10KSB 1 k2001.htm 10KSB 2001

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

Commission file number 0-12183

BOVIE MEDICAL CORPORATION

(Exact name of small business issuer as specified in its charter)

Delaware No. 11-2644611

(State or other jurisdiction of incorporation or organization) (IRS— Employer Identification No.)

734 Walt Whitman Rd., Melville, New York 11747

(Address of principal executive offices)

(631) 421-5452

(Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act

None

Securities registered under Section 12(g) of the Exchange Act

Common Stock, $.001 Par Value
(Title of class)

Indicate by check mark whether the registrant (I) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 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 [X] No[ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will 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 any amendment to this Form 10-KSB. [ X ]

Issuer’s revenues for its most recent fiscal year were $11,484,334.

The aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of March 01, 2002 was approximately $5,992,202.

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:13,204,755.

Company Symbol-BOVI Company SIC (Standard Industrial Code) 3841-98

DOCUMENTS INCORPORATED BY REFERENCE

There are no documents incorporated by reference.

Bovie Medical Corporation
2001 Form 10-KSB Annual Report

Part I                                                             Page

Item 1.      Description of Business...............................

Item 2.      Properties............................................

Item 3.      Legal Proceedings.....................................

Item 4.      Submission of Matters to a Vote of
             Security Holders......................................

Part II

Item 5.      Markets and Market Prices.............................

Item 6.      Management's Discussion and Analysis..................

Item 7.      Financial Statements   (See Financial Section)

Item 8.      Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure................

Part III

Item 9.      Directors, Executive Officers, Promoters
             and Control Persons...................................

Item 10.     Remuneration..........................................

Item 11.     Security Ownership of Certain Beneficial Owners
             and Management of Bovie Medical Corporation...........

Item 12.     Certain Relationships and Related Transactions........

Item 13.     Exhibits and Reports on Form 8-k......................

BOVIE MEDICAL CORPORATION

Part I

Item 1. Description of Business.

Background

Bovie Medical Corporation (“the Company”) was incorporated in 1982, under the laws of the State of Delaware and has its principal executive office at 734 Walt Whitman Road, Melville, New York 11747.

The Company is actively engaged in the business of manufacturing and marketing medical products and developing related technologies. Aaron Medical Industries, Inc. ("Aaron"), a 100% owned subsidiary based in St. Petersburg, Florida is engaged in marketing the Companys medical products. Although the Company’s largest current product line is battery operated cauteries, the Company has shifted its focus to the manufacture and marketing of generators and electrosurgery disposables. This new focus is evident in the development of the Aaron 800, Aaron 900, Aaron 1200, Aaron 1250 and Aaron 2100, high frequency desiccators (generators). The Aaron 1250 and Aaron 2100 are designed for today’s rapidly expanding surgi-center market. Additionally, each of the above generators will also be marketed under the Bovie name.

The Company also manufactures a variety of specialty lighting instruments for use in ophthalmology, general surgery, hip replacement surgery, and for the placement of endotracheal tubes. An industrial version of this light is distributed commercially through various retail outlets and stores.

Bovie manufactures and markets its products both under private label and the Bovie/Aaron label to distributors worldwide. Additionally, Bovie/Aaron has original equipment manufacturing (OEM) agreements with other medical device manufacturers. These OEM arrangements combined with private label and the Bovie/Aaron label allow the Company to gain greater market share for the distribution of its products.

Company Products

Battery Operated Cauteries

Battery operated cauteries constitute the Company’s largest product line. Cauteries were originally designed for precise hemostasis (to stop bleeding) in ophthalmology. The current use of cauteries has been substantially expanded to include sculpting woven grafts in bypass surgery, vasectomies, evacuation of subungual hematoma (smashed fingernail) and for arresting bleeding in many types of surgery. Battery operated cauteries are primarily a sterile one-time use product. The Company manufactures more types of cauteries than any other company in the world, including but not limited to, a line of replaceable battery and tip cauteries, which are popular in overseas markets.

Electrosurgery Products

The Company continues to expand its line of electrosurgery products. Electrosurgery products include generators, electrodes, electrosurgery pencils, and various ancillary disposable products. These products are used in surgery for the cutting and coagulation of tissues and constitute the Company’s second largest product line. Our accessory electrosurgery products are substantially compatible with all major manufacturers’ electrosurgery generator products. All electrosurgery generators and accessories are marketed using the Bovie trademark, which is recognized internationally in electrosurgery. It is estimated that 80% of all surgical procedures performed worldwide are accomplished by electrosurgery, which includes surgical procedures in gynecology, urology, plastic surgery, general surgery and dermatology.

Bovie/Aaron 800 and 900 High Frequency Desiccators

The Aaron 800 and Aaron 900 are low powered office based generators designed primarily for dermatology and plastic surgery. The units are 30 watt high frequency desiccators used mainly in doctors’ offices for removing small skin lesions and growths.

Bovie/Aaron 1200

The Company has developed a 120 watt, full-featured electrosurgery generator for outpatient surgical procedures. It was designed mainly for use in doctors’ offices and is utilized in a variety of specialties including: dermatology, gynecology, and plastic surgery.

