UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
April 10, 2002 (March 26, 2002)
Date of Report (Date of earliest reported):
MICRONETICS WIRELESS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-17966 22-2063614
(State or other jurisdiction (Commission (I.R.S. Employee
incorporation or File Number) Identification
No.)
26 Hampshire Drive, Hudson, New Hampshire 03051
(Address of principal executive offices ) (Zip Code)
Registrant's telephone number, including area code: (603) 883-2900
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 26, 2002 (the "Closing Date"), Micronetics Wireless,
Inc. ("Micronetics") acquired Enon Microwave, Inc. ("Enon") through
a statutory merger of Enon with and into Vectronics Microwave
Corp., a wholly-owned subsidiary of Micronetics (the "Merger"),
with Vectronics changing its name to Enon Microwave, Inc. (the
Surviving Corporation"). As a result of the Merger, Enon became
a wholly-owned direct subsidiary of Micronetics and the holders of
shares of Enon Common Stock outstanding immediately prior to the
Merger (all of which were cancelled upon consummation of the
Merger) became entitled to receive (a) .1709 shares of restricted
Micronetics Common Stock, and (b) $.8659 for each share of Enon
Common Stock held.
At the closing of the Merger (the "Closing"), the Surviving
Corporation entered into agreements with two individuals (who were
directors and executive officers of Enon) that provide for them to
provide certain services for the Surviving Corporation from the
Closing Date until March 26, 2003 and March 26, 2004, respectively.
The agreements with these individuals include covenants prohibiting
them from engaging in certain activities that may be competitive
with the Surviving Corporation's business. In these agreements,
the Surviving Corporation has agreed to pay to these individuals
compensation in the amount of $75,000 for one year and $110,000 per
year for two years, respectively.
The amount of the Merger consideration and the compensation
payable to the individuals engaged by the Surviving Corporation
were determined through arms' length negotiations between
Micronetics, on the one hand, and Enon and the individuals,
respectively, on the other hand.
The entire cost of the Merger, including without limitation
the Merger consideration and the fees and expenses incurred by the
parties to the Merger, was funded out of Micronetics' cash reserves
and a term loan FROM Banknorth, N.A.
Enon designs and manufactures high power, solid state
microwave switches, attenuators, limiters, phase shifters, filters
and control devices and assemblies. Enon's power capabilities range
from 10 watts to 10,000 watts, with average power capabilities as
high as 1,600 watts. Enon's customer base includes Lockheed Martin,
Northrop Grumman and Raytheon.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
1. Enon's financial statements as of December 31, 2001
and for the year then ended.
(b) Pro Forma Financial Information.
(c) Exhibits.
Number Description
2.1 Agreement of Merger dated as of February 14, 2002,
among Micronetics Wireless, Inc., Vectronics Microwave
Corp., and Enon Microwave, Inc. (the Agreement of
Merger").
2.2 Amendment dated as of February 21, 2002 to Agreement
of Merger.
2.3 Second Amendment dated as of March 26, 2002 to
Agreement of Merger.
2.4 Voting Agreement dated January 4, 2002 among
Micronetics Wireless, Inc. and certain stockholders of
Enon Microwave, Inc.
23.1 Consent of Independent Public Auditor.
INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
Financial Statements of Enon Microwave, Inc. (Audited)
Report of Independent
Auditor..................................................... F-1
Balance Sheet as of December 31, 2001....................... F-2
Statement of Operations for the year
ended December 31, 2001..................................... F-4
Statement of Changes in Shareholders' Equity for
the year ended December 31, 2001............................ F-5
Statement of Cash Flows for the
year ended December 31, 2001................................ F-6
Notes to Financial Statements............................... F-7
Pro Forma Consolidated Condensed Financial Statements (Unaudited)
Introduction................................................ F-10
Unaudited Pro Forma Consolidated Condensed Balance
Sheet as of December 31, 2001............................... F-11
Unaudited Pro Forma Consolidated Condensed Statement of
Operations for the nine months ended December 31,
2001........................................................ F-12
Unaudited Pro Forma Consolidated Condensed Statement of
Operations for the year ended March 31, 2001.................F-13
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements........................................ F-14
Signatures.................................................. F-16
Exhibit Index............................................... F-17
157:
Financial Statements of Enon Microwave, Inc.
