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, 1997
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)
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 October 31, 1997.
3,293,798 shares of common stock, par value $.01 per share.
Page 1 of 12
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, 1997 and March
31, 1997
Condensed Statements of Operations- 5
Three Months Ended September 30, 1997
and 1996
Condensed Statements of Operations - 6
Six Months Ended September 30, 1997
and 1996
Condensed Statements of Cash Flows - 7-8
Six Months Ended September 30, 1997
and 1996
Notes to Condensed Financial 9
Statements
Item 2. Management's Discussion and Analysis 10
of Financial Condition and
Result of Operations
Part II. Other Information
Item 2. Submission of Matters to a Vote of 11
Security Holders
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
PART I. FINANCIAL INFORMATION
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Assets
--------------
September 30, March 31,
1997 1997
-----------------------------
Current assets:
Cash $1,049,826 $ 961,314
Receivables
Trade (net of allowance for
doubtful accounts) 720,278 755,716
Inventories (note 2) 1,272,440 1,151,640
Prepaid expenses and other
current assets 28,218 43,348
Deferred tax asset 78,725 118,481
Other current assets 3,811 6,250
--------- ---------
Total current assets 3,153,298 3,036,719
Fixed assets:
Land 162,000 162,000
Building & improvements 848,809 846,547
Furniture, fixtures and
equipment 1,285,530 1,269,938
Capitalized leases 33,500 33,500
--------- ---------
Gross fixed assets 2,329,839 2,311,985
Accumulated depreciation and (863,111) (800,030)
amortization --------- ---------
Total (net) fixed assets 1,466,728 1,511,955
Other assets:
Deposits 5,493 1,102
Intangibles (net of amortization) 96,462 98,375
--------- ---------
Total other assets 101,955 99,477
--------- ---------
Total assets $4,721,981 $4,648,151
========= =========
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Liabilities and Shareholders' Equity
--------------------------------------------
September 30, March 31,
1997 1997
-----------------------------
Current liabilities:
Short term loans and capitalized
leases $ 88,950 $ 91,703
Accounts payable 214,602 374,746
Accrued expenses and taxes, other
than income taxes 204,244 155,953
Subordinated debentures 25,000 25,000
Income taxes payable 52,221 31,648
--------- ---------
Total current liabilities 585,017 679,020
Long term debt:
Capitalized leases 7,626 7,616
Notes payable - bank 905,822 948,022
--------- ---------
Total long-term debt 913,448 955,638
Shareholders' equity:
Common stock 31,937 31,887
Additional paid - in capital 2,396,823 2,393,748
Retained earnings 794,756 587,858
---------- ---------
Total shareholders' equity 3,223,516 3,013,493
---------- ---------
Total liabilities and
shareholders' equity $4,721,981 $4,648,151
========== =========
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
--------------------------------------------
3 Months Ended September 30,
1997 1996
-------------- ----------
Operating revenues $1,201,432 $ 935,202
Cost of operations 709,300 524,227
--------- ---------
Gross profit 492,132 410,975
--------- ---------
Selling, general and
administrative expenses 310,143 223,424
Research & development 58,292 46,048
expense --------- ---------
Operating income 123,697 141,503
Other income (expense):
Rental income 15,063 15,063
Interest income 9,310 1,726
Interest (expense) (16,148) (23,144)
Other income (expense) 20,158 (2,318)
--------- ---------
Total 28,383 (8,673)
--------- ---------
Income before taxes and
extraordinary items 152,080 132,830
Provision for income taxes 22,110 24,800
--------- ---------
Income before extraordinary
item $ 129,970 $ 108,030
Extraordinary item --
insurance settlement - 98,566
--------- ---------
Net income 129,970 206,596
========= =========
Net income per share
Before extraordinary item $ 0.04 $ 0.03
Extraordinary item - 0.03
--------- ---------
Net income per share $ 0.04 $ 0.06
========= =========
Weighted average number
of shares outstanding 3,370,753 3,268,858
========= =========
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
--------------------------------------------
6 Months Ended September 30,
1997 1996
-------------- ----------
Operating revenues $ 2,212,131 $ 1,784,049
Cost of operations 1,325,383 1,005,728
--------- ---------
Gross profit 886,748 778,321
Selling, general and
administrative expenses 537,704 443,621
Research & development expense 112,612 90,106
--------- ---------
Operating income 236,432 244,594
Other income (expense):
Rental income 30,125 30,125
Interest income 18,314 2,377
Interest (expense) (37,652) (46,423)
Other income (expense) 18,029 (4,571)
--------- ---------
Total 28,816 (18,492)
--------- ---------
Income before taxes and
extraordinary item 265,248 226,102
Provision for income taxes 53,350 46,000
--------- ---------
Income before extraordinary
item 209,898 180,102
Extraordinary item --
Insurance settlement - 98,566
--------- ---------
Net income $ 209,898 $ 278,668
========= =========
Net income per share
Before extraordinary item $ 0.06 $ 0.06
Extraordinary item - 0.03
--------- ---------
Net income per share $ 0.06 $ 0.09
========= =========
Weighted average number
of shares outstanding 3,370,753 3,268,858
========= =========
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------------------------
6 Months Ended September 30,
1997 1996
-------------- ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from operating
Activities:
Net income $ 206,898 $ 278,668
Adjustments to reconcile net
income to net cash provided
by operating activities:
Decrease in deferred tax asset 39,755 70,000
Depreciation and amortization 89,994 64,614
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, inventories, prepaid
expenses and other current assets (67,823) 30,445
(Increase) decrease in security
deposits and other assets (4,391) (1,130)
(Increase) decrease in insurance
receivable 0 596,376
(Decrease) increase in accounts
payable accrued liabilities,
notes payable and other current
liabilities (94,003) (14,879)
Increase (decrease) in deferred
sales 0 6,066
-------- ---------
Net cash provided (utilized)
by operating activities $ 170,430 $ 1,030,160
-------- ---------
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS (CONT.)
