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 31, 2000 0-9922
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EQUIDYNE CORPORATION
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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 (IRS Employer ID No.)
Incorporation or Organization)
238 Littleton Road, Westford, Massachusetts 01886
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(Address and Zip Code of Principal Executive Offices)
Issuer's telephone number, including area code: 978-692-6680
------------
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 March 20, 2000, there were outstanding 16,823,911 shares of the Issuer's
Common Stock, $.10 par value.
<PAGE>
EQUIDYNE CORPORATION
Index
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets, January 31, 2000 and
July 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Operations for the Three and
Six Months Ended January 31, 2000 and January 31, 1999 . . . 4
Consolidated Statements of Cash Flows for the Six
Months Ended January 31, 2000 and January 31, 1999 . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . 6
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 2. Changes in Securities . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . .11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . .12
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
EQUIDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, JULY 31,
2000 1999
----------- -----------
(Unaudited)
ASSETS (Thousands)
Current Assets:
Cash and cash equivalents . . . . . . . $ 893 $ 210
Accounts receivable . . . . . . . . . . 30 897
Inventories . . . . . . . . . . . . . . 117 1,480
Prepaid and other current assets . . . 65 196
------- -------
Total current assets . . . . . . . . 1,105 2,783
Property and equipment . . . . . . . . 868 745
Accumulated depreciation . . . . . . . (186) (115)
------- -------
682 630
Goodwill . . . . . . . . . . . . . . . 701 715
Patents . . . . . . . . . . . . . . . 2,027 2,897
Investment in affiliate. . . . . . . . 2,451 -
Other . . . . . . . . . . . . . . . . 14 216
------- -------
$ 6,980 $7,241
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank debt . . . . . . . . . . . . . . . $ - $1,073
Other short-term debt . . . . . . . . . 700 -
Accounts payable . . . . . . . . . . . 824 1,784
Accrued liabilities . . . . . . . . . . 443 815
Dividends payable . . . . . . . . . . . - 373
------- -------
Total current liabilities . . . . . . 1,967 4,045
Stockholders' equity:
Preferred stock, $.01 par value;
Authorized - 1,000,000 shares;
Series A Convertible; Outstanding-None at
January 31, 2000 and 2,400 at July 31, 1999 - 1,909
Series B Convertible; Outstanding-None at
January 31, 2000 and 1,170 at July 31, 1999 - 982
Common stock, $.10 par value; Authorized -
35,000,000 shares; Outstanding -14,843,280
at January 31, 2000 and 9,637,621 at
January 31, 1999 . . . . . . . . . . 1,484 963
Additional paid-in capital . . . . . . 20,033 14,837
Retained deficit . . . . . . . . . . . (16,248) (15,541)
Accumulated other comprehensive loss. . - (200)
------- -------
5,269 2,950
Deferred compensation . . . . . . . . . (256) (194)
------- -------
Total stockholders' equity . . . . 5,013 2,756
------- -------
$ 6,980 $ 7,241
======= =======
See accompanying notes.
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<PAGE>
EQUIDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ------------------
JANUARY JANUARY JANUARY JANUARY
31, 2000 31,1999 31, 2000 31, 1999
-------- -------- -------- ---------
(Thousands, except per share amounts)
Net sales . . . . . . . . . $ - $2,290 $ 802 $4,396
Cost of goods sold. . . . . - 1,454 502 2,673
------ ------ ------ ------
Gross profit. . . . . . . . - 836 300 1,723
Selling, general and
administrative . . . . . . 1,123 1,966 2,376 3,888
Research and development. . 225 77 361 205
------ ------ ------ ------
Total operating expenses . 1,348 2,043 2,737 4,093
------ ------ ------ ------
Operating loss. . . . . . . (1,348) (1,207) (2,437) (2,370)
Other income (expenses):
Gain on sale of affiliate
capital stock . . . . . . 1,003 - 1,865 -
Equity in losses of
affiliate . . . . . . . . (259) - (259) -
Minority interest in
affiliate . . . . . . . . - - 113 -
Interest, net . . . . . . 33 (58) 21 (75)
Other. . . . . . . . . . . (16) (91) (10) (197)
------ ------ ------ ------
761 (149) 1,730 (272)
------ ------- ------ ------
Net loss. . . . . . . . . . $ (587) $(1,356) $(707) $(2,642)
====== ======= ====== ======
Net loss attributable
to common stockholders* $ (464) $(1,494) $(725) $(2,897)
====== ======= ====== ======
Weighted average number
of common and common
equivalent shares
outstanding 13,974,559 7,369,800 11,886,646 7,217,218
========= ========= ========= =========
Net loss per share, basic
and diluted $ (.03) $ (.20) $ (.06) $ (.40)
======= ======= ======= =======
See accompanying notes.
