UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended MARCH 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to_________
Commission File No. 0-12374
EQUITEX, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 84-0905189
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7315 East Peakview Avenue
Englewood, Colorado 80111
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(303) 796-8940
---------------------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes |X| No | |
Number of shares of common stock outstanding at May 12, 1997: 3,191,115
<PAGE>
EQUITEX, INC.
Part 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The accompanying interim unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not include
all 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 adjustments) considered necessary
for a fair presentation have been included, and the disclosures are adequate to
make the information presented not misleading. Operating results for the three
months ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997. These statements should be
read in conjunction with the financial statements and notes thereto included in
the Annual 10-KSB Report (filed with the Securities and Exchange Commission) for
the year ended December 31, 1996.
F-1
<PAGE>
EQUITEX, INC.
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
MAR. 31, DEC. 31,
1997 1996
(Unaudited)
ASSETS
<S> <C> <C>
Investments, at fair value:
Securities (cost of $3,682,405 and
$3,767,309 in 1997 and 1996, respectively) .... $ 9,745,603 $10,138,562
Notes receivable, net of allowance
for uncollectible accounts of $100 ............ 1,100 20,250
Accrued interest receivable, net of
allowance for uncollectible interest of $35 ... 1,767 1,902
Trade receivables, net of allowance
for uncollectible accounts of $2,943 .......... 38,285 39,623
----------- -----------
9,786,755 10,200,337
Cash ............................................. 40,108 53,795
Accounts receivable - brokers .................... 774 4,766
Income taxes refundable .......................... 166,609 166,609
Furniture and equipment, net of
accumulated depreciation of $109,267
and $106,362 in 1997 and 1996, respectively ... 35,816 38,720
Other ............................................ 13,008 13,776
----------- -----------
$10,043,070 $10,478,003
=========== ===========
</TABLE>
(Continued)
F-2
<PAGE>
EQUITEX, INC.
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
MAR. 31, DEC. 31,
1997 1996
(Unaudited)
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities
Accounts payable and other
accrued liabilities ......................... $ 78,402 $ 55,441
Accounts payable to brokers ................... 748,800 739,023
Accrued bonus to officer ...................... 223,429 148,106
Deferred income taxes ......................... 2,214,460 2,274,650
----------- -----------
3,265,091 3,217,220
Net Assets
Preferred stock, par value $.01;
2,000,000 shares authorized; no
shares issued
Common stock, par value $.02;
7,500,000 shares authorized;
3,224,465 shares issued;
3,191,115 shares outstanding ................ 64,489 64,489
Additional paid-in capital .................... 4,447,175 4,447,175
Retained earnings
Accumulated deficit prior to
becoming a BDC ............................ (118,874) (118,874)
Accumulated net investment loss ............. (12,298,839) (12,025,669)
Accumulated net realized gains from
sales and permanent write-downs
of investments ............................ 11,099,514 11,121,234
Unrealized net gains on investments
(net of deferred income taxes of
$2,364,647 and $2,484,788 in 1997
and 1996, respectively) ................... 3,698,551 3,886,465
Less: treasury stock at cost
(33,350 shares) ........................... (114,037) (114,037)
----------- -----------
6,777,979 7,260,783
----------- -----------
$10,043,070 $10,478,003
=========== ===========
</TABLE>
F-3
<PAGE>
EQUITEX, INC.
Schedule of Investments
March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
NUMBER COST
OF AND/OR FAIR
COMPANY SHARES OWNED EQUITY VALUE
- ------- ------------ ------ -----
<S> <C> <C> <C>
AFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
METHOD OF VALUATION (c)(e)
IntraNet Solutions, Inc. (formerly
MacGregor Sports & Fitness, Inc.)
Document management services,
web-based internet software,
electronic document management
and demand printing ............. 645,085 $ 1,417,610 $ 2,429,949
RDM Sports Group (formerly
Roadmaster Industries, Inc.)
