FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 registrant 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
(Registrant's telephone number, including area code)
(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 Securities and Exchange Act of
1934 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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date:
As of February 4, 1999, 3,769,138 shares of the Issuer's
common stock, par value $.01 per share were outstanding.
Transitional Small Business Disclosure Format (check one);
Yes No X
MICRONETICS WIRELESS, INC.
INDEX
Page No.
Part I. Financial Information.
Item 1. Financial Statements.
Condensed Balance Sheets -
December 31, 1998 and March 3-4
31, 1998
Condensed Statements of Operations-
Three Months Ended December 31, 1998
and 1997 5
Condensed Statements of Operations - 6
Nine Months Ended December 31, 1998
and 1997
Condensed Statement of Cash Flows - 7-8
Nine Months Ended December 31, 1998
and 1997
Notes to Condensed Financial 9
Statements
Item 2. Management's Discussion and Analysis 10-11
of Financial Condition and
Results of Operations.
Part II. Other Information.
Item 2. Changes in Securities and Use of Proceeds. 12
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
-----------------------------
December 31, March 31,
1998 1998
----------- -----------
Current assets:
Cash $ 1,167,355 $ 1,031,625
Receivables (net of
allowance for doubtful
accounts) 962,297 1,010,219
Inventories 1,471,349 1,421,685
Prepaid expenses and other
current assets 85,403 37,238
Deferred tax asset - 43,302
Other current assets 78,028 57,338
----------- -----------
Total current assets 3,764,432 3,601,407
Fixed assets:
Land 162,000 162,000
Building and improvements 857,462 850,009
Furniture, fixtures and
equipment 1,353,223 1,324,586
Capitalized leases 82,990 82,990
----------- -----------
Gross fixed assets 2,455,675 2,419,585
Accumulated depreciation and
amortization (1,005,365) (898,516)
----------- -----------
Total (net) fixed assets 1,450,310 1,521,069
Other assets:
Deposits 1,683 4,479
Intangibles (net of amortization) 58,793 86,936
----------- -----------
Total other assets 60,476 91,415
----------- -----------
Total assets $ 5,276,218 $ 5,213,891
=========== ===========
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Liabilities and Shareholders' Equity
------------------------------------
December 31, March 31,
1998 1998
----------- -----------
Current liabilities:
Short-term loans and capitalized
leases $ 118,803 $ 106,471
Accounts payable 179,405 321,713
Accrued expenses and taxes, other
than income taxes 177,968 248,620
Subordinated debentures 0 25,000
Income taxes payable 44,163 17,810
----------- -----------
Total current liabilities 520,339 719,614
Long-term debt:
Capitalized leases 16,388 40,308
Notes payable - bank 804,780 868,720
----------- -----------
Total long-term debt 821,168 909,028
Shareholders' equity:
Common stock 34,529 34,153
Additional paid - in capital 2,540,324 2,535,137
Retained earnings 1,358,858 1,015,959
----------- -----------
Total shareholders' equity 3,933,711 3,585,249
----------- -----------
Total liabilities and
shareholders' equity $ 5,275,218 $ 5,213,891
=========== ===========
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
-----------------------------------
Nine Months Ended December 31,
1998 1997
---------- -----------
Operating revenues $3,297,823 $ 3,455,412
Cost of operations 1,989,724 2,007,230
--------- ---------
Gross profit 1,308,099 1,448,182
--------- ---------
Selling, general and
administrative expenses 799,528 875,388
Research and development 109,705 196,339
expense --------- ---------
Operating income 398,866 376,457
Other income (expense):
Rental income 46,504 45,187
Interest income 28,265 27,796
Interest (expense) (58,855) (58,729)
Other income (expense) (15,585) 15,770
--------- ---------
Total 31,499 30,024
--------- ---------
Income before taxes 430,365 406,481
Provision for income taxes 87,466 88,105
--------- ---------
Net income $ 342,899 $ 318,376
========= =========
Net income per share $ 0.10 $ 0.09
========= =========
Weighted average number
of shares outstanding 3,403,688 3,370,753
========= =========
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
-----------------------------------
Three Months Ended December 31,
1998 1997
---------- ----------
Operating revenues $1,095,089 $1,243,281
Cost of operations 675,522 681,847
--------- ---------
Gross profit 419,567 561,434
Selling, general and
administrative expenses 277,923 337,683
Research and development expense 21,027 83,727
--------- ---------
Operating income 120,617 140,024
Other income (expense):
Rental income 16,050 15,062
Interest income 8,949 9,482
Interest (expense) (19,054) (21,077)
Other income (expense) 3,821 (2,259)
--------- ---------
Total 9,766 1,208
--------- ---------
Income before taxes and
extraordinary item 130,383 141,232
Provision for income taxes 15,470 29,755
--------- ---------
Net income $ 114,913 $ 111,477
========= =========
Net income per share $ 0.03 $ 0.03
========= =========
Weighted average number
of shares outstanding 3,403,688 3,370,753
========= =========
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------
Nine Months Ended December 31,
1998 1997
---------- ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Operating
Activities:
Net income $ 342,899 $ 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 134,991 89,994
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, inventories, prepaid
expenses and other current assets (70,597) (67,823)
(Increase) decrease in security
deposits 2,796 (4,391)
(Decrease) increase in accounts
payable accrued liabilities,
notes payable and other current
liabilities (199,275) (94,003)
--------- ---------
Net cash provided (utilized)
by operating activities $ 254,116 $ 170,430
========= =========
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------
Nine Months Ended December 31,
1998 1997
------------ -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Investment
Activities:
(Additions) to fixed assets $ (36,090) $ (42,853)
-------- ---------
Net cash provided (used) by
investment activities $ (36,090) $ (42,853)
-------- ---------
Cash Flows from Financing
Activities:
(Reduction) increase of debt
and capitalized leases $ (87,860) $ (42,190)
Proceeds from stock options
exercised 5,564 3,125
Proceeds from issuance of
common stock 0 0
Proceeds from issuance of
subordinated convertible
debentures 0 0
-------- ---------
Net cash provided (used)
by financing activities $ (82,296) (39,065)
-------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 135,730 $ 88,512
Cash and cash equivalents, at
beginning of year 1,031,625 961,314
--------- ---------
CASH AND CASH EQUIVALENTS, AT
END OF QUARTER $1,167,355 $1,049,826
========= =========
MICRONETICS WIRELESS, INC.