* The three and six months ended January 31, 2000 includes the impact of $-0-
and $141,000, respectively, of dividends on Preferred Stock. The three and six
months ended January 31, 2000 also includes the impact of $123,000 of preferred
stock redemption discounts. The three and six months ended January 31,1999
includes the impact of $138,000 and $255,000, respectively, of dividends on
Preferred Stock.
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<PAGE>
EQUIDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
----------------
JANUARY 31, JANUARY 31,
2000 1999
----------- ----------
OPERATING ACTIVITIES: (Thousands)
Net loss $ (707) $(2,642)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 265 284
Deferred compensation 163 832
Gain on sale of affiliate capital stock (1,865) -
Equity in loss of unconsolidated affiliate 259 -
Minority interest in affiliate (113) -
Changes in operating assets and liabilities:
Accounts receivable 98 (252)
Inventories, prepaid and other current assets (70) (528)
Accounts payable and accrued liabilities (805) 969
------- -------
Net cash used in operating activities (2,775) (1,337)
INVESTING ACTIVITIES:
Proceeds from sale of affiliate stock 3,158 -
Purchase of property and equipment, net (749) (125)
------- -------
Net cash provided by (used in)
investing activities 2,409 (125)
FINANCING ACTIVITIES:
Payments on redemption of preferred stock (2,010) -
Net proceeds (payments)on debt and bank
line of credit (549) 650
Issuance of capital stock by consolidated
subsidiary 1,635 -
Net proceeds from bank debt - 153
Net proceeds from related party debt - 425
Issuance of common stock, net 2,172 (79)
Proceeds from exercise of stock options - 22
------- -------
Net cash provided by financing activities 1,248 1,171
------- -------
Effect of exchange rate changes on
cash and cash equivalents (12) 2
Decrease in cash due to change in method of
accounting from consolidation to equity method (187) -
Increase (decrease) in cash and cash equivalents 683 (289)
Cash and cash equivalents, beginning
of period 210 396
------- -------
Cash and cash equivalents, end of period $ 893 $ 107
======= =======
NON-CASH ACTIVITIES:
Short-term debt issued in connection
with preferred stock redemptions $ 700 $ -
======= =======
Common Stock issued in preferred
Stock redemptions $ 808 $ -
======= =======
Common stock issued for services $ 300 $ -
======= =======
Common stock issued under
conversion provision of warrants $ - $59
======= =======
See accompanying notes.
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<PAGE>
EQUIDYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated 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 31,
2000 are not necessarily indicative of the results that may be expected for the
year ending July 31, 2000. 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 31, 1999.
