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 September 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)
(603) 883-2900
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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
The number of shares outstanding of the issuer's common stock
par value $.01 per share, as of November 4, 1998 was 3,452,888.
Transitional Small Business Disclosure Format (check one);
Yes No X
Page 1 of 13
There is no Exhibit Index.
MICRONETICS WIRELESS, INC.
INDEX
Part I. Financial Information: Page No.
Item 1. Financial Statements.
Condensed Balance Sheets - 3-4
September 30, 1998 and March
31, 1998
Condensed Statements of Operations- 5
Three Months Ended September 30, 1998
and 1997
Condensed Statements of Operations - 6
Six Months Ended September 30, 1998
and 1997
Condensed Statements of Cash Flows - 7-8
Six Months Ended September 30, 1998
and 1997
Notes to Condensed Financial 9
Statements
Item 2. Management's Discussion and Analysis 10-11
of Financial Condition and
Result of Operations.
Part II. Other Information:
Item 2. Submission of Matters to a Vote of 12
Security Holders.
Item 6. Exhibits and Reports on Form 8-K. 12
Signature 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Assets
September 30, March 31,
1998 1998
---------------------------------
Current assets:
Cash $1,084,235 $1,031,625
Receivables
Trade (net of allowance for
doubtful accounts) 978,415 1,010,219
Inventories (note 2) 1,469,639 1,421,685
Prepaid expenses and other 63,550 37,238
current assets
Deferred tax asset - 43,302
Other current assets 78,028 57,338
--------- ---------
Total current assets 3,673,867 3,601,407
--------- ---------
Fixed assets:
Land 162,000 162,000
Building & improvements 850,103 850,009
Furniture, fixtures and 1,351,829 1,324,586
equipment
Capitalized leases 82,990 82,990
--------- ---------
Gross fixed assets 2,446,922 2,419,585
Accumulated depreciation and (969,750) (898,516)
amortization --------- ---------
Total (net) fixed assets 1,477,172 1,521,069
--------- ---------
Other assets:
Deposits 2,863 4,479
Intangibles (net of amortization) 68,174 86,936
--------- ---------
Total other assets 71,037 91,415
--------- ---------
Total assets 5,222,076 5,213,891
========= =========
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Liabilities and Shareholders' Equity
September 30, March 31,
1998 1998
------------------------------
Current liabilities:
Short-term loans and capitalized
leases $ 120,191 $ 106,471
Accounts payable 193,544 321,713
Accrued expenses and taxes, other 195,402 248,620
than income taxes
Subordinated debentures 0 25,000
Income taxes payable 46,504 17,810
--------- ---------
Total current liabilities 555,641 719,614
--------- ---------
Long term debt:
Capitalized leases 24,361 40,308
Notes payable - bank 823,276 868,720
--------- ---------
Total long-term debt 847,637 909,028
--------- ---------
Shareholders' equity:
Common stock 34,529 34,153
Additional paid - in capital 2,540,324 2,535,137
Retained earnings 1,243,945 1,015,959
--------- ---------
Total shareholders' equity 3,818,798 3,585,249
--------- ---------
Total liabilities and
shareholders' equity 5,222,076 5,213,891
========= =========
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
3 Months Ended September 30,
1998 1997
-------------------------------
Operating revenues $1,149,059 $1,201,432
Cost of operations 683,038 709,300
--------- ---------
Gross profit 466,021 492,132
--------- ---------
Selling, general and
administrative expenses 284,418 310,143
Research & development
expense 35,254 58,292
--------- ---------
Operating income 146,349 123,697
Other income (expense):
Rental income 10,871 15,063
Interest income 9,780 9,310
Interest (expense) (19,672) (16,148)
Other income (expense) 12,882 20,158
--------- ---------
Total 13,861 28,383
--------- ---------
Income before taxes 160,210 152,080
Provision for income taxes 30,064 27,110
--------- ---------
Net income $ 130,146 $ 124,970
========= =========
Net income per share $ 0.04 $ 0.04
========= =========
Weighted average number
of shares outstanding 3,403,688 3,370,753
========= =========
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
6 Months Ended September 30,
1998 1997
-------------------------------
Operating revenues $2,202,734 $2,212,131
Cost of operations 1,314,202 1,325,383
--------- ---------
Gross profit 888,532 886,748
Selling, general and
administrative expenses 521,605 537,704
Research & development expense 88,678 112,612
--------- ---------
Operating income 278,249 236,432
Other income (expense):
Rental income 30,454 30,125
Interest income 19,316 18,314
Interest (expense) (39,801) (37,652)
Other income (expense) 11,764 18,029
--------- ---------
Total 21,733 28,816
--------- ---------
Income before taxes 299,982 265,248
Provision for income taxes 71,996 58,350
--------- ---------
Net income $ 227,986 $ 206,898
========= =========
Net income per share $ 0.07 $ 0.06
========= =========
Weighted average number
of shares outstanding 3,403,688 3,370,753
========= =========
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
6 Months Ended September 30,
1998 1997
---------------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Operating
Activities:
Net income $227,986 $206,898
Adjustments to reconcile net
income to net cash provided
by operating activities:
Decrease in deferred tax asset 43,302 39,755
Depreciation and amortization 89,994 89,994
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, inventories, prepaid
expenses and other current assets (63,152) (67,823)
(Increase) decrease in security
deposits and other assets 1,616 (4,391)
(Decrease) increase in accounts
payable accrued liabilities,
notes payable and other current
liabilities (163,973) (94,003)
------- -------
Net cash provided
by operating activities $135,773 $170,430
------- -------
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS (CONT.)