Bovie/Aaron 1250

The Company has developed, a 120 watt multipurpose electrosurgery generator. The unit also features monopolar and bipolar functions with pad sensing. The product has received a positive response from the OEM community and is being produced in at least two private label formats in addition to the Bovie/Aaron label.

Bovie/Aaron 2100

The Company has developed, a 200 watt multipurpose electrosurgery generator, designed for the rapidly expanding surgi-center market in the United States. The unit features both monopolar and bipolar functions, has pad and tissue sensing plus nine blended cutting settings. This powerful unit has the capability to do practically any procedure performed today in the surgi-center or outpatient setting.

New Generators

In addition to the Aaron 2100 and 1250, the Company is continuing to develop and expand its range of electrosurgery generators. The Company has two generators currently in the design and development phase. The first new generator is expected to be released in the third quarter of 2002 and the second is expected to be ready for release near the end of 2002.

Jump Unipolar Low Temperature Focused Plasma Technology

In February, 2000, the Company entered into a Joint Venture Agreement with a German corporation, Jump Agentur Fuer Elektrotechnik GMBH. Pursuant to the agreement, Bovie advanced $200,000 to the partnership to cover costs of further European research toward the production of two commercial prototypes. Bovie has made available its facilities in Florida available for development, manufacturing and marketing of the products of the joint venture and is responsible to expend its best efforts to secure all necessary financing for the research, development and marketing of the products estimated to be an amount up to $1,500,000.

The joint venture acquired an exclusive license to produce and market any surgical device utilizing this technology. As of December 31, 2001, Bovie had advanced $200,000 to the joint venture and expensed $24,924 in development costs plus engineering’s costs estimated at $45,000.

The technology utilizes a gas ionization process utilizing only one working electrode. The device produces a stable thin focused beam of ionized gas that can be controlled in a wide range of temperatures and intensities, providing the surgeon with precision, minimal invasiveness and an absence of conductive currents during surgery.

The device has been developed and patented in both Europe and the U.S. Bovie is currently building its first prototypes for eventual FDA submission and approval. The initial intended uses are in the areas of Dermatology and Plastic Surgery. Other contemplated uses for the technology are: cardiovascular, thoracic, gynecological, trauma and other surgeries.

Battery Operated Medical and Industrial Lights

The Company manufactures a variety of specialty lighting instruments for use in ophthalmology as well as patented specialty lighting instruments for general surgery, hip replacement surgery and for the placement of endotracheal tubes in emergency and pro-surgery procedures. These lighting instruments have also been adapted for commercial and industrial use and are sold to automotive mechanics through companies such as Snap-On Tools, MAC and Matco.

Nerve Locator Stimulator

The Company manufactures a nerve locator stimulator primarily used for identifying motor nerves in hand and facial reconstructive surgery. This instrument is a self-contained, battery operated unit, used for single surgical procedures.

Manufacturing, Marketing and Distribution

The Company manufactures the majority of its products on its premises in St. Petersburg, Florida. Labor intensive sub-assemblies and labor intensive products may be out-sourced to the Company's specification. The Company markets its products through national trade journal advertising, direct mail, distributor sales representatives and trade shows, under both the Bovie/Aaron name and private label. Major distributors include Allegiance, Bergen Brunswig Medical, Burrows, McKesson, HBOC, IMCO, NDC (Abco, Cida and Starline), Owens & Minor, and Physician Sales & Service.

Competition

The medical device industry is highly competitive. Many competitors in this industry are well established, do a substantial amount of business, and have greater financial resources and facilities than the Company.

Main competitors are Conmed, Valley Lab (a division of Tyco), in the electrosurgery market and Xomed in the battery operated cautery market. Management believes that, based upon recent developments, the Company has the ability to aggressively compete in these markets.

Government Regulation

United States

The Company’s products and research and development activities are subject to regulation by the FDA and other regulatory bodies. FDA regulations govern, among other things, the following activities:

o Product development.
o Product testing.
o Product labeling.
o Product storage.
o Pre-market clearance or approval.
o Advertising and promotion.
o Product traceability, and
o Product indications.

In the United States, medical devices are classified on the basis of control deemed necessary to reasonably ensure the safety and effectiveness of the device. Class I devices are subject to general controls. These controls include registration and listing, labeling, pre-market notification and adherence to the FDA Quality System Regulation. Class II devices are subject to general and special controls. Special controls include performance standards, post market surveillance, patient registries and FDA guidelines. Class III devices are those which must receive pre-market approval by the FDA to ensure their safety and effectiveness.

Manufacturing

Manufacturing and distribution of our products may be subject to continuing regulation by the FDA. We will also be subject to routine inspections by the FDA to determine compliance with the following:

o Quality System Regulations.
o Medical device reporting regulations, and
o FDA restrictions on promoting products for unapproved or off-label uses.

In addition to regulations enforced by the FDA. We are also subject to regulations under the Occupational Safety and Health Act, the Environmental Protection Act and other federal, state and local regulations.

International

To market products in the European Union and countries other than the United States, we must obtain regulatory approval similar to that required by the FDA. All the Company medical devises are classified as Class III devices under the European Medical Devices Directive. Therefore, we were required to obtain a “CE Mark” certification from a “Notified Body” in one of the member countries in the European Union. CE Mark certification is an international symbol of adherence to quality assurance standards and compliance with the applicable European Medical Devices Directive.

