-----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, CbfAu3higxQmM6uZq4ixLNe2hvWN9CYLhbfXDfDXTFgUQi9yfZNGTurvR/zWV8jw A+m7cBIxW6ddL4vDa+Whvg== 0000950120-97-000177.txt : 19970619 0000950120-97-000177.hdr.sgml : 19970619 ACCESSION NUMBER: 0000950120-97-000177 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970426 FILED AS OF DATE: 19970618 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ELECTROMEDICS CORP CENTRAL INDEX KEY: 0000352281 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 042608713 STATE OF INCORPORATION: DE FISCAL YEAR END: 0727 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09922 FILM NUMBER: 97625865 BUSINESS ADDRESS: STREET 1: 13 COLUMBIA DR STE 18 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 10QSB 1 FORM 10-QSB OF AMERICAN ELECTROMEDICS CORP. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB 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 26, 1997 0-9922 -------------- ------ AMERICAN ELECTROMEDICS CORP. ---------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) DELAWARE 04-2608713 -------- ---------- (State or Other Jurisdiction (IRS Employer of Incorporation or ID No.) Organization) 13 COLUMBIA DRIVE, SUITE 18, AMHERST, NEW HAMPSHIRE 03031 --------------------------------------------------------- (Address and Zip Code of Principal Executive Offices) Issuer's telephone number, including area code: 603-880-6300 ------------ 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 13, 1997, there were outstanding 2,553,136 shares of the Issuer's Common Stock, $.10 par value, after adjustment for a one-for-five reverse stock split effective November 8, 1996. AMERICAN ELECTROMEDICS CORP. Index ----- Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets, April 26, 1997 and July 27, 1996 . 3 Statements of Income for the Three and Nine Months Ended April 26, 1997 and April 27, 1996 . . . . 4 Statements of Cash Flows for the Nine Months Ended April 26, 1997 and April 27, 1996 . . . . . . . 5 Notes to Financial Statements . . . . . . . . . . 6 Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . 7 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 8 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 9 -2- PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS AMERICAN ELECTROMEDICS CORP. BALANCE SHEETS APRIL 26, 1997 JULY 27, 1996 -------------- ------------- (UNAUDITED) ASSETS (THOUSANDS) Current assets: Cash and cash equivalents . . $ 372 $ 317 Accounts receivable, net of allowance of $11,000: Trade . . . . . . . . . . . 306 303 264 402 Affiliate . . . . . . . . . ----- ----- 570 705 Inventories . . . . . . . . . 665 480 Prepaid and other current 309 133 assets . . . . . . . . . . . ----- ----- Total current assets . . . 1,916 1,635 Property and equipment . . . 442 406 (388) (365) Accumulated depreciation . . ----- ----- 54 41 Deferred financing costs . . 141 -- Investment in affiliate . . . 821 876 211 219 Goodwill . . . . . . . . . . ----- ----- $3,143 $2,771 ===== ===== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . $ 236 $ 324 Bank line of credit . . . . . 300 300 Accrued liabilities . . . . . 142 38 Current portion of long-term 167 67 debt . . . . . . . . . . . . ----- ----- Total current liabilities . 845 729 Long-term debt . . . . . . . 410 94 Convertible subordinated 720 -- debentures . . . . . . . . . Stockholders' equity: Preferred stock, $.01 par value; Authorized - 1,000,000 shares; -- -- Outstanding-none . . . . . . Common stock, $.10 par value; Authorized - 20,000,000 shares; Outstanding - 2,553,136 shares at April 26, 1997 and 2,454,666 shares 255 245 at July 27, 1996 . . . . . . Additional paid-in capital . 2,919 2,783 (2,006) (1,080) Retained deficit . . . . . . ----- ----- 1,168 1,948 Total stockholders' equity ----- ----- $3,143 $2,771 ===== ===== See accompanying notes. -3- AMERICAN ELECTROMEDICS CORP. STATEMENTS OF INCOME (Unaudited) THREE MONTHS ENDED ------------------ APRIL 26, 1997 APRIL 27, 1996 -------------- -------------- (THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales . . . . . . . . . . $ 423 $1,066 247 519 Cost of goods sold . . . . . ----- ----- Gross profit . . . . . . 176 547 Selling, general and 411 264 administrative . . . . . . . 10 50 Research and development . . ----- ----- 421 314 Total operating expenses ----- ----- Operating income (loss) . . . (245) 233 Other income (expenses): Undistributed earnings of (12) (7) affiliate . . . . . . . . Interest, net . . . . . . (38) (10) (237) -- Other . . . . . . . . . . ----- ----- (287) (17) Income (loss) before (532) 216 provision for income taxes . -- 15 Provision for income taxes . ----- ----- $(532) $ 201 Net income (loss) . . . . . . ===== ====== Weighted average number of 2,526,965 2,520,787 common and common equivalent ========== ========= shares outstanding . . . . . Earnings (loss) per common $(.21) $ .08 and common equivalent share . ===== ===== NINE MONTHS ENDED ----------------- APRIL 26, 1997 APRIL 27, 1996 -------------- -------------- (THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales . . . . . . . . . . . . $1,486 $2,573 841 1,338 Cost of goods sold . . . . . . . ----- ------ Gross profit . . . . . . . . 645 1,235 Selling, general and 1,100 713 administrative . . . . . . . . . 