -----------
Net cash provided by operating activities 3,392,458 2,451,064
------------ -----------
Investing Activities:
Purchases of property and equipment (670,308) (265,361)
Change in other assets, net 8,089 (477,956)
------------ -----------
Net cash used in investing activities (662,219) (743,317)
------------ -----------
Financing Activities:
Principal payments on long-term obligations (2,469,523) (2,326,566)
Proceeds from (payments on) line of credit, net 400,000 (100,000)
Proceeds from exercise of stock options 242,946 314,375
Proceeds from employee stock purchase plan 111,845 108,975
------------ -----------
Net cash used in financing activities (1,714,732) (2,003,216)
------------ -----------
Effect of exchange rates on cash and cash equivalents 292,265 (311,438)
------------ -----------
Net increase (decrease) in cash and cash equivalents 1,307,772 (606,907)
Cash and Cash Equivalents at Beginning of Period 759,611 2,227,352
------------ -----------
Cash and Cash Equivalents at End of Period $ 2,067,383 $ 1,620,445
============ ===========
Supplemental Cash Flow Information
Interest paid $ 554,378 $ 1,025,743
============ ===========
Income taxes paid $ 2,662,220 $ 2,582,920
============ ===========
6
REHABILICARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
1. Accounting Policies
The amounts set forth in the preceding financial statements are unaudited as of
and for the periods ended March 31, 2002 and 2001 but, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the results for the periods
presented. Such results are not necessarily indicative of results for the full
year. The accompanying financial statements of the Company should be read in
conjunction with the audited consolidated financial statements for the year
ended June 30, 2001 included in the Company's Annual Report on Form 10-K.
Certain previously reported amounts have been reclassified to conform to
classifications adopted in fiscal year 2002. These reclassifications had no
effect on net income, cash flows or stockholders' equity.
2. Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001, with early adoption permitted for companies with fiscal years
beginning after March 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the statements. Other
intangible assets will continue to be amortized over their useful lives.
The Company adopted the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal 2002. Amounts
previously recorded as separately identifiable intangibles for acquired work
force and customer list have been subsumed to goodwill in accordance with FAS
141, increasing goodwill by $1.6 million as of the date of adoption. Effective
with the July 1, 2002 adoption of FAS 142, goodwill is no longer amortized but
is instead subject to an annual impairment test. The transitional impairment
test conducted in connection with the adoption of FAS 142 resulted in no
required provision for impairment.
Goodwill and other intangible assets resulting from acquisitions of business and
the formation of the Company consist of the following:
June 30, 2001 March 31, 2002
------------- --------------
Goodwill $11,504,520 $11,504,520
Less accumulated amortization 1,671,430 1,671,430
----------- -----------
Net goodwill 9,833,090 9,833,090
----------- -----------
Other intangible assets: 1,783,686 1,783,686
Less accumulated amortization 366,015 566,249
----------- -----------
Net other intangible assets 1,417,671 1,217,407
----------- -----------
Total intangible assets, net $11,250,761 $11,050,497
=========== ===========
7
With the adoption of FAS 142, the Company ceased amortization of goodwill as of
July 1, 2001. The following table presents the results of the Company for all
periods presented on a comparable basis:
Nine Months Ended March 31
------------------------------
2002 2001
------------ -------------
Reported net income attributed to
common shareholders $ 3,611,718 $ 2,806,237
Add back goodwill amortization, net of
tax provision -- 354,459
------------ -------------
Adjusted net income attributed to
common shareholders $ 3,611,718 $ 3,160,696
============ =============
Diluted net income per share:
Reported net income attributed to
common shareholders $ .32 $ .26
Goodwill amortization -- .03
------------ -------------
Adjusted net income attributed to
common shareholders $ .32 $ .29
============ =============
3. Note Payable and Long Term Debt
The Company has a $20,000,000 credit facility which provides for both term and
revolving borrowings at varying rates based either on the bank's prime rate or
LIBOR. As of March 31, 2002, there were borrowings outstanding of $8,597,000
under the long-term note and $400,000 under the revolving credit line.
