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
January 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 (IRS Employer ID No.)
of Incorporation 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
--- ---
As of March 11, 1996 there were outstanding 12,218,333 shares of the
Issuer's Common Stock, $.10 par value.
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2
AMERICAN ELECTROMEDICS CORP.
Index
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Page
----
Balance Sheets, January 27, 1996 and July 29, 1995 3
Statements of Income for the Three and Six Months Ended
January 27, 1996 and January 28, 1995. 4
Statements of Cash Flows for the Six Months Ended
January 27, 1996 and January 28, 1995. 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan 7-8
of Operation.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 8
SIGNATURES 9
<PAGE>
3
AMERICAN ELECTROMEDICS CORP.
BALANCE SHEETS
January 27, 1996 July 29, 1995
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(Unaudited)
(Thousands)
Assets
Current Assets:
Cash and cash equivalents $ 255 $ 505
Accounts receivable, net 540 431
Inventories 521 267
Prepaid and other current assets 111 29
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Total current assets 1,427 1,232
Property and Equipment 399 389
Accumulated depreciation (351) (338)
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48 51
Investment in affiliate 919 -
Goodwill 225 230
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$2,619 $1,513
===== =====
Liabilities & Stockholders' Equity
Current Liabilities:
Accounts payable $ 388 $ 290
Bank line of credit 300 -
Accrued liabilities 17 23
Current portion of long-term debt 66 4
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Total current liabilities 771 317
Long-term debt 128 -
Stockholders' Equity:
Preferred stock, $.01 par value;
Authorized-1,000,000 shares;
Outstanding-none - -
Common stock, $.10 par value;
Authorized-20,000,000 shares;
Outstanding-12,218,333 at
January 27, 1996 and 11,718,333
at July 29, 1995 1,222 1,172
Additional paid-in capital 1,796 1,546
Retained deficit (1,298) (1,522)
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Total stockholders' equity 1,720 1,196
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$ 2,619 $ 1,513
====== ======
See accompanying notes.
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4
AMERICAN ELECTROMEDICS CORP.
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
------------------------- -------------------------
January 27, January 28, January 27, January 28,
1996 1995 1996 1995
---- ---- ---- ----
(Thousands, except per share amounts)
Net sales $ 843 $ 559 $ 1,507 $ 1,120
Cost of goods sold 428 344 819 665
----- ----- ------ -------
Gross profit 415 215 688 455
Selling, general and
administrative 256 137 449 290
Research and development 48 7 108 14
----- ----- ------- -------
Total operating expenses 304 144 557 304
Operating income 111 71 131 151
Other income (expenses):
Equity in net income
of affiliate 100 - 100 -
Interest, net (1) - 3 -
Other - (3) - (6)
----- ----- ----- -----
Income before provision
for income taxes 210 68 234 145
Provision for income taxes 8 10 10 10
----- ----- ----- -----
Net income $ 202 $ 58 $ 224 $ 135
===== ===== ===== =====
Weighted average
number of common
and common equivalent
shares outstanding 12,275,296 9,193,333 12,235,471 9,193,333
========== ========= ========== =========
Earnings per common
and common equivalent
share $.02 $.01 $.02 $.01
========= ========= ========== =========
See accompanying notes.
<PAGE>
5
AMERICAN ELECTROMEDICS CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
-----------------------------
January 27, January 28,
1996 1995
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(Thousands)
Operating activities:
Net Income $ 224 $ 135
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 18 17
Equity in net income of affiliate (100) -
Provision for doubtful accounts - (3)
Changes in operating assets and liabilities:
Accounts receivable (109) (154)
Inventories, prepaid and other current
assets (336) (119)
Accounts payable and accrued liabilities 92 70
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Net cash used in operating activities (211) (54)
Investing activities:
Investment in affiliate (519) -
Purchase of property and equipment, net (10) -
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Net cash used in investing activities (529) -
Financing activities:
Proceeds from term loan and bank line
of credit 500 -
Principal payments on notes payable (10) (4)
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Net cash provided by (used in)
financing activities 490 (4)
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Decrease in cash and cash equivalents (250) (58)
Cash and cash equivalents, beginning
of period 505 265
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Cash and cash equivalents, end of period $ 255 $ 207
===== =====
See accompanying notes.
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6
AMERICAN ELECTROMEDICS CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 27, 1996
(Unaudited)
1. BASIS OF PRESENTATION
---------------------
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 six month periods ended January 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 January 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 one month ended January
27, 1996 is as follows: sales - $243,000; gross profit - $74,000; net
income - $349,000, which includes $335,000 from the sale of the ENT
distributorship rights discussed above.
3. DEBT
----
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, $194,000 as of
January 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 January 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>
7
AMERICAN ELECTROMEDICS CORP.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
---------------------
Net sales for the three and six month periods ended January 27,1996
were $843,000 and $1,507,000, respectively, compared to $559,000 and
$1,120,000 for the three and six month periods ended January 28, 1995,
respectively. The increase in sales is primarily a result of shipments
of the new Race Car Tympanometer(, introduced in the second quarter,
along with continued market acceptance of our other product lines.
Additionally, net sales benefited from increased market penetration
by our 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 six months ended January 27, 1996 were
50.8% and 54.3% of net sales compared to 61.5% and 59.4% 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 six month
periods ended January 27, 1996 were $256,000 and $449,000, respectively,
compared to $137,000 and $290,000, respectively, for the comparable prior
year periods. The increase reflects increased sales and promotional
activity and corporate development expense.
Research and development expense was $48,000 and $108,000 for the three
and six month periods ended January 27, 1996, respectively, compared to
$7,000 and $14,000, 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 six month periods ended January 27, 1996
was $202,000, or $.02 per share, and $224,000, or $.02 per share,
respectively, compared to $58,000, or $.01 per share, and $135,000,
or $.01 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 January 27, 1996 was $656,000 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>
8
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
Filed Form 8-K, for Item 5, dated January 11, 1996, reporting the
Company's investment in Rosch GmbH Medizintechnik, a marketing and
distribution company.
Exhibits
27. Financial Data Schedule
<PAGE>
9
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.
----------------------------
/s/ Noel A. Wren Dated: March 11, 1996
------------------
Noel A. Wren
President and Chief Executive Officer
/s/ Michael T. Pieniazek Dated: March 11, 1996
-------------------------
Michael T. Pieniazek
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
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 JANUARY 27, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-27-1996
<PERIOD-END> JAN-27-1996
<CASH> 255
<SECURITIES> 0
<RECEIVABLES> 540
<ALLOWANCES> 0
<INVENTORY> 521
<CURRENT-ASSETS> 1,427
<PP&E> 399
<DEPRECIATION> 351
<TOTAL-ASSETS> 2,619
<CURRENT-LIABILITIES> 771
<BONDS> 0
0
0
<COMMON> 1,222
<OTHER-SE> 498
<TOTAL-LIABILITY-AND-EQUITY> 2,619
<SALES> 1,507
<TOTAL-REVENUES> 1,507
<CGS> 819
<TOTAL-COSTS> 819
<OTHER-EXPENSES> 557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 234
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<EPS-PRIMARY> .02
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