UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-16453
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MICRONETICS WIRELESS, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-2063614
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
26 Hampshire Drive, Hudson NH 03051
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(Address of principal executive offices)
(603) 883-2900
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if change
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 the latest practical date.
4,378,764 shares of common stock, par value $.01 per share as
of October 17, 2002.
MICRONETICS WIRELESS, INC.
INDEX
Page No.
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Part I. Financial Information:
Item 1. Financial Statements.
Consolidated Condensed Balance
Sheets - September 30, 2002 and March
31, 2002 3-4
Consolidated Condensed Statements
of Operations - Three and Six Months
Ended September 30, 2002 and 2001 5-6
Consolidated Condensed Statement
of Cash Flows - Six Months Ended
September 30, 2002 and 2001 7-8
Notes to Consolidated Condensed
Financial Statements 9
Item 2. Management's Discussion and Analysis
or Plan of Operation. 10-11
Item 3. Controls and Procedures 12
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K. 13
Signature 14
Certifications 15-18
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
Assets
September 30, March 31,
2002 2002
------------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 2,606,456 $ 2,500,414
Accounts receivable (net of
allowance for doubtful accounts
of $60,366 and $69,239 at September
30 and March 31, 2002, respectively) 1,713,825 1,579,395
Inventories 3,093,976 3,078,221
Prepaid expenses and taxes 66,187 88,202
Other current assets 119,268 168,371
----------- ----------
TOTAL CURRENT ASSETS 7,599,712 7,414,603
----------- ----------
PROPERTY AND EQUIPMENT
Land 162,000 162,000
Building & improvements 975,286 975,286
Furniture, fixtures, and
equipment 3,973,292 3,751,574
Equipment held under capital leases 603,515 603,516
---------- ----------
5,714,093 5,492,376
Less: Accumulated depreciation 3,422,740 3,301,494
---------- ----------
TOTAL PROPERTY AND EQUIPMENT 2,291,353 2,190,882
OTHER ASSETS
Security deposits 10,335 1,460
Goodwill 988,182 988,182
---------- ----------
TOTAL OTHER ASSETS 998,517 989,642
---------- ----------
TOTAL ASSETS $10,889,582 $10,595,127
=========== ===========
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
Liabilities and Shareholders' Equity
September 30, March 31,
2002 2002
------------- ---------
CURRENT LIABILITIES:
Short-term loans and capitalized
leases $ 323,250 $ 332,542
Accounts payable 275,791 507,534
Accrued expenses and taxes, other
than income taxes 498,664 477,234
Income taxes payable 81,526 18,974
----------- -----------
TOTAL CURRENT LIABILITIES 1,179,231 1,336,284
----------- -----------
LONG-TERM DEBT:
Notes payable 1,331,652 1,507,291
Capitalized lease obligations 87,317 117,520
----------- ----------
TOTAL LONG-TERM DEBT 1,418,969 1,624,811
----------- ----------
TOTAL LIABILITIES 2,598,200 2,961,095
----------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock - $.10 par value,
Authorized 500,000 shares; Issued
- none at September 30,
2002 and March 31, 2002
Common stock $.01 par value,
Authorized 10,000,000 shares; Issued
4,447,264 shares at September 30,
2002 and 4,368,889 shares at March
31, 2002 43,788 43,385
Additional paid - in capital 4,620,047 4,455,497
Retained earnings 3,829,336 3,238,513
Less: Treasury stock at cost,
68,500 shares at September 30, 2002
and 30,400 shares at March 31,
2002 (201,789) (103,363)
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TOTAL SHAREHOLDERS' EQUITY 8,291,383 7,634,032
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $10,889,582 $10,595,127
=========== ===========
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
2002 2001
---------- ----------
Net sales $2,654,262 $1,917,574
Cost of sales 1,480,637 1,093,641
---------- ----------
Gross profit 1,173,625 823,933
Selling, general and
administrative expenses 632,171 485,014
Research & development expenses 184,290 102,810
---------- ----------
Income from operations 357,164 235,109
Other income (expense):
Rental income 29,992 24,963
Interest income 14,858 9,454
Interest (expense) (27,380) (16,831)
Other income (expense) 6,154 (12,342)
---------- ----------
Total other income (expense) 23,624 5,244
---------- ----------
Income before provision
for income taxes 380,788 240,353
Provision for income taxes 57,118 47,241
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Net income $ 323,670 $ 193,112
========== ==========
Net income per share $ 0.07 $ 0.05
========== ==========
Diluted weighted average number
of shares outstanding 4,434,093 4,216,550
========== ==========
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended September 30,
2002 2001
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Net sales $4,995,911 $3,701,599
Cost of sales 2,758,543 2,107,341