Approval by a Notified Body typically includes a detailed review of the following:

o Description of the device and its components,
o Safety and performance of the device,
o Clinical evaluations with respect to the device,
o Methods, facilities and quality controls used to manufacture the device, and
o Proposed labeling for the device.

Manufacturing and distribution of a device is subject to continued inspection and regulation by the Notified Body after CE Mark certification to ensure compliance with quality control and reporting requirements.

Pre-market notification clearance must be obtained for many Class I and most Class III devices when the FDA has not called for pre-market approval. A pre-market approval application is required for most Class III devices. A pre-market approval application must be supported by valid scientific evidence to demonstrate the safety and effectiveness of the device. The pre-market approval application typically includes:

o Results of bench and laboratory tests, animal studies, and clinical studies,
o A complete description of the device and its components,
o A detailed description of the methods, facilities and controls used to manufacture the device, and
o Proposed labeling.

The approval process can be expensive, uncertain and lengthy. A number of devices for which FDA approval has been sought by other companies have never been approved for marketing.

In July of 1998, we received ISO 9001 and EN 46001 qualification of our products, a principal step in the CE Mark certification process. We obtained CE Mark certification to market our products in the European Union in 1999. In addition to CE Mark certification, each member country of the European Union maintains the right to impose additional regulatory requirements.

Outside of the European Union, regulations vary significantly from country to country. The time required to obtain approval to market products may be longer or shorter than that required in the United States or the European Union. Certain European countries outside of the European Union do recognize and give effect to the CE Mark certification. We are permitted to market and sell our products in those countries.

Patents and Trademarks

The Company owns a total of fourteen patents. No assurance can be given that competitors will not infringe the Company’s patent rights or otherwise create similar or non-infringing competing products that are technically patentable in there own right. (See competition)

Liability Insurance

The manufacture and sale of medical products entail significant risk of product liability claims. The Company currently maintains product liability insurance with combined coverage limits of 5 million on a claim made basis. There is no assurance that this coverage will be adequate to protect the Company from any liabilities it might incur in connection with the sale or testing of its products. In addition, the Company may need increased product liability coverage as products are commercialized. This insurance is expensive and in the future may not be available on acceptable terms, if at all.

Research and Development

The approximate amount expended by the Company on research and development of its products during the years 2001 and 2000, totaled $463,133 and $513,020, respectively. The Company has not incurred any direct costs relating to environmental regulations or requirements.

Employees

Presently the Company has a total of approximately 108 employees. These consist of 5 executives, 10 administrative, 6 sales, and 87 technical support and factory employees.

Significant Subsidiary - Aaron Medical Industries, Inc.

Aaron Medical Industries, Inc., is a Florida Corporation with offices in St. Petersburg, Florida. It is principally engaged in the business of marketing Company medical products.

Purchase Company Shares

The Company entered into an agreement in December, 1999, whereby the Company agreed to repurchase 2,000,000 shares from a major shareholder group which had originally acquired its shares in connection with the ART transaction in 1998. The purchase was completed in November 2001.

Item 2. Properties.

The Company has executive office space at 734 Walt Whitman Road, Melville, New York and its St. Petersburg, Florida facility. The Company leases the executive offices in New York for $1,350 per month and the lease expires in the year 2003.

As part of the purchase of its St. Petersburg, Florida (manufacturing facility), the Company caused the seller to acknowledge that it had previously conducted assessments to document environmental conditions existing on the property, the results of which, are set forth in a June 23, 1994 Contamination Assessment Report (CAR) and a January 27, 1995 Contamination Assessment Addendum (CARA). The Florida Department of Environmental Protection (FDEP) stated in a letter, dated March 31, 1995, that based on their review of the CARA, the CAR could not be approved and that additional work was needed to be performed.

In February of 1998, the environmental engineering firm Geo-Ambient conducted a second addendum to the CAR, (CAR Addendum II) to complete the additional work requested by the FDEP. Based on the results of CAR Addendum II, Geo-Ambient recommended to the FDEP that a “no further action” status be granted for the site.

Based on the “no further action” finding by Geo-Ambient and the anticipated issuance of an SCRO by the FDEP, management of the Company had estimated the present value of the cost of environmental work to be zero.

On February 16, 2001, Meryman Environmental, Inc. conducted a ground water test and determined “the data continues to show an overall decrease in the mass contamination at the site”.

At the end of 2001 the remediation was complete and the seller was released and his mortgage paid off.

Item 3. Legal Proceedings

There are no material legal proceedings pending against the Company that the Company believes could have an adverse effect on the Company’s financial condition.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to securities holders during the year ended December 31, 2001.

PART II

Item 5. Markets and Market Prices

Bovie’s common stock is traded in the over-the-counter market on the National Association of Securities Dealers, Inc. Bulletin Board (“OTC Bulletin Board”). The table shows the reported high and low bid prices for the common stock during each quarter of the last eight quarters as reported by the OTC Bulletin Board (symbol “Bovi”). These prices do not represent actual transactions and do not include retail markups, markdowns or commissions.