(UNAUDITED)
6 Months Ended September 30,
1998 1997
-----------------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Investment
Activities:
(Additions) to fixed assets $ (27,337) $ (42,853)
--------- ---------
Net cash provided (used) by
investment activities (27,337) (42,853)
--------- ---------
Cash Flows from Financing
Activities:
(Reduction) of debt
and capitalized leases $ (61,390) (42,190)
Proceeds from stock options
exercised 5,564 3,125
--------- ---------
Net cash provided (used)
by financing activities (55,826) (39,065)
--------- ---------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 52,610 88,512
Cash and cash equivalents, at
beginning of year 1,031,625 961,314
--------- ---------
CASH AND CASH EQUIVALENTS, AT
END OF QUARTER $1,084,235 $1,049,826
========= =========
MICRONETICS WIRELESS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. In the opinion of the Company, the accompanying
unaudited consolidated condensed financial
statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to
present fairly the financial position as of
September 30, 1998 and 1997, the results of
operations for the three month and six month
periods ended September 30, 1998 and 1997 and cash
flows for the six month periods ended September
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 and six
month periods ended September 30, 1998 are not
necessarily indicative of the results of the full
year.
Note 2. Inventories are summarized below:
September 30, 1998 March 31, 1998
Raw materials and
work-in-process $1,129,180 $1,064,264
Finished goods 340,459 357,421
Total $1,469,639 $1,421,685
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
The Company had revenues of $1,149,059 and $1,201,432 for the
three months ended September 30, 1998 and 1997, respectively, a
decrease of 4.3% compared to the prior period. The Company had net
income of $130,146 or $.04 per share, as compared with net income of
$124,970 or $.04 per share, for the three month periods ended September
30, 1998 and 1997, respectively.
The Company had revenues of $2,202,734 and $2,212,131 for the six
months ended September 30, 1998 and 1997, respectively, a decrease of
.4% over the prior period. The Company had net income of $227,986 or
$.07 per share, and $206,898 or $.06 per share, for the six month
periods ended September 30, 1998 and 1997, respectively.
Gross profit as a percent of net sales for the three months ended
September 30, 1998 was 40.6% compared to 40.9% during the corresponding
period of the prior fiscal year. For the six month periods ended
September 30, 1998 and 1997, gross profit as a percent of net sales was
40.3% and 40.1%, respectively. Selling, general and administrative
expenses ("SGA") as a percent of net sales for the three months ended
September 30, 1998 decreased to 24.7% as compared to 25.8% in the prior
year. For the six month period ended September 30, 1998, SGA as a
percent of net sales decreased to 23.7% from 24.3% in the year earlier
period. Research and development expenses ("R&D") as a percent of net
sales for the periods presented declined during the current periods as
fewer new products were introduced during the current period.
Financial Condition
The Company's working capital at September 30, 1998 was
$3,118,226. It was $2,881,793 at March 31, 1998. The Company's
current ratio was 6.6 to 1.0 at September 30, 1998, as compared to 5.0
to 1.0 at March 31, 1998.
The Company generated cash from operating activities in the amount
of 135,773 during the six months ended September 30, 1998 as compared
to $170,430 in the year earlier period. The Company purchased $27,337
of new equipment during the six months ended September 30, 1998, as
compared to $42,853 a year ago. The Company used $55,826 for financing
activities during the six months ended September 30, 1998, as compared
to a use of $39,065 related to the year earlier period. As a result,
the Company's cash and cash equivalents increased from $1,049,826 at
March 31, 1998 to $1,084,235 at September 30, 1998.
With respect to the Year 2000 issue, the Company is in the process
of ensuring that all internal computer equipment, telecommunications
equipment, computer applications, manufacturing, distribution and
business equipment will be Year 2000 compliant. The Company has
purchased Year 2000 compliant software and it does not anticipate the
costs associated with becoming Year 2000 compliant to have any
additional material impact.
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 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.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
During the quarter ended September 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.
Dated: November 10, 1998 s/Richard S. Kalin
Richard S. Kalin,
President and (Principal Executive
and Financial Officer)
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