U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File #0-3392
WESTERN MICROWAVE, INC.
- - --------------------------------------------------------------------------------
Exact name of small business issuer as specified in its charter
VIRGINIA 94-1530593
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 64252
Sunnyvale, California 94086
---------------------------
(Address of Principal Executive Offices)
(415) 366-9777
---------------------------
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
As of May 10, 1996 there were 1,378,491 shares of the issuer's Common Stock
outstanding.
Transitional Small Business Disclosure Format: Yes No x
--- ---
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WESTERN MICROWAVE, INC.
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet - March 31, 1996..........................................3
Consolidated Statements of Earnings
- Three and Six Months Ended March 31, 1996
and March 31, 1995 ..................................................................4
Consolidated Statements of Cash Flows
- Six Months Ended March 31, 1996 and
March 31, 1995 ......................................................................5
Notes to Consolidated Financial Statements ..........................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................7-8
PART II. OTHER INFORMATION
Item 5. Other Information: Delisting of the Company's
Securities from the Nasdaq SmallCap Market...........................................8
Item 6. Exhibits and Reports on Form 8-K..............................................................9
Signatures ....................................................................................10
</TABLE>
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WESTERN MICROWAVE, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 247,504
SECURITIES AVAILABLE FOR SALE 7,500,751
NOTE RECEIVABLE 40,907
PREPAID EXPENSES 735
-----------
TOTAL CURRENT ASSETS 7,789,897
PROPERTY, PLANT AND EQUIPMENT - AT COST:
PRODUCTION MACHINERY AND TEST EQUIPMENT 200,000
OFFICE FURNITURE AND OTHER EQUIPMENT 61,159
-----------
TOTAL PROPERTY, PLANT AND EQUIPMENT 261,159
LESS ACCUMULATED DEPRECIATION 260,161
-----------
PROPERTY, PLANT AND EQUIPMENT, NET 998
TOTAL ASSETS $7,790,895
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 748,092
ACCRUED LIABILITIES 1,685,445
-----------
TOTAL CURRENT LIABILITIES 2,433,537
STOCKHOLDERS' EQUITY:
COMMON STOCK - $.10 PAR VALUE; 3,000,000
SHARES AUTHORIZED;
1,405,233 SHARES ISSUED, 1,378,491 OUTSTANDING 137,849
CAPITAL IN EXCESS OF PAR VALUE 4,013,981
RETAINED EARNINGS 1,205,528
-----------
TOTAL STOCKHOLDERS' EQUITY 5,357,358
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,790,895
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
-3-
WESTERN MICROWAVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31 MARCH 31,
----------------------------- ---------------------------
1996 1995 1996 1995
-------- -------- -------- -------
<S> <C> <C> <C> <C>
SALES $ 0 $ 606,571 $ 0 $1,114,884
COST OF SALES 0 406,260 0 779,121
----------------- ---------------------- ------------------- ------------
GROSS PROFIT 0 200,311 0 335,763
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 237,906 179,262 515,332 311,024
INVESTMENT INCOME (173,598) (101,755) (284,951) (181,203)
OTHER INCOME (10,927) 0 (44,232) 0
----------------- ---------------------- ------------------- ------------
53,381 77,507 186,149 129,821
NET INCOME (LOSS)
BEFORE INCOME TAXES (53,381) 122,804 (186,149) 205,942
INCOME TAX EXPENSE 0 (21,707) 0 (30,891)
----------------- ---------------------- ------------------- ------------
NET (LOSS) INCOME $ (53,381) $ 101,097 $(186,149) $ 175,051
================= ====================== =================== ============
NET (LOSS) INCOME
PER SHARE ($0.04) $0.08 ($0.13) $0.13
================= ====================== =================== ============
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 1,378,491 1,384,591 1,378,491 1,384,591
================= ====================== =================== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
-4-
WESTERN MICROWAVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
------------------------------
1996 1995
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING
ACTIVITIES:
NET (LOSS) INCOME $ (186,149) $ 175,051
ADJUSTMENT TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION 998 32,900
CHANGES IN ASSETS AND LIABILITIES:
TRADE RECEIVABLES 0 46,784
OTHER RECEIVABLES 39,093 4,442
PREPAID EXPENSES 1,685 (3,810)
ACCOUNTS PAYABLE 545,327 (34,553)
ACCRUED LIABILITIES AND TAXES PAYABLE (296,859) (46,994)
-------- ------------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES 104,095 173,820
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF INVESTMENT SECURITIES (800,159) (67,912)
PAYMENTS ON MARGIN LOAN 517,780 (104,355)
------- ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (282,379) (172,267)
--------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (178,284) 1,553
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 425,788 20,552
------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 247,504 $ 22,105
========= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
-5-
WESTERN MICROWAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Basis of Presentation
The accompanying unaudited financial statements reflect, in the opinion of
Management, all adjustments, consisting of normal recurring accruals, necessary
to present fairly the financial position and results of operations of and for
the periods indicated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission rules and regulations, although the Company believes the disclosures
which are made are adequate to make the information presented not misleading.