(UNAUDITED)
6 Months Ended September 30,
1997 1996
--------------- ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Investment
Activities:
(Additions) to fixed assets $ (42,853) $ (46,190)
--------- ---------
Net cash provided (used) by
investment activities (42,853) (46,190)
--------- ---------
Cash Flows from Financing
Activities:
(Reduction) increase of debt
and capitalized leases (42,190) (53,715)
Proceeds from stock options
exercised 3,125 1,000
Proceeds from issuance of common
stock 0 0
Proceeds from issuance of
subordinated convertible
debentures 0 0
--------- ---------
Net cash provided (used)
by financing activities (39,065) (52,715)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 88,512 931,255
Cash and cash equivalents, at
beginning of year 961,314 146,674
--------- ---------
CASH AND CASH EQUIVALENTS, AT
END OF QUARTER $ 1,049,826 $ 1,077,929
========= =========
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, 1997 and 1996, the results of
operations for the three month and six month
periods ended September 30, 1997 and 1996 and
cash flows for the six month periods ended
September 30, 1997 and 1996.
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, 1997.
The results of operations for the three and six
month periods ended September 30, 1997 are not
necessarily indicative of the results of the
full year.
Note 2. Inventories are summarized below:
September 30, 1997 March 31, 1997
Raw materials and
work-in-process $ 996,487 $ 974,337
Finished goods 275,953 177,303
Total $ 1,272,440 $ 1,151,640
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The Company had revenues of $1,201,432 and $935,202 for the
three months ended September 30, 1997 and 1996, respectively, an
increase of 28.4% compared to the prior period. The Company had net
income of $124,970 or $.04 per share, as compared with net income of
$206,596 or $.06 per share, for the three month periods ended
September 30, 1997 and 1996, respectively. The Company had revenues
of $2,212,131 and $1,784,049 for the six months ended September 30,
1997 and 1996, respectively, an increase of 23.9% over the prior
period. The Company had net income of $206,898 or $.06 per share,
and $278,668 or $.09 per share, for the six month periods ended
September 30, 1997 and 1996, respectively. The three and six month
periods ended September 30, 1996 included $98,566 or $.03 per share
extraordinary gain from an insurance settlement.
Gross profit as a percent of net sales for the three months
ended September 30, 1997 was 40.9% compared to 43.9% during the
corresponding period of the prior fiscal year. For the six month
periods ended September 30, 1997 and 1996 gross profit as a percent
of net sales was 40.1% and 43.6%, respectively. The decreases during
the current periods were due to the introduction of certain new
products which required higher start-up manufacturing costs.
Selling, general and administrative expenses ("SGA") as a percent of
net sales for the three months ended September 30, 1997 increased to
25.8% as compared to 23.9% in the prior year. The Company increased
its advertising expenses during the current period. For the six
month period ended September 30, 1997, SGA as a percent of net sales
decreased to 24.3% from 24.9% in the year earlier period. Research
and development expenses ("R&D") as a percent of net sales for the
periods presented were approximately the same as a percent of net
sales.
Financial Condition
The Company's working capital at September 30, 1997 was
$2,568,281. It was $2,357,699 at March 31, 1997. The Company's
current ratio was 5.39 to 1 at September 30, 1997, as compared to
4.47 to 1 at March 31, 1997.
The Company generated cash from operating activities in the
amount of $170,430 during the six months ended September 30, 1997 as
compared to $1,030,160 in the year earlier period. A large part of
the increase last year was due to an insurance settlement. The
Company purchased $42,853 of new equipment during the six months
ended September 30, 1997, as compared to $46,190 a year ago. The
Company used $39,065 for financing activities during the six months
ended September 30, 1997, as compared to a use of $52,715 related to
financing activities during the year earlier period. As a result,
the Company's cash and cash equivalents increased from $961,314 at
March 31, 1997 to $1,049,826 at September 30, 1997.
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. Submission of Matters to a Vote of Security Holders
On October 7, 1997, at the Company's Annual Meeting of
Shareholders, the Company's shareholders elected management's slate
of directors, which included Messrs. Richard S. Kalin, David Siegel,
Roy L. Boe and Ms. Barbara Meirisch. Mr. Kalin received 2,280,705
votes for, 0 against and 20,680 withheld. Mr. Siegel received
2,280,705 votes for, 0 against and 21,880 withheld. Mr. Boe received
2,280,705 votes for, 0 votes against and 20,480 withheld. Ms.
Meirisch received 2,280,705 votes for, 0 votes against and 21,780
withheld.
Item 6. Exhibits and Reports on Form 8-K
(b) During the quarter ended September 30, 1997, 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, 1997 s/Richard S. Kalin
Richard S. Kalin,
President and Chief
Financial Officer
wp51\MICRONET\10q-sep.O97