Manufacturer of fitness
equipment and juvenile products ... 5,107,037 1,145,423 6,324,991
OTHER - PUBLIC MARKET METHOD
OF VALUATION
RDM Sports Group 8% Convertible
Manufacturer of fitness Subordinated
equipment and juvenile products ... Debentures 150,682 129,500
----------- -----------
Sub-Total
AFFILIATED COMPANIES ............. 2,713,715 8,884,440
----------- -----------
UNAFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
METHOD OF VALUATION
Diametrics Medical
Medical equipment ................. 10,000 76,883 30,625
Cambridge Holdings
Real estate - commercial .......... 87,209 34,000 32,703
IVI Publishing
Publishing technology ............. 30,000 171,258 82,500
Meditech Pharmaceuticals, Inc.
Antiviral products ................ 500,000 40,000 10,000
Racotek
Medical technology ................ 50,000 317,387 156,250
Audio King
Consumer electronics .............. 12,000 31,543 18,750
</TABLE>
(Continued)
F-4
<PAGE>
EQUITEX, INC.
Schedule of Investments (Page 2)
March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
NUMBER COST
OF AND/OR FAIR
COMPANY SHARES OWNED EQUITY VALUE
- ------- ------------ ------ -----
<S> <C> <C> <C>
UNAFFILIATED COMPANIES (CONTINUED)
COMMON STOCKS - PUBLIC MARKET
METHOD OF VALUATION
Frontier Airlines
Commercial air carrier ............ 10,000 92,520 31,250
Las Vegas Discount Golf
and Tennis
Sporting goods retailer ........... 30,000 31,600 26,250
COMMON STOCKS - PRIVATE MARKET
METHOD OF VALUATION (a)(e)
All Systems Go
Software development .............. 20,000(b) 25,000 25,000
NevStar Gaming Corporation 10,000 Series
Gaming development ................ A preferred 38,500 38,500
Ocean Power Technology
Alternative energy
research and development .......... 35,714(b) 40,000 89,285
100,000 -- 250,000
Gain, Inc.
Male vascular devices ............. 20,000(b) 50,000 50,000
Juice Island
Health food stores ................ 10,000(b) 20,000 20,000
WARRANTS (f)(e)
Nationsmart
Consumer services ................. 10,000 -- 50
Juice Island
Health food stores ................ 2,500 -- --
----------- ----------- -----------
Sub-total
UNAFFILIATED COMPANIES ............ 968,690 861,163
----------- -----------
Total
ALL COMPANIES ..................... $ 3,682,405 $ 9,745,603
=========== ===========
</TABLE>
(Continued)
F-5
<PAGE>
EQUITEX, INC.
Schedule of Investments (Page 3)
March 31, 1997
(Unaudited)
RESTRICTIONS AS TO RESALE
(a) Non-public company whose securities are privately owned. The Board of
Directors determines fair value in good faith using cost information, but also
taking into consideration the impact of such factors as available financial
information of the investee, the nature and duration of any restrictions on
resale, and other factors which influence the market in which a security is
purchased and sold.
(b) May be sold under the provisions of Rule 144 of the Securities Act of 1933
after an initial holding period expires.
(c) Since the Company is a greater than five percent shareholder, it may be
affected by a sales limitation of one percent of the investee's outstanding
common stock during any three-month period.
(e) Since certain of these securities have certain restrictions as to resale,
the Board of Directors determines fair value in good faith using public market
information, but also taking into consideration the impact of such factors as
available financial information of the investee, the nature and duration of
restrictions on the disposition of securities, and other factors which influence
the market in which a security is purchased and sold.
(f) Valued at higher of cost or fair market value of underlying stock less
exercise price, subject to valuation adjustments as determined in good faith by
the Board of Directors, taking into consideration the impact of such factors as
available financial information of the investee, the nature and duration of any
restrictions on resale, and other factors which influence the market in which a
security is purchased and sold.
F-6
<PAGE>
EQUITEX, INC.
Schedule of Investments
December 31, 1996
<TABLE>
<CAPTION>
NUMBER COST
OF AND/OR FAIR
COMPANY SHARES OWNED EQUITY VALUE
- ------- ------------ ------ -----
<S> <C> <C> <C>
AFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
METHOD OF VALUATION (c)(e)
IntraNet Solutions, Inc. (formerly
MacGregor Sports & Fitness, Inc.)
Document management services,
web-based internet software,
electronic document management
and demand printing ............. 645,085 $ 1,417,610 $ 3,193,171
RDM Sports Group (formerly
Roadmaster Industries, Inc.)