               2001                               High            Low
               ----                               ----            ---

           1st Quarter                         $   .79         $  .68

           2nd Quarter                             .71            .45

           3rd Quarter                             .70            .51

           4th Quarter                             .82            .51


              2000
              ----

           1st Quarter                           $1.50           $.75

           2nd Quarter                            1.05            .65

           3rd Quarter                            1.50            .70

           4th Quarter                            1.50            .55

On February 28, 2002, the Closing bid for Bovie’s Common Stock as reported by the OTC Bulletin Board was $.64 per share. As of February 28, 2002, the total number of shareholders of the Company’s Common Stock was approximately 1,500, of which approximately 700 are shareholders whose shares are held in the name of their broker or stock depositories or the escrow agent holding shares for the benefit of Bovie Medical Corporation shareholders and the balance are shareholders who keep their shares registered in their own name.

Item 6. Management's Discussion and Analysis.

Results of Operations

Bovie’s net revenues for 2001 were approximately $11.48 million as compared to $9.93 million for 2000. The increase in sales of $ 1.55 million (18%) was the net result of an increase in revenues from the sale of cauteries and electrosurgery products. The sales for medical products represented approximately 89% of total sales in 2001 and 2000.

The cost of goods sold increased by $731,672 (15%) from $4,992,749 in 2000 to $5,724,421 in 2001. The percentage of gross profit from sales increased from 49% in 2000 to 51% in 2001. Increased margins are partly attributable to certain component manufacturing being undertaken in Europe and the Far East. The difference in cost of sales and gross profit were principally due to an increase in sales and decrease in cost of sales of the Company’s family of cauteries. For both years 2001 and 2000 cauteries accounted for 42% of sales, and 36% of cost of goods sold.

Research and development expenses decreased by $49,887 (10%) from $513,020 to $463,133, from 2000 to 2001. The Company continued to invest in the development of electrosurgery devices and other Company products. Research and development costs are made up of material, engineering, and payroll costs.

The Company's effective federal income tax rate is 35%. As a result of the net gain in the past two years, the Company has increased its projected net operating loss tax benefit asset by $236,557. The net operating loss carryover is $8.02 million.

General and administrative expenses of the Company increased $507,135 or 30% from $1.7 million in 2000 to $2.2 million in 2001. This was mainly attributable to: 1. An increase in trade show and advertising expenses of $135,000, 2. An increase of $71,800 in the cost of discontinued European operations, 3. An increase in cost of general liability insurance of $64,430 and, 4. A write down of obsolete inventory of $108,000.

Salaries and related costs increased by 20% from $1.8 million in 2000 to $2.2 million in 2001. The increase in salaries was due in part to the hiring of additional administrative, quality control and technical personnel and the overtime needed primarily to produce electrosurgery products.

Cost of professional services decreased by 16% from $379,289 in 2000 to $320,480 in 2001. Professional fees were primarily related to consulting, auditing and legal costs.

Gain from operations was $583,580 in 2001 as compared to an operating gain of $522,876 in 2000. Net gain of the Company in 2001 was $784,293 as compared to net gain in 2000 of $583,580, an increase of 56%.

Total other costs as a percentage of sales were 44% in 2001 as compared to 45% in 2000. These costs primarily increased due to the costs associated with the increased sales and development of the electrosurgery line of products. For the year 2001, total other costs were $5,176,333 as compared to $4,420,261 for 2000, a 17% increase.

The Company sells its products through distributors both overseas and in US markets. New distributors are contacted through responses to Company advertising in international and domestic medical journals and domestic or international trade shows.

During 2001, international sales of the Company’s product lines increased by a total of $372,000 (23%). In 2000, these sales were $1.6 million (16% of total sales) as compared to $2.0 million (17% of total sales) in 2001. The Company recently closed it sales office in Germany and will market European operations from the U.S.A.

In the fourth quarter of 1998, the Company made agreements with various sales representatives to develop markets for its new products and maintain customer relations. The representatives receive an average commission of approximately 2% of sales in their market areas. In 2001 and 2000, commissions paid were $220,109 and $176,425, respectively, an increase of 25%.

An adequate supply of raw materials is available from both domestic and international suppliers. The relationship between the Company and its suppliers is generally limited to individual purchase order agreements, supplemented by contractual arrangements with key vendors to ensure availability of certain products. The Company has developed multiple sources of supply where possible.

In order to provide additional working capital, the Company has secured a $1,500,000 credit facility with a local commercial bank. This facility is payable on demand by the bank.

Financial Condition

As of December 31, 2001, cash totaled $578,354 as compared to $278,662 at December 31, 2000. Cash provided by operating activities was $940,777 in 2001 compared to $657,500 in 2000. Net working capital of the Company was $2,924,709 and $2,506,882 on December 31, 2001 and 2000, respectively.

The amount of cash used in investing activities was $639,869 in 2000, compared to $519,308 in 2001. The Company continued to invest in property, plant and equipment needed for future business requirements, including manufacturing capacity. In the year 2000, the Company invested $200,000 in a joint venture involving a new unipolar low temperature plasma technology.