Paul A. Taylor
Certified Public Accountant
62 Pleasant Street
Marblehead, MA 01945
Independent Auditors Report
ENON MICROWAVE, INC.
Topsfield, Massachusetts
To the Board of Directors:
I have audited the accompanying balance sheet of Enon
Microwave, Inc. as of December 31, 2001 and the related statement
of income, changes in shareholders' equity and cash flows for the
year then ended. These financial statements are the responsibility
of company management. My responsibility is to express an opinion
on these financial statements based on my audits.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide
a reasonable basis for my opinion.
In my opinion, the financial statements referred to above
present fairly, in all materials respects, the financial position
of Enon Microwave, Inc. as of December 31, 2001, and the results of
its operations, changes in its shareholders' equity and its cash
flows for the year then ended in conformity with generally accepted
accounting principles.
Paul Taylor
January 23, 2002
ENON MICROWAVE, INC.
Balance Sheet
December 31, 2001
2001
Current Assets:
Cash $ 57,376
Accounts receivable 327,721
Inventory 750,851
Prepaid expenses 11,764
Total current assets 1,147,712
Plant and equipment 1,591,119
Less accumulated depreciation 1,369,548
Total 221,571
Total Assets $1,369,283
The accompanying notes are an integral part of these financial
statements.
ENON MICROWAVE, INC.
Balance Sheet
December 31, 2001
Liabilities and Shareholders' Equity
2001
Current Liabilities:
Current portion of debt $ 60,000
Accounts payable 46,856
Other accrued liabilities 52,439
Accrued income taxes 21,644
Total 180,939
Long Term Debt:
Notes and leases payable 130,000
Loans payable officers 161,273
Accrued interest on officers'
loans payable 42,264
333,537
Shareholders' Equity:
Common stock - $.15 par value
2,000,000 shares authorized,
1,067,813 shares issued and
outstanding in 2001 160,172
Additional paid-in capital 457,576
Retained earnings 237,059
854,807
Total Liabilities &
Shareholders' Equity $1,369,283
The accompanying notes are an integral part of these financial
statements.
ENON MICROWAVE, INC.
Statement of Operations
for the year ended December 31, 2001
2001
Sales $2,779,138
Cost of Sales 1,508,058
Gross Profit 1,271,080
Other Expenses:
General and administrative 627,191
Interest expense 42,400
Research and development 112,754
Total 782,345
Net Income before taxes 488,735
State Income Taxes 17,808
Federal Income Taxes 5,769
Total Income Taxes 23,577
Net Income 465,158
Retained Earnings beginning of period (228,099)
Retained earnings end of period $ 237,059
The accompanying notes are an integral part of these financial
statements.
ENON MICROWAVE, INC.
Statement of Changes in Shareholders' Equity
for the Year Ended December 31, 2001
Common Stock Additional
Par Paid-In Retained
Shares Value Capital Earnings Total
Balance -
December 31, 2000 1,067,813 $160,172 $457,516 $(228,099) $389,649
Net income - - - 456,158 456,158
Balance -
December 31, 2001 1,067,813 $160,172 $457,516 $ 237,059 $854,807
The accompanying notes are an integral part of these
financial statements.
ENON MICROWAVE, INC.
Statement of Cash Flows
for the Year Ended December 31, 2001
2001
Cash Flow from Operating Activities:
Net income $ 465,158
Adjustments to reconcile income
to cash provides (applies to)
operating activities
Depreciation 85,205
(Increase) decrease in
Accounts receivable (178,536)
Inventories 44,089
Prepaid expenses 4,945
Increase (Decrease) in:
Accounts payable (102,232)
Income taxes 20,678
Other accrued liabilities (4,991)
Accrued interest - long term (112,558)
Customer deposits (6,604)
Cash provided from operating activities 215,154
Cash flow from investing activities
addition to equipment (14,055)
Cash flow from financing activities:
Shareholder loans (55,000)
Repayment of debt (250,686)
Cash flow from financing activities (305,686)
Cash flow (104,587)
Cash - beginning of year 161,963
Cash - end of year $ 57,376
The accompanying notes are an integral part of these financial
statements.