Foreign Currency Translation
Effective November 1, 1999, the Company changed its method of accounting
for its foreign affiliate, Rosch AG Medizintechnik ("Rosch AG"), from the
consolidated basis to the equity method, due the decrease in the Company's
ownership percentage (see Note 3). Through October 31, 1999, the foreign
affiliate was accounted for on the consolidated basis, and accordingly, its
financial statements were translated into U.S. dollars in accordance with
Statement of Financial Standards No. 52, Foreign Currency Translation. All
balance sheet amounts were translated using the exchange rates in effect at the
balance sheet date. Statement of Operations amounts were translated using
average exchange rates. The gains and losses resulting from the changes in
exchange rates from the date of acquisition of Rosch AG to October 31, 1999 were
reported separately as a component of stockholders equity. For periods
subsequent to October 31, 1999, in accordance with the equity method of
accounting, the Company reports its percentage share of the foreign affiliate's
results of operations as a separate component in its statement of operations.
This amount is determined by translating the results of operations of the
foreign affiliate to U.S. dollars using average exchange rates for the period.
The aggregate transaction gains and losses are insignificant.
Comprehensive Income (Loss)
Effective August 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 130
establishes new rules for the reporting and display of comprehensive income or
loss and its components, however, the adoption of this statement had no impact
on the Company's net income or shareholders' equity. For the three months ended
January 31, 2000, there were no items of other comprehensive income. For the six
months ended January 31, 2000, the Company's only item of other comprehensive
income was the foreign currency translation adjustment recognized in
consolidation of its partially-owned German affiliate, Rosch AG. This
affiliate ceased to be consolidated effective November 1, 1999 (see Note 3).
SFAS 130 requires such adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income. Prior year financial statements have been reclassified to conform to the
requirements of SFAS 130.
The foreign currency translation adjustment and comprehensive loss for the
three months ended January 31, 2000 was $0 and ($587,000), respectively. The
foreign currency translation adjustment and comprehensive loss for the six
months ended January 31, 2000 was $(40,000) and ($707,000), respectively.
2. DEBT
The Company's method of accounting for its German affiliate, Rosch AG, was
changed from consolidation basis to equity method effective November 1, 1999
(see Note 3). As a result, the debt of Rosch AG is no longer included in the
consolidated balance sheet of Equidyne Corporation and Subsidiaries.
-6-
<PAGE>
In connection with the redemption of the Company's Series A Preferred Stock
(see Note 4), the Company issued a Promissory Note and Security Agreement (the
"Secured Note") in the principal amount of $1,050,000. The Secured Note was
non-interest bearing, due in full on the earlier to occur of (i) five business
days of the closing date of the initial public offering in Germany of Rosch AG
or (ii) April 30, 2000. The initial public offering took place on February 24,
2000 (see Note 5), thus the Secured Note matured on February 29, 2000. The terms
of the Secured Note provided that the principal amount would be reduced to
$700,000 if the average closing bid price of the Company's Common Stock for the
five trading days prior to maturity exceeded $3.00 per share. As this provision
was met, the balance of the Secured Note has been stated at $700,000 in the
balance sheet as of January 31, 2000 . The Secured Note was secured by certain
intellectual property rights of the Company, and was paid in full on March 7,
2000.
3. INVESTMENT IN AFFILIATE
Effective November 15, 1999, the Company closed an agreement with a
director of the Company, whereby the director purchased 800,000 shares of the
Company's Common Stock, a three-year warrant to purchase up to 300,000
additional shares of Common Stock at an exercise price of $2.00 per share and a
5% ownership interest in Rosch AG, through a subparticipation contract with the
general manager of Rosch AG, in exchange for a payment of $2 million. This sale
resulted in the reduction of the Company's ownership percentage in Rosch AG to
45.01%.
Effective December 16, 1999, the Company sold an additional 1.11% of Rosch
AG to an outside investor for $520,000. The outside investor also contributed
approximately $2.6 million into Rosch AG, further diluting the Company's
ownership to 41.43%.
As a result of these transactions, the Company changed its method of
accounting for its investment in Rosch AG from the consolidation basis to the
equity method of accounting, effective as of November 1, 1999. Under the equity
method of accounting, the Company's percentage share of Rosch AG's operating
results are reported as a single line item in its Statement of Operations. For
the three months ended January 31, 2000, the Company's share of the net loss of
Rosch AG was approximately $259,000.
