-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DhrzI9kBzcBTY4CgtSXMuxXapaHQDzYO1D1yQ2PICN4tcyn/cSwadyy8gRnO5kzN Yc7yCxMCmCu9niWutiAt3w== /in/edgar/work/20000829/0000950120-00-000225/0000950120-00-000225.txt : 20000922 0000950120-00-000225.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950120-00-000225 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUIDYNE CORP CENTRAL INDEX KEY: 0000352281 STANDARD INDUSTRIAL CLASSIFICATION: [3845 ] IRS NUMBER: 042608713 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-09922 FILM NUMBER: 712287 BUSINESS ADDRESS: STREET 1: 13 COLUMBIA DR STE 5 CITY: AMHERST STATE: NH ZIP: 03031 BUSINESS PHONE: 6038806300 MAIL ADDRESS: STREET 1: 13 COLUMBIA DR STREET 2: STE 18 CITY: AMHERST STATE: NH ZIP: 03031 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN ELECTROMEDICS CORP DATE OF NAME CHANGE: 19920703 10QSB/A 1 0001.txt FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A AMENDMENT NO. 1 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended Commission File Number APRIL 30, 2000 0-9922 --------------- ------ EQUIDYNE CORPORATION -------------------- (Exact Name of Small Business Issuer as Specified in its Charter) DELAWARE 04-2608713 -------- ---------- (State or Other Jurisdiction of Incorporation or Organization) 238 Littleton Road, Westford, Massachusetts 01886 ------------------------------------------------- (Address and Zip Code of Principal Executive Offices) Issuer's telephone number, including area code: 978-692-6680 ------------ Securities registered pursuant to Section 12(b) of the Exchange Act: NONE ------------ Securities registered pursuant to Section 12(g) of the Exchange Act: COMMON STOCK, PAR VALUE $.10 PER SHARE ------------ (Title of Class) Indicate by check mark whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- As of June 9, 2000, there were outstanding 16,128,933 shares of the Issuer's Common Stock, $.10 par value. EQUIDYNE CORPORATION Index ----- The registrant hereby amends its Quarterly Report on Form 10-Q for the quarter ended April 30, 2000 to (a) correct a change in the number of outstanding shares of the registrant's Common Stock, (b) correct certain errors in the registrant's unaudited consolidated balance sheets and unaudited consolidated statements of operations, (c) correct certain errors in the unaudited financial statements under "4. Income Taxes", "5. Equity" and "6. Earnings Per Common and Common Equivalent Shares", and (d) correct certain errors under Item 2. Changes in Securities. In accordance with the instructions for Form 10-Q, Item 1 is included herein in its entirety and a revised financial data schedule is attached as Exhibit 27.1. No other changes have been made to the Quarterly Report on Form 10-Q for the period ended April 30, 2000. Page ---- PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets, April 30, 2000 and July 31, 1999 .................3 Consolidated Statements of Operations for the Three and Nine Months Ended April 30, 2000 and April 30, 1999............................4 Consolidated Statements of Cash Flows for the Nine Months Ended April 30, 2000 and April 30, 1999.................................5 Notes to Consolidated Financial Statements ....................................6 Item 2. Management's Discussion and Analysis or Plan of Operation ..........10 PART II - OTHER INFORMATION Item 2. Changes in Securities ..............................................12 Item 6. Exhibits and Reports on Form 8-K ...................................12 SIGNATURES ...................................................................13 2 PART I - FINANCIAL INFORMATION Item 1. CONSOLIDATED FINANCIAL STATEMENTS EQUIDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS April 30, 2000 July 31, 1999 -------------- ------------- (Unaudited) ASSETS (Thousands) - ------ ----------- Current Assets: Cash and cash equivalents................. $ 8,868 $ 210 Accounts receivable....................... 23 897 Inventories............................... 90 1,480 Deferred income taxes..................... 162 - Prepaid and other current assets.......... 112 196 --------- --------- Total current assets...................... 9,255 2,783 Property and equipment.................... 1,001 745 Accumulated depreciation.................. (218) (115) --------- --------- 783 630 Deposits on tooling and machinery......... 899 - Goodwill.................................. 694 715 Patents................................... 1,962 2,897 Investment in affiliate................... 8,487 - Deferred income taxes, net of current..... 940 - Other..................................... 134 216 --------- --------- $ 23,154 $ 7,241 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Bank debt................................. $ - $ 1,073 Accounts payable.......................... 784 1,784 Accrued liabilities....................... 744 815 Dividends payable......................... - 373 --------- --------- Total current liabilities............ 1,528 4,045 Minority interest in consolidated subsidiary................................ - 440 Stockholders' equity: Preferred Stock, $.01 par value; Authorized - 1,000,000 shares; Series A Convertible Preferred - Outstanding None at April 30, 2000 and 2,400 at July 31, 1999............................. - 1,909 Series B Convertible Preferred - Outstanding None at April 30, 2000 and 1,170 at July 31, 1999............................. - 982 Common stock, $.10 par value; Authorized - 35,000,000 shares; Outstanding - 16,128,933 shares at April 30, 2000 and 9,637,621 at July 31, 1999... 1,613 963 Additional paid-in capital................ 28,426 14,837 Retained deficit.......................... (8,261) (15,541) Accumulated other comprehensive loss...... - (200) --------- --------- 21,778 2,950 Deferred compensation..................... (152) (194) --------- --------- Total stockholders' equity................ 21,626 2,756 --------- --------- $ 23,154 $ 7,241 ========= ========= See accompanying notes. 3 EQUIDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED April 30, April 30, April 30, April 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (Thousands, except per share amounts) Net sales................................ $ - $ 1,756 $ 802 $ 6,132 Cost of goods sold....................... - 1,343 502 4,024 ----------- ----------- ----------- ----------- Gross profit............................. - 413 300 2,108 Selling, general and administrative...... 3,248 1,765 5,624 5,616 Research and development................. 315 78 676 283 Write-down of goodwill................... - 3,196 - 3,196 ----------- ----------- ----------- ----------- Total operating expenses................. 3,563 5,039 6,300 9,095 ----------- ----------- ----------- ----------- Operating loss........................... (3,563) (4,626) (6,000) (6,987) Other income (expenses): Loss on sale of audiometrics assets...... - (98) - (98) Gain on sale of affiliate capital stock.. 10,819 - 12,684 - Equity in losses of affiliate............ (150) - (409) - Minority interest in affiliate........... - - 113 - Interest, net............................ 69 (114) 90 (197) Other.................................... 31 (95) 21 (293) 10,769 (307) 12,499 (588) ----------- ----------- ----------- ----------- Income (loss) before income tax benefit.................................. 7,206 (4,933) 6,499 (7,575) Income tax benefit....................... (781) - (781) - ----------- ----------- ----------- ----------- Net income (loss)........................ $ 7,987 $ (4,933) $ 7,280 $ (7,575) =========== =========== =========== =========== Net income (loss) attributable to common stockholders*..................... $ 7,987 $ (5,001) $ 7,262 $ (7,898) =========== =========== =========== =========== Income (loss) per common and common equivalent share: Basic $ .51 $ (.64) $ .55 $ (1.07) =========== =========== =========== =========== Diluted $ .47 $ (.64) $ .47 $ (1.07) =========== =========== =========== ===========
See accompanying notes. * The three and nine months ended April 30, 2000 includes the impact of $-0- and $141,000, respectively, of dividends on Preferred Stock. The three and nine months ended April 30, 2000 also includes the impact of $-0- and $123,000, respectively, of preferred stock redemption discounts. The three and nine months ended April 30,1999 includes the impact of $68,000 and $323,000, respectively, of dividends on Preferred Stock. All of the remaining outstanding Preferred Stock was redeemed/converted during the second quarter of the fiscal year ending July 31, 2000. 4 EQUIDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) NINE MONTHS ENDED ----------------- APRIL 30, APRIL 30, 2000 1999 ----------- ----------- (Thousands) OPERATING ACTIVITIES: Net income (loss) $ 7,280 $ (7,575) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 375 435 Loss on disposal of fixed assets 47 - Deferred compensation amortization 517 964 Deferred income taxes (1,102) - Stock compensation 1,003 - Equity in loss of unconsolidated affiliate 409 - Minority interest in affiliate (113) - Gain on sale of affiliate capital stock (12,684) - Loss on sale of audiometrics assets - 98 Write-down of goodwill - 3,196 Changes in operating assets and liabilities: Accounts receivable 105 (381) Inventories,prepaid and other current assets (126) (209) Accounts payable and accrued liabilities (601) 694 ----------- ----------- Net cash used in operating activities (4,890) (2,778) INVESTING ACTIVITIES: Purchase of property and equipment, net (962) (246) Deposits on tooling and machinery (899) - Proceeds from sale of affiliate stock 14,305 - Proceeds from sale of audiometrics assets - 625 ----------- ----------- Net cash provided by investing activities 12,444 379 FINANCING ACTIVITIES: Payments on redemption of preferred stock (2,010) - Net proceeds (payments) on debt and bank line of credit (1,249) 157 Issuance of capital stock by unconsolidated affiliate 1,635 - Net proceeds from related party debt - 231 Dividends paid - (15) Issuance of common stock, net 2,422 485 Issuance of preferred stock, net - 1,498 Proceeds from exercise of stock options and warrants 505 22 ----------- ----------- Net cash provided by financing activities 1,303 2,378 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents (12) 16 Decrease in cash due to change in method of accounting from consolidation to equity method (187) - ----------- ----------- Increase (decrease)in cash and cash equivalents 8,658 (5) Cash and cash equivalents, beginning of period 210 396 ----------- ----------- Cash and cash equivalents, end of period $ 8,868 $ 391 =========== =========== NON-CASH ACTIVITIES: Common stock issued for services $ 300 $ 188 =========== =========== Common stock issued in connection with employment agreements $ 1,003 $ - =========== =========== Common stock issued under cashless conversion provision of options/warrants $ 74 $ 59 =========== =========== Common stock issued upon conversions and redemptions of convertible preferred stock $ 808 $ 135 =========== =========== Short-term debt issued in connection with Preferred stock redemptions $ 700 $ - =========== =========== See accompanying notes. 