Manufacturer of fitness
equipment and juvenile products ... 5,142,037 1,149,559 5,789,367
OTHER - PUBLIC MARKET METHOD
OF VALUATION
RDM Sports Group 8% Convertible
Manufacturer of fitness Subordinated
equipment and juvenile products ... Debentures 150,682 130,375
----------- -----------
Sub-Total
AFFILIATED COMPANIES ............. 2,717,851 9,112,913
----------- -----------
UNAFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
METHOD OF VALUATION
Diametrics Medical
Medical equipment ................. 10,000 76,883 42,500
Cambridge Holdings
Real estate - commercial .......... 87,209 34,000 54,506
IVI Publishing
Publishing technology ............. 30,000 171,258 93,750
Meditech Pharmaceuticals, Inc.
Antiviral products ................ 500,000 40,000 13,750
Meteor Industries
Petroleum distributor ............. 5,120 19,502 25,920
Racotek
Medical technology ................ 50,000 317,387 212,500
Audio King
Consumer electronics .............. 12,000 31,543 13,500
</TABLE>
(Continued)
F-7
<PAGE>
EQUITEX, INC.
Schedule of Investments (Page 2)
December 31, 1996
<TABLE>
<CAPTION>
NUMBER COST
OF AND/OR FAIR
COMPANY SHARES OWNED EQUITY VALUE
- ------- ------------ ------ -----
<S> <C> <C> <C>
UNAFFILIATED COMPANIES (CONTINUED)
COMMON STOCKS - PUBLIC MARKET
METHOD OF VALUATION
Frontier Airlines
Commercial air carrier ............ 10,000 92,520 32,500
LaMan Corporation
Manufacturer - decontamination
devices ........................... 29,400 61,265 36,750
Las Vegas Discount Golf
and Tennis
Sporting goods retailer ........... 30,000 31,600 27,188
COMMON STOCKS - PRIVATE MARKET
METHOD OF VALUATION (a)(e)
All Systems Go
Software development .............. 20,000(b) 25,000 25,000
NevStar Gaming Corporation 10,000 Series
Gaming development ................ A preferred 38,500 38,500
Ocean Power Technology
Alternative energy
research and development .......... 35,714(b) 40,000 89,285
100,000 -- 250,000
Gain, Inc.
Male vascular devices ............. 20,000(b) 50,000 50,000
Juice Island
Health food stores ................ 10,000(b) 20,000 20,000
WARRANTS (f)(e)
Juice Island
Health food stores ................ 2,500 -- --
----------- ----------- -----------
Sub-total
UNAFFILIATED COMPANIES ............ 1,049,458 1,025,649
----------- -----------
Total
ALL COMPANIES ..................... $ 3,767,309 $10,138,562
=========== ===========
</TABLE>
(Continued)
F-8
<PAGE>
EQUITEX, INC.
Schedule of Investments (Page 3)
December 31, 1996
RESTRICTIONS AS TO RESALE
(a) Non-public company whose securities are privately owned. The Board of
Directors determines fair value in good faith using cost information, but also
taking into consideration the impact of such factors as available financial
information of the investee, the nature and duration of any restrictions on
resale, and other factors which influence the market in which a security is
purchased and sold.
(b) May be sold under the provisions of Rule 144 of the Securities Act of 1933
after an initial holding period expires.
(c) Since the Company is a greater than five percent shareholder, it may be
affected by a sales limitation of one percent of the investee's outstanding
common stock during any three-month period.
(e) Since certain of these securities have certain restrictions as to resale,
the Board of Directors determines fair value in good faith using public market
information, but also taking into consideration the impact of such factors as
available financial information of the investee, the nature and duration of
restrictions on the disposition of securities, and other factors which influence
the market in which a security is purchased and sold.
(f) Valued at higher of cost or fair market value of underlying stock less
exercise price, subject to valuation adjustments as determined in good faith by
the Board of Directors, taking into consideration the impact of such factors as
available financial information of the investee, the nature and duration of any
restrictions on resale, and other factors which influence the market in which a
security is purchased and sold.