ENON MICROWAVE, INC.
Notes to Financial Statements
for the Year Ended December 31, 2001
Significant Accounting Policies
1. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Actual
results could differ from those estimates.
Certain prior year balances have been reclassified to conform
to the current year presentation.
2. Accounts Receivables - No provision is made for doubtful
accounts. All receivables are deemed collectable by
management as of the Report date.
3. Parts and Finished Goods - Parts and finished goods are valued
at lower of cost or market determined by the average cost.
The value is $670,614 at December 31, 2001.
4. Work in Process Inventory - Work in process is recorded at
lower of cost or market. Cost is determined as the cost of
materials, direct labor and an allocation of overhead expenses
based upon the percentage of total direct labor hours per job
to the total direct labor hours. Work in process inventory is
$80,237 at December 31, 2001.
5. Plant and Equipment - Plant and Equipment is recorded at cost
and depreciated over their estimated useful lives using the
straight line method. The estimated useful lives of the
assets are:
Equipment 5-7 years
Office and Computer Equipment 5-7 years
Leasehold Improvements 5-10 years
6. Research and Development Cost - Research and development costs
are costs incurred in engineering and new product development,
over and above amounts funded by contract programs. These
costs are for initial design and prototypes. The Company has
been awarded Federal Grants to develop new products. The
receipts under these grants are offset against the expenses
incurred in such development.
ENON MICROWAVE, INC.
Notes to Financial Statements
for the Year Ended December 31, 2001 (Continued)
7. Income Taxes - The Federal income tax liability for 2001 is
$5,769. The Company has a research and development tax credit
available of $47,517 through 2010. State tax liability for
2001 is $17,808.
8. Note payable to Bank - At December 31, 2001, the Company had
available a line of credit which provides for borrowings up to
$250,000 in 2001. Borrowings under the agreement are secured
by certain assets of the Company. Outstanding amounts under
the line of credit bear interest at 1.5 percent above the
bank's prime rate. The amount of the line of credit
outstanding at December 31, 2001 is $0.
The Company also has a term loan that was established in 2000
for $300,000. The loan is payable over 60 months at $5,000
per month plus interest at the base rate (currently 4.25%).
Both of these credit facilities are secured by certain assets
of the Company. A second mortgage on the property rented by
the Company which is owned by a related party is guaranteed by
the officers/shareholders of the Company.
In conjunction with the debt restructuring, property rented by
the Company which is owned by a related party was remortgaged.
This new first mortgage has a term of 60 months. Repayment is
based on a 240 month principal amortization together with
interest at 9.7%. The proceeds from this new mortgage were
used to pay the note payable to MBDC (see Note 9) in 2000.
9. Note Payable to MBDC - Due in monthly installments of $2,292 per
month plus interest at prime plus 2-3/4%, through April 1,
2004, secured by equipment. The note was repaid in 2000.
$25,000 of this loan was repaid by the Company. The remaining
debt of $96,436 was repaid by a related party owning the
premises rented by the Company.
10. Commitments - The Company rents office and manufacturing
facilities under non-cancelable operating lease agreements
from one related party and one unrelated party. Future
minimum lease payments on operating leases are as follows:
2002 120,700
2003 73,000
ENON MICROWAVE, INC.
Notes to Financial Statements
for the Year Ended December 31, 2001 (Continued)
Rent expense was $113,500 in fiscal year 2001.
11. 401(k) Savings and Retirement Plan - The Company has a 401(k)
savings and retirement plan for all employees. Under
provisions of the plan, employees may voluntarily contribute
up to 15% of their compensation up to the statutory limit. In
addition, the Company can make a matching contribution at its
discretion. There was no Company match in 2001.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed
financial statements as of March 31, 2001 and for the nine months
ended December 31, 2001 give effect to the acquisition of Enon
Microwave, Inc. ( Enon"). The pro forma consolidated condensed
balance sheet presents Micronetics Wireless, Inc.'s ( Micronetics")
financial position as if the acquisition of Enon had occurred on
December 31, 2001. The pro forma consolidated condensed statements
of operations present our results as if the acquisition of Enon had
occurred on April 1, 2000. Micronetics' fiscal year end is March 31 and
Enon's fiscal year end is December 31. Micronetics' third quarter of its
current fiscal year ended on December 31, 2001, while the third
quarter of Enon's most recent fiscal year ended on December 31, 2001.