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Gross profit 2,237,368 1,594,258
Selling, general and
administrative expenses 1,244,621 1,001,313
Research & development expenses 339,172 197,278
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Income from operations 653,575 395,667
Other income (expense):
Rental income 43,992 37,425
Interest income 26,016 18,334
Interest (expense) (58,236) (32,705)
Other income (expense) 12,278 (11,501)
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Total other income (expense) 24,050 11,553
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Income before provision
for income taxes 677,625 407,220
Provision for income taxes 86,802 76,444
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Net income $ 590,823 $ 330,776
========== ==========
Net income per share $ 0.13 $ 0.08
========== ==========
Diluted weighted average number
of shares outstanding 4,442,188 4,216,645
========== ==========
See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended September 30,
2002 2001
------------ ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash flows from operating
activities:
Net income $590,823 $330,776
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 121,246 95,972
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, inventories, prepaid
expenses and other current assets (79,067) (209,095)
(Increase) decrease in security
deposits and other assets (8,875) (34,451)
(Decrease) increase in accounts
payable, accrued liabilities,
notes payable and other current
liabilities (157,053) (168,969)
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Net cash provided
by operating activities $467,074 $ 14,233
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See accompanying notes to consolidated condensed financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT.)
(UNAUDITED)
Six Months Ended September 30,
2002 2001
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INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash flows from investing
activities:
(Additions) to fixed assets $ (221,717) $ (91,461)
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Net cash (used for)
investing activities $ (221,717) $ (91,461)
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Cash flows from financing
activities:
(Repayments) increase of debt
and capitalized leases (205,842) 63,232
Proceeds from stock options
exercised 164,953 44,718
Purchase of treasury stock (98,426) (60,738)
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Net cash provided by (used for)
financing activities $ (139,315) $ 47,212
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 106,042 $ (30,016)
Cash and cash equivalents, at
beginning of year 2,500,414 1,573,081
---------- ----------
CASH AND CASH EQUIVALENTS, AT
END OF QUARTER $2,606,456 $1,543,065
========== ==========
See accompanying notes to consolidated condensed financial statements.
MICRONETICS, WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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) which in
the opinion of management are necessary in
order to present fairly the financial position
as of September 30, 2002 and 2001, the results
of operations for the three month periods
ended September 30, 2002 and 2001 and cash
flows for the three month periods ended
September 30, 2002 and 2001.
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, 2002.
The results of operations for the three and
six month periods ended September 30, 2002 are
not necessarily indicative of the results of
the full year.
Note 2. Inventories are summarized below:
September 30, 2002 March 31, 2002
------------------ --------------
Raw materials and
work-in-process $2,861,477 $2,827,581
Finished goods 437,257 492,961
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3,298,734 3,320,542
Less: allowance for obsolescence (204,758) (242,321)
---------- ----------
Total $3,093,976 $3,078,221
========== ==========
Item 2. Management's Discussion and Analysis or Plan of
Operation.
Results of Operations
The Company had revenues of $2,654,262 and $1,917,574 for the
three months ended September 30, 2002 and 2001, respectively, an
increase of $763,688 or 38.4% in the current period. A large
percentage of this increase was due to the inclusion of sales from
Enon Microwave, Inc. that was acquired by the Company in March
2002. Gross profit as a percent of net sales increased to 44.2% in
the current period from 42.9% during the corresponding period of
the prior fiscal year. This was due primarily to improvements in
our Defense Electronics Group. Selling, general and administrative
expenses as a percent of net sales for the current period decreased
to 23.8% from 25.3% during the corresponding period a year ago.
This was due primarily to the impact of controlled increases
against a larger sales base. Research and development expenses
increased to 6.9% of net sales during the current period as
compared to 5.4% of net sales a year ago. The Company increased
new product development activities during the current period.