F-9
<PAGE>
EQUITEX, INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Revenues
Interest and dividends ........................ $ 7,590 $ 32,337
Consulting fees ............................... -- 36,000
Administrative fees ........................... 14,123 14,107
Miscellaneous ................................. 63,655 8,656
----------- -----------
85,368 91,100
Expenses
Salaries and consulting fees .................. 77,763 85,445
Officer's bonus ............................... 75,323 132,982
Office rent ................................... 7,500 7,500
Legal and accounting .......................... 28,396 26,105
Employee benefits ............................. 38,006 38,075
Other general and administrative .............. 46,751 47,523
Interest ...................................... 18,297 20,532
Bad debt expense .............................. -- (7,304)
Depreciation and amortization ................. 2,904 2,427
----------- -----------
294,940 353,282
Net investment loss .............................. (209,572) (262,182)
Net realized gain on investments and
net unrealized gain on investments:
Proceeds from sales of investments ............ 60,258 11,855
Less: cost of investments ..................... 81,978 13,126
----------- -----------
Net realized (loss) on investments
before income taxes ........................... (21,720) (1,271)
Net investment loss and net realized (loss)
on investments before income taxes ............ (231,292) (263,453)
Income tax benefit (provision) - current ......... (3,648) --
Income tax benefit (provision) - deferred ........ (59,950) (24,448)
----------- -----------
Net investment loss and net realized
(loss) on investments ......................... (294,890) (287,901)
</TABLE>
(Continued)
F-10
<PAGE>
EQUITEX, INC.
Statements of Operations (Page 2)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Increase (decrease) in unrealized
appreciation on investments ................... $ (308,055) $(1,167,155)
Less income tax benefit (provision)
applicable to decrease (increase) in
realized appreciation ......................... 120,141 455,190
----------- -----------
(187,914) (711,965)
----------- -----------
Net (decrease) in net assets
resulting from operations ..................... $ (482,804) $ (999,866)
=========== ===========
(Decrease) in net assets per share ............... $ (.15) $ (.31)
=========== ===========
Weighted average number of common shares ......... 3,214,708 3,217,615
=========== ===========
</TABLE>
F-11
<PAGE>
EQUITEX, INC.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net change in net assets ...................... $ (482,804) $ (999,866)
Adjustments to reconcile net change in
net assets to net cash provided by
operating activities:
Depreciation and amortization ............ 2,904 2,427
Donation of stock ........................ 4,136 --
Provision for bad debts on notes receivable -- (7,304)
Realized loss on sale of investments ..... 21,720 1,271
Unrealized loss on investments ........... 308,055 1,167,155
Proceeds from sales of investments ............ 60,258 11,855
Purchase of investments ....................... (1,210) --
Repayment of notes receivable ................. 19,150 370
Changes in assets and liabilities:
Decrease in interest receivable ............ 135 14,599
Decrease in other assets ................... 768 905
(Increase) decrease in trade receivables ... 1,338 (1,060)
(Increase) decrease in accounts
receivable - brokers ..................... 3,992 (8,834)
Increase in accounts payable and
other accrued liabilities ................ 22,961 8,740
Increase in accounts payable to brokers .... 9,777 13,595
Increase in accrued bonus to officer ....... 75,323 82,805
(Decrease) in provision for deferred
income taxes ............................. (60,190) (430,742)
----------- -----------
Net cash (used) by operating
activities ............................... (13,687) (144,084)
Cash flows from investing activities:
Purchase of furniture and equipment ........... -- (1,663)
Increase in deposit ........................... -- 800
----------- -----------
Net cash (used) by investing activities .... -- (863)
</TABLE>
(Continued)
F-12
<PAGE>
EQUITEX, INC.
Statements of Cash Flows (Page 2)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from financing activities:
Issuance of notes payable ..................... $ -- $ --
Repayment of notes payable .................... -- --
Common stock issued for cash .................. -- --
----------- -----------
Net cash provided by financing activities . -- --
Increase (decrease) in cash ...................... (13,687) (144,947)
Cash, beginning of period ........................ 53,795 176,752
----------- -----------
Cash, end of period .............................. $ 40,108 $ 31,805
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid ............................. $ 18,297 $ 20,532
=========== ===========
Interest received ......................... $ 7,725 $ 37,936
=========== ===========
</TABLE>
F-13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
LIQUIDITY AND CAPITAL RESOURCES The Registrant's cash position decreased
slightly by $13,687 at March 31, 1997 as compared to a significant decrease of
$144,947 at March 31, 1996. During both periods the decrease was due to net cash
used by operating activities. The decrease in cash used by operating activities
from the prior year was primarily due to increased proceeds from sales of
investments.
