FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 33-16453
MICRONETICS WIRELESS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-2063614
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
26 Hampshire Drive, Hudson NH 03051
(Address of principal executive offices)
(Zip Code)
(603) 883-2900
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
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 and Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date.
3,445,715 shares of common stock, par value $.01 per share as of
August 3, 1998.
Page 1 of 12. There is no Exhibit Index.
MICRONETICS WIRELESS, INC.
INDEX
Page No.
Part I. Financial Information:
Item 1. Financial Statements.
Condensed Balance Sheets -
June 30, 1998 and March 3-4
31, 1998
Condensed Statements of Operations-
Three Months Ended June 30, 1998
and June 30, 1997 5
Condensed Statement of Cash Flows - 6-7
Three Months Ended June 30, 1998
and June 30, 1997
Notes to Condensed Financial 8
Statements
Item 2. Management's Discussion and Analysis
or Plan of Operation. 9-10
Part II. Other Information:
Item 2. Changes in Securities and Use of Proceeds. 11
Item 6. Exhibits and Reports on Form 8-K. 11
Signature 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Assets
June 30, March 31,
1998 1998
---------------------------
CURRENT ASSETS:
Cash 1,232,461 1,031,625
Receivables
Trade (net of allowance for
doubtful accounts) 694,783 1,010,219
Inventories (note 2) 1,494,744 1,421,685
Prepaid expenses and other
current assets 45,956 37,238
Deferred tax asset 12,550 43,302
Other current assets 76,778 57,338
--------- ---------
TOTAL CURRENT ASSETS 3,557,272 3,601,407
FIXED ASSETS
Land 162,000 162,000
Building & Improvements 850,009 850,009
Furniture, Fixtures, and
Equipment 1,340,251 1,324,586
Capitalized Leases 82,990 82,990
--------- ---------
Gross Fixed Assets 2,435,250 2,419,585
Accumulated Depreciation
and Amortization (934,132) (898,516)
--------- ---------
TOTAL (NET) FIXED ASSETS 1,501,118 1,521,069
OTHER ASSETS
Deposits 4,144 4,479
Intangibles (Net of
Amortization) 77,555 86,936
--------- ---------
TOTAL OTHER ASSETS 81,699 91,415
--------- ---------
TOTAL ASSETS 5,140,089 5,213,891
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Liabilities and Shareholders' Equity
June 30, March 31,
1998 1998
-----------------------------
CURRENT LIABILITIES:
Short-term loans and capitalized
leases 117,647 106,471
Accounts payable 225,131 321,713
Accrued expenses and taxes, other
than income taxes 181,740 248,620
Subordinated debentures 25,000 25,000
Income taxes payable 28,990 17,810
--------- ---------
TOTAL CURRENT LIABILITIES 578,508 719,614
LONG-TERM DEBT:
Capitalized leases 31,926 40,308
Notes Payable - Bank 845,691 868,720
--------- ---------
TOTAL LONG-TERM DEBT 877,617 909,028
SHAREHOLDER'S EQUITY:
Common stock 34,161 34,153
Additional paid - in capital 2,536,004 2,535,137
Retained earnings 1,113,799 1,015,959
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 3,683,964 3,585,249
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 5,140,089 5,213,891
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30,
1998 1997
------------ ----------
Operating revenues $ 1,053,675 $ 1,010,699
Cost of operations 631,164 616,083
--------- ---------
Gross profit 422,511 394,616
Selling, general and
administrative expenses 237,187 227,561
Research & development 53,424 54,320
--------- ---------
Operating income 131,900 112,735
Other income (expense):
Rental income 19,583 15,062
Interest income 9,536 9,004
Interest (expense) (20,129) (21,504)
Other income (expense) ( 1,118) ( 2,129)
--------- ---------
Total 7,872 433
--------- ---------
Income before provision
for income taxes 139,772 113,168
Provision for income taxes 41,932 31,240
--------- ---------
Net income $ 97,840 $ 81,928
========= =========
Net income per share 0.03 0.03
========= =========
Weighted average number
of shares outstanding 3,403,688 3,268,858
--------- ---------
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended June 30,
1998 1997
------------ ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash flows from operating
Activities:
Net income $ 97,840 $ 81,928
Adjustments to reconcile net
income to net cash provided
by operating activities:
Decrease in deferred tax asset 30,752 23,368
Depreciation and amortization 44,997 44,997
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, inventories, prepaid
expenses and other current assets 214,219 104,550
(Increase) decrease in security
deposits and other assets 335 (1,951)
(Decrease) increase in accounts
payable accrued liabilities,
notes payable and other current
liabilities (152,407) (193,919)
--------- ---------
Net cash provided (utilized)
by operating activities $ 235,736 $ 58,973
========= =========
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS (CONT.)
(UNAUDITED)
Three Months Ended June 30,
1998 1997
------------ ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Investment
Activities:
(Additions) to fixed assets $ (15,665) $ (17,993)
--------- --------
Net cash provided (used) by
investment activities (15,665) (17,993)
--------- --------
Cash Flows from Financing
Activities:
(Reduction) increase of debt
and capitalized leases (20,235) (23,877)
Proceeds from stock options
exercised 1,000 0
--------- --------
Net cash provided (used)
by financing activities $ (19,235) $ (23,877)
========= ========
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 200,836 $ 17,103
Cash and cash equivalents, at
beginning of year 1,031,625 961,314
--------- --------
CASH AND CASH EQUIVALENTS, AT
END OF QUARTER $1,232,461 $ 978,417
========= ========
MICRONETICS, WIRELESS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. In the opinion of the Company, the accompany-
ing unaudited consolidated condensed financial
statements contain all adjustments (consisting
of only normal recurring adjustments) which in
the opinion of management are necessary in order
to present fairly the financial position as of
June 30, 1998 and 1997, the results of
operations for the three month period ended June
30, 1998 and 1997 and cash flows for the three
month period ended June 30, 1998 and 1997.