For the three months ended October 31, 1999, the Company consolidated the
operating results of Rosch AG and recognized the minority stockholders' share of
Rosch AG's net losses of approximately $113,000.
The following is summarized unaudited financial information of Rosch AG as
of and for the three months ended January 31, 2000:
Net sales $ 1,279,898
Net income (loss) (624,242)
Total assets 8,492,865
Total liabilities 2,575,870
4. EQUITY
Effective November 16, 1999, pursuant to an agreement with the holders of
the Company's outstanding 1,170 shares of Series B Convertible Preferred Stock,
the Company redeemed/converted all such outstanding shares, together with all
accrued and unpaid dividends, penalties and redemption premiums, in exchange for
a total payment of $1,170,000 and the issuance of 369,000 shares of the
Company's Common Stock.
Effective November 17, 1999, pursuant to a Securities Exchange Agreement
with the holder of the Company's outstanding Series A Convertible Preferred
Stock, the Company made a cash payment of $840,000, issued 2,228,312 shares of
its Common Stock and issued a Promissory Note and Security Agreement (see Note
2) in the principal amount of $1,050,000 in exchange for (i) the conversion
1,350 shares of Series A Preferred Stock and the accrued dividends on all
outstanding Series A Preferred Stock, (ii) the redemption of 700 shares of
Series A Preferred Stock and (iii) the exchange of 350 shares of Series A
Preferred Stock for the Secured Note.
Effective November 18, 1999, the Company sold 1,333,333 shares of Common
Stock to Concord Effekten AG, a minority stockholder of Rosch AG, for a purchase
price of $1 million.
-7-
<PAGE>
Effective November 29, 1999, the Company renewed its consulting agreement
with American Financial Communications, Inc. ("AFC"). The agreement expires in
June 2000, and provides a total fee for AFC's services of 200,000 shares of the
Company's Common Stock. The Company has valued the shares at fair market value
on the effective date of the agreement, which was $1.125 per share, and has
recorded deferred compensation totaling $225,000 to be amortized over the term
of the agreement.
During the three months ended January 31, 2000, the Company issued a total
of 81,680 shares of its common stock to two individuals in satisfaction of
outstanding amounts due to those individuals.
5. SUBSEQUENT EVENT
On February 24, 2000, Rosch AG completed an Initial Public Offering ("IPO")
of its shares on the Neuer Market, a segment of the Frankfurt (Germany) Stock
Exchange. Rosch AG sold 1,263,950 newly issued shares in the IPO, which, along
with the Company's sale of certain of its shares of Rosch AG in the IPO, reduced
the Company's ownership of Rosch AG to 26.43%. The Company received proceeds of
approximately $11 million from the sale of its shares, and will recognize a
pre-tax gain of approximately $10.8 million.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
In the past, the Company's ability to achieve its goals has been negatively
impacted by its working capital deficiency. This has changed as a result of net
proceeds of approximately $11 million from the IPO of Rosch AG in February 2000,
which has provided the Company with the funding necessary to execute its
business plan. The business plan is focused on the successful market
introduction of the INJEX (TM) System in the U.S. As a result, the Company has:
(1) Entered into a $3.2 million contract with the leading worldwide manufacturer
in precision injection molding for the healthcare industry to build and operate
automated, low-cost production systems to supply the INJEX(TM) System product
for its July 2000 U.S. market launch, and (2) begun the hiring of a 50-person
dedicated sales force.
Through the various sales of the Company's ownership in Rosch AG throughout
the past year, including the Rosch AG IPO in February 2000, the Company has
realized total net proceeds of approximately $14 million, while retaining
ownership of 26.43% of Rosch AG. Thus, the Company continues to hold a
significant stake in the European market for the INJEX(TM) System through its
ownership of Rosch AG.
