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 27, 1996 0-9922
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AMERICAN ELECTROMEDICS CORP.
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(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 04-2608713
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(State or Other Jurisdiction of Incorporation (IRS Employer ID No.)
or Organization)
13 COLUMBIA DRIVE, SUITE 18, AMHERST, NEW HAMPSHIRE 03031
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(Address and Zip Code of Principal Executive Offices)
Issuer's telephone number, including area code: 603-880-6300
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Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
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Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
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(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
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As of June 10, 1996 there were outstanding 12,273,333 shares of the
Issuer's Common Stock, $.10 par value.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
INDEX
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PAGE
----
Balance Sheets, April 27, 1996 and July 29, 1995 3
Statements of Income for the Three and Nine Months Ended
April 27, 1996 and April 29, 1995. 4
Statements of Cash Flows for the Nine Months Ended
April 27, 1996 and April 29, 1995. 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan
of Operation. 7-8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 8
SIGNATURES 9
<PAGE>
AMERICAN ELECTROMEDICS CORP.
BALANCE SHEETS
APRIL 27, 1996 JULY 29, 1995
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(Unaudited)
(Thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 215 $ 505
Accounts receivable, net 735 431
Inventories 454 267
Prepaid and other current assets 138 29
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Total current assets 1,542 1,232
Property and Equipment 403 389
Accumulated depreciation (358) (338)
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45 51
Investment in affiliate 912 -
Goodwill 224 230
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$2,723 $1,513
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LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 294 $ 290
Bank line of credit 300 -
Accrued liabilities 20 23
Current portion of long-term debt 66 4
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Total current liabilities 680 317
Long-term debt 112 -
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-12,273,333
at April 27, 1996 and 11,718,333
at July 29, 1995 1,227 1,172
Additional paid-in capital 1,801 1,546
Retained deficit (1,097) (1,522)
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Total stockholders' equity 1,931 1,196
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$2,723 $1,513
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See accompanying notes.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
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April 27, April 29, April 27, April 29,
1996 1995 1996 1995
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(Thousands, except per share amounts)
Net sales $ 1,066 $ 590 $ 2,573 $1,710
Cost of goods sold 519 322 1,338 986
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Gross profit 547 268 1,235 724
Selling, general and administrative 264 210 713 501
Research and development 50 32 158 46
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Total operating expenses 314 242 871 547
Operating income 233 26 364 177
Other income (expenses):
Equity in net income of affiliate (7) - 93 -
Interest, net (10) - (7) (1)
Other - (2) - (8)
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Income before provision for income
taxes 216 24 450 168
Provision for income taxes 15 2 25 12
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Net income $ 201 $ 22 $ 425 $ 156
======= ====== ======= ======
Weighted average number of
common and common equivalent
shares outstanding 12,603,939 9,505,000 12,358,293 9,297,000
========== ========= ========== =========
Earnings per common
and common equivalent share $.02 $.00 $.03 $.02
========== ========= ========== =========
See accompanying notes.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
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April 27, April 29,
1996 1995
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(Thousands)
OPERATING ACTIVITIES:
Net Income $ 425 $ 156
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 26 25
Equity in net income of affiliate (93) -
Provision for doubtful accounts - 5
Changes in operating assets and liabilities:
Accounts receivable (304) (166)
Inventories, prepaid and other current assets (296) (155)
Accounts payable and accrued liabilities 1 138
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Net cash provided by (used in) operating
activities (241) 3
INVESTING ACTIVITIES:
Investment in affiliate (519) -
Purchase of property and equipment, net (14) (10)
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Net cash used in investing activities (533) (10)
FINANCING ACTIVITIES:
Proceeds from term loan and bank line of credit 500 -
Principal payments on notes payable (26) (5)
Proceeds from exercise of stock options 10 68
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Net cash provided by financing activities 484 63
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Increase (decrease) in cash and cash equivalents (290) 56
Cash and cash equivalents, beginning of period 505 265
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Cash and cash equivalents, end of period $ 215 $ 321
======= ========
See accompanying notes.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 27, 1996
(Unaudited)
1. BASIS OF PRESENTATION
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The accompanying unaudited financial statements of American
Electromedics Corp. (the "Company") 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 27, 1996 are not necessarily indicative of the results that may
be expected for the year ended July 27, 1996. For further information,
refer to the financial statements and footnotes thereto included in the
Registrant's annual report on Form 10-KSB for the year ended July 29, 1995.