The Company's significant accounting policies are summarized in the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30, 1995. These
policies have been consistently applied during the periods presented in this
report. The accompanying report on Form 10-QSB, including the unaudited
financial statements, should be read in conjunction with the financial
statements referenced above.
-6-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
In July, 1995, the Company sold certain of the assets associated with the
design, development, manufacture and sale of a range of microwave devices,
components and subsystems used in both military and commercial microwave
electronic systems (the "WMI Business") to ST Microwave Corp. (the "Buyer") in
exchange for cash and the assumption by the Buyer of certain of the liabilities
of the Company. Between July 21, 1995 and September 15, 1995, when the Company's
lease for its facility at 495 Mercury Drive, Sunnyvale California expired, the
Company disposed of substantially all of its remaining tangible assets. As a
result of such transactions, the Company is no longer engaged in the WMI
Business. The Company's remaining business activity involves the resolution of
the Company's ongoing environmental liability for the cleanup of the Company's
former headquarters on Reamwood Avenue, Sunnyvale, California (the "Former
Headquarters").
The Company's Board of Directors has adopted a Plan of Dissolution and
Liquidation of the Company and has recommended approval of such Plan by the
shareholders. The Company is in the process of preparing proxy solicitation
materials for use at a Special Meeting of Shareholders to be held for the
purpose of acting upon the Plan.
Pending the resolution of the Company's environmental liability and the
liquidation of the Company, the Company has temporarily invested its assets in a
portfolio of marketable securities with a view towards the preservation of such
assets and the generation of investment income from interest, dividends and
capital gains.
Financial Condition
Assets and Total Stockholders' Equity. Net current assets and total
stockholders' equity both increased in the second quarter of the 1996 fiscal
year by approximately $335,000, notwithstanding the second quarter net loss of
approximately $53,000. The increase in net current assets and total
stockholders' equity is attributable to unrealized gains in the value of the
Company's investment securities, net of any margin loan to purchase such
securities. For the six months ended March 31, 1996, net current assets and
total stockholders' equity increased approximately $220,000 from the beginning
of the fiscal year. Book value per share at the end of the second quarter
increased to $3.87 per share as compared to $3.73 per share at the beginning of
the fiscal year.
Environmental Liability. Under the terms of the settlement agreements entered
into by the Company in connection with the settlement of the environmental
lawsuits, the Company has agreed to undertake certain groundwater remediation
activities at its
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Former Headquarters. The Company has established a reserve for future
environmental clean-up costs representing management's best estimate of the
anticipated costs and expenses to complete the clean-up of the site in
accordance with the Company's workplan.
At March 31, 1996, the Company's reserve for future environmental cleanup costs
remained at $1,000,000. As set forth above, the Board of Directors is
recommending to the shareholders the adoption of a Plan of Dissolution and
Liquidation of the Company. As a part of such plan, prior to liquidation the
Board of Directors intends to increase the reserve for future environmental
costs from $1.0 million to at least $3.0 million to insure adequate funds to
complete the cleanup and to allow for the distribution of the Company's
remaining assets.
Results of Operations
Investment Income. Investment income for the second quarter of fiscal 1996,
consisting of interest and dividends on the Company's portfolio of marketable
securities, totaled approximately $173,000, an increase of 70% from the same
period one year ago. For the first six months of the current fiscal year, net
investment income totaled approximately $285,000, representing an increase of
approximately 57% from the same period of the prior fiscal year. The increase in
investment income is due to the increase in current assets available for
investment as a result of the sale of the WMI Business. The net unrealized
appreciation in the value of the Company's marketable securities at the end of
the second quarter increased by approximately $335,000 from the beginning of the
current fiscal year.
Selling, General and Administrative Expenses. For the second quarter of fiscal
1996, selling, general and administrative expenses totaled approximately
$237,000, substantially all of which was attributable to environmental matters
and legal and investment management fees. Included in selling, general and
administrative expenses of approximately $515,000 for the six months ended
March 31, 1996 was an environmental consulting and management fee paid to
Dr. Ibrahim Hefni of $75,000 in lieu of any salary as president, treasurer and
chief executive officer of the Company.
PART II - OTHER INFORMATION
Item 5. Other Information
DELISTING OF THE COMPANY'S SECURITIES FROM THE NASDAQ
SMALLCAP MARKET
On February 21, 1996, The Nasdaq Stock Market, Inc. ("Nasdaq") notified
the Company that as a result of the sale of the WMI Business, the
Company was analogous to a "public
-8-
shell" and that there was probable cause for the immediate delisting of
the Company's securities from the Nasdaq SmallCap Market. In response
to such notice, the Company filed a written protest in which the
Company argued:
1. The Company currently met all of the quantitative
requirements for continued listing;
2. The Company was not a mere "shell" corporation because it was
actively engaged in the cleanup of the environmental
contamination at its former facility; and
3. The Company was attempting to establish the final amount of
its environmental liability, at which time the Company
intended to submit a Plan of Dissolution and Liquidation to
its shareholders and wind up its affairs.
