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 December 31, 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 January 23, 2002 was 4,142,292.
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
December 31, 2001 and March 31, 2001
Consolidated Condensed Statements 5
of Operations - Three Months Ended
December 31, 2001 and 2000
Consolidated Condensed Statements 6
of Operations - Nine Months Ended
December 31, 2001 and 2000
Consolidated Condensed Statements of 7-8
Cash Flows - Nine Months Ended
December 31, 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.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
Assets
December 31, March 31,
2001 2001
Current assets:
Cash and cash equivalents $2,141,743 $1,573,081
Accounts receivable,
net of allowance for
doubtful accounts 1,697,337 1,561,157
Inventories (note 2) 2,374,928 2,555,172
Prepaid expenses 80,154 88,037
Other current assets - 46,311
Total current assets 6,294,162 5,823,758
Property and equipment:
Land 162,000 162,000
Building & improvements 956,246 956,246
Furniture, fixtures and
equipment 2,634,215 2,542,903
Capitalized leases 179,034 146,253
Gross fixed assets 3,931,495 3,807,402
Less: accumulated depreciation
and amortization 1,984,040 1,835,597
Total (net) property and equipment 1,947,455 1,971,805
Other assets:
Security deposits 1,460 960
Intangibles, net of accumulated
amortization 137,205 107,294
Goodwill, net of accumulated
amortization 320,471 320,471
Total other assets 459,136 428,725
Total assets $8,700,753 $8,224,288
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
(UNAUDITED)
CONSOLIDATED CONDENSED BALANCE SHEETS
Liabilities and Shareholders' Equity
December 31, March 31,
2001 2001
Current liabilities:
Short-term loans and current
portion of capitalized leases $ 67,572 $ 76,032
Accounts payable 260,089 482,295
Accrued expenses and taxes, other
than income taxes 284,324 307,903
Income taxes payable 120,437 26,475
Total current liabilities 732,422 892,705
Noncurrent liabilities:
Notes payable - bank
and capitalized leases 739,851 759,541
Total noncurrent liabilities 739,851 759,541
Shareholders' equity:
Common Stock - $.01 par value,
authorized 10,000,000 shares; issued
4,172,692 at December 31, 2001
and 4,088,317 at March 31, 2001;
outstanding 4,142,292 at December
31, 2001 and 4,088,317 at March
31, 2001 41,423 40,883
Additional paid - in capital 3,774,859 3,627,406
Retained earnings 3,515,461 2,903,753
Less: treasury stock at cost
30,400 shares at December 31, 2001 (103,263) -
Total shareholders' equity 7,228,480 6,572,042
Total liabilities and
shareholders' equity $8,700,753 $8,224,288
See accompanying notes to consolidated condensed financial statements.
220: MICRONETICS WIRELESS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended December 31,
2001 2000
Operating revenues $5,585,675 $5,570,439
Cost of operations 3,155,186 3,200,631
Gross profit 2,430,489 2,369,808
Selling, general and
administrative expenses 1,490,383 1,288,945
Research and development
expense 295,951 211,705
Operating income 644,155 869,157
Other income (expense):
Rental income 46,925 53,175
Interest income 24,999 39,910
Interest (expense) (49,027) (56,274)
Other income 3,582 (108,385)
Total 26,479 (71,574)
Income before taxes and extra-
ordinary item 670,634 797,583
Provision for income taxes 117,931 106,648
Income before extraordinary item $ 552,703 $ 690,935
Extraordinary item 59,005 -
Net income $ 611,708 $ 690,935
Income per share:
Income before extraordinary item $ .13 $ .16
Extraordinary item .01 -
Net income $ .14 $ .16
Weighted average number
of shares outstanding 4,222,909 4,216,676
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended December 31,
2001 2000
Operating revenues $1,884,076 $2,075,585
Cost of operations 1,047,845 1,098,167
Gross profit 836,231 977,418
Selling, general and
administrative expenses 489,069 483,438
Research and development expense 98,673 104,433
Operating income 248,489 389,547
Other income (expense):
Rental income 9,500 13,462
Interest income 6,665 17,451
Interest (expense) (16,322) (18,145)
Other income (expense) 15,082 (76,118)
Total 14,925 (63,350)
Income before taxes and
extraordinary item 263,414 326,197
Provision for income taxes 41,487 21,793
Income before extraordinary item $ 221,927 $ 304,404
Extraordinary item 59,005 -
Net income $ 280,932 $ 304,404
Income per share:
Income before extraordinary item $ .06 $ .07
Extraordinary item .01 -
Net income $ .07 $ .07
Weighted average number
of shares outstanding 4,235,438 4,216,692
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended December 31,
2001 2000
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Operating
Activities:
Net income $ 611,708 $ 690,935
Adjustments to reconcile net
income to net cash provided
by operating activities:
Decrease in deferred tax asset - 49,834
Depreciation and amortization 148,443 179,224
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, inventories, prepaid
expenses and other current assets 98,258 (915,694)
(Increase) decrease in security
deposits (30,411) -
(Decrease) increase in accounts
payable, accrued liabilities,
notes payable and other current
liabilities (160,283) 125,927
Net cash provided
by operating activities $ 667,715 $ 130,226
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended December 31,
2001 2000
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (CONTINUED):
Cash Flows from Investment
Activities:
(Additions) to fixed assets $ (124,093) $ (250,404)
Net cash provided (used) by
investment activities (124,093) (250,404)
Cash Flows from Financing
Activities:
(Reduction) of debt
and capitalized leases (19,690) 74,464
Proceeds from stock options
exercised 147,993 226,467
Purchase of treasury stock (103,263) -
Net cash provided (used)
by financing activities $ 25,040 $ 300,931
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 568,662 180,753
Cash and cash equivalents, at
beginning of year 1,573,081 1,424,988
CASH AND CASH EQUIVALENTS, AT
END OF QUARTER $2,141,743 $1,605,741
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
December 31, 2001 and March 31, 2001, the results
of operations for the three month and nine month
periods ended December 31, 2001 and 2000 and cash
flows for the nine month periods ended December
31, 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 nine
month periods ended December 31, 2001 are not
necessarily indicative of the results of the full
year.