In connection with its investments, the Registrant is required, from time
to time, to make loans to its investees in order to protect its investments. As
a result of these loans, the Registrant carried notes receivable of $1,100 and
$20,250 at March 31, 1997 and December 31, 1996, respectively.
Of the Registrant's liabilities of $3,265,091 at March 31, 1997, the
Registrant had no amounts due to banks. Of those liabilities, 68% or $2,214,460
is deferred income taxes, primarily for the Registrant's unrealized appreciation
on investments, leaving $1,050,631 in other liabilities. This compares to total
liabilities of $3,217,220, deferred income taxes of $2,274,650 and other
liabilities of $942,570 at December 31, 1996. The Registrant is not obligated to
discharge a significant portion of its current liabilities in the near future;
however, the Registrant intends to extinguish these liabilities to make other
investments as cash flow permits.
The Registrant's sources of income to defray operating overhead will be
derived primarily from consulting fees, transaction fees gained from the
Registrant assisting both existing and new investees in structuring and
completing mergers, acquisitions or asset-based financing transactions and
administrative fees through which the Registrant directly apportions a certain
amount of its operating overhead to an investee to help defray operating costs.
This allows some of the income generated by other sources to be used for
purposes other than operating overhead. The Registrant also receives income from
the sale of certain of its longer term investments from time to time during the
year as well as through utilizing its cash position at any given time to trade
in the equities markets. During 1996 the Registrant's sources of income were
sufficient to cover its operating overhead and it is anticipated this trend will
continue during 1997.
The Registrant's liquidity is affected primarily by the business success,
securities prices and marketability of its investee companies and by the amount
and timing of any new or incremental investments it makes. The Registrant
believes that its present liquidity and capital resources are adequate to
finance anticipated needs arising from or relating to its business in the 1997
year due to its increased ability to sell portions of its investee companies'
stock positions as restrictions on their ability to be sold end. Although the
Registrant expects that its ability to liquidate portions of its portfolio
companies will be increased as the restrictions
F-14
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued).
as to resale end, the Registrant generally is a long-term holder of its
investments and therefore does not necessarily liquidate them upon the
expiration of these restrictions. As the Registrant cannot forecast the types of
large-scale sales which generated significant profit in previous years, the
Registrant does not typically rely on sales of this nature for its financing
needs.
The Registrant's largest investee company, RDM Sports Group, Inc. (RDM), is
a publicly held-company which conducts most of its business through its
wholly-owned subsidiaries. The Registrant owns common stock and convertible
debentures in RDM which is one of the largest manufacturers of juvenile products
and a leading producer of fitness equipment, toys and team sports equipment in
the United States. Management of the Registrant devotes significant efforts and
resources to providing managerial assistance to RDM.
The fair value of the Registrant's investment in RDM comprised 67% of the
Registrant's investment portfolio at March 31, 1997. The trademarks and brand
names under which RDM currently sells its products include Flexible Flyer,
Vitamaster, MacGregor, DP, Hutch, Reach and Forster. RDM is listed on the New
York Stock Exchange where it is traded under the symbol "RDM".
For the year ended December 31, 1996, RMI had sales of approximately
$366,683,000 with a net income of $775,000. At December 31, 1996, RMI's total
assets were $577,107,000 and its total liabilities were $521,583,000 with
shareholders' equity of $55,524,000. RMI's borrowings represented 64% of its
total assets at December 31, 1996.
As of March 31, 1997, the Registrant had made no other material commitments
for capital expenditures or loans to investees. The Registrant expects that it
will continue to sell certain of its investments during the remainder of the
current year. At the discretion of the Board of Directors, the Registrant also
may sell certain of its investments resulting in a realized loss in order to
prevent further losses from occurring.
RESULTS OF OPERATIONS
Revenues for the three months ended March 31, 1997 were $85,368 as compared
to $91,100 for the three months ended March 31, 1996.
Overall the total revenue is fairly comparable. There is decreased
consulting fees but an increase in miscellaneous income received from investee
companies which included $65,850 in payments on notes receivable which had been
written off in prior years. The Registrant receives consulting fees on a per
transaction basis when assisting
F-15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued).
investees with acquisitions, refinancing or restructuring. $36,000 of such fees
were received during the first quarter 1996 under an agreement which has since
expired. No such fees have been received in 1997.
