UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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 0-17966
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)
The number of shares outstanding of the issuer's common stock
par value $.01 per share, as of October 11, 2001 was 4,127,292.
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.
Consolidated Condensed Balance Sheets - 3-4
September 30, 2001 and March 31, 2001
Consolidated Condensed Statements 5
of Operations - Three Months Ended
September 30, 2001 and 2000
Consolidated Condensed Statements 6
of Operations - Six Months Ended
September 30, 2001 and 2000
Consolidated Condensed Statements of 7-8
Cash Flows - Six Months Ended
September 30, 2001 and 2000
Notes to Consolidated Condensed Financial 9
Statements
Item 2. Management's Discussion and Analysis 10-11
or Plan of Operation.
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K. 12
Signature 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
110: MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
Assets
September 30, March 31,
2001 2001
Current assets:
Cash and cash equivalents $1,543,065 $1,573,081
Accounts receivable,
net of allowance for
doubtful accounts 1,689,660 1,561,157
Inventories (note 2) 2,689,064 2,555,172
Prepaid expenses 81,048 88,037
Deferred tax asset - -
Other current assets - 46,311
Total current assets 6,002,837 5,823,758
Property and equipment:
Land 162,000 162,000
Building & improvements 956,246 956,246
Furniture, fixtures and
equipment 2,601,583 2,542,903
Capitalized leases 179,034 146,253
Gross fixed assets 3,898,863 3,807,402
Less: Accumulated depreciation
and amortization 1,931,569 1,835,597
Total (net) property and equipment 1,967,294 1,971,805
Other assets:
Security deposits 1,460 960
Intangibles, net of accumulated
amortization 141,245 107,294
Goodwill, net of accumulated
amortization 320,471 320,471
Total other assets 463,176 428,725
Total assets $8,433,307 $8,224,288
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
Liabilities and Shareholders' Equity
September 30, March 31,
2001 2001
Current liabilities:
Short-term loans and current
portion of capitalized leases $ 12,192 $76,032
Accounts payable 358,201 482,295
Accrued expenses and taxes, other
than income taxes 285,424 307,903
Income taxes payable 67,919 26,475
Total current liabilities 723,736 892,705
Noncurrent liabilities:
Notes payable - bank
and capitalized leases 822,773 759,541
Total Noncurrent liabilities 822,773 759,541
Shareholders' equity:
Common stock 41,068 40,883
Additional paid - in capital 3,714,464 3,627,406
Retained earnings 3,234,528 2,903,753
Less: treasury stock at cost
30,400 shares at September 30, 2001 (103,263) -
Total shareholders' equity 6,886,797 6,572,042
Total liabilities and
shareholders' equity $8,433,306 $8,224,288
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
218: CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
2001 2000
Net sales $1,917,574 $1,996,032
Cost of sales 1,093,641 1,156,265
Gross profit 823,933 839,767
Selling, general and
administrative expenses 486,014 459,560
Research & development
expenses 102,810 44,812
Income from operations 235,109 335,395
Other income (expense):
Rental income 24,963 18,314
Interest income 9,454 10,659
Interest (expense) (16,831) (22,873)
Other income (expense) (12,342) (23,120)
Total other income (expense) 5,244 (17,020)
Income before taxes 240,353 318,375
Provision for income taxes 47,241 61,905
Net income $ 193,112 $ 256,470
Net income per share $ 0.05 $ 0.06
Weighted average number
of shares outstanding 4,216,550 4,233,625
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended September 30,
2001 2000
Operating revenues $3,701,599 $3,494,854
Cost of operations 2,107,341 2,102,464
Gross profit 1,594,258 1,392,390
Selling, general and
administrative expenses 1,001,313 805,507
Research & development expense 197,278 107,273
Operating income 395,667 479,610
Other income (expense):
Rental income 37,425 39,713
Interest income 18,334 22,459
Interest (expense) (32,705) (38,129)
Other income (expense) (11,501) (32,267)
Total 11,553 (8,224)
Income before taxes 407,220 471,386
Provision for income taxes 76,444 84,855
Net income $ 330,776 $ 386,531
Net income per share $ 0.08 $ 0.09
Weighted average number
of shares outstanding 4,216,645 4,209,096
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended September 30,
2001 2000
Cash flows from operating
activities:
Net income $ 330,776 $ 386,532
Adjustments to reconcile net
income to net cash provided
by (used for) operating activities:
Decrease in deferred tax asset - 47,138
Depreciation and amortization 95,972 119,666
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, inventories, prepaid
expenses and other current assets (209,095) (616,293)
(Increase) decrease in security
deposits and other assets (34,451) -
(Decrease) increase in accounts
payable accrued liabilities,
notes payable and other current
liabilities (168,969) 24,326
Net cash provided by (used for)
operating activities $ 14,233 $ (38,631)
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONT.)