The net cash used by financing activities was $154,043 in 2000 as compared to $121,777 in 2001. The most significant item of financing activity in 2000 resulted from the re-purchase of 400,000 shares of the Company’s common stock for $152,000, from a major shareholder group that acquired it in connection with the ART transaction in 1998. The most significant activity in 2001 was the refinancing of the Company’s line of credit which was raised from $600,000 to $1,500,000 and the refinancing of the Company’s first mortgage on its St. Petersburg facility from $372,652 to $475,000.

The Company believes that it has the financial resources needed to meet business requirements in the foreseeable future, including capital expenditures needed for the expansion of its manufacturing site, working capital requirements, and product development programs.

The Company’s ten largest customers accounted for approximately 59% of net revenues for 2001 as compared to 58% in 2000. At December 31, 2001, the Company’s ten largest trade receivables accounted for approximately 63% of outstanding trade receivables as compared to 58% in 2000.

Outlook

The statements contained in this Outlook are based on current expectations. These statements are forward looking and actual results may differ materially.

The Company believes that the world market for disposable medical products, including the Company’s battery-operated cauteries, have growth potential since these products have not been affordable or effectively marketed outside the U.S. Due to these factors, the Company has designed certain disposable products to be reusable. The Company presently has a significant portion of the U.S. cautery market and expects moderate growth in sales of cautery-related products to continue.

The Company has focused on expanding its line of electrosurgery products. Electrosurgery products sold by the Company include the standard stainless steel electrodes, the Bovie Aaron 800, Bovie Aaron 900, Bovie Aaron 1200, Bovie Aaron 1250, and the Bovie Aaron 2100 high frequency generators. Pursuant to perceived market demands, the Company is developing a higher wattage generator and other specialty electrosurgery devices.

From 2000 to 2001, the Company’s electrosurgery sales increased by 40% from $2.5 million to $3.5 million. The increase was mainly attributable to private label sales to other electrosurgery manufacturers. With the introduction of new electrosurgery products, the Company expects electrosurgery sales to continue to increase in 2002. The Company, through its private label capability, anticipates continued opportunities in the domestic market. The electrosurgery product market is larger than the Company’s other traditional markets and is dominated by two competitors, ValleyLab and Conmed. The global market for electrosurery products exceeds $300 million annually.

Non-Medical Products

In 2001, the Company sales of its flexible lighting products, used primarily in the automotive and locksmith industries, totaled $885,000. One customer accounted for $650,000 of such sales.

Reliance on Collaborative, Manufacturing and Selling Arrangements

The Company is dependent on certain contractual partners for manufacturing and product development. Should a collaborative partner fail to develop and manufacture products, the Company’s future business and value of related assets could be negatively affected. No assurance can be given that a collaborative partner may give sufficient high priority to the Company’s products. In addition, disagreements or disputes may arise between the Company and its contractual partners which could adversely affect production of its products.

Liquidity and Future Plans

The Company’s focus is to acquire, develop, and manufacture new product technologies and to expand its manufacturing capabilities.

In order to increase international sales growth and maintain its ability to sell in Europe, the Company has been certified as ISO9001/EN46001

quality system compliant and has been granted its CE mark (International Quality control.)

In December, the Company satisfied its first mortgage on the building it owns in St. Petersburg, Florida and replaced it with a new first mortgage from its prime lender in the amount of $475,000. The mortgage, loan is to be repaid over 5 years with a variable interest starting at the banks present base rate of 4.75%. The Company pays a principal payment of $2,639.00 plus interest each month. A balloon payment of $316,660 is due in December, 2006.

In May, 2001, the Company changed commercial lenders and increased its credit line from $600,000 to $1,500,000. The interest rate on the line is variable and is presently at the bank’s base rate, which is 4.75% per annum. The outstanding balance on the credit line on December 31, 2001 was $150,000. The Company believes it is in compliance with the bank’s covenants at December 31, 2001.

The Company’s future results of operations and the other forward-looking statements contained herein, particularly the statements regarding growth in the medical products industry, capital spending, research and development, and marketing and general and administrative expenses, involve a number of risks and uncertainties. In addition to the factors discussed above, other factors that could cause actual results to differ materially, are the following:

business conditions and the general economy; competitive factors such as rival manufacturers’ availability of products at reasonable prices; risk of nonpayment of accounts receivable; risks associated with foreign operations; and litigation involving intellectual property and consumer issues.

The management of Bovie Medical Corporation believes that it has the product mix, facilities, personnel, and competitive and financial resources for business success, but future revenues, costs, margins, product mix and profits are all subject to the influence of a number of factors, as discussed above.

Item 7. Financial Statements.

(See Attached)

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There are no disagreements with, or changes in, accountants.

Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons

The Company’s Executive Officers and directors are as follows:

   Name                    Position                Director Since
   ----                    --------                --------------

Andrew Makrides         Chairman of the             December,1982
                        Board, President,
                        CEO and Director

J. Robert Saron         President of Aaron
                        Medical Industries, Inc.    August, 1994
                        and Director

George Kromer           Director                    October 1995

Alfred V. Greco         Director                    April, 1998

Nancy Keller            Chief Financial Officer     Resigned in 2001


Moshe Citronowicz       Executive Vice President
                        Chief Operating Officer

Charles Peabody         Chief Financial Officer
                        Secretary

Andrew Makrides, Esq. age 60, Chairman of the Board and President, member of the Board of Directors, received a Bachelor of Arts degree in Psychology from Hofstra University and a Juris Doctor Degree from Brooklyn Law School. He is a member of the Bar of the State of New York and practiced law from 1968 until joining Bovie Medical Corporation as Executive Vice President and director, in 1982. Mr. Makrides became President of the Company in 1985 and the CEO in December 1998 and has served as such to date.

J. Robert Saron, age 49, Director, holds a Bachelor's degree in Social and Behavioral Science from the University of South Florida. From 1988 to present Mr. Saron has served as a director of Aaron Medical Industries, Inc. (formerly Suncoast Medical Manufacturing, Inc.). Mr. Saron served as CEO and chairman of the Board of the Company from 1994 to December 1998. Mr. Saron is presently the President of Aaron Medical Industries, Inc., which serves as the Company's marketing subsidiary, and he is also a member of the Board of Directors of the Company.

Alfred V. Greco, Esq. age 66, Director, is the principal of Alfred V. Greco, PLLC, and has been counsel to the Company since its inception. Mr. Greco is a member of the Bar of the State of New York and has been engaged in the practice of law for the past 35 years in the City of New York. The main focus of Mr. Greco's experience for the past 30 years has been in the area of corporate and securities law during which he has represented a large number of public companies, securities brokerage firms, executives and registered representative and has developed a broad range of experience in administrative, regulatory and legal aspects of public companies. Mr.Greco graduated from the Fordham University School of Law with a Doctor of Law degree in June of 1960. He was admitted to the New York State Bar in March, 1961.

George W. Kromer, Jr., age 61, became a director on October 1, 1995. Bovie Medical Corporation has also retained Mr. Kromer on a month-to-month basis as a consultant in addition to his capacity as a director. He has been writing for business publications since 1980. In 1976, he received a Master’s Degree in health administration from Long Island University. He was engaged as a Senior Hospital Care Investigator for the City of New York Health & Hospital Corporation from 1966 to 1986. He also holds a Bachelor of Science Degree from Long Island University’s Brooklyn Campus and an Associate in Applied Science Degree from New York City Community College, Brooklyn, New York.

Moshe Citronowicz, age 49, is a graduate of the University of Be’er Sheva, Be’er Sheva, Israel, with a Bachelor of Science Degree in electrical engineering. He has also received certificates from Worcester Polytech, Lowell University and the American Management Association for completion of seminars in MRP, master scheduling, purchasing SPC, JIT, accounting and plant management.

Since coming to the United States in 1978, Mr. Citronowicz has worked in a variety of manufacturing and high tech industries. In October 1993, Mr. Citronowicz joined the Company as Vice President of Operations. He is responsible for all areas of manufacturing, purchasing, product redesign, as well as new product design. In September 1997, Mr. Citronowicz was appointed by the Board of Directors to the position Executive Vice President and Chief Operating Officer.

Charles Peabody, CPA, age 48, graduated from Babson College with a BSBA in accounting. He is a Certified Public Accountant in the States of Florida and Vermont. During the past twenty years, Mr. Peabody has had positions ranging from vice president, finance and administration of an $11 million telecommunication equipment manufacturer to the chief financial officer of a $18 million commercial refrigeration glass door company. Mr. Peabody is a member of the American and Florida Institutes of Certified Public Accountants.

Pursuant to the agreement with Maxxim Medical, Inc. (“Maxxim”), Kenneth Davidson (a former officer of Maxxim) was designated by Maxxim to serve as a director of Bovie Medical Corp. In October, 2000, Mr. Davidson resigned as a director of Maxxim. Pursuant to instructions from Maxxim that Mr. Davidson has ceased acting as a director of the Company, management has deemed that he has officially resigned as a director of Bovie. Maxxim has elected not to replace or redesignate a replacement for Mr. Davidson.

Item 10. Remuneration

The following table sets forth the compensation paid to the executive officers of the registrant for the three years ended December 31, 2001:

                           Summary Compensation Table

                          Annual Compensation          Long Term Compensation
                          -------------------          ----------------------

                                                             Securities
                                                             Underlying
 Name and                                        Restricted     Stock
 Principal                        (a)      (b)    Stock       Option
 Position        Year    Salary    Bonus    Other  Awards(#)   SARS(#)  Pay-outs
 --------        ----    ------    -----    -----  ---------   -------  --------

Andrew Makrides  2001   $146,446   2,567   12,352      --    155,000          --
the Board        2000   $123,764   2,388    7,235      --         --          --
President, CEO   1999   $116,312   2,198    9,263      --         --          --
Chairman of
the Board

J.Robert Saron   2001   $199,485    --  3,62418,018    --    155,000          --
Director         2000   $167,528    --  3,38112,556    --         --          --
President of     1999   $166,181    --  3,24514,409    --         --          --
Aaron Medical
and Director

Moshe Citronowicz
Executive
Vice President-  2001   $149,697    2,671   17,205     --    155,000          --
Chief Operating  2000   $122,076    2,485   12,711     --         --          --
Officer          1999   $116,193    2,439   14,564     --         --          --

Manfred Sablowski
Vice President
Sales &
Marketing        2001   $105,361      407    2,360     --     25,000          --

Richard Kozloff
Quality Control
Officer          2001    $106,096   1,955    7,124     --     35,000          --

(b) Other compensation consists of medical insurance and auto.