5 EQUIDYNE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2000 (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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 nine month periods ended April 30, 2000 are not necessarily indicative of the results that may be expected for the year ending July 31, 2000. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended July 31, 1999. Foreign Currency Translation Effective November 1, 1999, the Company changed its method of accounting for its foreign affiliate, Rosch AG Medizintechnik ("Rosch AG"), from the consolidated basis to the equity method, due to the decrease in the Company's ownership percentage (see Note 3). Through October 31, 1999, the foreign affiliate was accounted for on the consolidated basis, and accordingly, its financial statements were translated into U.S. dollars in accordance with Statement of Financial Standards No. 52, Foreign Currency Translation. All balance sheet amounts were translated using the exchange rates in effect at the balance sheet date. Statement of Operations amounts were translated using average exchange rates. The gains and losses resulting from the changes in exchange rates from the date of acquisition of Rosch AG to October 31, 1999 were reported separately as a component of stockholders equity. For periods subsequent to October 31, 1999, in accordance with the equity method of accounting, the Company reports its percentage share of the foreign affiliate's results of operations as a separate component in its statement of operations. This amount is determined by translating the results of operations of the foreign affiliate to U.S. dollars using average exchange rates for the period. The aggregate transaction gains and losses are insignificant. Comprehensive Income (Loss) Effective August 1, 1998, the Company adopted Statement of Financial Accounting Standard No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 130 establishes new rules for the reporting and display of comprehensive income or loss and its components, however, the adoption of this statement had no impact on the Company's net income or shareholders' equity. For the three months ended April 30, 2000, there were no items of other comprehensive income. For the nine months ended April 30, 2000, the Company's only item of other comprehensive income was the foreign currency translation adjustment recognized in consolidation of its partially-owned German affiliate, Rosch AG. This affiliate ceased to be consolidated effective November 1, 1999 (see Note 3). SFAS 130 requires such adjustments, which prior to adoption were reported separately in shareholders' equity, to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of SFAS 130. The foreign currency translation adjustment and comprehensive income for the three months ended April 30, 2000 was $0 and $7,987,000, respectively. The foreign currency translation adjustment and comprehensive income for the nine months ended April 30, 2000 was $(40,000) and $7,280,000, respectively. 2. DEBT The Company's method of accounting for its German affiliate, Rosch AG was changed from consolidation to the equity method effective November 1, 1999 (see Note 3). As a result, the debt of Rosch AG is no longer included in the consolidated balance sheet of Equidyne Corporation and Subsidiaries. 6 In November 1999, in connection with the redemption of the Company's Series A Preferred Stock, the Company issued a Promissory Note and Security Agreement (the "Secured Note") in the principal amount of $1,050,000. The Secured Note was non-interest bearing and secured by certain intellectual property rights of the Company. The Secured Note was due in full on the earlier to occur of (i) five business days of the closing date of the initial public offering in Germany of Rosch AG or (ii) April 30, 2000. The initial public offering took place on February 24, 2000 (see Note 3), thus the Secured Note matured on February 29, 2000. The terms of the Secured Note provided that the principal amount would be reduced to $700,000 if the average closing bid price of the Company's Common Stock for the five trading days prior to maturity exceeded $3.00 per share. As this provision was met, the balance of the Secured Note was adjusted to $700,000. The Secured Note was paid in full on March 7, 2000. 3. INVESTMENT IN AFFILIATE On February 24, 2000, Rosch AG completed an Initial Public Offering ("IPO") of its shares on the Neuer Market, a segment of the Frankfurt (Germany) Stock Exchange. Rosch AG sold 1,263,950 newly issued shares in the IPO, which, along with the Company's sale of certain of its shares of Rosch AG in the IPO, reduced the Company's ownership of Rosch AG to 26.43%. The Company received proceeds of approximately $11.1 million from the sale of its shares, and has recognized a pre-tax gain of approximately $10.8 million. Effective November 1, 1999, the Company accounts for its investment in Rosch AG under the equity method of accounting. Under the equity method of accounting, the Company's percentage share of Rosch AG's operating results are reported as a single line item in its Statement of Operations. For the three and nine months ended April 30, 2000, the Company's share of the net loss of Rosch AG was approximately $150,000 and $409,000, respectively. For the three months ended October 31, 1999, the Company consolidated the operating results of Rosch AG and recognized the minority stockholders' share of Rosch AG's net losses of approximately $113,000. The following is summarized unaudited financial information of Rosch AG as of and for the three months ended April 30, 2000: (000's) Gross sales $ 1,022 Cost of goods sold 523 Net income (loss) (567) Total assets 33,750 Total liabilities 1,638 At April 30, 2000, the quoted market value of the Company's investment in Rosch AG was approximately $79 million. The valuation represents a mathematical calculation based on a closing quotation published by the Neuer Market and Euro to U.S. Dollar conversion rates at that date. The valuation is not necessarily indicative of the amount that could be realized upon sale. Furthermore, the Company is prohibited from selling any its shares of Rosch AG until August 24, 2000, under the terms of an agreement between the Frankfurt Stock Exchange and the Company. 4. INCOME TAXES The Company's deferred tax assets (which result primarily from net operating loss carryforwards) as of April 30, 2000 and July 31, 1999 were $1,102,000 and $4,095,000, respectively. SFAS No. 109 requires a valuation allowance against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. As of July 31, 1999, uncertainty existed about the realization of the Company's deferred tax assets, and a valuation allowance of $4,095,000 was recognized. SFAS No. 109 sets forth several possible sources of future taxable income to be used to evaluate the likelihood of realization of deferred tax assets. One such source is the availability of tax planning strategies that could be used to accelerate future taxable income in order to utilize expiring carryforwards. Management believes that sufficient tax planning strategies, as defined by SFAS No. 109, are available such that it is more likely than not that the deferred tax assets will be realized, and therefore, the valuation allowance against deferred tax assets has been adjusted to $-0-, thereby recognizing approximately $1.1 million of net deferred tax assets at April 30, 2000. As of April 30, 2000, the Company has net operating loss carryforwards available totaling approximately $2.5 million, after utilization of approximately $6.2 million for the three months ended April 30, 2000. These carryforwards expire from 2004 through 2020, and are subject to annual limitations under Internal Revenue Code Section 382. Based upon an evaluation of these limitations, the Company expects to offset all of its Federal taxable income for the fiscal year ending July 31, 2000 by utilizing its net operating loss carryforwards. However, the Company will be subject to alternative minimum tax, and has recognized a current provision for Federal income taxes based upon estimated alternative minimum taxable income for its fiscal year ending July 31, 2000. In addition, due to limitations on net operating loss carryforward usage imposed by certain states, a current provision for State income taxes has also been recognized based upon estimated taxable income for State income tax purposes. 