85 158 Research and development . . . . ----- ------ 1,185 871 Total operating expenses . . ----- ------ Operating income (loss) . . . . . (540) 364 Other income (expenses): Undistributed earnings of (55) 93 affiliate . . . . . . . . . . Interest, net . . . . . . . . (81) (7) (250) -- Other . . . . . . . . . . . . ----- ------ (386) 86 Income (loss) before provision for (926) 450 income taxes . . . . . . . . . . -- 25 Provision for income taxes . . . ----- ------ $ (926) $ 425 Net income (loss) . . . . . . . . ====== ====== Weighted average number of common 2,495,232 2,471,658 and common equivalent shares ========= ========= outstanding . . . . . . . . . . . Earnings (loss) per common and $ (.37) $ .17 common equivalent share . . . . . ====== ===== See accompanying notes. -4- AMERICAN ELECTROMEDICS CORP. STATEMENTS OF CASH FLOWS (Unaudited) NINE MONTHS ENDED ----------------- APRIL APRIL 26, 27, 1997 1996 ---- ---- (THOUSANDS) OPERATING ACTIVITIES: Net income (loss) . . . . . . . . . . . . . . . . $(926) $ 425 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization . . . . . . . . . 56 26 Undistributed earnings of affiliate . . . . . . 55 (93) Changes in operating assets and liabilities: Accounts receivable . . . . . . . . . . . . . 135 (304) Inventories, prepaid and other current assets . . . . . . . . . . . . . . . . . . (361) (296) Accounts payable and accrued liabilities . . 16 1 ----- ----- Net cash used in operating activities . . . . (1,025) (241) INVESTING ACTIVITIES: Investment in affiliate . . . . . . . . . . . . . -- (519) Purchase of property and equipment, net . . . . . (36) (14) ----- ----- Net cash used in investing activities . . . . (36) (533) FINANCING ACTIVITIES: Principal payments on long-term debt . . . . . . (84) (26) Proceeds from long-term debt and bank line of credit . . . . . . . . . . . . . . . . . . . . 500 500 Issuance of common stock, net . . . . . . . . . . 144 -- Issuance of convertible subordinated debt . . . . 720 -- Deferred financing costs . . . . . . . . . . . . (166) -- Proceeds from exercise of stock options . . . . . 2 10 ----- ----- Net cash provided by financing activities . . 1,116 484 Increase (decrease) in cash and cash equivalents 55 (290) Cash and cash equivalents, beginning of period . 317 505 ----- ----- Cash and cash equivalents, end of period . . . . $ 372 $ 215 ===== ===== See accompanying notes. -5- AMERICAN ELECTROMEDICS CORP. NOTES TO FINANCIAL STATEMENTS APRIL 26, 1997 (Unaudited) 1. BASIS OF PRESENTATION --------------------- The accompanying unaudited 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 26, 1997 are not necessarily indicative of the results that may be expected for the year ending July 26, 1997. 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 27, 1996. 2. CORPORATE FINANCING ------------------- In October 1996, the Company completed a private placement (the "Placement") of 12 units (the "Units") at a price of $75,000 per Unit or an aggregate Placement of $900,000. Each Unit consisted of a $60,000 principal amount 14% Convertible Subordinated Debenture due October 31, 1999 (the "Debentures") and 4,000 shares of Common Stock, or an aggregate of $720,000 principal amount of Debentures and 48,000 shares of Common Stock. The Debentures are convertible into Common Stock at $3.75 per share upon or after the Debentures are called for redemption or the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Act"), covering the underlying shares of Common Stock, subject to customary anti- dilution provisions. The Company may call all or part of the Debentures at par, plus accrued interest, at any time after October 31, 1997. The Debentures contain various covenants upon the Company, including a restriction on the payment of cash dividends on its Common Stock. Simultaneously with the closing of the Placement, the Company received a Term Loan from its bank. The bank had conditioned the closing of the Term Loan on the Company receiving at least $700,000 from the issuance of subordinated debentures and/or capital stock. The Term Loan is repayable over five years, bears annual interest at prime plus 1/2%, and is guaranteed by the New Hampshire Business Finance Authority. The bank also increased the Company's revolving line of credit to $400,000 from $300,000. As of April 26, 1997 there was $300,000 outstanding under this revolving line of credit. The Term Loan and the credit line are secured by a lien on the Company's assets. The net proceeds of the Placement and the Term Loan of approximately $1,200,000 are being used for general working capital purposes, including possible acquisitions and marketing. 3. REVERSE STOCK SPLIT ------------------- At the Company's annual meeting of stockholders on October 8, 1996, stockholders authorized the Board of Directors to effect a reverse stock split at a ratio to be determined by the Board and when the Board determined it was in the best interest of the Company and the stockholders. In November 1996, the Company announced that its Board of Directors had approved a 1-for-5 reverse stock split, to be effective November 8, 1996. The reverse split reduced the number of shares outstanding to 2,506,266. All prior periods presented have been adjusted to reflect the above reverse stock split. 