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
OCTOBER 26, 1996 0-9922
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AMERICAN ELECTROMEDICS CORP.
------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 04-2608713
-------- ----------
(State or Other Jurisdiction of Incorporation (IRS Employer
or Organization) ID No.)
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 December 9, 1996, there were outstanding 2,506,266 shares
of the Issuer's Common Stock, $.10 par value, after adjustment
for a one-for-five reverse stock split effective November 8,
1996.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
Index
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, October 26, 1996 and July 27, 1996 . . 2
Statements of Income for the Three Months Ended
October 26, 1996 and October 28, 1995 . . . . . . . . 3
Statements of Cash Flows for the Three Months Ended
October 26, 1996 and October 28, 1995 . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis or Plan of
Operation . . . . . . . . . . . . . . . . . . . . 6
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
6
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 7
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 8
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
AMERICAN ELECTROMEDICS CORP.
BALANCE SHEETS
OCTOBER 26 JULY 27
1996 1996
--------- ----------
(Thousands)
ASSETS
Current assets:
Cash and cash equivalents . . $1,465 $ 317
Accounts receivable, net of
allowance of $11,000:
Trade . . . . . . . . . . . 194 303
402
Affiliate . . . . . . . . . 447
641 705
Inventories . . . . . . . . . 561 480
133
Prepaid and other current 99
assets . . . . . . . . . . .
Total current assets . . 2,766 1,635
Property and equipment . . . 412 406
Accumulated depreciation . . (372) (365)
40 41
Deferred financing costs . . 166
Investment in affiliate . . . 846 876
Goodwill . . . . . . . . . . 216 219
----- ------
$4,034 $2,771
======== =======
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable . . . . . . $0,418 $0,324
Bank line of credit . . . . . 300 300
Accrued liabilities . . . . . 16 38
67
Current portion of long-term 167
debt . . . . . . . . . . . .
Total current liabilities 901 729
Long-term debt . . . . . . . 477 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 - 12,531,333 1,253 1,227
shares at October 26, 1996
and 12,273,333 shares
at July 27, 1996 . . . . .
Additional paid-in capital . 1,923 1,801
Retained deficit . . . . . . (1,240) (1,080)
------- --------
Total stockholders' equity 1,936 1,948
------ --------
$4,034 $2,771
======= ========
See accompanying notes.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
----------------------------------
OCTOBER 26 JULY 28
1996 1995
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(Thousands except per share amounts)
Net sales . . . . . . . . . . . . . . $0,540 $ 664
312 391
Cost of goods sold . . . . . . . . . ----- -----
Gross profit . . . . . . . . . . . 228 273
Selling, general and administrative . 315 193
34 60
Research and development . . . . . . ---- ----
349 253
Total operating expenses . . . . . ----- -----
(121) 20
Operating income (loss) . . . . . . . ------ -----
Other income (expenses):
Undistributed earnings of affiliate
(30) --
Interest, net . . . . . . . . . . . (9) 4
Other . . . . . . . . . . . . . . . ------ -----
(39) 4
Income (loss) before provision for
income taxes . . . . . . . . . . . . (160) 24
- 2
Provision for income taxes . . . . . ----- ------
$ (160) $ 22
------- -------
Net income (loss) . . . . . . . . . .
Weighted average number of common and
common equivalent 12,280,321 12,195,639
shares outstanding . . . . . . . =========== ============
Earnings (loss) per common and common $ (.01) $ .00
equivalent share . . . . . . . . . .
See accompanying notes.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS
------------------
OCTOBER OCTOBER
26, 1996 28, 1995
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(Thousands)
Operating activities:
Net income (loss) . . . . . . . . . . . $ (160) $ 22
Adjustments to reconcile net income
(loss) to net cash
used in operating activities:
Depreciation and amortization . . . . 10 6
Undistributed earnings of affiliate . 30 --
Changes in operating assets and
liabilities:
Accounts receivable . . . . . . . . 64 36
Inventories, prepaid and other (47) (227)
current assets . . . . . . . . . . . .
Accounts payable and accrued 72 11
liabilities . . . . . . . . . . . . . .
Net cash used in operating activities (31) (152)
INVESTING ACTIVITIES:
Purchase of property and equipment, net (6) 2
----- ----
Net cash provided by (used in)
investing activities . . . . . . . . . (6) 2
FINANCING ACTIVITIES:
Principal payments on long-term debt . (17) (1)
Proceeds from long-term debt . . . . . 500 --
Issuance of common stock, net . . . . . 146 __
Issuance of convertible subordinated
debt . . . . . . . . . . . . . . . . . 720 __
Deferred financing costs . . . . . . . (166) __
Proceeds from exercise of stock options 2 __
----- ------
Net cash provided by (used in)
financing activities . . . . . . . . 1,185 (1)
Increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . 1,148 (151)
Cash and cash equivalents, beginning of
year . . . . . . . . . . . . . . . . . 317 505
------- ------
Cash and cash equivalents, end of year $1,465 $ 354
====== ======
See accompanying notes.
<PAGE>
AMERICAN ELECTROMEDICS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 26, 1996
(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 month period ended October
26, 1996 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 20,000 shares of Common Stock,
or an aggregate of $720,000 principal amount of Debentures and 240,000
shares of Common Stock.