During the three months ended January 31, 2000, the Company improved upon
its capital structure through a combination of conversions and redemptions of
all of the Company's previously outstanding convertible preferred stock. The
Company also completed its plan to focus its resources on the INJEX(TM)
needle-free drug delivery system by ceasing the operations of Dynamic Dental
Systems. In addition, the Company appointed Randy Nelson, former head of U.S.
marketing for Eli Lilly's $1 billion diabetes care business, as its new
President, Chief Executive Officer and as a director. In March 2000, the Company
announced that Dr. James Gavin, a past president of the American Diabetes
Association, has joined the Company's Board of Directors.
RESULTS OF OPERATIONS
Net sales for the three and six month periods ended January 31, 2000 were
$-0- and $802,000, respectively, compared to $2,290,000 and $4,396,000 for the
three and six month periods ended January 31, 1999, respectively. Cost of sales
for the three and six month periods ended January 31, 2000 were $-0- and
$502,000, respectively, compared to $1,454,000 and $2,673,000 for the three and
six month periods ended January 31, 1999, respectively. The decrease in net
sales and cost of sales is attributable to three major factors : (1) the
Company's sale of its audiometrics business assets in April 1999 resulted in a
decrease in sales of approximately $253,000 and $587,000 for the three and six
month periods, respectively, as compared to the same period in the prior fiscal
year; (2) The Company's shift in focus towards its INJEX(TM) System, and away
from the intraoral dental camera equipment market served by the Company's
wholly-owned subsidiary, Dynamic Dental Systems (DDS), coupled with DDS' poor
financial performance, and the inability to secure a buyer for DDS, led to the
Company's decision to cease DDS' operations during the three months ended
January 31, 2000, resulting in net sales of DDS for the three and six months
ended January 31, 2000 decreasing by $469,000 and $826,000, respectively; and
(3) The Company's change from the consolidation basis to the equity method of
accounting for its German affiliate, Rosch AG, resulted in a change in the
method of reporting the operations of Rosch AG in the Company's Consolidated
Statements of Operations. Under the consolidation basis, the Rosch AG Statement
of Operations is consolidated with the Statement of Operations of the Company.
Under the equity method of accounting, the Company's Statement of Operations
only reflects its share of the net income or loss of Rosch AG as a separate
-8-
<PAGE>
component of the Company's Statement of Operations. As a result, the Statements
of Operations for the three and six months ended January 31, 2000 do not include
the net sales and cost of sales of Rosch AG, whereas the Statements of
Operations for the three and six months ended January 31, 1999 include Rosch AG
net sales of $1,404,000 and $2,653,000, respectively.
Selling, general and administrative expenses for the three and six month
periods ended January 31, 2000 were $1,123,000 and $2,376,000, respectively,
compared to $1,966,000 and $3,888,000, respectively, for the comparable prior
year periods. The decrease reflects the impact of the Company's sale of its
audiometrics business assets in April 1999, and cost savings associated with
ceasing the operations of DDS. The change in accounting method described above
resulted in a reduction in the selling, general and administrative expense
reported in the consolidated Statement of Operations for the three and six month
periods of $577,000 and $1,055,000, respectively. Also contributing to the net
decrease was a reduction for the three and six month periods ended January 31,
2000 of approximately $324,000 and $669,000, respectively of amortization
expense due primarily to deferred compensation recognized in connection with the
acquisitions of DDS and the Company's wholly-owned subsidiary, Equidyne Systems,
Inc. ("ESI"). These expenses became fully amortized during the fiscal year ended
July 31, 1999. These decreases in costs were partially offset by increased costs
incurred in connection with ESI, and its preparation for full-scale market
introduction of the INJEX(TM) System.
Research and development expenses for the three and six months ended
January 31, 2000 were $225,000 and $361,000, respectively, compared to $77,000
and $205,000, respectively, for the comparable prior year periods. The increase
reflects the availability of working capital at the Company, and management's
decision to allocate a greater portion of the Company's resources towards the
development of high-volume, automated production tools and improved product
features.