Borrowings under the credit facility are secured by substantially all of the
U.S. assets of the Company other than those pledged as collateral on previously
existing lease or mortgage obligations. The interest rate on the term loan was
3.875% at March 31, 2002 and the weighted average rate on borrowings under the
revolving line of credit was 5.65%.
The Company was in compliance with all financial covenants of its credit
agreement as of March 31, 2002 and for the period then ended.
8
4. Segment Information
Rehabilicare and its consolidated subsidiaries operate in one reportable
segment, the manufacture and distribution of electromedical pain management,
rehabilitation and sports training products. The Company's chief operating
decision makers use consolidated results to make operating and strategic
decisions. Net revenue from the United States and foreign sources (primarily
Europe) was as follows:
For the Nine Months Ended
March 31
----------------------------
2002 2001
----------- -----------
U.S. revenue $34,180,374 $33,184,315
Foreign revenue 17,228,928 12,083,725
----------- -----------
$51,409,302 $45,268,040
=========== ===========
Net revenue by product line was as follows:
For the Nine Months Ended
March 31
----------------------------
2002 2001
----------- -----------
Rehabilitation products $10,707,791 $ 9,194,245
Pain management 10,469,977 10,571,689
Consumer Products 12,477,936 8,592,509
Accessories and supplies 17,753,598 16,909,597
----------- -----------
$51,409,302 $45,268,040
=========== ===========
During the first nine months of fiscal 2002 and 2001, one customer accounted for
approximately 15% and 13%, respectively, of consolidated revenue. This customer
represented approximately 9% of total accounts receivable at March 31, 2002.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company designs, manufactures and distributes electrotherapy
products used for pain management, rehabilitation and sports training.
Its products are used in clinical, home health care, sports medicine
and occupational medicine applications. It also distributes other
medical products used in related applications. The Company operates in
one business segment, distributing its products through sales to
medical product dealers and distributors, sport shops and, in the
United States and the United Kingdom, through direct rental or sale to
patients.
The direct rental or sale approach in the United States involves
placing electrotherapy units with physicians, physical therapists and
other health care providers who then refer those units to patients
after determining an appropriate treatment regimen. Units are left on
consignment with the health care providers for such referral. The
Company then bills the patient or the patient's insurance carrier
directly after being notified that a unit has been prescribed and
provided to the patient. The Company takes responsibility for
subsequent patient follow-up, including extension of the rental period;
sale of the unit, if appropriate, and sale of additional supplies
required for continued use of the electrotherapy units. This
distribution approach requires the Company to maintain significant
investments in inventories and receivables.
10
RESULTS OF OPERATIONS
The following table sets forth information from the statements of operations as
a percentage of revenue for the periods indicated:
Three Months Ended Nine Months Ended
March 31 March 31
-------------------- --------------------
2002 2001 2002 2001
------ ------ ------ ------
Net sales and rental revenue 100.0% 100.0% 100.0% 100.0%
Cost of sales and rentals (32.1) (31.8) (32.8) (31.4)
Gross profit 67.9 68.2 67.2 68.6
Operating expenses -
Selling, general and administrative (54.5) (53.0) (50.9) (52.6)
Research and development (2.7) (3.3) (3.1) (2.9)
------ ------ ------ ------
Total operating expenses (57.2) (56.3) (54.0) (55.5)
------ ------ ------ ------
Income from operations 10.8 11.9 13.2 13.1
Other income (expense), net (0.8) (1.9) (1.1) (2.2)
Income tax provision (4.2) (4.3) (5.1) (4.7)
------ ------ ------ ------
Net income 5.8 5.7 7.0 6.2
====== ====== ====== ======
Revenue was $17,777,000 for the third quarter of fiscal 2002, a 17% increase
from $15,172,000 for the third quarter of fiscal 2001. Revenue for the nine
months ended March 31, 2002 increased 14% to $51,409,000 from $45,268,000 for
the first nine months of fiscal 2001. The largest component of those increases
was the Company's Compex operation where revenue increased 70% in the third
quarter and 45% in the first nine months of fiscal 2002 over the same periods in
fiscal 2001. Compex's revenue increases resulted from volume increases in all
markets, particularly Spain. Revenue from U.S. operations was up 2% in the third
quarter and up 3% in the first nine months of fiscal 2002 compared to the same
periods in fiscal 2001. Increases in revenue from direct rental or sale to
patients of 5% in the third quarter and 7% in the first nine months resulted
primarily from increased sales of units and supplies. Those increases were
offset by declines in sales to medical product dealers and distributors as many
of them converted some of their purchases to lower priced, often imported,
units.