Note 2. Inventories are summarized below:
December 31, 2001 March 31, 2001
Raw materials and
work-in-process $1,993,590 $2,287,365
Finished goods 474,007 372,807
Total $2,467,597 $2,660,172
Reserve for obsolescence (92,669) (105,000)
Net Inventories $2,374,928 $2,555,172
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
The Company had revenues of $1,884,076 and $2,075,585 for the
three months ended December 31, 2001 and 2000, respectively.
Significant increases were reported in the Components and
Subassemblies Group offset by reductions in the Test Solutions and
VCO Products Groups. The Company had income before extraordinary
item of $221,927 or $.05 per share, during the current three months
as compared to income before extraordinary item of $304,404, or
$.07 per share in the year earlier period. The Company had an
extraordinary gain of $59,005 from the sale of a portion of one of
its product lines in the current period. The Company had net
income of $280,932, or $.07 per share, as compared with net income
of $304,404, or $.07 per share, for the three-month periods ended
December 31, 2001 and 2000, respectively.
The Company had revenues of $5,585,675 and $5,570,439 for the
nine months ended December 31, 2001 and 2000, respectively.
Significant revenue increases occurred in the Components and
Subassemblies Group offset largely by reductions in the Test
Solutions and VCO Products Groups. The Company had income before
extraordinary item of $552,703, or $.13 per share in the current
nine month period as compared to income before extraordinary item
of $690,935, or $.16 per share in the year earlier nine month
period. The Company had income from extraordinary item of $59,005,
or $.01 per share, in the current nine month period. The Company
had net income of $611,708, or $.14 per share, and $690,935, or
$.16 per share, for the nine month periods ended December 31, 2001
and 2000, respectively.
Gross profit as a percent of net sales for the three months
ended December 31, 2001 was 44.4% compared to 47.1% during the
corresponding period of the prior fiscal year. For the nine-month
periods ended December 31, 2001 and 2000, gross profit as a percent
of net sales was 43.5% and 42.5%, respectively. This was largely
due to a significant improvement in the gross profit margin in the
Components and Subassemblies Group, offset by a decline in the Test
Solutions Group. Selling, general and administrative expenses
("SG&A") as a percent of net sales for the three months ended
December 31, 2001 increased to 26% as compared to 23.3% in the
three month period of the prior year. For the nine month period
ended December 31, 2001, SG&A as a percent of net sales increased
to 26.7% from 23.1% in the year earlier period. SG&A expenses as
a percent of net sales increased during the current periods
primarily due to increased SG&A expenses in our Test Solutions and
VCO Products Groups. Research and development expenses ("R&D") as
a percent of net sales increased to 5.2% during the three-month
period ended December 31, 2001 as compared to 5.0% in the year
earlier period. R&D expenses as a percent of net sales increased to
5.3% during the nine-month period ended December 31, 2001 as
compared to 3.8% 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 December 31, 2001 was
$5,561,740. It was $4,931,053 at March 31, 2001. The Company's
current ratio was 8.6 to 1.0 at December 31, 2001, as compared to
6.5 to 1.0 at March 31, 2001. The Company generated cash from
operating activities in the amount of $667,715 during the nine
months ended December 31, 2002 as compared to $130,226 in the year
earlier period. The Company purchased $124,093 of new equipment,
during the nine months ended December 31, 2001, as compared to
$250,404 of such investments in the year earlier period. The
Company provided $25,040 from financing activities during the nine
months ended December 31, 2001, as compared to $306,931 in the year
earlier period. During the nine months ended December 31, 2001, the
Company purchased 30,400 shares of treasury stock at a cost of
$103,238 and had less option exercises than last year. As a result
of these activities, the Company's cash and cash equivalents
increased to $2,141,743 at December 31, 2001 from $1,573,081 at
March 31, 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. In October 2001, the Company
576: issued 20,000 shares of Common Stock to a director and
577: former director of the Company upon exercise of non-incentive
578: stock options.
579: In December 2001, the Company issued 15,000 shares of
580: Common Stock to an executive officer of the Company upon
581: 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.
598: During the quarter ended December 31, 2001, the
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: January 31, 2002 By:/s/Richard S. Kalin
Richard S. Kalin,
President and (Principal
Executive Officer)