Net loss for the three and six month periods ended January 31, 2000 was
$587,000 and $707,000, respectively, compared to a net loss of $1,356,000 and
$2,642,000, respectively, for the same periods in the prior fiscal year. The
decrease in net loss is primarily the result of the gains recognized on the
partial sales of the Company's ownership in Rosch AG, which were $1,003,000 and
$1,865,000 for the three and six months ended January 31, 2000, respectively.
The sale of the audiometrics business assets in April 1999 and ceasing the
operations of DDS also caused reductions to the Company's net losses for the
periods, as both operations incurred significant losses during the three and six
months ended January 31, 1999. The net loss for the three and six month periods
ended January 31, 2000 were partially offset by the increased costs incurred in
connection with ESI and its preparation for full-scale market introduction of
the INJEX(TM) System.
LIQUIDITY AND CAPITAL RESOURCES
Working capital (deficit) of the Company at January 31, 2000 was
$(862,000), compared to $(1,262,000) at July 31, 1999. The increase of $400,000
primarily resulted from the proceeds from the sales of a portion of the
Company's ownership in Rosch AG of approximately $3.2 million, partially offset
by the net effect of the Company's operating losses. In addition, the change in
the accounting treatment for the Company's investment in Rosch AG from
consolidation basis to equity method had the impact of removing the working
capital of Rosch AG from the consolidated balance sheet of the Company. Rosch
AG's working capital at July 31, 1999 was approximately $400,000.
In February 2000, Rosch AG completed an Initial Public Offering ("IPO") of
its shares on the Neuer Market, a segment of the Frankfurt (Germany) Stock
Exchange. Rosch AG sold 1,263,950 newly issued shares in the IPO, which, along
with the Company's sale of certain of its shares of Rosch AG in the IPO, reduced
the Company's ownership of Rosch AG to 26.43%. The Company received proceeds of
approximately $11 million from the sale of its shares, and will recognize a
pre-tax gain of approximately $10.8 million.
The Company has significantly improved its working capital position, and
currently has sufficient working capital to sustain the Company through at least
the next twelve months. Of the proceeds from the IPO described above, $700,000
was used to pay-off the Company's $700,000 note payable outstanding at January
31, 2000. The balance of the proceeds are being used to fund the acquisition of
the high-volume, fully-automated production tools that are necessary to fill the
anticipated demand for the INJEX(TM) System. In addition, the funds are being
used to build the infrastructure necessary to support the business, including
the hiring of a full-time dedicated sales force, a customer support team, and
various other personnel requirements. The proceeds are also being used to
implement strategic marketing initiatives and continued research and development
initiatives.
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<PAGE>
PART II. - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
During the three month period ended January 31, 2000, the Company completed
the following transactions:
- - A sale to a director of the Company of 800,000 shares of the Company's Common
Stock, a three-year warrant to purchase up to 300,000 additional shares of
Common Stock at an exercise price of $2.00 per share and a 5% ownership interest
in Rosch AG, through a subparticipation contract with the general manager of
Rosch AG, in exchange for a payment of $2 million.
- - The Company redeemed/converted all of the 1,170 outstanding shares of Series B
Convertible Preferred Stock, together with all accrued and unpaid dividends,
penalties and redemption premiums, in exchange for a total payment of $1,170,000
and the issuance of 369,000 shares of the Company's Common Stock.
- - The Company made a cash payment of $840,000, issued 2,228,312 shares of its
Common Stock and issued a Promissory Note and Security Agreement (the "Secured
Note") in the principal amount of $1,050,000 (subject to adjustment) in exchange
for (i) the conversion 1,350 shares of Series A Convertible Preferred Stock and
the accrued dividends on all outstanding Series A Preferred Stock, (ii) the
redemption of 700 shares of Series A Preferred Stock and (iii) the exchange of
350 shares of Series A Preferred Stock for the Secured Note. The principal
amount of the Secured Note was reduced to $700,000 in accordance with its terms,
and matured in February 2000.