7 Significant components of the Company's deferred tax assets are as follows: April 30, 2000 July 31, 1999 -------------- ------------- Deferred tax assets: Net operating loss carryforwards $ 842,000 $3,582,000 Accrued expenses 30,000 83,000 Inventory 115,000 139,000 Other 15,000 10,000 Deferred compensation - 281,000 Alternative minimum tax credit carryforward 100,000 - ----------- ----------- Total deferred tax assets 1,102,000 4,095,000 Valuation allowance for deferred tax assets - (4,095,000) ----------- ----------- Net deferred tax assets $1,102,000 $ - =========== =========== Following is a summary of the tax provision (benefit) recognized for the three and nine months ended April 30, 2000: Current Deferred -------- ---------- Federal $100,000 $(1,066,000) State 221,000 (36,000) --------- ------------ Total $321,000 $(1,102,000) ========= ============ For the three and nine months ended April 30, 1999, the net provision for Federal and State income taxes was $-0-, due to the Company's net losses for the periods, and the valuation allowance recognized against the deferred tax assets, as described above. A reconciliation of income taxes computed at the federal statutory rates to income tax expense for the nine months ended April 30, 2000 is as follows: Amount Percent -------- ------- Benefit at Federal Statutory Rates $2,210,000 34.0% State Income Taxes, net of Federal Benefit 122,000 1.9 Change in Valuation Reserve (3,146,000) (48.4) Other 33,000 .5 ----------- ---------- Total $(781,000) (12.0)% =========== ========== 5. EQUITY During the three months ended April 30, 2000, the Company closed on a private placement of 62,500 shares of Common Stock with six investors for a total of $250,000. Effective February 17, 2000, the Company issued 150,000 shares of Common Stock to two executives pursuant to the terms of their respective employment agreements. The common stock was valued at its quoted fair market value at the close of business on February 17, 2000, or $6.69 per share, resulting in the recognition of compensation expense of $1,003,000. In addition, during the three months ended April 30, 2000, the Company issued 1,073,153 shares of Common Stock pursuant to the exercise of outstanding stock options and warrants. 8 6. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE The following table sets forth the computation of basic and diluted earnings per share:
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------ ------------------------ APRIL 30, APRIL 30, APRIL 30, APRIL 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (Thousands, except per share amounts) Numerator: Net income (loss).................... $ 7,987 $ (4,933) $ 7,280 $ (7,575) Preferred stock redemption premium... - - 123 - Preferred stock dividends............ - (68) (141) (323) ----------- ----------- ----------- ----------- Numerator for basic earnings per share-income available to common stockholders........................ $ 7,987 $ (5,001) $ 7,262 $ (7,898) Effect of dilutive securities: Preferred stock redemption premium.. - - (123) - Preferred stock dividends........... - - 141 - ----------- ----------- ----------- ----------- - - 18 - ----------- ----------- ----------- ----------- Numerator for diluted earnings per share-income available to common shareholders after assumed conversions................. $ 7,987 $ (5,001) $ 7,280 $ (7,898) Denominator: Denominator for basic earnings per share-weighted average share........ 15,653,170 7,806,813 13,142,154 7,413,750 Effect of dilutive securities: Stock options....................... 895,814 - 565,900 - Warrants............................ 499,857 - 178,328 - Convertible preferred stock......... - - 1,513,942 - ----------- ----------- ----------- ----------- Dilutive potential common shares..... 1,395,671 - 2,258,170 - ----------- ----------- ----------- ----------- Denominator for diluted earnings per share-adjusted weighted- average shares and assumed conversions......................... 17,048,841 7,806,813 15,400,324 7,412,750 =========== =========== =========== =========== Basic earnings (loss) per share........ $ 0.51 $ (0.64) $ 0.55 $ (1.07) =========== =========== =========== =========== Diluted earnings (loss) per share...... $ 0.47 $ (0.64) $ 0.47 $ (1.07) =========== =========== =========== ===========
Dilutive securities were not included in the calculation of diluted weighted average shares for the three and nine months ended April 30, 1999, due to their anti-dilutive effect. For additional disclosure regarding the stock options and the warrants, see Note 5. Options to purchase 235,000 shares of common stock at prices ranging from $5.94 to $7.00 per share were outstanding at April 30, 2000 but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive. 7. COMMITMENTS Effective February 15, 2000, Equidyne Systems, Inc. relocated its principal offices within San Diego, California, terminating its month-to-month lease, and entering into a new 36-month lease. The new lease provides for monthly rent beginning at $6,282 and increasing annually to $8,077 and $8,301 per month in years two and three, respectively. In addition, in December 1999, the Company entered into a lease amendment for its Aliso Viejo, California facility, adding new space within the same office complex. The amended lease has a 39 month term, expiring February 2003, and provides for monthly rent of $6,528 through February 2001. Monthly rent for the subsequent two twelve-month periods is fixed at $6,854 and $7,197, respectively. In January 2000, the Company relocated from its Amherst, New Hampshire offices to Westford, Massachusetts, entering into a three year lease at the rate of $2,606 per month. In May 2000, the Company entered into an amendment to its San Diego office lease for additional space adjacent to its San Diego office facility. The amended lease will commence upon completion of improvements for a term of 36 months. The monthly rent for the additional space is $4,832 for the first year, and increasing to $5,025 and $5,227 for years two and three, respectively. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This Report contains or refers to forward-looking information made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. That information covers future revenues, products and income and is based upon current expectations that involve a number of business risks and uncertainties. Among the factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statement include, but are not limited to, technological innovations of competitors, delays in product introductions, changes in health care regulation and reimbursements, changes in foreign economic conditions or currency translation, product acceptance or changes in government regulation of the Company's products, as well as other factors discussed in other Securities and Exchange Commission filings for the Company. OVERVIEW - -------- The success of the IPO of Rosch AG in February 2000 provided the Company with an infusion of working capital that has allowed the Company to aggressively pursue its goal of a full-scale market introduction of the INJEX(TM) System to the U.S. market in July 2000. The INJEX(TM) System is a hand-held, spring-powered device that injects drugs from a needle-free syringe through the skin as a narrow, high-pressure stream of liquid. The INJEX(TM) System has received U.S. FDA 510(k) clearance to market the system in the U.S. During the quarter ended April 30, 2000, the Company has made significant investments in the automated, low-cost production systems capable of fulfilling the anticipated demand for the product. The Company has also added key operating and sales executives, hired nearly all of its 50-person dedicated sales force, and has forged alliances with outside firms for assistance in the areas of public relations and diabetes education. In addition, the Company has made significant investments in its marketing materials, including product literature and a new logo. These achievements have put the Company in position to launch the INJEX(TM) System as planned this July. However, there can be no assurance that the Company will be able to successfully manufacture, market, sell and deliver the INJEX(TM) System, as it has yet to be introduced into the U.S. market, and has not yet been commercially accepted. RESULTS OF OPERATIONS - --------------------- Net sales for the three and nine month periods ended April 30, 2000 were $-0- and $802,000, respectively, compared to $1,756,000 and $6,132,000 for the three and nine month periods ended April 30, 1999, respectively. Cost of sales for the three and nine month periods ended April 30, 2000 were $-0- and $502,000, respectively, compared to $1,343,000 and $4,024,000 for the three and nine month periods ended April 30, 1999, respectively. The decrease in net sales and cost of sales is attributable to three major factors: (1) the Company's sale of its audiometrics business assets in April 1999 resulted in a decrease in sales of approximately $31,000 and $618,000 for the three and nine month periods, respectively, as compared to the same period in the prior fiscal year; (2) The cessation of the operations of the Company's wholly-owned subsidiary, Dynamic Dental Systems (DDS), resulted in net sales of DDS for the three and nine months ended April 30, 2000 decreasing by $254,000 and $1,078,000, respectively; and (3) The Company's change from the consolidation basis to the equity method of accounting for its German affiliate, Rosch AG, resulted in a change in the method of reporting the operations of Rosch AG in the Company's Consolidated Statements of Operations. Under the consolidation basis, the Rosch AG Statement of Operations is consolidated with the Statement of Operations of the Company. Under the equity method of accounting, the Company's Statement of Operations only reflects its share of the net income or loss of Rosch AG as a separate component of the Company's Statement of Operations. As a result, the Statements of Operations for the three and nine months ended April 30, 2000 do not include the net sales and cost of sales of Rosch AG, whereas the Statements of Operations for the three and nine months ended April 30, 1999 include Rosch AG net sales of $1,306,000 and $3,959,000, respectively. Selling, general and administrative expenses for the three and nine month periods ended April 30, 2000 were $3,248,000 and $5,624,000, respectively, compared to $1,765,000 and $5,616,000, respectively, for the comparable prior year periods. The increase for the three months ended April 30, 2000 is due primarily to the recognition of approximately $1 million for compensation associated with common stock issued to two executives of the Company in accordance with the terms of their respective employment agreements. Other increases resulted from an increased number of employees at the Company's wholly-owned subsidiary, Equidyne Systems, Inc. ("ESI"), recruiting fees associated with the hiring of 50 new ESI sales representatives, and increased market research activity. The increase for the quarter and decrease for the nine month period ended April 30, 2000 reflects the impact of the Company's sale of its audiometrics business assets in April 1999, and cost savings associated with ceasing the operations of DDS. The change in accounting method described above resulted in a reduction in the selling, general and administrative expense reported in the consolidated Statement of Operations for the three and nine month periods of $560,000 and $1,616,000, respectively. Also contributing to the change was a reduction for the three and nine month periods ended April 30, 2000 of approximately $295,000 and $964,000, respectively of amortization expense due primarily to deferred compensation recognized in connection with the acquisitions of DDS and ESI. These expenses became fully amortized during the fiscal year ended July 31, 1999. 10 Research and development expenses for the three and nine months ended April 30, 2000 were $315,000 and $676,000, respectively, compared to $78,000 and $283,000, respectively, for the comparable prior year periods. The increase reflects the availability of working capital at the Company, and management's decision to allocate a greater portion of the Company's resources towards the development of new products and improved product features. Net income for the three and nine month periods ended April 30, 2000 was $7,987,000 and $7,280,000, respectively, compared to a net (loss) of $(4,933,000) and $(7,575,000), respectively, for the same periods in the prior fiscal year. The change is primarily the result of the gains recognized on the partial sales of the Company's ownership in Rosch AG, which were $10,819,000 and $12,684,000 for the three and nine months ended April 30, 2000, respectively. The sale of the audiometrics business assets in April 1999 and ceasing the operations of DDS also caused reductions to the Company's net losses for the periods, as both operations incurred significant losses during the three and nine months ended April 30, 1999. The net income for the three and nine month periods ended April 30, 2000 were further increased by the recognition of a net income tax benefit of $781,000 relating primarily to a reduction in the Company's valuation allowance against a portion of its deferred tax assets. The increase in net income for the three and nine months ended April 30, 2000 was also offset by increased costs (described above)incurred in connection with ESI and its preparation for full-scale U.S. market introduction of the INJEX(TM) System. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital (deficit) of the Company at April 30, 2000 was $7,727,000, compared to $(1,262,000) at July 31, 1999. The increase of approximately $9 million primarily resulted from the proceeds from the sale of a portion of the Company's ownership in Rosch AG of approximately $11.1 million, partially offset by the net effect of the Company's operating losses. In addition, the change in the accounting treatment for the Company's investment in Rosch AG from consolidation to equity method had the impact of removing the working capital of Rosch AG from the consolidated balance sheet of the Company. Rosch AG's working capital at July 31, 1999 was approximately $400,000. The Company has significantly improved its working capital position, and currently has sufficient working capital to sustain the Company through the next twelve months. Of the proceeds from the IPO described above, $700,000 was used to pay-off the Company's $700,000 note payable outstanding at January 31, 2000 (see Note 2). The balance of the proceeds are being used to fund the acquisition of the high-volume, fully-automated production tools that are necessary to fill the anticipated demand for the INJEX(TM) System. In addition, the funds are being used to build the infrastructure necessary to support the business, including the hiring of a full-time dedicated sales force, a customer support team, and various other personnel requirements. The proceeds are also being used to implement strategic marketing initiatives, continued research and development initiatives, and general corporate purposes. 11 PART II. - OTHER INFORMATION Item 2. CHANGES IN SECURITIES During the three months ended April 30, 2000, the Company closed a private placement of 62,500 shares of Common Stock with six "accredited investors", as such term is defined in Regulation D under the Securities Act, for a total of $250,000. In addition, the Company issued 1,073,153 shares of Common Stock pursuant to the exercise of outstanding stock options and warrants, and issued 150,000 shares of Common Stock to two executives pursuant to the terms of their respective employment agreements. The issuance of these shares was claimed exempt from the registration requirements of the Securities Act of 1933, as amended, by reason of Section 4(2) thereof. Item 6. EXHIBITS AND REPORTS ON FORM 8-K There were no reports on Form 8-K filed during the quarterly period ended April 30, 2000. Exhibits: 10.1 - Amended and Restated Employment Agreement dated January 1, 2000 by and between the registrant and Thomas A. Slamecka 10.2 - Amended and Restated Employment Agreement dated January 1, 2000 by and between the registrant and Michael T. Pieniazek 27. Financial Data Schedule 12 SIGNATURES ---------- In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EQUIDYNE CORPORATION Dated: August 29, 2000 /s/ J. Randall Nelson --------------------------------------- J. Randall Nelson Chief Executive Officer Dated: August 29, 2000 /s/ Michael T. Pieniazek --------------------------------------- Michael T. Pieniazek Chief Financial Officer 13 EXHIBIT INDEX Exhibit Description - ------- ----------- 10.1 Amended and Restated Employment Agreement dated January 1, 2000 by and between the registrant and Thomas A. Slamecka 10.2 Amended and Restated Employment Agreement dated January 1, 2000 by and between the registrant and Michael T. Pieniazek 27 Financial Data Schedule EX-99 2 0002.txt EXHIBIT 10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AGREEMENT, dated as of the lst day of January, 2000, by and between AMERICAN ELECTROMEDICS CORP., a Delaware corporation (the "Company"), and THOMAS A. SLAMECKA (the "Executive"). W I T N E S S E T H: WHEREAS, the Company has employed the Executive in the capacity of Chairman of the Board of Directors, and the Executive has rendered such services, pursuant to Employment Agreements, dated as of February 5, 1997 and January 1, 1998 (the "Original Agreements"); and WHEREAS, the Company and the Executive desire to amend their Original Agreements to assure the continuity of their relationship, all subject to the terms and conditions contained herein. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, agree as follows: 1. Retention of Employment. The Company hereby continues the employment of the Executive as Chairman of the Board of Directors of the Company, and the Executive hereby accepts the continuation of such employment, all upon and subject to the terms and conditions hereinafter set forth. 2. Term. The term of the employment under this Amended Agreement shall be for a period commencing on January 1, 2000 and terminating on December 31, 2003 (the "Initial Term"), and shall be automatically renewed for additional one (1) year periods thereafter (the "Renewal Term"), unless either party gives the other written notice of termination not less than sixty (60) days prior to the end of the Initial Term or any Renewal Term (collectively, the "Term"). 3. Position, Duties and Representations. 3.01. Service with the Company. The Executive shall serve as Chairman of the Board of Directors of the Company. The Executive agrees to perform such executive employment duties for the Company consistent with the position specified above, and as the Board of Directors shall assign to him from time to time consistent with his position with the Company. The Company agrees to include the Executive on the management slate of directors at any stockholders meeting held or consent in lieu of a meeting executed during the Term at which directors are to be elected. 3.02. Scope of Services. The Executive agrees to serve the Company faithfully and to the best of his ability, and to devote the time, attention and efforts necessary to advance the business and affairs of the Company during the Term. If requested, the Executive shall serve as an officer and/or director of any subsidiary of the Company, without any additional compensation hereunder. During the Term, the Executive may render services to other entities, provided such services do not violate Sections 5.01 and 5.03 hereof and do not interfere with his obligations to the Company hereunder. 4. Compensation. 4.01. Annual Salary. The Executive will receive an annual base salary ("Base Salary") at an annual rate of $75,000 for the Initial Term paid in accordance with the Company's normal payroll practices. In addition, on an annual basis the Board of Directors or a committee thereof (the "Compensation Committee") shall review the Executive's compensation with a view towards increasing the Base Salary and granting stock options to the Executive, based on the Executive's performance during the preceding year established by the Compensation Committee. 4.02. Bonus. (a) In further consideration of the Executive's agreement to perform services hereunder, the Executive shall be entitled to an annual cash bonus (the "Profits Bonus") in an amount equal to five percent (5%) of the Company's consolidated pre-tax profits (the "Company Profits") in excess of $500,000 (the "Threshold") for the first two fiscal years during the Term commencing with fiscal year ending July 31, 2000. This annual Profits Bonus shall not exceed $275,000 in the first fiscal year and $785,000 in the second fiscal year. (b) The Profits Bonus amount shall be calculated initially by the Chief Financial Officer of the Company based upon the Company's audited financial statements for the relevant fiscal year. Promptly after completion of the Profits Bonus calculation for each fiscal year, a report of the calculation shall be sent to the Board of Directors. The Board of Directors will then present the proposed Profits Bonus to the Executive. Within thirty (30) days after receipt thereof, the Executive may object to the calculation by requesting that the accounting firm then auditing the financial statements of the Company review the calculation. The results of such accountants' review shall be final and binding on the Executive and the Company. Any Profits Bonus shall be paid to the Executive within thirty (30) days after the Executive receives the Profits Bonus calculation, except that if he objects thereto, the payment shall be made as soon as practicable after the resolution of the objection. The Executive shall bear the cost of the accounting firm's review, except if upon such review of the Profits Bonus calculation the accounting firm determines that the amount of the Profits Bonus should be increased by ten percent (10%) or more from the amount calculated by the Company, in which case the Company shall bear the cost of the accounting firm's review. (c) In the event the period of the Term for which a Profits Bonus is being determined is less than the entire fiscal year being used for the calculation, the Profits Bonus, if any, and the Threshold for such period shall be multiplied by a fraction, the numerator of which shall be the number of whole months during such fiscal year that the Executive was an employee of the Company and the denominator of which shall be 12. (d) Notwithstanding any Profits Bonus which may be paid to the Executive pursuant to this Section 4.02, for each fiscal year during the Term the Compensation Committee may award the Executive a supplemental bonus based upon factors other than the Company Profits for such fiscal year, as determined by such Committee. 4.03. Bonus Shares. The Company hereby agrees to issue to the Executive 100,000 shares (the "Bonus Shares") of the Company's Common Stock, as presently constituted, in the event that the closing price of the Company's Common Stock as reported on the OTC Bulletin Board or other national market quote system or exchange where the Common Stock is then traded (the "Trading Price") equals or exceeds $6.20 per share for a period of three (3) consecutive trading days during the Term. In the event of any increase in the number of shares outstanding, stock split, stock dividend, reorganization or other change in the Common Stock, the number of Bonus Shares and/or the Trading Price shall be proportionately adjusted. The Company shall immediately register the Bonus Shares under the Securities Act of 1933, as amended, after the issuance thereof, subject to the availability of audited financial information and regulatory review. 4.04. Participation in Benefit Plans. The Executive shall also be entitled, to the extent that his position, title, tenure, salary, age, health and other qualifications make him eligible, to participate in all employee benefit plans or programs (including, but not limited to, medical/dental insurance, disability, stock option, retirement and pension plans and vacation time, sick leave and holidays) of the Company currently in existence on the date hereof or as may hereafter be instituted from time to time. The Executive's participation in any such plan or program shall be subject to the provisions, rules and regulations applicable thereto. 4.05. Expenses. In accordance with the Company's policies established from time to time, the Company shall pay or reimburse the Executive for all reasonable and necessary expenses incurred by him in the performance of his duties under this Agreement, subject to the presentment of appropriate vouchers and receipts. 4.06. Insurance. The Executive acknowledges and agrees that the Company may obtain a life insurance policy on the life of the Executive in the amount of at least $1,000,000 with the Company named as the beneficiary. The Executive shall cooperate fully with the Company's efforts to obtain such insurance policy, including making himself available for physical examinations. 5. Non-Disclosure of Confidential Information; Non-Competition. 5.01. Confidentiality. Except as may be in furtherance of the Executive's performance of his functions as a senior executive officer of the Company, the Executive shall not, throughout the Term of this Agreement and thereafter, disclose to any third party or use or authorize any third party to use, any information relating to the business, business plans, trade secrets or other interests of the Company (including customers and clients of the Company) which is confidential and valuable to the Company or any of its subsidiaries or any third party (including customers and clients of the Company) and which is not known to the public (the "Confidential Information"). The Confidential Information is and will remain the sole and exclusive property of the Company. During the Term of this Agreement, the Confidential Information, when entrusted to the Executive's custody, shall be deemed to remain at all times in the Company's sole possession and control. Notwithstanding the foregoing, the Executive may, after prior written notice to the Company (to the extent such notice is possible under the circumstances) disclose such Confidential Information pursuant to subpoena or other legal process, and promptly thereafter shall advise the Company in writing as to the Confidential Information which was disclosed and the circumstances of such disclosure. 5.02. Return of Documents. The Executive agrees that, upon the expiration of his employment with the Company for any reason, he shall forthwith deliver up to the Company any and all documents and other material, and all copies thereof, in his possession or under his control relating to any Confidential Information which is otherwise the property of the Company. 5.03. Non-Competition. The Executive recognizes that the services to be performed by him for the Company are special and unique. The Executive further recognizes that the nature of the Company's business is such that the Executive will have full knowledge of the Company's business plans and practices. The parties therefore confirm that, in order to protect the Company's goodwill, it is necessary that the Executive agree, and the Executive hereby does agree that he will not in the United States, for a period of two (2) years after he ceases to be employed by the Company, engage in or hold any equity interest or act as a sole proprietor, partner, co-venturer, principal, director or shareholder (to the extent of 5% or more of the equity interest thereof), directly or indirectly, of any sole proprietorship, partnership, joint venture, corporation or other business entity engaged in or plans to engage in the business of the research, development, manufacture and sale of automatic injection devices or in any other business in which the Company engages in (or has formulated plans to engage) at the time during the six (6) month period preceding his termination of employment; provided, however, that should the Executive's employment be terminated pursuant to Section 6.04 hereof or by the Company other than pursuant to Section 6.01 or 6.03 hereof, the foregoing restriction shall not be effective. 5.04. Remedies. The Executive agrees that any breach or threatened breach by him of any provision of this Section 5 shall entitle the Company, in addition to any other legal remedies available to it, to apply to any court of competent jurisdiction to enjoin such breach or threatened breach. The parties understand and intend that each restriction agreed to by the Executive hereinabove shall be construed as separable and divisible from every other restriction, and that the unenforceability, in whole or in part of any restriction, will not affect the enforceability of the remaining restrictions and that one or more or all of such restrictions may be enforced in whole or in part as the circumstances warrant. No waiver of any one breach of the restrictions contained in this Section 5 shall be deemed a waiver of any future breach. 6. Termination. 6.01. Disability. (a) The Executive shall be considered disabled if, due to illness or injury, either physical or mental, he is unable to perform his customary duties and responsibilities as required by this Agreement for more than two (2) months in the aggregate out of any period of six (6) consecutive months. The determination that the Executive is disabled shall be made by the Executive Committee or, if there is no Executive Committee, by the Board of Directors of the Company (with the Executive abstaining from the decision if he is then a member of such Committee or the Board), based upon an examination and certification by a physician selected by the Company subject to the Executive's approval, which approval shall not be unreasonably withheld. The Executive agrees to submit timely to any required medical or other examination, provided that such examination shall be conducted at a location convenient to the Executive and that if theexamining physician is other than the Executive's personal physician, the Executive shall have the right to have such personal physician present at such examination. (b) If the Executive is determined to be disabled pursuant to this Section 6.01, the Company shall have the option to terminate this Agreement by written notice to the Executive stating the date of termination, which date may be any time subsequent to the date of such determination. 6.02. Death. If the Executive shall die during the Term of this Agreement, this Agreement and the Executive's employment hereunder shall terminate immediately upon the Executive's death. 