On April 30, 1996, a hearing was held before the Nasdaq Hearing Panel
to determine if the Company's securities should continue to be listed on The
Nasdaq SmallCap Market. The Hearing Panel subsequently made its recommendation
to the Nasdaq Listing Qualifications Committee.
On May 8, 1996, the Company was notified that the Nasdaq Listing
Qualification Committee did not agree that the Company's environmental
remediation activities constituted an operating business for Nasdaq purposes and
concluded that the Company was analogous to a "public shell". Based on this
determination, THE COMPANY'S SECURITIES WERE DELETED FROM THE NASDAQ SMALLCAP
MARKET EFFECTIVE MAY 9, 1996. AS A RESULT OF THIS ACTION, THE COMPANY'S
SECURITIES CAN NO LONGER BE TRADED ON THE NASDAQ MARKET AFTER MAY 9, 1996.
However, as set forth above, the Board of Directors of the Company has adopted a
Plan of Dissolution and Liquidation of the Company which, if approved by the
shareholders, will result in a significant liquidating distribution to each
shareholder.
The Company considered seeking inclusion of the Company's securities on
the Nasdaq OTC Bulletin Board. However, because the Company intends to submit a
Plan of Dissolution and Liquidation to it shareholders for approval in the near
future, it is unlikely that the Company's securities would be approved for
inclusion on the OTC Bulletin Board.
Item 6. Exhibits and Reports on Form 8-K
Item 27. Financial Data Statement
Item 99. Press Release
-9-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
WESTERN MICROWAVE, INC.
/s/ Ibrahim Hefni
------------------------------------
Ibrahim Hefni,
President, Treasurer and
Chief Executive Officer
Dated: May 14, 1996
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-1-1996
<PERIOD-END> MAR-31-1996
<CASH> 247,504
<SECURITIES> 7,500,751
<RECEIVABLES> 40,907
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,789,897
<PP&E> 261,159
<DEPRECIATION> 260,161
<TOTAL-ASSETS> 7,790,895
<CURRENT-LIABILITIES> 2,433,537
<BONDS> 0
0
0
<COMMON> 137,849
<OTHER-SE> 5,219,509
<TOTAL-LIABILITY-AND-EQUITY> 7,790,895
<SALES> 0
<TOTAL-REVENUES> 184,525
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 237,906
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (53,381)
<INCOME-TAX> 0
<INCOME-CONTINUING> (53,381)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (53,381)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
EXHIBIT 99
FOR IMMEDIATE RELEASE
WESTERN MICROWAVE, INC. (WMIC) May 13, 1996
CONTACT: DR. IBRAHIM HEFNI
TEL: (415) 399-9777
Woodside, California -- Western Microwave, Inc. (the "Company") today announced
that it has been notified by The Nasdaq Stock Market, Inc. that effective May 9,
1996, the Company's securities have been delisted from the Nasdaq SmallCap
Market. In its notice of delisting, Nasdaq advised the Company that the Company
was analogous to a "public shell" as a result of the sale by the Company of
substantially all of its operating assets and business in July, 1995. The
Company's remaining activity involves the resolution of its ongoing
environmental liability for the cleanup of its former facility in Sunnyvale,
California.
At the time of the delisting, the Company's Board of Directors had approved a
Plan of Dissolution and Liquidation of the Company and was in the process of
preparing proxy solicitation materials for use at a Special Meeting of
Shareholders to be held for the purpose of acting upon the Plan. It is
anticipated that a Special Meeting of Shareholders to consider and act upon the
Plan will be held on or before July 30, 1996.
The Company also announced its results of operations for the second quarter of
fiscal 1996 (the three and six months ended March 31, 1996) as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 0 $ 606,571 $ 0 $1,114,884
Cost of sales 0 406,260 0 779,121
---------- ----------- ----------- -----------
Gross profit 0 200,311 0 335,763
Selling, general and administrative
expenses 237,906 179,262 515,332 311,024
Investment income (173,598) (101,755) (284,951) (181,203)
Other income (10,927) 0 (44,232) 0
---------- ----------- ----------- -----------
53,381 77,507 186,149 129,821
Net income (loss) before
income taxes (53,381) 122,804 (186,149) 205,942
Income tax expense 0 (21,707) 0 (30,891)
---------- ----------- ----------- -----------
Net (loss) income $(53,381) $101,097 $(186,149) $175,051
========== =========== =========== ===========
Net (loss) income per share ($0.04) $0.08 ($0.13) $0.13
========== =========== =========== ===========
Weighted average number of shares of
common stock outstanding 1,378,491 1,384,591 1,378,491 1,384,591
========== =========== =========== ===========
</TABLE>