The Company had net income of $323,670, or $.07 per share, as
compared to net income of $193,112, or $.05 per share, for the
three month periods ended September 30, 2002 and 2001,
respectively. This is an increase of $130,558 or 67.6% from a year
ago. The weighted average shares outstanding for the three months
ended September 30, 2002 and 2001, were 4,434,093 and 4,216,550,
respectively.
The Company had revenues of $4,995,911 and $3,701,599 for the
six months ended September 30, 2002 and 2001, respectively, an
increase of $1,294,312 or 35% in the current period. A large
percentage of this increase was due to the inclusion of sales from
Enon Microwave, Inc. that was acquired by the Company in March
2002. Gross profit as a percent of net sales increased to 44.8% in
the current period from 43.1% during the corresponding period of
the prior fiscal year. This was due primarily to improvements in
our Defense Electronics Group. Selling, general and administrative
expenses as a percent of net sales for the current period decreased
to 24.9% from 27.0% during the corresponding period a year ago.
This was due primarily to the impact of controlled increases
against a larger sales base. Research and development expenses
increased to 6.8% of net sales during the current period as
compared to 5.4% of net sales a year ago. The Company increased
new product development activities during the current period.
The Company had net income of $590,823, or $.13 per share, as
compared to net income of $330,776, or $.08 per share, for the six
month periods ended September 30, 2002 and 2001, respectively.
This is an increase of $260,047 or 78.6% as compared to the year
ago six month period. The weighted average shares outstanding for
the six months ended September 30, 2002 and 2001, were 4,442,188
and 4,216,645, respectively.
Financial Condition
The Company's working capital at September 30, 2002 was
$6,420,481, an increase of $342,162 from $6,078,319, the working
capital at March 31, 2002. The Company's current ratio was
approximately 6.44 to 1.0 at September 30, 2002; it was
approximately 5.55 to 1.0 at March 31, 2002.
Net cash of $467,074 was provided by operating activities
during the six months ended September 30, 2002 as compared to
$14,233 that was provided by operating activities during the year
earlier period. This was primarily due to increased net income in
the current period. Net cash used by investing activities during
the six months ended September 30, 2002 was $221,717 as compared to
$91,461 during the year earlier period. This was due to the
purchase of more equipment during the current period. Net cash
used by financing activities during the six months ended September
30, 2002 was $139,315 as compared to cash of $47,212 provided
during the year earlier period. This was largely due to increased
debt reduction and increased purchases of treasury stock in the
current period. As a result of these activities, the Company's
cash position increased $106,042 during the current six months as
compared to a decrease of $30,016 in the year ago period.
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. This report should be
read in conjunction with the Company's Annual Report on Form 10-KSB
for its fiscal year ended March 31, 2002.
Item 3. Controls and Procedures.
Within the 90 days prior to the date of this report, the
Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the
Company's Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon the evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective. There were no significant
changes in the Company's internal controls or in other factors that
could significantly affect these controls subsequent to the date of
their evaluation.
PART II. OTHER INFORMATION
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. 33-16453 (the "Registration Statement").
3.2 By-Laws of the Company incorporated by reference to
Exhibit 3.2 of the Registration Statement.
99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(b) Reports on Form 8-K.
During the quarter ended September 30, 2002, 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: October 17, 2002 By:/s/Richard S. Kalin
----------------------
Richard S. Kalin,
President (Principal
Executive Officer)
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard S. Kalin certify that:
1. I have reviewed this quarterly report on Form 10-QSB
of Micronetics Wireless, Inc.;
2. Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
(a) designed such disclosure controls and
procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filling date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board
of directors (or persons performing the equivalent functions):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that
involves management or other employees who have a significant role
in the registrant's internal controls.
6. The registrant's other certifying officers and I
have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: October 17, 2002
/s/Richard S. Kalin
------------------------
Name: Richard S. Kalin
Title: President and
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dennis Dow, certify that:
1. I have reviewed this quarterly report on Form 10-QSB
of Micronetics Wireless, Inc.;
2. Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
(a) designed such disclosure controls and
procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filling date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board
of directors (or persons performing the equivalent functions):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that
involves management or other employees who have a significant role
in the registrant's internal controls.
6. The registrant's other certifying officers and I
have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: October 16, 2002
/s/Dennis Dow
-------------------------
Name: Dennis Dow
Title: Vice President - Finance
(Principal Financial Officer)