6.03. By the Company for Cause. The Company may terminate this Agreement for cause at any time. For purposes of this Agreement, the term "cause" shall be limited to (i) conviction of a felony or equivalent crime under the laws of the United States or any state, (ii) conviction of a felony or equivalent crime under the laws of any other country or political subdivision thereof involving moral turpitude, (iii) action involving willful gross misconduct having a material adverse effect on the Company including willfully aiding the competition, or (iv) the breach by the Executive of any of his material obligations under this Agreement without proper justification, which breach is not cured within thirty (30) days after written notice thereof from the Company. Upon termination of employment by the Company "for cause," the Executive shall receive any accrued Base Salary through the termination date, less any amounts by reason of claims the Company may have against the Executive. 6.04. By the Executive for Cause. The Executive may terminate this Agreement for "cause" at any time. For purposes of this Section 6.04, the term "cause" shall be the failure of the Company to perform, in a material respect, its material obligation under this Agreement without proper justification after notice thereof from the Executive and, if curable, the opportunity to cure, within thirty (30) days after the giving of written notice thereof to the Company. 6.05. Termination Benefit. Upon termination of employment (i) by the Company other than for "cause" pursuant to Section 6.03 hereof, (ii) upon the disability of the Executive pursuant to Section 6.01 hereof, (iii) by the Executive's death pursuant to Section 6.02 hereof, or (iv) by the Executive for "cause" pursuant to Section 6.04 hereof, the Executive (or his estate or representative) shall receive a severance payment equal to the greater of (i) the amount of the then current annual Base Salary or (ii) the continuation of the then Base Salary for the balance of the Term. 6.06. Change in Control of the Company. (a) If at anytime during the Term hereof a change in control of the Company (as defined in Subsection (b) below) occurs, then within sixty (60) days after receipt of written notice of such change in control of the Company, the Executive may, by written notice to the Company (or its successor), terminate this Agreement. In the event of said termination, (i) the Executive shall receive a lump sum payment equal to 2.99 times his average annual Base Salary for (x) the period from commencement of his employment with the Company or (y) the last five (5) years, whichever is shorter, payable within thirty (30) days after termination of this Agreement, (ii) the Company (or its successor) shall maintain, at its expense, the health plan coverage of the Executive for a period of twelve (12) months after such termination, subject to termination of such health plan benefits upon the Executive becoming covered by a comparable plan offered by a subsequent employer and also subject to any changes in such plan as applicable to other executive officers and (iii) all stock options and other equity based awards granted to the Executive by the Company shall become fully vested and exercisable subject to their respective terms; provided, however, if the amount to be paid or distributed to the Executive pursuant to this Section 6.06 (taken together with any amounts otherwise to be paid or distributed to the Executive by the Company) (such amounts collectively the "Section 6.06 Payment") would result in the application of an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor or similar provision thereto, the Section 6.06 Payment shall not be paid or distributed in the amounts or at the times otherwise required by this Agreement, but shall instead be paid or distributed annually, beginning within thirty (30) days after the termination date and thereafter on each anniversary thereof, in the maximum substantially equal amounts and over the minimum number of years that are determined to be required to reduce the aggregate present value of Section 6.06 Payment to the maximum amount that will not cause any Section 6.06 Payment to be non-deductible under Section 280G of the Code. For purposes of this Section 6.06, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) "Change of control of the Company" shall be deemed to have occurred if: (i) any "person" or "group" (as "person" and "group" are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (A) the Executive or a person controlled by him, (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (C) a person or group by reason of a transaction with the Company approved by the Company Board of Directors as constituted in accordance with Paragraph (ii) below, or (D) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; or (ii) individuals who on the commencement date of this Agreement constitute members of the Board of Directors, or successors chosen by such individuals, shall cease for any reason to constitute a majority of the whole Board of Directors. 7. Notices. All notices, requests, demands or other communications hereunder shall be deemed to have been given if delivered in writing personally or by registered mail or national overnight courier or by facsimile to either party at the address set forth below, or at such other address as either party may designate in writing to the other: If to the Company: American Electromedics Corp. 13 Columbia Drive Amherst, New Hampshire 03031 Attn: Michael T. Pieniazek, President If to Executive: Thomas A. Slamecka 305 Mossy Pointe Duluth, Georgia 30155 Fax: (770) 613-9963 8. Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof, supersedes any prior agreement between the parties. No change, termination or attempted waiver of any of the provisions hereof shall be binding unless in writing and signed by the party against whom the same is sought to be enforced. 9. Successors and Assigns; Binding Effect. This Agreement will be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive, and his heirs and administrators. The Company may assign this Agreement to any corporation which is in a consolidated group with the Company or which acquires the Company, subject to the Executive's rights under Section 6.06 hereof. 10. Waiver and Severability. The waiver by either party of a breach of any terms or conditions of this Agreement shall not operate or be construed as a waiver of any subsequent breach by such party. In the event that any one or more of the provisions of this Agreement shall be declared to be illegal or unenforceable under any law, rule or regulation of any government having jurisdiction over the parties hereto, such illegality or unenforceability shall not affect the validity and enforceability of the other provisions of this Agreement. 11. Heading; Interpretations. The headings and captions used in this Agreement are for convenience only and shall not be construed in interpreting this Agreement. 12. Governing Law. All matters concerning the validity and interpretation of and performance under this Agreement shall be governed by the laws of the Commonwealth of Massachusetts without regard to the conflicts of law principles thereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. AMERICAN ELECTROMEDICS CORP. By: ------------------------------- Michael T. Pieniazek Chief Financial Officer ------------------------------- Thomas A. Slamecka EX-99 3 0003.txt EXHIBIT 10.2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AGREEMENT, dated as of the lst day of January 2000, by and between AMERICAN ELECTROMEDICS CORP., a Delaware corporation (the "Company"), and MICHAEL T. PIENIAZEK (the "Executive"). W I T N E S S E T H: WHEREAS, the Company has employed the Executive as an executive officer, and the Executive has rendered such services, pursuant to an Employment Agreement, dated as of January 1, 1998 (the "Original Agreement"); and WHEREAS, the Company and the Executive desire to amend their Original Agreement to assure the continuity of their relationship, all subject to the terms and conditions contained herein. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, agree as follows: 1. Retention of Employment. The Company hereby continues the employment of the Executive as Executive Vice-President and Chief Financial Officer, and the Executive hereby accepts the continuation of such employment, all upon and subject to the terms and conditions hereinafter set forth. 2. Term. The term of the employment under this Agreement shall be for an initial period commencing on January 1, 2000 and terminating on December 31, 2003 (the "Initial Term"), and shall be automatically renewed for additional one (1) year periods thereafter (the "Renewal Term"), unless either party gives the other written notice of termination not less than sixty (60) days prior to the end of the Initial Term or any Renewal Term (collectively, the "Term"). 3. Position, Duties and Representations. 3.01. Service with the Company. The Executive shall serve as Executive Vice-President and Chief Financial Officer. The Executive agrees to perform such executive employment duties for the Company consistent with the positions specified above, and as the Board of Directors and the Chairman of the Board or the President of the Company shall assign to him from time to time consistent with his positions with the Company. The Company agrees to include the Executive on the management slate of directors at any stockholders meeting held or consent in lieu of meeting executed during the Term at which directors are to be elected. The Executive shall report to the Board of Directors, the Chairman of the Board and/or the President. 