The realized loss on investments before income taxes for the three months
ended March 31, 1997 was $(21,720) as compared to a loss of $(1,271) for the
same period in 1996. The Registrant's sales activity in 1996 was very minimal as
compared to the first quarter of 1997 when investments with a cost basis
totaling $81,978 were sold. In addition, the lack of sales of large portions of
the Registrant's lower cost long-term investments as described above contributed
to the higher net investment loss (and/or less realized gain on investments
after taxes), and may do so in future periods in the absence of such sales.
While the restrictions as to resale on many of the Registrant's investments
continue to diminish, the opportunity for the sale of large portions of the
investments cannot be predicted.
Expenses for the three months ended March 31, 1997 were $294,940 as
compared to $353,282 in 1996, a decrease of 17%. While the Registrant's expenses
decreased just slightly in most categories, officer's bonus expense decreased by
$57,659 which was mostly due to the decrease in unrealized gains.
At March 31, 1997, the unrealized gain on investments decreased $308,055 as
compared to a decrease of $1,167,155 at March 31, 1996. The lower decrease in
1997 versus 1996 is attributed to a slight increase in the market price of the
Registrant's largest investee, RDM, occurring during the period from December
31, 1996 to March 31, 1997 whereas a decrease of $1,734,656 occurred in RMI's
market value in the first quarter of 1996. As there is no way to predict the
future value of the Registrant's investment portfolio, the Registrant cannot
predict future changes in the unrealized value of its investment portfolio. The
change in net assets resulting from operations decreased $482,804 in the first
quarter of 1997 as compared to a decrease of $996,866 for the same period in
1996.
With the acquisition of RMI in 1987, the Registrant began concentrating on
investments in more mature investee companies. Due to this change, the
Registrant's net asset value and cash flows have fluctuated as a result of the
market fluctuations of a few larger investees, particularly RMI. As the
Registrant increases the number of its investments in more mature companies, the
Registrant's net asset value and cash flows should become less susceptible to
the market fluctuations of fewer investee companies. During the past three
years, the Registrant has been concentrating its efforts on enhancing the value
of its existing portfolio companies and therefore has not made any major new
investments. Until such time as more of these mature investments are added, the
Registrant will continue to be susceptible to market fluctuations.
F-16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued).
On December 12, 1996, the Registrant announced that it intended to
implement a withdrawal of its election as a Business Development Company ("BDC")
under the Investment Company Act. The Registrant's Board of Directors instructed
its management to prepare a detailed plan which will address the corporate
governance issues and process which must be followed for decertification
including the legal, accounting, securities listing and other effects of such
withdrawal on the Registrant. While the Registrant is currently working on a
detailed withdrawal plan, management of Registrant believes any such withdrawal
would require the decertification to take place concurrently with the
acquisition of an operating company. As of the filing of the report, the
Registrant has been unable to identify a suitable acquisition candidate and
continues to work on the plan for decertification.
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports of Form 8-K
(a) Financial data schedule for SEC registrants
(b) No reports on Form 8-K were filed during the current quarter
covered by this report
F-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITEX, INC.
(Registrant)
By /S/ HENRY FONG
------------------------------
Henry Fong
President, Treasurer and Chief
Financial Officer
Date: May 13, 1997
F-18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Registrant's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1997, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 40,108
<SECURITIES> 9,745,603
<RECEIVABLES> 45,004
<ALLOWANCES> 3,078
<INVENTORY> 0
<CURRENT-ASSETS> 9,827,637
<PP&E> 145,083
<DEPRECIATION> 109,267
<TOTAL-ASSETS> 10,043,070
<CURRENT-LIABILITIES> 3,265,091
<BONDS> 0
0
0
<COMMON> 64,489
<OTHER-SE> 6,713,490
<TOTAL-LIABILITY-AND-EQUITY> 10,043,070
<SALES> 0
<TOTAL-REVENUES> 85,368
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 276,643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,297
<INCOME-PRETAX> (231,292)
<INCOME-TAX> 63,598
<INCOME-CONTINUING> (294,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (294,890)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