The following two tables summarize: 1. The options granted in the last fiscal year and 2. the aggregated option exercises in the last fiscal year and the fiscal year end option values.

                      Option/SAR Grants in Last Fiscal Year

                              Individual Grants
--------------------------------------------------------------------------------
(a)                     (b)              (c)              (d)              (e)

                     Number of        % of Total
                    Securities       Options/SARs
                    Underlying        Granted to       Exercise
                      Option/         Employees in      or Base       Expiration
Name                    SARs          Fiscal Year      Price($/Sh)        Date
--------------------------------------------------------------------------------



Andrew Makrides       155,000             13.67           $ .50   April 24, 2011

Moshe Citronowicz     155,000             13.67             .50   April 24, 2011

Robert Saron          155,000             13.67             .50   April 24, 2011

Manfred Sablowski      25,000              2.20             .50   April 24, 2011

Richard Kozloff        35,000              3.09             .50   April 24, 2011

Total Issued        1,134,000              100%

                       Aggregated Option Exercises in Last
                  Fiscal Year and Fiscal Year End Option Values

                                                                         Value
                                                                          of
                                                        Number of    Unexercised
                                                      Unexercised   In-The-Money
                                                       Options at     Options at
                   Shares                   Options    Fiscal Year       Fiscal
                  Acquired on   Value       Received     End(#)           Year
Name              Exercise(#)  Realized       2001     Exercisable       End(a)
----             ------------  --------    ---------   ------------  -----------

Andrew Makrides     --            --        155,000        375,000       27,900
J. Robert Saron     --            --        155,000        395,000       27,900
Moshe Citronowicz   --            --        155,000        330,000       27,900
Manfred Sablowski   --            --         25,000         25,000        4,500
Richard Kozloff     --            --         35,000        100,000        6,500

(a) As of December 31, 2001, the exercise prices of the options which were issued in 2001 were lower than the closing sale prices on that day for the common stock by $.18 per share. The bid price as reported on OTC Bulletin Board on December 31, 2001 was $.68.

Outside Directors are compensated in their capacities as Board members through option grants. The Company's Board of Directors presently consists of J. Robert Saron, Andrew Makrides, Chairman CEO, and President, George W. Kromer, Jr. and Alfred Greco. For the past years, pursuant to a written agreement, Mr. Kromer has been retained by Bovie Medical Corporation as a business and public relations consultant on a month-to-month basis at an average monthly fee of $1,200. Mr. Greco is an officer and director of Alfred V Greco PLLC, counsel to the corporation which earned legal fees from the Company of $90,136 during 2001. In the year 2001, Messrs. Kromer and Greco were each granted 100,000 options as members of the Board of Directors.

There have been no changes in the pricing of any options previously or currently awarded.

In February 2002, the Company extended employment contracts with certain of its officers for three years. The following schedule shows all contracts and terms with officers of the Company.

                            Bovie Medical Corporation
                               Officers' Contracts
                                December 31, 2001

                        Contract     Expiration    Contractual      Auto
                          Date         Date(1)       Base Pay     Allowance
                          ----         -------       --------     ---------

Andrew Makrides         01/01/98     12/31/2007      $  92,773      $ 6,310
J. Robert Saron         01/01/98     12/31/2007        136,123        6,310
Moshe Citronowicz       01/01/98     12/31/2007         99,905        6,310

(1) Includes a two year and a three year extension- Salaries increase annually pursuant to a contract formula.

Item 11. Security Ownership of Certain Beneficial Owners and Management of Bovie

The following table sets forth certain information as of December 31, 2001, with respect to the beneficial ownership of the Company's common stock by all persons known by the Company to be the beneficial owners of more than 5% of its outstanding shares, by directors who own common stock and/or options to levy common stock and by all officers and directors as a group.

                                    Number of       Nature       Percentage
Name and                             Shares           of            of
Address                 Title       Owned (i)       Ownership     Ownership(i)
-------                 -----       ---------       ---------     ------------


Maxxim Medical Inc.    Common      3,000,000      Beneficial        18.1%
 10300 49th St. North
 Clearwater, FL 33762

Directors and Officers
----------------------

Andrew Makrides        Common        690,800(ii)  Beneficial         4.2%
 734 Walt Whitman Road
 Melville, NY 11746

George Kromer          Common        305,000(iii) Beneficial         1.8%
 P.O. Box 188
 Farmingville, NY 11738

Alfred Greco           Common        301,500(iv)  Beneficial         1.8%
 666 5th Ave.
 New York, NY 10103

J. Robert Saron        Common        827,976 (v)   Beneficial        5.0%
 Ashley Drive
 Seminole, FL

Moshe Citronowicz      Common        504,591 (vi)  Beneficial        3.0%
 7100 30th Avenue N.
 St. Petersburg, FL 33710

Officers and Directors
as a group                           2,629,867(vii)                  16.0%

(i) Based on common shares of 13,204,755 and 3,239,500 options outstanding to acquire shares. Officers and directors have 1,655,000 options to acquire shares at December 31, 2001.