3.02. Scope of Services. The Executive agrees to serve the Company faithfully and to the best of his ability and to devote his full business time, attention and efforts necessary to advance the business and affairs of the Company during the Term of this Agreement. If requested, the Executive shall serve as an officer and/or director of any subsidiary of the Company, without any additional compensation hereunder. The Executive shall perform his services at the Company's offices at 13 Columbia Drive, Amherst, New Hampshire until the Company relocates to 238 Littleton Road, Westford, Massachusetts after which time the Executive shall perform his services at such office. The Executive acknowledges that as part of his services hereunder he will be required to travel from the offices identified in the preceding sentence; provided, however, without his prior consent, the Company shall not require the Executive to spend more than eight (8) days in any calendar month during the Term on travel assignments for the Company. 4. Compensation. 4.01. Annual Salary. The Executive will receive an annual base salary ("Base Salary") at an annual rate of $150,000 for the Initial Term paid in accordance with the Company's normal payroll practices, provided that upon Rosch GmbH Medizintechnik, the Company's German subsidiary, closing its initial public offering in Germany, the Base Salary shall be increased to annual rate of $165,000. In addition, on an annual basis the Board of Directors or a committee thereof (the "Compensation Committee") shall review the Executive's compensation with a view towards increasing the Base Salary and granting stock options to the Executive based on the Executive's performance during the preceding year or pursuant to guidelines established by the Compensation Committee. 4.02. Bonus. (a) In further consideration of the Executive's agreement to perform services hereunder, the Executive shall be entitled to an annual cash bonus (the "Profits Bonus") in an amount equal to five percent (5%) of the Company's consolidated pre-tax profits (the "Company Profits") in excess of $500,000 (the "Threshold") for the first two fiscal years during the Term commencing with the fiscal year ending July 31, 2000. This annual Profits Bonus shall not exceed $275,000 in the first fiscal year and $785,000 in the second fiscal year. (b) The Profits Bonus amount shall be calculated initially by the Treasurer or Controller of the Company based upon the Company's audited financial statements for the relevant fiscal year. Promptly after completion of the Profits Bonus calculation for each fiscal year, a report of the calculation shall be sent to the Board of Directors. The Board of Directors will then present the proposed Profits Bonus to the Executive. Within thirty (30) days after receipt thereof, the Executive may object to the calculation by requesting that the accounting firm then auditing the financial statements of the Company review the calculation. The results of such accountants' review shall be final and binding on the Executive and the Company. Any Profits Bonus shall be paid to the Executive within thirty (30) days after the Executive receives the Profits Bonus calculation, except that if he objects thereto, the payment shall be made as soon as practicable after the resolution of the objection. The Executive shall bear the cost of the accounting firm's review, except if upon such review of the Profits Bonus calculation the accounting firm determines that the amount of the Profits Bonus should be increased by ten percent (10%) or more from the amount calculated by the Company, in which case the Company shall bear the cost of the accounting firm's review. (c) In the event the period of the Term for which a Profits Bonus is being determined is less than the entire fiscal year being used for the calculation, the Profits Bonus, if any, and the Threshold for such period shall be multiplied by a fraction, the numerator of which shall be the number of whole months during such fiscal year that the Executive was an employee of the Company and the denominator of which shall be 12. (d) Notwithstanding any Profits Bonus which may be paid to the Executive pursuant to this Section 4.02, for each fiscal year during the Term the Compensation Committee may award the Executive a supplemental bonus based upon factors other than the Company Profits for such fiscal year, as determined by such Committee. 4.03. Bonus Shares. The Company hereby agrees to issue to the Executive 50,000 shares (the "Bonus Shares") of the Company's Common Stock, as presently constituted, in the event that the closing price of the Company's Common Stock as reported on the OTC Bulletin Board or other national market quote system or exchange where the Common Stock is then traded (the "Trading Price") equals or exceeds $6.20 per share for a period of three (3) consecutive trading days during the Term. In the event of any increase in the number of shares outstanding, stock split, stock dividend, reorganization or other change in the Common Stock, the number of Bonus Shares and/or the Trading Price shall be proportionately adjusted. The Company shall immediately register the Bonus Shares under the Securities Act of 1933, as amended, after the issuance thereof, subject to the availability of audited financial information and regulatory review. 4.04. Participation in Benefit Plans. The Executive shall also be entitled, to the extent that his position, title, tenure, salary, age, health and other qualifications make him eligible, to participate in all employee benefit plans or programs (including, but not limited to, medical/dental insurance, disability, stock option, retirement and pension plans and vacation time, sick leave and holidays) of the Company currently in existence on the date hereof or as may hereafter be instituted from time to time. The Executive's participation in any such plan or program shall be subject to the provisions, rules and regulations applicable thereto. 4.05. Automobile. The Company shall provide the Executive with (i) the use of an automobile or (ii) an allowance or reimbursement for the use by the Executive of his personal automobile for Company purposes, provided that the cost to the Company does not exceed $700 a month. 4.06. Expenses. In accordance with the Company's policies established from time to time, the Company shall pay or reimburse the Executive for all reasonable and necessary expenses incurred by him in the performance of his duties under this Agreement, subject to the presentment of appropriate vouchers and receipts. 4.07. Insurance. The Executive acknowledges and agrees that the Company may obtain a life insurance policy on the life of the Executive in the amount of at least $2,000,000 with the Company named as the beneficiary. The Executive shall cooperate fully with the Company's efforts to obtain such insurance policy, including making himself available for physical examinations. 5. Non-Disclosure of Confidential Information; Non-Competition. 5.01. Confidentiality. Except as may be in furtherance of the Executive's performance of his functions as a senior executive officer of the Company, the Executive shall not, throughout the Term of this Agreement and thereafter, disclose to any third party or use or authorize any third party to use, any information relating to the business, business plans, trade secrets or other interests of the Company (including customers and clients of the Company) which is confidential and valuable to the Company or any of its subsidiaries or any third party (including customers and clients of the Company) and which is not known to the public (the "Confidential Information"). The Confidential Information is and will remain the sole and exclusive property of the Company. During the Term of this Agreement, the Confidential Information, when entrusted to the Executive's custody, shall be deemed to remain at all times in the Company's sole possession and control. Notwithstanding the foregoing, the Executive may, after prior written notice to the Company (to the extent such notice is possible under the circumstances) disclose such Confidential Information pursuant to subpoena or other legal process, and promptly thereafter shall advise the Company in writing as to the Confidential Information which was disclosed and the circumstances of such disclosure. 5.02. Return of Documents. The Executive agrees that, upon the expiration of his employment with the Company for any reason, he shall forthwith deliver up to the Company any and all documents and other material, and all copies thereof, in his possession or under his control relating to any Confidential Information which is otherwise the property of the Company. 5.03. Non-Competition. The Executive recognizes that the services to be performed by him for the Company are special and unique. The Executive further recognizes that the nature of the Company's business is such that the Executive will have full knowledge of the Company's business plans and practices. The parties therefore confirm that, in order to protect the Company's goodwill, it is necessary that the Executive agree, and the Executive hereby does agree that he will not in the United States, for a period of two (2) years after he ceases to be employed by the Company, engage in or hold any equity interest or act as a sole proprietor, partner, co-venturer, principal, director or shareholder (to the extent of 5% or more of the equity interest thereof), directly or indirectly, of any sole proprietorship, partnership, joint venture, corporation or other business entity engaged in or plans to engage in the business of the research, development, manufacture and sale of automatic injection devices or in any other business in which the Company engages in (or has formulated plans to engage) at the time during the six (6) month period preceding his termination of employment; provided, however, that should the Executive's employment be terminated pursuant to Section 6.04 hereof or by the Company other than pursuant to Section 6.01 or 6.03 hereof, the foregoing restriction shall not be effective. 