While the Company believes that the disclosures
presented are adequate to make the information
not misleading, it is suggested that these
consolidated condensed financial statements be
read in conjunction with the Company's Annual
Report on Form 10-KSB for its fiscal year ended
March 31, 1998.
The results of operations for the three month
period ended June 30, 1998 are not necessarily
indicative of the results of the full year.
Note 2. Inventories are summarized below:
June 30, 1998 March 31, 1997
Raw materials and
work-in-process $ 1,155,769 $ 1,064,264
Finished goods 338,975 357,421
Total $ 1,494,744 $ 1,421,685
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
The Company had revenues of $1,053,675 and $1,010,699 for the
three months ended June 30, 1998 and 1997, respectively, an increase
of $42,976 or 4% in the current period. Gross profit as a percent of
net sales increased to 40.1% during the current period as compared to
39% during the corresponding period of the prior fiscal year.
Selling, general and administrative expenses as a percent of net
sales for the current period remained at 22.5% during the current
period. Research and development expenses were 5.1% of net sales
during the current period as compared to 5.4% of net sales a year
ago.
The Company had net income of $97,840, or $.03 per share, as
compared to net income of $81,928, or $.03 per share, for the three
month periods ended June 30, 1998 and 1997, respectively. This is an
increase of $15,912 or 19.4% in the current period. The weighted
average shares outstanding for the three months ended June 30, 1998
and June 30, 1997, were 3,403,688 and 3,268,858, respectively.
Financial Condition
The Company's working capital at June 30, 1998 was $2,978,764,
an increase of $96,971 from $2,881,793, the working capital at March
31, 1998. The Company's current ratio was approximately 6.15 to 1.0
at June 30, 1998; it was approximately 5.0 to 1.0 at March 31, 1998.
Net cash of $235,736 was provided by operating activities during
the three months ended June 30, 1998 as compared to $58,973 during
the year earlier period. This was primarily due to increased net
income and decreased accounts receivables. Net cash utilized by
investing activities during the three months ended June 30, 1998 was
$15,665 as compared to $17,993 during the year earlier period. This
use of cash was primarily due to the purchase of equipment. Net cash
utilized by financing activities during the three months ended June
30, 1998 was $20,235, as compared to $23,877 during the year earlier
period. The primary use of cash was to the reduction of debt. As a
result of these activities, the Company's cash position increased by
$200,836 during the current three months as compared to an increase
of $17,103 in the year ago period.
The Company is exploring its options with respect to software in
order to be in compliance with year 2000. The Company does not
expect the costs associated with this to be material.
Safe Harbor Statement
Statements which are not historical facts, including statements
about the Company's confidence and strategies and its expectations
about new and existing products, technologies and opportunities,
market and industry segment growth, demand and acceptance of new and
existing products are forward looking statements that involve risks
and uncertainties. These include, but are not limited to, product
demand and market acceptance risks; the impact of competitive
products and pricing; the results of financing efforts; the loss of
any significant customers of any business; the effect of the
Company's accounting policies; the effects of economic conditions and
trade, legal, social, and economic risks, such as import, licensing,
and trade restrictions; the results of the Company's business plan
and the impact on the Company of its relationship with its lender.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c) Recent Sales of Unregistered Securities
On June 16, 1998, the Company issued a five-year non-incentive
Stock Option to purchase 50,00 shares of Common Stock to a key
employee. The option is exercisable at a price equal to $2.3125 per
share of Common Stock, that being the fair market value on the date
of grant and is exercisable at a rate of 50% per year commencing June
16, 1999.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Certificate of Incorporation of the Company, as amended,
incorporated by reference to Exhibit 3.1 to Registration
Statement No. 83-16453 (the "Registration Statement").
3.2 By-Laws of the Company incorporated by reference to Exhibit
3.2 of the Registration Statement.
10.1 Incentive Stock Option Plan incorporated by reference to
Exhibit 10.1 of the Registration Statement.
10.3 Stock Option Plan approved by the Board of Directors of the
Company incorporated by reference to Exhibit 10.8 of the
1994 10-K.
10.4 Loan Agreement dated February 2, 1996 between the Company
and the Bank incorporated by reference to Exhibit 7(c)(1)
of the Form 8-K filed with the Securities and Exchange
Commission on February 16, 1996.
10.5 Authorization and Debenture Guaranty Agreement dated
February 2, 1996 between the Company and the U.S. Small
Business Administration incorporated by reference to
Exhibit 10.8 of the 1996 10-K.
10.7 1996 Stock Option Plan incorporated by reference to Exhibit
4.1 of Registration Statement No. 333-48087 filed on Form
S-8.
10.8 Employment Agreement dated September 19, 1996 between the
Company and Richard S. Kalin incorporated by reference to
Exhibit 10.8 of the 1998 10-K.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended June 30, 1998, the registrant did not
file any reports on Form 8-K.
SIGNATURE
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.
MICRONETICS WIRELESS, INC.
(Registrant)
Dated: August 11, 1998 By: s\ Richard S. Kalin
Richard S. Kalin,
President (Principal Executive
and Financial Officer)
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