The pro forma consolidated condensed balance sheet as of December
31, 2001 is based upon Micronetics' historical balance sheet as of December
31, 2001, which has been adjusted for the effects of the Enon
acquisition. The pro forma consolidated condensed statement of
operations for the nine months ended December 31, 2001 is based
upon Micronetics' historical results and the pro forma statement of
operations for Enon for the nine months ended September 30, 2001.
The pro forma consolidated statement of operations for the year
ended March 31, 2001 is based on Micronetics' historical statement of
operations and the pro forma statement of operations of Enon for
the year ended December 31, 2000.
The pro forma consolidated condensed financial statements
include, in management's opinion, all material adjustments
necessary to reflect the acquisition of Enon. The pro forma
consolidated condensed financial statements do not represent the
Company's actual results of operations, including the acquisition,
nor do they purport to predict or indicate our financial position
or results of operations at any future date or for any future
period.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
Assets
Micro(a) Enon(b) Pro(c) Micronetics
December 31, December 31, Forma Wireless, Inc.
2001 2001 Adjustments Pro Forma
Cash $2,141,743 $ 57,376 $ (924,623) $ 1,274,496
Accounts receivable 1,697,337 327,721 (16,386) 2,008,672
Inventories 2,374,928 750,851 (112,628) 3,013,151
Other current assets 80,154 11,764 - 91,918
Property and equipment
- net 1,947,455 221,571 - 2,169,026
Deferred tax asset - - 47,517 47,517
Intangibles and other
assets 459,136 - 1,048,607 1,507,743
Total assets $8,700,753 $1,369,283 $ 42,487 $10,112,523
Liabilities and Shareholders' Equity
Total current liabilities $ 732,422 $ 180,939 $ 222,081 $ 1,135,442
Long-term debt 739,857 333,537 - 1,073,388
Shareholders' equity:
Common stock 41,423 160,172 (153,420) 48,175
Additional paid -
in capital 3,774,859 457,576 210,885 4,443,320
Retained earnings 3,515,461 237,059 (237,059) 3,515,461
Treasury stock (103,263) - - (103,263)
Total liabilities and
shareholders' equity $8,700,753 $1,369,283 $ 42,487 $10,112,523
The accompanying notes to the pro forma consolidated condensed financial
statements are an integral part of these pro forma financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 2001
(UNAUDITED)
Micronetics
Micronetics Enon Pro Wireless, Inc.
Wireless, Microwave, Forma & Subsidiaries
Inc. (d) Inc. (e) (f) Adjustments Pro Forma
Revenues $5,585,675 $2,132,134 $ - $7,717,809
Cost of Revenues 3,155,186 1,156,971 - 4,312,157
Gross Profit 2,430,489 975,163 - 3,405,652
Selling, general and
administrative expense 1,490,383 470,393 (77,839) 1,882,937
Research and development 295,951 84,565 - 380,516
Operating Income 644,155 420,205 77,839 1,142,199
Other income (expense) 26,479 (31,800) - (5,321)
Income before taxes and
extraordinary item $ 670,634 $ 388,405 $ 77,839 $1,136,878
Provision for income
taxes 117,931 18,400 118,000 254,331
Income before extraord-
inary item 552,703 370,005 (40,161) 882,547
Extraordinary item 59,005 - - 59,005
Net Income $ 611,708 $ 370,005 $ (40,161) $ 941,552
Income per share:
Income before extra-
ordinary item $ .13 $ .35 $ - $ .20
Extraordinary item .01 - - .01
Net Income .14 .35 - .21
Weighted average number
of shares outstanding 4,222,909 1,067,813 $ - 4,405,399
The accompanying notes to the pro forma consolidated condensed financial
statements are an integral part of these pro forma financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2001
(UNAUDITED)
Micronetics
Micronetics Enon Pro Forma Wireless, Inc.
