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 25, 1997 0-9922
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AMERICAN ELECTROMEDICS CORP.
------------------------------
(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
--------------------------------------
(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 7, 1997, 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, January 25, 1997 and July 27, 1996 . . . . . 2
Statements of Income for the Three and Six Months
Ended January 25, 1997 and January 27, 1996 . . . . . . . 3
Statements of Cash Flows for the Six Months Ended
January 25, 1997 and January 27, 1996 . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis or Plan of Operation . 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 6
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
AMERICAN ELECTROMEDICS CORP.
BALANCE SHEETS
JANUARY 25, 1997 JULY 27, 1996
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(UNAUDITED)
ASSETS (THOUSANDS)
Current assets:
Cash and cash equivalents . . . . $ 760 $ 317
Accounts receivable, net of
allowance of $11,000:
Trade . . . . . . . . . . . . . 325 303
Affiliate . . . . . . . . . . . 239 402
------ ------
564 705
Inventories . . . . . . . . . . . 611 480
Prepaid and other current assets 354 133
------ ------
Total current assets . . . . . 2,289 1,635
Property and equipment . . . . . 430 406
Accumulated depreciation . . . . (380) (365)
------ ------
50 41
Deferred financing costs . . . . 153 -
Investment in affiliate . . . . . 833 876
Goodwill . . . . . . . . . . . . 214 219
Other assets . . . . . . . . . . 100 -
------ ------
$3,639 $2,771
====== ======
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . $ 262 $ 324
Bank line of credit . . . . . . . 300 300
Accrued liabilities . . . . . . . 43 38
Current portion of long-term debt 167 67
------ ------
Total current liabilities . . . 772 729
Long-term debt . . . . . . . . . 447 94
Convertible subordinated debentures 720 -
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 - 2,506,266
shares at January 25, 1997
and 2,454,666 shares
at July 27, 1996 . . . . . . . . 251 245
Additional paid-in capital . . . 2,923 2,783
Retained deficit . . . . . . . . (1,474) (1,080)
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Total stockholders' equity 1,700 1,948
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$3,639 $2,771
====== ======
See accompanying notes.
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<PAGE>
AMERICAN ELECTROMEDICS CORP.
STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
-----------------------------------
JANUARY 25, 1997 JANUARY 27, 1996
---------------- ----------------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales . . . . . . . . . . . . $ 523 $ 843
Cost of goods sold . . . . . . . 282 428
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Gross profit . . . . . . . . . 241 415
Selling, general and administrative 374 256
Research and development . . . . 41 48
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Total operating expenses . . . 415 304
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Operating income (loss) . . . . . (174) 111
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Other income (expenses):
Undistributed earnings of affiliate (13) 100
Interest, net . . . . . . . . (34) (1)
Other . . . . . . . . . . . . (13) -
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(60) 99
Income (loss) before provision
for income taxes . . . . . . . (234) 210
Provision for income taxes . . . - 8
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Net income (loss) . . . . . . . . $ (234) $ 202
======= ======
Weighted average number of common
and common equivalent shares
outstanding . . . . . . . . . 2,506,266 2,455,059
========= =========
Earnings (loss) per common and
common equivalent share . . $ (.09) $ .08
======= ======
SIX MONTHS ENDED
-----------------------------------
JANUARY 25, 1997 JANUARY 27, 1996
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(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales . . . . . . . . . . . . $1,063 $1,507
Cost of goods sold . . . . . . . 594 819
------ ------
Gross profit . . . . . . . . . 469 688
Selling, general and administrative 689 449
Research and development . . . . 75 108
------ ------
Total operating expenses . . . 764 557
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Operating income (loss) . . . . . (295) 131
------ ------
Other income (expenses):
Undistributed earnings of affiliate (43) 100
Interest, net . . . . . . . . (43) 3
Other . . . . . . . . . . . . (13) -
------ ------
(99) 103
Income (loss) before provision
for income taxes . . . . . . . (394) 234
Provision for income taxes . . . - 10
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Net income (loss) . . . . . . . . $ (394) $ 224
====== ======
Weighted average number of common
and common equivalent shares
outstanding . . . . . . . . . 2,481,164 2,447,094
========= =========
Earnings (loss) per common and
common equivalent share . . . $ (.16) $ .09
====== ======
See accompanying notes.