Gross profit was $12,074,000 or 67.9% of revenue for the third quarter and
$34,529,000 or 67.2% of revenue for the first nine months of fiscal 2002,
compared with $10,349,000 or 68.2% of revenue for the third quarter and
$31,049,000 or 68.6% of revenue for the first nine months of fiscal 2001. The
decline in the gross margin percentage resulted from continued growth of Compex
revenue as a percent of total revenue and further reductions in the Compex gross
margin percentage as a result of changes in product mix toward lower price sport
and fitness products. Overall margins are expected to continue in the mid-
sixties.
11
Selling, general and administrative expenses increased 20% to $9,687,000 in the
third quarter of fiscal 2002 from $8,049,000 in fiscal 2001. As a percent of
revenue, those expenses increased to 54% in the third quarter of fiscal 2002
from 53% in fiscal 2001. U.S. expenses for the third quarter included a charge
of $563,000 for accrued compensation payable to David B. Kaysen, who resigned as
President and CEO of the Company effective March 31, 2002. For the nine months
ended March 31, 2002, selling, general and administrative expenses increased 10%
to $26,180,000 from $23,813,000 in fiscal 2001. As a percent of revenue, those
expenses declined to 51% during the first nine months of fiscal 2002 from 53% in
fiscal 2001. The decline in the nine-month period resulted from Compex expenses
increasing at a rate slower than the related increase in its revenue as newer
markets achieve significant growth. In the U.S., those expenses are essentially
unchanged as a percent of revenue after adjusting for the effect of
discontinuing amortization of goodwill as described in Note 2 to the financial
statements.
Research and development expense decreased 4% to $473,000 in the third quarter
of fiscal 2002. In the nine months ended March 31, 2002, those costs increased
18% to $1,576,000 from $1,334,000 in fiscal 2001. The increase in the nine-month
period reflects the cost of new product development activities both in the U.S.
and Compex operations. The most significant project in the U.S. was the new
ProMax TENS unit for which production started in October 2001. In Europe, three
new products have been introduced in the last nine months. The Company
anticipates that research and development expenses will remain relatively
constant as a percentage of revenue in future periods.
Interest expense decreased 54% from $313,000 in the third quarter of fiscal 2001
to $144,000 in the third quarter of fiscal 2002 and decreased 45% from
$1,026,000 in the first nine months of fiscal 2001 to $560,000 in fiscal 2002.
The decreases resulted from lower interest rates and overall lower borrowings
under the Company's credit facility. The Company expects interest expense to
continue to decline with the lower overall balance of its indebtedness.
The provision for income taxes is 42% of income before taxes for the first nine
months of fiscal 2002 compared to 43% for the same period of fiscal 2001. The
Company operates in various countries in Europe as well as the United States.
Some countries have higher tax rates than the United States as well as different
rules on the deductibility of certain expenses and the availability of certain
credits for taxes paid to other jurisdictions. The Company believes that 42% is
a reasonable estimate of the effective rate for fiscal 2002 based on most recent
estimates of expected sources of revenue and expenses for the entire year. The
Internal Revenue Service has recently completed an examination of the Company's
federal income tax returns for the years ended June 30, 1997 and 1998 and has
proposed adjustments pursuant to such audit, most of which relate to the timing
of revenue or expense recognition. The Company has filed a formal appeal of
certain proposed adjustments and believes its provision for income taxes and
related reserves are adequate.
As a result of the above activity, net income increased from $853,000 in the
third quarter of fiscal 2001 to $1,029,000 in the third quarter of fiscal 2002.
For the nine months ended March 31, 2002, net income increased to $3,612,000
from $2,806,000 during the same period in fiscal 2001. Diluted earnings per
share increased from $.08 to $.09 for the third quarter and $.26 to $.32 per
share for the nine month period.