Wireless, Microwave, Adjustments & Subsidiaries
Inc. (d) Inc. (e) (f) Pro Forma
Net sales $ 7,793,306 $2,452,444 $ - $10,245,750
Cost of sales 5,315,344 1,891,683 - 7,207,027
Gross Profit 2,477,962 560,761 - 3,038,723
Selling, general and
administrative expense 1,196,874 582,565 (103,785) 1,675,654
Research and development 270,484 104,949 - 375,433
Income (loss) from
operations 1,010,604 (126,753) 103,785 987,636
Other income (expense) 77,428 (68,606) - 8,822
Income before provision
for income taxes $ 1,088,032 $ (195,359) $ 103,785 $ 996,458
Provision for income
taxes 214,800 2,740 (35,000) 182,540
Net Income (loss) $ 873,232 $ (198,099) $ 138,785 $ 813,918
Basic and diluted earnings
(loss) per common share:
Net income - Basic $ .22 $ (.19) $ - $ .19
Net income - Diluted $ .21 $ (.19) $ - $ .19
Weighted average shares
outstanding:
Basic 4,025,701 1,067,813 - 4,208,191
Diluted 4,216,739 1,067,813 - 4,399,229
The accompanying notes to the pro forma consolidated condensed financial
statements are an integral part of these pro forma financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO THE PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(UNAUDITED)
(a) Reflects the historical financial position of Micronetics at
December 31, 2001.
(b) Reflects the historical financial position of Enon at
December 31, 2001.
(c) Pro Forma adjustments to record the acquisition as of
December 31, 2001 reflect:
- An increase in equity of approximately $675,000
relating to the issuance of 182,490 shares of
Micronetics common stock. The Micronetics common
stock to be issued was valued based on a price per
share of $3.70, which was the market price on the date
of merger.
- An increase in accrued expenses of approximately
$222,000 relating to the incurence of transaction
costs by Micronetics and Enon and a reduction of
income taxes paid by Enon.
- An increase in deferred tax assets to reflect research
and development credit carryforwards of Enon.
- A decrease in equity of approximately $850,000
relating to the elimination of Enon's historical
shareholders' equity.
- The preliminary allocation of the excess of the
$1,843,561 purchase price over the book value of net
assets acquired to:
Goodwill in the amount of $1,048,607;
Write-down of accounts receivable in the amount
of $16,386; and
Write-down of inventories in the amount of
$112,628.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
NOTES TO THE PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(UNAUDITED) (Continued)
(d) Reflects the historical operating results of Micronetics for
the nine months ended December 31, 2001, and the year ended
March 31, 2001. Outstanding share and per share information
has been adjusted to reflect the issuance of additional
shares of Micronetics in the merger.
(e) Reflects the historical operating results of Enon. For the
nine months ended September 30, 2001 and the year ended
December 31, 2000.
(f) Pro Forma adjustments to record the merger for the nine
months ended December 31, 2001 and the year ended March 31,
2001 reflect:
- Increase of $19,661 and $26,215, respectively, in
amortization of goodwill relating to the amortization
of the excess of the purchase price to acquire Enon
over the fair value of its net assets acquired which
has been allocated to goodwill and is amortized on a
straight-line basis over forty years.
- Decrease in salaries of $97,500 and $130,000,
respectively, to reflect the employment contracts
entered into in the merger which are for less than
salaries on historical statements.
- Increase of $118,000 and decrease of $35,000,
respectively, in income taxes provided at a 34% tax
rate.
SIGNATURES
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 hereunto duly authorized.
Dated: April 10, 2002 MICRONETICS WIRELESS, INC.
By:/s/Richard S. Kalin
Name: Richard S. Kalin,
Title: President (Principal
executive and
financial officer)
EXHIBIT INDEX
Exhibit
Number Description
2.1 Agreement of Merger dated as of February 14, 2002,
among Micronetics Wireless, Inc., Vectronics Microwave
Corp., Enon Microwave, Inc. (the Agreement of
Merger").
2.2 Amendment dated as of February 21, 2002 to Agreement
of Merger.
2.3 Second Amendment dated as of March 26, 2002 to the
Agreement of Merger.
2.4 Voting Agreement dated January 4, 2002 among
Micronetics Wireless, Inc. and certain stockholders of
Enon Microwave, Inc.
23.1 Consent of Independent Public Auditor.