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<PAGE>
AMERICAN ELECTROMEDICS CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
---------------------------------
JANUARY 25, 1997 JANUARY 27, 1996
---------------- ----------------
(Thousands)
OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . $ (394) $ 224
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization . . . . . . . 33 18
Undistributed earnings of affiliate . . . . 43 (100)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . 141 (109)
Inventories, prepaid and other current assets (352) (336)
Accounts payable and accrued liabilities. . (57) 92
------ -----
Net cash used in operating activities . . . (586) (211)
INVESTING ACTIVITIES:
Investment in affiliate . . . . . . . . . . . . - (519)
Purchase of property and equipment, net . . . . (24) (10)
Payment for product license . . . . . . . . . . (100) -
------ -----
Net cash used in investing activities . . . (124) (529)
FINANCING ACTIVITIES:
Principal payments on long-term debt . . . . . (47) (10)
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 --
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Net cash provided by financing
activities . . . . . . . . . . . . . . . 1,153 490
Increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . 443 (250)
Cash and cash equivalents,
beginning of period . . . . . . . . . . . . . 317 505
------ -----
Cash and cash equivalents, end of period . . . $ 760 $ 255
====== =====
See accompanying notes.
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<PAGE>
AMERICAN ELECTROMEDICS CORP.
NOTES TO FINANCIAL STATEMENTS
JANUARY 25, 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 six month periods ended January 25, 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 January 25, 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 will be 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.
- 5 -
<PAGE>
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 25,
1997 were $523,000 and $1,063,000, respectively, compared to
$843,000 and $1,507,000 for the three and six month periods ended
January 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, intially because of
temporary regulatory delays which have become less of a factor in
the second quarter, and subsequently because of changes in the
reimbursement policy for the Company's products in Germany.
Cost of sales for the three and six months ended January 25, 1997
were 53.9% and 55.9% of net sales compared to 50.8% and 54.3% 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
industry-wide slowdown.
Selling, general and administrative expenses for the three and
six month periods ended January 25, 1997 were $374,000 and
$689,000, respectively, compared to $256,000 and 449,000 for the
comparable prior year periods. The increase reflects increased
sales and promotional activity, corporate development, regulatory
and communications expense.
Net loss for the three and six month periods ended January 25,
1997 were $234,000, or $.09 per share, and $394,000, or $.16 per
share, respectively, compared to net income of $202,000, or $.08
per share, and $224,000, or $.09 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.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital of the Company at January 25, 1997 was
$1,517,000, compared to $906,000 at fiscal year ended July 27,
1996. The increase of $611,000 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 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a Form 8-K for an event of November 7, 1996
to report on Item 5 thereof the reverse stock split.
Exhibits -
27. Financial Data Schedule
- 6 -
<PAGE>
AMERICAN ELECTROMEDICS CORP.
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 10, 1997
----------------
Noel A. Wren
President
/s/ Michael T. Pieniazek Dated: March 10, 1997
------------------------
Michael T. Pieniazek
Chief Financial Officer
- 7 -
<PAGE>
EXHIBIT INDEX
Exhibit Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM AMERICAN ELECTROMEDICS CORP. FORM 10-QSB FOR THE PERIOD ENDED
JANUARY 25, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-25-1997
<CASH> 760
<SECURITIES> 0
<RECEIVABLES> 564
<ALLOWANCES> 0
<INVENTORY> 611
<CURRENT-ASSETS> 2,289
<PP&E> 430
<DEPRECIATION> (380)
<TOTAL-ASSETS> 3,639
<CURRENT-LIABILITIES> 772
<BONDS> 720
0
0
<COMMON> 251
<OTHER-SE> 1,449
<TOTAL-LIABILITY-AND-EQUITY> 3,639
<SALES> 523
<TOTAL-REVENUES> 523
<CGS> 282
<TOTAL-COSTS> 282
<OTHER-EXPENSES> 415
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> (234)
<INCOME-TAX> 0
<INCOME-CONTINUING> (234)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (234)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