4. OTHER EXPENSES -------------- The Company expensed $225,000 in the quarterly period ended April 26, 1997 as a result of a strategic change in direction of the business. The Company has decided it will not pursue the development and marketing of a new product technology it licensed in November 1996 from BioFlo Systems, Inc. This amount represents the write-off of the technology and estimates related to the release of outgoing management and associated costs. -6- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS --------------------- Net sales for the three and nine month periods ended April 26, 1997 were $423,000 and $1,486,000, respectively, compared to $1,066,000 and $2,573,000 for the three and nine month periods ended April 27, 1996. The decrease in sales was attributable to a substantial decline in sales in Germany, which had constituted the Company's major international market, initially because of temporary regulatory delays which have become less of a factor in the latter part of the third quarter upon receipt of ISO 9000 certification for the manufacture of medical devices, and subsequently because of changes in the reimbursement policy for the Company's products in Germany. Cost of sales for the three and nine months ended April 26, 1997 were 58.4% and 56.6% of net sales compared to 48.7% and 52.0% of net sales during the same periods in the prior year. The increase in cost as a percentage of sales can be attributed to the product mix and unfavorable overhead variances as a result of decreased manufacturing levels in response to the general domestic industry-wide slowdown and the previously mentioned decline in sales in Germany. Selling, general and administrative expenses for the three and nine month periods ended April 26, 1997 were $411,000 and $1,100,000, respectively, compared to $264,000 and 713,000 for the comparable prior year periods. The increase reflects higher corporate development, including retention of senior level executives, sales and promotional activity, regulatory and corporate communications expenses. Net loss for the three and nine month periods ended April 26, 1997 were $532,000, or $.21 per share, and $926,000, or $.37 per share, respectively, compared to net income of $201,000, or $.08 per share, and $425,000, or $.17 per share, for the same periods last year. The decrease in net income is the result of decreased sales along with increases in expenditures for marketing efforts to promote and position the Company's new products, and the Company's corporate development, regulatory and communications efforts. Additionally, included in the three month period ended April 26, 1997 was a $225,000 charge related to a write-off of certain licensed technology and estimates related to the release of outgoing management and associated costs. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Working capital of the Company at April 26, 1997 was $1,071,000, compared to $906,000 at fiscal year ended July 27, 1996. The increase of $165,000 was primarily the result of net proceeds of the Company's private placement and Term Loan from its bank of approximately $1,200,000 offset by results of operations. Currently, the Company expects that available cash and its existing bank line of credit will be sufficient to meet its normal operating requirements, including research and development expenditures, over the near term. The Company is considering future growth through acquisitions of companies or business segments in related lines of business or other lines of business, as well as through expansion of the existing line of business. There is no assurance that management will find suitable acquisition candidates or effect the financial arrangements which may be necessary for such acquisitions. PART II. - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Noel Wren commenced an action against the Company returnable on May 6, 1997 in the Superior Court of New Hampshire, Hillsborough County, seeking damages resulting from the Company's termination of his employment as President and Chief Executive Officer, together with costs and fees, and also a petition to attach. Mr. Wren remains a director of the Company. The Company filed an appearance responding to and denying the allegations and objected to the petition to attach. Management believes that it has sufficient defenses to the claims and it intends to file counterclaims. Discovery has not yet commenced. -7- Item 6. EXHIBITS AND REPORTS ON FORM 8-K There were no reports on Form 8-K filed during the quarterly period ended April 26, 1997. Exhibits - 27. Financial Data Schedule -8- AMERICAN ELECTROMEDICS CORP. 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. AMERICAN ELECTROMEDICS CORP. ---------------------------- /s/ Thomas A. Slamecka Dated: June 16, 1997 ------------------------- Thomas A. Slamecka Chairman /s/ Michael T. Pieniazek Dated: June 16, 1997 ------------------------- Michael T. Pieniazek President and Chief Financial Officer -9- EXHIBIT INDEX Exhibit Description ------- ----------- 27 Financial Data Schedule EX-27 2 ART 5 FDS FOR 3RD QUARTER 10-QSB
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN ELECTROMEDICS CORP. FORM 10-QSB FOR THE PERIOD ENDED APRIL 26, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUL-31-1997 APR-26-1997 372 0 570 0 665 1,916 442 (388) 3,143 845 720 0 0 255 913 3,143 423 423 247 247 708 0 38 (532) 0 (532) 0 0 0 (532) (.21) (.21)
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