The Debentures are convertible into Common Stock at $.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 a
rate equal to prime plus 1/2%, and is guaranteed by the New Hampshire
Business Finance Authority. The bank had separately increased the
Company's revolving line of credit to $400,000 from $300,000. As of
October 26, 1996 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 will be used for general working capital
purposes, including possible acquisitions and marketing.
3. SUBSEQUENT EVENT
----------------
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 will reduce the number
of shares outstanding to 2,506,266.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
---------------------
Net sales for the three month period ended October 26,1996 was
$540,000, compared to $664,000 for the three month period ended
October 28, 1995. The decrease in first quarter sales resulted from a
temporary regulatory delay of a single product in Germany by the
Company's German medical products distribution arm, Rosch GmbH
Medizintechnik along with a general industry-wide slowdown.
Cost of sales for the three months ended October 26, 1996 was 57.8% of
net sales compared to 58.9% of net sales during the three months ended
October 28,1995. The decrease in cost as percentage of sales can be
attributed to the favorable product mix.
Selling, general and administrative expenses for the three month
period ended October 26, 1996 was $315,000, compared to $193,000 for
the comparable prior year period. The increase reflects increased
sales and promotional activity and corporate development and
communications expense.
Net loss for the three month period ended October 26, 1996 was
$160,000, or $.01 per share, compared to net income of $22,000, or
$.00 per share, for the same period 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
and communications efforts.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital of the Company at October 26, 1996 was $1,865,000,
compared to $906,000 at fiscal year ended July 27, 1996. The increase
of $959,000 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On October 8, 1996, the Company held an annual meeting of
stockholders (the "Meeting").
(b) At the Meeting, the following persons were elected directors,
each to hold office until the next annual meeting of stockholders:
Noel A. Wren
Alan Gelband
Kenneth Levy
Thomas A. Slamecka
Joseph Wear
(c) The other items considered at the Meeting were the adoption of
the 1996 Stock Option Plan (the "Option Plan") and the authorization
of a reverse stock split (the "Reverse Split") or if the Reverse Split
is not effected an increase in the authorized shares of Common Stock
to 30,000,000 shares (the "Recapitalization"). The votes cast at the
Meeting were as follows:
ABSTAIN OR BROKER
ITEM FOR AGAINST WITHHOLD NO-VOTE
------ ---- -------- --------- ------
Directors 10,649,671 2,200
Option Plan 7,428,218 45,900 1,043 3,176,710
Reverse 10,530,078 21,300 493 100,000
Split
Recapital- 10,248,528 303,300 43 100,000
ization
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a Form 8-K, for an event October 25, 1996, to report
on Item 5 the completion of a private placement of an aggregate of
$900,000 and the receipt of a $500,000 term loan.
Exhibits -
4.1 Form of 14% Convertible Subordinated Debentures, due October 31,
1999 (filed as Exhibit 4 to the Company's Form 8-K for an event
of October 25, 1996, and incorporated herein by reference).
10.1 Loan Agreement, dated October 4, 1996, between the Company and
Citizens Bank New Hampshire (the "Bank") (filed as Exhibit 10.9.1
to the Company's Form 10-KSB for the fiscal year ended July 27,
1996 (the "1996 Form 10-KSB"), and incorporated herein by
reference).
10.2 Security Agreement, dated October 4, 1996, between the Company
and the Bank (filed as Exhibit 10.9.2 to the Company's 1996 Form
10-KSB and incorporated herein by reference).
10.3 Revolving Line of Credit Promissory Note, dated October 4, 1996,
from the Company to the Bank (filed as Exhibit 10.9.3 to the
Company's 1996 Form 10-KSB and incorporated herein by reference).
10.4 Term Promissory Note, dated October 4, 1996, from the Company to
the Bank (filed as Exhibit 10.9.4 to the Company's 1996 Form 10-
KSB and incorporated herein by reference).
27. Financial Data Schedule
<PAGE>
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/ Noel A. Wren Dated: December 9, 1996
-----------------------
Noel A. Wren
President and Chief Executive Officer
/s/ Michael T. Pieniazek Dated: December 9, 1996
------------------------
Michael T. Pieniazek
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM AMERICAN ELECTROMEDICS CORP FORM 10-QSB
FOR THE PERIOD ENDED OCTOBER 26, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> OCT-26-1996
<CASH> 1,465
<SECURITIES> 0
<RECEIVABLES> 641
<ALLOWANCES> 0
<INVENTORY> 561
<CURRENT-ASSETS> 2,766
<PP&E> 412
<DEPRECIATION> (372)
<TOTAL-ASSETS> 4,034
<CURRENT-LIABILITIES> 901
<BONDS> 720
0
0
<COMMON> 1,253
<OTHER-SE> 683
<TOTAL-LIABILITY-AND-EQUITY> 4,034
<SALES> 540
<TOTAL-REVENUES> 540
<CGS> 312
<TOTAL-COSTS> 312
<OTHER-EXPENSES> 349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> (160)
<INCOME-TAX> 0
<INCOME-CONTINUING> (160)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (160)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