12
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 31, 2002, the Company's operations provided cash
of $3,392,000, mainly from net income of $3,612,000 plus depreciation and
amortization and less the net increase in current assets. Prepaid expenses
declined due to lower value added tax prepayments by Compex. Accounts receivable
increased $2,144,000, mainly from higher sales and slower collections for
Compex. The decrease in accounts payable relates to timing differences and the
payment of year-end accruals.
The Company used $662,000 in investing activities for the first nine months of
fiscal 2002 for net purchases of property and equipment, including clinical and
rental equipment.
The Company's financing activities used $1,715,000 of cash during the first nine
months of fiscal 2002, mainly for the repayment of $2,470,000 of long-term debt
under its $20,000,000 credit facility, less net borrowings of $400,000 under
that facility. Borrowings were used primarily to build inventories in connection
with new product introductions. At March 31, 2002, a total of $8,997,000 is
outstanding under this facility, including $400,000 of short-term debt under the
revolving line of credit.
This credit facility has a maturity date of June 30, 2004, at which time all
outstanding borrowings are to be repaid. The Company anticipates all or
substantially all borrowings under this credit facility will be repaid prior to
the maturity date. If any borrowings are still outstanding at maturity, the
Company believes that the agreement could be extended with the current financial
institution or another facility put in place.
Managing receivables represents one of the biggest business challenges to the
Company. The process of determining what products will be reimbursed by third
party payors and the amounts to be paid for those products is very complex and
the reimbursement environment is constantly changing. That risk is spread across
many payors throughout the United States. The determination of an appropriate
reserve for uncollectible accounts at the end of each reporting period is based
on various factors including historical trends and relationships and experience
with insurance companies or other third party payors. The Company believes that
the reserve at March 31, 2002 is adequate to cover future losses on its
receivables based on collection history and trends. The provision for
uncollectible accounts recorded in the income statement may continue to
fluctuate significantly from quarter to quarter as such trends change. The
reserve was 31% of receivables at March 31, 2002 compared to 30% at June 30,
2001.
The Company has no material commitment for capital expenditures. The Company
believes that available cash and borrowings under its credit line will be
adequate to fund cash requirements for the current fiscal year and the
foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in the interest
rates on certain of its outstanding debt. The outstanding loan balance
under the $20 million credit facility bears interest at a variable rate
based on the bank's prime rate or LIBOR. Based on the average
outstanding bank debt for the period ended March 31, 2002, a 100 basis
point change in interest rates would not change interest expense by a
material amount.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In late January 2001, Rehabilicare was served with documents in
connection with a product liability case brought in the California
Superior Court for Solano County. Although Rehabilicare had no record
of the proceedings, the action had progressed to the entry of a default
judgment on January 11, 2001.
Rehabilicare appealed the default judgment to the California Court of
Appeals in March 2001. On May 10, 2002, the appeals court overturned
the default judgment holding that there was no valid complaint against
Rehabilicare on file.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of Rehabilicare was held on January
10, 2002. Shareholders holding 8,814,831 shares, or approximately 81.4%
of outstanding shares, were represented at the meeting by proxy or in
person. The only matter submitted at the meeting for vote by the
shareholders was as follows:
a. Election of Directors
The following nominees were elected to serve as members of the
Board of Directors until the annual meeting of shareholders in
2002 or until such time as a successor may be elected.
In Favor Withheld
-------- --------
Frederick H. Ayers 8,746,145 68,686
Richard E. Jahnke 8,740,280 74,551
David B. Kaysen 8,735,559 79,272
John H.P. Maley 8,739,168 75,663
Robert C. Wingrove 8,747,004 67,827
Mr. Kaysen subsequently resigned as an executive officer and
director effective March 31, 2002.
14
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Separation Agreement dated March 31, 2002 between the
Company and David B. Kaysen
(b) Reports on Form 8-K
None filed during the quarter ended March 31, 2002
15
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.
REHABILICARE INC.
May 15, 2002 /s/ John H.P. Maley
----------------------- ---------------------------------------------
Date John H.P. Maley
Chief Executive Officer
May 15, 2002 /s/ W. Glen Winchell
----------------------- ---------------------------------------------
Date W. Glen Winchell
Vice President of Finance
(Principal Financial and Accounting Officer)
16