(UNAUDITED)
Six Months Ended September 30,
2001 2000
Cash flows from investing
activities:
Purchase of property and equipment $ (91,461) $ (203,660)
Net cash used for investing activities (91,461) (203,660)
Cash flows from financing
activities:
Net repayment of debt and
capitalized leases 63,232 74,883
Net proceeds from stock options
exercised 44,718 223,170
Purchase of treasury stock (60,738) -
Net cash provided by (used for)
financing activities 47,212 298,053
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (30,016) 55,672
Cash and cash equivalents, at
beginning of period 1,573,081 1,424,988
CASH AND CASH EQUIVALENTS, AT
END OF PERIOD $1,543,065 $1,480,660
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED 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, 2001 and March 31, 2001, the results
of operations for the three month and six month
periods ended September 30, 2001 and 2000 and cash
flows for the six month periods ended September
30, 2001 and 2000.
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, 2001.
The results of operations for the three and six
month periods ended September 30, 2001 are not
necessarily indicative of the results of the full
year.
Note 2. Inventories are summarized below:
September 30, 2001 March 31, 2001
Raw materials and
work-in-process $2,342,981 $2,287,365
Finished goods 430,385 372,807
Total $2,773,366 $2,660,172
Reserve for obsolescence (84,302) (105,000)
Net Inventories $2,689,064 $2,555,172
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
The Company had revenues of $ 1,917,574 and $1,996,032 for the
three months ended September 30, 2001 and 2000, respectively, a
decrease of $78,458 or 3.9% compared to the prior period.
Significant increases were reported in the Components and
Subassemblies Group offset by a reduction in the Test Solutions
Group. The Company had net income of $193,112, or $.05 per share,
as compared with net income of $256,470, or $.06 per share, for the
three-month periods ended September 30, 2001 and 2000,
respectively. This is a decrease of $63,558 or 24.7% in the
current period.
The Company had revenues of $3,701,599 and $3,494,854 for the
six months ended September 30, 2001 and 2000, respectively, an
increase of $206,645 or 6% in the current period. Significant
revenue increases occurred in the Components and Subassemblies
Group offset largely by a reduction in the Test Solutions Group.
The Company had net income of $330,576, or $.08 per share, and
$386,531, or $.09 per share, for the six-month periods ended
September 30, 2001 and 2000, respectively, a decrease of $55,955 or
14.5% in the current period.
Gross profit as a percent of net sales for the three months
ended September 30, 2001 was 43.0% compared to 42.1% during the
corresponding period of the prior fiscal year. For the six-month
periods ended September 30, 2001 and 2000, gross profit as a
percent of net sales was 43.1% and 39.8%, respectively. This was
largely due to a significant improvement in the gross profit margin
in the Components and Subassemblies Group. Selling, general and
administrative expenses ("SG&A") as a percent of net sales for the
three months ended September 30, 2001 increased to 25% as compared
to 23% in the prior year. For the six month period ended September
30, 2001, SG&A as a percent of net sales increased to 27% from 23%
in the year earlier period. SG&A expenses as a percent of net
sales increased during the current periods primarily due to
allocating SG&A on lower sales, especially in our Test Solutions
Group. Research and development expenses ("R&D") as a percent of
net sales increased to 5.4% during the three-month period ended
September 30, 2001 as compared to 2.2% in the year earlier period.
R&D expenses as a percent of net sales increased to 5.3% during the
six-month period ended September 30, 2001 as compared to 3.1% in
the prior year period. This is due to a large investment in new
product development, mostly in our Test Solutions and VCO Products
Groups.
Financial Condition
The Company's working capital at September 30, 2001 was
$5,279,101. It was $4,931,053 at March 31, 2001. The Company's
current ratio was 8.3 to 1.0 at September 30, 2001, as compared to
6.5 to 1.0 at March 31, 2001. The Company generated cash from
operating activities in the amount of $14,233 during the six months
ended September 30, 2001 as compared to using cash in the amount of
$38,631 in the year earlier period. The Company purchased $91,461
of new equipment and improvements to its headquarters facility and
its VCO Products Division, during the six months ended September
30, 2001, as compared to $203,660 of such investments in the year
ago period. The Company provided $47,212 from financing activities
during the six months ended September 30, 2001, and $298,053
related in the year earlier period. During the current period, the
Company purchased 30,400 shares of treasury stock at a cost of
$60,738 and had less option exercises than last year. As a result
of these activities, the Company's cash and cash equivalents
decreased by about $30,000 from March 31, 2001 to September 30,
2001.
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. The information in
this report should be reviewed in conjunction with the Company's
Annual Report for its fiscal year ended March 31, 2001.
PART II - OTHER INFORMATION
Item 2. Changes in Securities. On September 30, 2001, the
Company issued 25,000 shares of Common Stock to an
executive officer of the Company upon exercise of a
non-incentive stock option.
On September 20, 2001, the Company issued 5,000 shares of
Common Stock to a director of the Company upon exercise
of a non-incentive stock option.
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.
(b) Reports on Form 8-K.
During the quarter ended September 30, 2001, the registrant
did not file any reports on Form 8-K.
S IGNATURE
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: October 23, 2001 By:/s/Richard S. Kalin
Richard S. Kalin,
President and (Principal
Executive Officer)
626: