UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED
September 23, 1995.
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 0-7207
National Micronetics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 14-1507019
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
71 Smith Avenue
Kingston, New York 12401
( Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 338-0333
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 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 filing requirements for
the past 90 days.
Yes X No
As of September 23, 1995, the registrant had 22,312,524 shares
of Common Stock issued and outstanding.
NATIONAL MICRONETICS, INC.
INDEX
Part I. Financial Information:
Consolidated Balance Sheets - September 23, 1995
and June 24, 1995 ................................... 3
Consolidated Statements of Operations - Three Months
Ended September 23, 1995, and
September 24, 1994 ................................... 4
Consolidated Statements of Cash Flows
Three Months Ended September 23, 1995 and
September 24, 1994 ................................... 5
Notes to Consolidated Financial Statements ............ 6
Management's Discussion and Analysis of the
Financial Condition and Results of Operations ........ 7,8
Part II. Other Information ................................ 8
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
Sept. 23, June 24,
1995 1995
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 747 $ 538
Trade receivables, net 85 125
Inventories 837 814
Other current assets 56 78
Total current assets 1,725 1,555
Property, plant and equipment, net 3,598 3,845
$5,323 $5,400
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and lease obligations $1,687 $1,358
Long-term debt classified as current 2,841 3,170
Short-term debt 4,896 4,896
Accounts payable 660 675
Accrued salaries and related expenses 227 212
Other accrued expenses 206 205
Due to related parties, net 1,959 1,845
Total current liabilities 12,476 12,361
Long-term debt and lease obligations, less
current portion 87 98
Total liabilities 12,563 12,459
Stockholders' equity:
Common stock $.10 par value 2,231 2,231
Additional paid-in capital 58,343 58,343
Accumulated deficit (67,814) (67,633)
Total stockholders'
equity (deficit) (7,240) (7,059)
$ 5,323 $ 5,400
See accompanying notes to consolidated financial statements.
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share amounts)
Three Months Ended
Sept. 23, Sept. 24,
1995 1994
Net Sales $ 1,018 $ 1,734
Cost and expenses:
Cost of products sold 757 1,574
Research, development
and engineering 60 71
Selling and administration 177 193
994 1,838
Income (Loss) from
operations 24 (104)
Other deductions (income):
Interest expense 237 223
Interest income (15) 0
Other (income) expense, net (17) (49)
205 174
Net earnings (loss) $ (181) $ (278)
Net earnings (loss) per
common and common
equivalent share $ (.08) $ (.12)
Average common shares
outstanding 22,313 22,313
See accompanying notes to consolidated financial statements.
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Three Months Ended
Sept. 23, Sept. 24,
1995 1994
Cash flows from operating activities:
Net income (loss) $ (181) $ (278)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 153 200
Retirements of property and equipment 94 50
Changes in operating assets and liabilities:
Decrease (Increase) in trade receivables 40 27
Decrease (Increase) in inventories (23) 57
Decrease (Increase) in other current assets 22 20
Decrease (Increase) in other assets - 13
Increase (Decrease) in accounts payable
and accrued expenses 1 (290)
Increase (Decrease) in due to related parties 114 337
Net cash provided (used) by
operating activities 220 136
Cash flows from financing activities:
Sale of assets to a related party - 110
Repayment on long-term debt and
capitalized lease obligations (11) (6)
Net cash provided (used) by
financing activities (11) 104
Net increase (decrease) in cash and cash
equivalents 209 240
Cash and cash equivalents at beginning
of period 538 172
Cash and cash equivalents at end of period $ 747 $ 412
See accompanying notes to consolidated financial statements.
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary to present fairly the financial position as of
September 23, 1995 and the results of operations for the three
month periods ended September 23, 1995 and September 24, 1994
and changes in cash flows for the three month periods then
ended.
The results of operations for the three month period ended
September 23, 1995 are not necessarily indicative of the results
to be expected for the full year.
The accounting policies followed by the Company are set forth
in Note (1) to the Company's fiscal year 1995 financial
statements which have been incorporated in form 10-K filed for
the year ended June 24, 1995.
2. Inventories consisted of the following (in thousands):
September 23, 1995 June 24, 1995
Finished goods $ 719 $ 667
Work in process 39 61
Raw materials and supplies 79 86
$ 837 $ 814
3. Debt payments totalling $658,000 due during June and September
1995 have not been paid and a waiver has not been obtained from
the primary lending institution. As a result of the above noted
default, debt payments due beyond one year have been
reclassified to current liabilities.
4. Earnings per common share has been determined on the basis of
the weighted average number of common and dilutive common
equivalent shares outstanding during the respective quarters.
At September 23, 1995 and September 24, 1994 there was no
dilutive effect from common stock options or warrants.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated the
relative percentages that certain items in the Company's Consolidated
Statements of Operations bear to net sales.
Three Months Ended In September
Income and Expense
Items as percent Percent Change
of sales in dollars
1995 1994 from 1994-1995
Net Sales 100% 100% (41)%
Cost of products sold 74 91 (52)
Gross Profit (loss) 26 9 63
Research, development & engineering 6 4 (15)
Selling and administration 18 11 (8)
Other deductions (income) 20 10 18
Net earnings (loss) (18)% (16)% 35%
Sales volume has decreased 41% from the same period in the prior
year. Production volume has remained at a level where it is unable
to absorb significant overhead. A significant increase in volume
would be required for the Company to reach breakeven for net
earnings.
The Company continues to perform technical and market research on
products that could be sold by the Company. Spending on research,
development and engineering has decreased 15% from the same period
in the prior year.
Efforts have been made to reduce selling and administration costs as
much as possible while maintaining all necessary services. This cost
has been reduced 8% from the prior year and yet represents 18% of
net sales as a result of the historically low volume.
The consolidated balance sheet at September 23, 1995 reflects an
approximate increase of $55,000 in net working capital since fiscal
year-end. This increase is the result of many small changes none of
which are individually significant. Within the components of working
capital, due to related parties increased by $114,000 as a result of
increases in interest expense on related party debt remaining unpaid
and timing of ongoing transactions. Cash increased by $209,000 as
a result of the above and the proceeds received for assets sold.
Liquidity and Capital Resources
The consolidated balance sheet at September 23, 1995 reflects an
$11,000 reduction of long-term debt for the three month period. The
Company is not in compliance with its lending agreements as of
September 23, 1995. The Company has not made payment of $329,000 due
the primary lender on June 30, 1995 nor an additional $329,000
payment which was due September 30, 1995. The Company has not
received a written notice of default from the primary lender and
continues efforts to negotiate acceptable terms with the bank.
The Company is hopeful that funds generated by operations and
received from Newmax will be adequate to fund debt service and other
operational needs. Although there is no firm commitment, related
parties are expected to advance funds on a short-term as needed basis
to offset operational cash shortfalls. Management believes that the
combination of reduction in overhead spending and development of
distribution markets for non-manufactured products will enable the
Company to remain viable for the next twelve months.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Exhibits
Exhibit No. Description
27 Financial data schedule
Reports on Form 8-K - None
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, thereunto duly authorized.
NATIONAL MICRONETICS, INC.
By Dr. Yoon H. Choo
Dr. Yoon H. Choo
President, Chief
Executive Officer
and Treasurer
(Principal Financial
Officer)
Dated: November 1, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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