2. INVESTMENT IN AFFILIATE
-----------------------
In January 1996, the Company invested $500,000 of cash and issued
500,000 shares of its common stock, $.10 par value, for a fifty percent
interest in Rosch GmbH Medizintechnik ("Rosch GmbH"). Rosch GmbH is a
marketing and distribution company based in Berlin, Germany specializing in
the distribution of healthcare products, including American Electromedics
products, to primary care physicians throughout Europe. In January 1996,
Rosch GmbH sold its exclusive distributorship rights for a manufacturer's
ear, nose, and throat ("ENT") line of products in order to concentrate on
the Company's products as well as other healthcare products. At April 27,
1996 the investment in Rosch GmbH exceeded the Company's share of the
underlying equity in net assets by approximately $550,000 and is being
amortized over forty years.
Financial information for Rosch GmbH for the three-month period ended
April 27, 1996 is as follows: sales - $723,000; gross profit - $229,000;
net loss - $14,000. For the four-month period ended April 27, 1996, Rosch
GmbH results of operations were as follows: sales - $966,000; gross profit
- $303,000; and net income - $186,000, which includes $335,000 from the
sale of the ENT distributorship rights discussed above.
3. DEBT
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In December 1995, the Company entered into a term loan agreement with a
bank. The loan is payable in equal monthly installments through December
1998. Interest is based on the Wall Street Journal Prime Rate plus .5%.
There remains outstanding, under this loan, $178,000 as of April 27, 1996.
The Company also has a revolving line of credit from the same bank in
the amount of $300,000. Interest is payable monthly and is based on the
Wall Street Journal Prime Rate plus .5%. As of April 27, 1996 there was
$300,000 outstanding under this revolving line of credit.
Borrowings under these loans are collateralized by essentially all of
the assets of the Company.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
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 27, 1996 were
$1,066,000 and $2,573,000, respectively, compared to $590,000 and
$1,710,000 for the three and nine month periods ended April 29, 1995,
respectively. The increase in sales is primarily a result of shipments of
the new Race Car Tympanometer(R) which was introduced in the second
quarter. Additionally, sales increased as a result of continued market
penetration of the Company's other product lines, including the Pilot(R)
Audiometer, introduced in 1995. The Company is also selling its products
throughout the European Community using its new 50%-owned German medical
products distribution affiliate, Rosch GmbH Medizintechnik. The Company
made this strategic investment in January 1996.
Cost of sales for the three and nine months ended April 27, 1996 were 48.7%
and 52.0% of net sales compared to 54.6% and 57.7% of net sales during the
same periods in the prior year. The decrease in cost as a percentage of
sales can be attributed to the product mix.
Selling, general and administrative expenses for the three and nine month
periods ended April 27, 1996 were $264,000 and $713,000, respectively,
compared to $210,000 and $501,000, respectively, for the comparable prior
year periods. The increase reflects increased sales and promotional
activity and corporate development expense.
Research and development expense was $50,000 and $158,000 for the three and
nine month periods ended April 27, 1996, respectively, compared to $32,000
and $46,000, respectively, for the same periods last year. The increase in
research and development expenditures is the result of work performed in
preparation for the release of the Company's new Race Car Tympanometer
along with other products under development.
Net income for the three and nine month periods ended April 27, 1996 was
$201,000, or $.02 per share, and $425,000, or $.03 per share, respectively,
compared to $22,000, or $.00 per share, and $156,000, or $.02 per share,
respectively, for the same periods last year. The increase in net income is
the result of a combination of higher sales and an increase in gross profit
margins.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital of the Company at April 27, 1996 was $862,000 compared to
$915,000 at fiscal year ended July 29, 1995. The decrease was primarily
the result of the strategic investment in our new German affiliate offset
by proceeds from a term loan and bank line of credit and the results of
operations.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(Continued)
Currently, the Company expects that available cash 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. In
this connection, the Company is seeking to enhance its banking facility and
also sell its capital stock. There is no assurance that management will
find suitable acquisition candidates or effect the necessary financial
arrangements.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarterly period ended
April 27, 1996.
Exhibits -
27. Financial Data Schedule
<PAGE>
SIGNATURES
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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.
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/s/ Noel A. Wren Dated: June 10, 1996
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Noel A. Wren
President and Chief Executive Officer
/s/ Michael T. Pieniazek Dated: June 10, 1996
-------------------------
Michael T. Pieniazek
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
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Exhibit Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
ELECTROMEDICS CORP.'S BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASH
FLOW FOR THE PERIOD ENDED APRIL 27, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<COMMON> 1,227
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<TOTAL-LIABILITY-AND-EQUITY> 2,723
<SALES> 2,573
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