NOTES TO BE 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) necessary
to present fairly the financial position as of
December 31, 1998 and 1997, the results of
operations for the three and nine month periods
ended December 31, 1998 and 1997 and cash flows
for the nine month periods ended December 31,
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 nine
month periods ended December 31, 1998 are not
necessarily indicative of the results of the
full year.
Note 2. Inventories are summarized below:
December 31, 1998 March 31, 1998
Raw materials and
work-in-process 1,153,133 1,064,264
Finished goods 318,216 357,421
Total 1,471,349 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 $1,095,089 and $1,243,281 for the
three months ended December 31, 1998 and 1997, respectively. For the
three months ended December 31, 1998, sales of VCOs and control
components were up, but sales of equipment were down, as compared to
the prior period. The Company's net income increased to $114,913, or
$.03 per share, as compared with net income of $111,477, or $.03 per
share, for the three month periods ended December 31, 1998 and 1997,
respectively.
The Company had revenues of $3,297,823 and $3,455,412 for the
nine months ended December 31, 1998 and 1997, respectively. For the
nine months ended December 31, 1998, sales of VCOs and control
components were up, but equipment sales were down. The Company had
net income of $342,899, or $.10 per share, and $318,376 or $.09 per
share, for the nine month periods ended December 31, 1998 and 1997,
respectively.
Gross profit as a percent of net sales for the three and nine
month periods ended December 31, 1998 was 38.4% and 39.7%,
respectively, as compared to 45.1% and 41.9%, respectively, during
the corresponding periods of the prior fiscal year. This was largely
due to product mix. Selling, general and administrative ("SGA")
expenses as a percent of net sales for the three months ended
December 31, 1998 was 25.4% as compared to 25.3% in the prior year.
For the nine month period ended December 31, 1998, SGA as a percent
of net sales was 24.2% as compared to 25.3% for the prior period.
Research and development ("R&D") expense declined to under 2% of net
sales from over 6% of net sales for the three months ended December
31, 1998 as compared to the prior year. For the nine month period
ended December 31, 1998, R&D expenses were over 3.3% of net sales as
compared to 5.6% of net sales in the corresponding period of the
prior year.
Financial Condition
The Company's working capital at December 31, 1998 was
$3,244,000. It was $2,882,000 at March 31, 1998. The Company's
current ratio at December 31, 1998 was 7.2 to 1, and at March 31,
1998 it was 5.0 to 1.
Net cash provided by operations in the nine months ended
December 31, 1998 was $254,116 as compared to $170,430 in the prior
year. Net cash utilized from investment activities was $36,090
during the nine months ended December 31, 1998 as compared to $42,853
used in the prior year. This was primarily due to the purchase of
new equipment. Net cash used by financing activities during the nine
months ended December 31, 1998 was $82,296, as compared to $39,065
used during the prior year. This was largely due to the repayment of
debt during both periods.
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 lenders.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c) Recent Sales of Unregistered Securities.
In January 1999, the Company issued an aggregate of 271,250
unregistered shares of its Common Stock to Floyd S. Parin
and Mark B. Goldman (collectively, the "Sellers") in
connection with payment of $308,594 of the purchase price
by the Company for all of the outstanding capital stock of
Microwave & Video Systems, Inc. These shares were issued
pursuant to the exemption from registration provided under
Regulation D promulgated pursuant to the Securities Act of
1933.
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.
3.3 Stock Purchase Agreement between the Company and Floyd S.
Parin and Mark B. Goldman dated as of October 29, 1998.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
During the quarter ended December 31, 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: February 10, 1999 /s/ Richard S. Kalin
Richard S. Kalin,
President
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