(ii) Includes 375,000 shares owned by Mr. Makrides reserved pursuant to 10 year options to purchase shares of the Company. His options range from $.50 for 155,000 to $1.15 for 50,000.

(iii) Constitute 305,000 shares reserved pursuant to 10 year options owned by Mr. Kromer to purchase shares of the Company. His options range from $.50 for 100,000 shares to $1.125 for 105,000 shares.

(iv) Include 250,000 shares reserved pursuant to 10 year options exercisable up to $.75 per share.

(v) Includes 395,000 shares reserved pursuant to 10 year options exercisable between $1.125 and $0.50 per share for 155,000 shares.

(vi) Includes 330,000 shares reserved pursuant to 10 year options exercisable at $.75 per share owned by Mr. Citronowicz.

(vii) Includes 1,655,000 shares reserved for options.

Item 12. Certain Relationships and Related Transactions

Former CEO and President

In October, 1999, the Company settled its dispute with this former officer for alleged sums claimed to be due him for interest and consulting fees incurred during his affiliation with Robert Speiser, the Company. The claim was settled in the amount of $150,000, payable $50,000 upon execution of the agreement and $100,000 over 20 months at $5,000 per month. As of December 31, 2001, the Company had satisfied its debt to the former officer.

See "Certain Relationships and Related Transactions". Presently there are no lawsuits between the Company and any former officer.

Alfred V. Greco a director and the principal of Alfred V. Greco PLLC, the Company's counsel. Mr. Greco's company received $90,136 in legal fees during 2001. See "Security Ownership of Certain Beneficial Owners and Management.

George Kromer, a director, also serves as a consultant to the Company with average consulting compensation of approximately $1,200 per month.

Item 13. Exhibits and Reports on Form 8-k

No Form 8-k was filed in the fourth quarter of 2001.

SIGNATURES

Pursuant to the requirements of the 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, in the City of St. Petersburg, State of Florida on March 15, 2002.

                                         Bovie Medical Corporation



                                         By: S/ Andrew Makrides
                                         ----------------------
                                         Andrew Makrides
                                         Chairman of the Board
                                         President

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

         Signatures                                   Title and Date

s/Andrew Makrides                                     Chairman of Board
-----------------------------------------------------
Andrew Makrides                                       Chief Executive Officer
                                                      President, Director
                                                      March 15, 2002

S/J. Robert Saron                                     Director
-----------------------------------------------------
J. Robert Saron                                       March 15, 2002



S/George W. Kromer                                    Director
-----------------------------------------------------
George W. Kromer                                      March 15, 2002



s/Charles Peabody                                     Chief Financial Officer
-----------------------------------------------------
Charles Peabody                                       March 15, 2002



s/Alfred Greco                                        Director
-----------------------------------------------------
Alfred Greco                                          March 15, 2002

F31

PART II

ITEM 7. FINANCIAL STATEMENTS

BOVIE MEDICAL CORPORATION INDEX
TO FINANCIAL STATEMENTS

       Contents                                          Page
       --------                                          ----

Independent Auditors' Report                              F2

Consolidated Balance Sheet at
 December 31, 2001 and 2000                               F3

Consolidated Statements of Operations for the
 years ended December 31, 2001 and 2000                   F5

Consolidated Statements of Shareholders' Equity
 for the years ended December 31, 2001 and 2000           F7

Consolidated Statements of Cash Flows for the
 years ended December 31, 2001 and 2000                   F8

Notes to Consolidated Financial Statements                F11

Consent of Certified Public Accountant                    F32

Bloom & Co., LLP.
50 Clinton Street, Suite 502
Hempstead, NY 11550 516 486-5900

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors
and Shareholders of
Bovie Medical Corporation

We have audited the accompanying consolidated balance sheets of Bovie Medical Corporation as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the 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. These 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 consolidated financial position of Bovie Medical Corporation as of December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Bloom & Co., LLP.
Hempstead, New York
March 13, 2002

BOVIE MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001 and 2000

ASSETS

                                               2001               2000
                                               ----               ----
Current assets:

Cash                                       $  578,354        $  278,662
Trade accounts receivable, net              1,200,933         1,256,049
Inventories                                 2,419,827         1,994,564
Prepaid expenses                              128,045           111,343
Deferred tax asset                            386,200           175,010
Other Assets                                      779           111,179
                                            ---------         ---------

Total current assets                        4,714,138         3,926,807

Property and equipment, net                 1,531,658         1,552,179

Other assets:

Repair parts                                  300,272           317,698
Trade name                                  1,509,662         1,603,527
Patent rights, net                            314,691           277,644
Deposits                                        8,124            35,719
Investment Joint Venture                      200,000           200,000
                                            ---------         ---------

                                            2,332,749         2,434,588
                                            ---------        ----------

   Total Assets                           $ 8,578,545       $ 7,913,574
                                            =========         =========