5.04. Remedies. The Executive agrees that any breach or threatened breach by him of any provision of this Section 5 shall entitle the Company, in addition to any other legal remedies available to it, to apply to any court of competent jurisdiction to enjoin such breach or threatened breach. The parties understand and intend that each restriction agreed to by the Executive hereinabove shall be construed as separable and divisible from every other restriction, and that the unenforceability, in whole or in part of any restriction, will not affect the enforceability of the remaining restrictions and that one or more or all of such restrictions may be enforced in whole or in part as the circumstances warrant. No waiver of any one breach of the restrictions contained in this Section 5 shall be deemed a waiver of any future breach. 6. Termination. 6.01. Disability. (a) The Executive shall be considered disabled if, due to illness or injury, either physical or mental, he is unable to perform his customary duties and responsibilities as required by this Agreement for more than two (2) months in the aggregate out of any period of six (6) consecutive months. The determination that the Executive is disabled shall be made by the Executive Committee or, if there is no Executive Committee, by the Board of Directors of the Company (with the Executive abstaining from the decision if he is then a member of such Committee or the Board), based upon an examination and certification by a physician selected by the Company subject to the Executive's approval, which approval shall not be unreasonably withheld. The Executive agrees to submit timely to any required medical or other examination, provided that such examination shall be conducted at a location convenient to the Executive and that if the examining physician is other than the Executive's personal physician, the Executive shall have the right to have such personal physician present at such examination. (b) If the Executive is determined to be disabled pursuant to this Section 6.01, the Company shall have the option to terminate this Agreement by written notice to the Executive stating the date of termination, which date may be any time subsequent to the date of such determination. 6.02. Death. If the Executive shall die during the Term of this Agreement, this Agreement and the Executive's employment hereunder shall terminate immediately upon the Executive's death. 6.03. By the Company for Cause. The Company may terminate this Agreement for cause at any time. For purposes of this Agreement, the term "cause" shall be limited to (i) conviction of a felony or equivalent crime under the laws of the United States or any state, (ii) conviction of a felony or equivalent crime under the laws of any other country or political subdivision thereof involving moral turpitude, (iii) action involving willful gross misconduct having a material adverse effect on the Company including willfully aiding the competition, or (iv) the breach by the Executive of any of his material obligations under this Agreement without proper justification, which breach is not cured within thirty (30) days after written notice thereof from the Company. Upon termination of employment by the Company "for cause," the Executive shall receive any accrued Base Salary through the termination date, less any amounts by reason of claims the Company may have against the Executive. 6.04. By the Executive for Cause. The Executive may terminate this Agreement for "cause" at any time. For purposes of this Section 6.04, the term "cause" shall be limited to (i) the removal by the Company of its principal place of business to a location which is more than 50 miles from the Executive's current residence, or (ii) the failure of the Company to perform in a material respect of its obligations under this Agreement without proper justification after notice thereof from the Executive and, if curable, the opportunity to cure, within ten (10) days after the giving of written notice thereof to the Company. 6.05. Termination Benefit. Upon termination of employment (i) by the Company other than for "cause" pursuant to Section 6.03 hereof, (ii) upon the disability of the Executive pursuant to Section 6.01 hereof, (iii) by the Executive's death pursuant to Section 6.02 hereof, or (iv) by the Executive for "cause" pursuant to Section 6.04 hereof, the Executive (or his estate or representative) shall receive a severance payment equal to the greater of (i) the amount of the then current annual Base Salary or (ii) the continuation of the then Base Salary for the balance of the Term. 6.06. Change in Control of the Company. (a) If at anytime during the Term hereof a change in control of the Company (as defined in Subsection (b) below) occurs, then within sixty (60) days after receipt of written notice of such change in control of the Company, the Executive may, by written notice to the Company (or its successor), terminate this Agreement. In the event of said termination, (i) the Executive shall receive a lump sum payment equal to 2.99 times his then current Base Salary, payable within thirty (30) days after termination of this Agreement, (ii) the Company (or its successor) shall maintain, at its expense, the health plan coverage of the Executive for a period of twelve (12) months after such termination, subject to termination of such health plan benefits upon the Executive becoming covered by a comparable plan offered by a subsequent employer and also subject to any changes in such plan as applicable to other executive officers and (iii) all stock options and other equity based awards granted to the Executive by the Company shall become fully vested and exercisable subject to their respective terms; provided, however, if the amount to be paid or distributed to the Executive pursuant to this Section 6.06 (taken together with any amounts otherwise to be paid or distributed to the Executive by the Company) (such amounts collectively the "Section 6.06 Payment") would result in the application of an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor or similar provision thereto, the Section 6.06 Payment shall not be paid or distributed in the amounts or at the times otherwise required by this Agreement, but shall instead be paid or distributed annually, beginning within thirty (30) days after the termination date and thereafter on each anniversary thereof, in the maximum substantially equal amounts and over the minimum number of years that are determined to be required to reduce the aggregate present value of Section 6.06 Payment to the maximum amount that will not cause any Section 6.06 Payment to be non-deductible under Section 280G of the Code. For purposes of this Section 6.06, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) "Change of control of the Company" shall be deemed to have occurred if: (i) any "person" or "group" (as "person" and "group" are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (A) the Executive or a person controlled by him, (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (C) a person or group by reason of a transaction with the Company approved by the Company Board of Directors as constituted in accordance with Paragraph (ii) below, or (D) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; or (ii) individuals who on the commencement date of this Agreement constitute members of the Board of Directors, or successors chosen by such individuals, shall cease for any reason to constitute a majority of the whole Board of Directors. 7. Notices. All notices, requests, demands or other communications hereunder shall be deemed to have been given if delivered in writing personally or by registered mail or national overnight courier or by facsimile to either party at the address set forth below, or at such other address as either party may designate in writing to the other: If to the Company: American Electromedics Corp. 13 Columbia Drive Amherst, New Hampshire 03031 Attn: Thomas A. Slamecka, Chairman If to Executive: Michael T. Pieniazek 38 Westview Road Worcester, MA 01602 Fax: ( ) - --- --- ---- 8. Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof, supersedes any prior agreement between the parties. No change, termination or attempted waiver of any of the provisions hereof shall be binding unless in writing and signed by the party against whom the same is sought to be enforced. 9. Successors and Assigns; Binding Effect. This Agreement will be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive, and his heirs and administrators. The Company may assign this Agreement to any corporation which is in a consolidated group with the Company or which acquires the Company, subject to the Executive's rights under Section 6.06 hereof. 10. Waiver and Severability. The waiver by either party of a breach of any terms or conditions of this Agreement shall not operate or be construed as a waiver of any subsequent breach by such party. In the event that any one or more of the provisions of this Agreement shall be declared to be illegal or unenforceable under any law, rule or regulation of any government having jurisdiction over the parties hereto, such illegality or unenforceability shall not affect the validity and enforceability of the other provisions of this Agreement. 11. Heading; Interpretations. The headings and captions used in this Agreement are for convenience only and shall not be construed in interpreting this Agreement. 12. Governing Law. All matters concerning the validity and interpretation of and performance under this Agreement shall be governed by the laws of the Commonwealth of Massachusetts without regard to the conflicts of law principles thereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. AMERICAN ELECTROMEDICS CORP. By: ------------------------------------ Thomas A. Slamecka Chairman ------------------------------------ Michael T. Pieniazek EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Equidyne Corporation's Form 10-QSB for the period ended April 30, 2000 and is qualified in its entirety by refernce to such financial statements. 1,000 3-MOS JUL-31-2000 APR-30-2000 8,868 0 23 0 90 274 1,001 218 23,154 1,528 0 0 0 1,613 21,541 23,154 0 0 0 3,563 10,700 0 69 7,206 781 7,987 0 0 0 7,987 .51 .47
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