- - Effective November 18, 1999, the Company sold 1,333,333 shares of Common Stock
to Concord Effekten AG, a minority stockholder of Rosch AG, for a purchase price
of $1 million.
- - Effective November 29, 1999, the Company renewed its consulting agreement with
American Financial Communications, Inc. ("AFC"), and issued 200,000 shares of
the Company's Common Stock to AFC in full payment for the services to be
provided through June 2000.
- - Effective December 16, 1999, the Company sold an additional 1.11% of Rosch AG
to an outside investor for $520,000. The outside investor also contributed
approximately $2.6 million into Rosch AG, further diluting the Company's
ownership to 41.43%.
- - During the three months ended January 31, 2000, the Company issued a total of
81,680 shares of its common stock to two individuals in satisfaction of
outstanding amounts due to those individuals.
All shares issued under the above transactions were with "accredited investors",
as such term is defined in Regulation D under the Securities Act. See Notes 3
and 4 to the financial statements for further information.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On December 29, 1999, the Company held its 1999 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:
Thomas A. Slamecka
Michael T. Pieniazek
Marcus R. Rowan
Blake C. Davenport
Jim Fukushima
Andy Rosch
-10-
<PAGE>
(c) The other items considered at the Meeting were an increase in the
authorized shares of common stock to 35,000,000, an amendment to change the
Corporate name to Equidyne Corporation and an amendment to the 1996 Stock
Option Plan to increase the number of shares reserved for issuance
thereunder to 700,000. The votes cast at the Meeting were as follows:
ABSTAIN OR BROKER
ITEM FOR AGAINST WITHHOLD NO-VOTE
---- --------- ------- ----------- -------
Directors 7,906,061 - 18,160 -
Authorized Shares 7,837,198 68,323 17,700 -
Name Change 7,899,425 4,323 12,200 -
Option Plan 7,675,645 180,276 64,300 -
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a report on Form 8-K for an event on November 15, 1999 to
report that the Company completed several agreements whereby it
converted/redeemed all outstanding shares of its Series A and Series B
Convertible Preferred Stock, through the issuance of a total of 4,730,645 shares
of common stock and warrants to purchase up to 300,000 shares of common stock,
the sale of 5% of its foreign affiliate, and the issuance of a Secured
Promissory Note.
The Company filed a report on Form 8-K for an event on January 5, 2000 to report
the results of the vote of its stockholders at the Company's annual meeting,
whereby the Company increased its authorized shares of common stock from
20,000,000 to 35,000,000, and changed the Company's name to Equidyne
Corporation.
Exhibits -
27. Financial Data Schedule
-11-
<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.
EQUIDYNE CORPORATION
--------------------
Dated: March 21, 2000 /s/ Joseph R. Nelson
----------------
Joseph R. Nelson
Chief Executive Officer
Dated: March 21, 2000 /s/ Michael T. Pieniazek
--------------------
Michael T. Pieniazek
Chief Financial Officer
-12-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Equidyne
Corporation Form 10-QSB for the period ended January 31, 2000 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-31-2000
<PERIOD-END> Jan-31-2000
<CASH> 893
<SECURITIES> 0
<RECEIVABLES> 30
<ALLOWANCES> 0
<INVENTORY> 117
<CURRENT-ASSETS> 65
<PP&E> 868
<DEPRECIATION> (186)
<TOTAL-ASSETS> 6,980
<CURRENT-LIABILITIES> 1,967
<BONDS> 0
0
0
<COMMON> 1,484
<OTHER-SE> 3,529
<TOTAL-LIABILITY-AND-EQUITY> 6,980
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (33)
<INCOME-PRETAX> (587)
<INCOME-TAX> 0
<INCOME-CONTINUING> (587)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (587)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
