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
March 25, 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 March 25, 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 - March 25, 1995
and June 25, 1994 ................................... 3
Consolidated Statements of Operations - Three Months
and Nine Months Ended March 25, 1995, and
March 26, 1994....................................... 4
Consolidated Statements of Cash Flows
Nine months Ended March 25, 1995 and
March 26, 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)
Mar. 25, June 25,
1995 1994
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 192 $ 172
Certificate of deposit 500 -
Trade receivables, net 98 49
Inventories 330 371
Other current assets 111 104
Total current assets 1,231 696
Property, plant and equipment, net 4,005 4,736
Other assets - 17
$5,236 $5,449
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and lease obligations $ 988 $3,073
Long-term debt classified as current - 1,421
Short-term debt 4,896 4,896
Accounts payable 735 1,192
Accrued salaries and related expenses 282 463
Other accrued expenses 204 204
Due to related parties, net 1,393 714
Total current liabilities 8,498 11,963
Long-term debt and lease obligations, less
current portion 3,499 -
Total liabilities 11,997 11,963
Stockholders' equity:
Common stock $.10 par value 2,231 2,231
Additional paid-in capital 58,349 57,289
Accumulated deficit (67,341) (66,034)
Total stockholders'
equity (deficit) (6,761) (6,514)
$ 5,236 $ 5,449
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 Nine Months Ended
Mar. 25, Mar. 26, Mar. 25, Mar. 26,
1995 1994 1995 1994
Net Sales $ 428 $ 1,649 $ 2,961 $ 4,924
Cost and expenses:
Cost of products sold 629 1,943 2,953 6,121
Research, development
and engineering 55 98 185 502
Selling and administration 185 177 541 595
869 2,218 3,679 7,218
Income (Loss) from (441) (569) (718) (2,294)
operations
Other deductions (income):
Interest expense 225 212 676 650
Other (income) expense, net (56) 4 (87) 5
169 216 589 655
Net earnings (loss) $ (610) $ (785) $ (1,307) $(2,949)
Net earnings (loss) per
common and common
equivalent share $ (.03) $ (.03) $ (.06) $ (.13)
Average common shares
outstanding 22,313 22,313 22,313 22,313
See accompanying notes to consolidated financial statements.
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Nine Months Ended
Mar. 25, Mar. 26,
1995 1994
Cash flows from operating activities:
Net income (loss) $(1,307) $(2,949)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 518 753
Retirements of property and equipment 213 14
Changes in operating assets and liabilities:
Increase in Certificate of deposit (500) -
Decrease (Increase) in trade receivables (49) 49
Decrease (Increase) in inventories 41 (17)
Decrease (Increase) in other current assets (7) 91
Decrease (Increase) in other assets 17 39
Increase (Decrease) in accounts payable
and accrued expenses (638) (1,129)
Increase (Decrease) in due to related parties 679 1,961
Net cash provided (used) by
operating activities (1,033) (1,188)
Cash flows from financing activities:
Sale of assets to a related party 1,060 695
Repayment on long-term debt and
capitalized lease obligations (7) (356)
Proceeds (Repayments) of short-term debt - 856
Net cash provided from financing activities 1,053 1,195
Net increase (decrease) in cash and cash
equivalents 20 7
Cash and cash equivalents at beginning
of period 172 57
Cash and cash equivalents at end of period $ 192 $ 64
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 March
25, 1995 and the results of operations for the three month
periods and nine month periods ended March 25, 1995 and March
26, 1994 and changes in cash flows for the nine month periods
then ended.
The results of operations for the nine month period ended March
25, 1995 are not necessarily indicative of the results to be
expected for the full year.
The accounting policies followed by the Company are set fourth
in Note (1) to the Company's fiscal year 1994 financial
statements which have been incorporated in form 10-K filed for
the year ended June 25, 1994.
2. Inventories consisted of the following (in thousands):
March 25, 1995 June 25, 1994
Finished goods $ 160 $ 69
Work in process 82 52
Raw materials and supplies 88 250
$ 330 $ 371
3. Repayment terms of the term loan and revolving credit agreements
were renegotiated with the primary lending institution by letter
dated December 23, 1994. Payments on the term loan are due
quarterly from June 30, 1995 through June 30, 1996. Payments
on the revolving credit agreement are due quarterly from
September 30, 1996 through June 30, 1997. As a result of the
revised payment terms, $3,499,000 payable on the debt
agreements has been reclassified to long-term debt.
4. The Company sold equipment with a net book value of $100,000
for $1,187,000 during December 1994. Most of the equipment
was sold to related parties and the gain of $1,060,000 on
these sales was recorded in additional paid-in capital and
not reflected in the consolidated statement of operations.
5. 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 March 25, 1995 and March 26, 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.
Nine Months Ended In March
Income and Expense
Items as percent Percent Change
of sales in dollars
1995 1994 from 1994-1995
Net Sales 100% 100% (40%)
Cost of products sold 100 124 (52)
Gross Profit (loss) 0 (24) 101
Research, development & engineering 6 10 (63)
Selling and administration 18 12 (9)
Other deductions (income) 20 13 (10)
Net earnings (loss) (44)% (59)% 56%
Sales volume has decreased 40% 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 63% 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 9% from the prior year and yet represents 18% of
net sales as a result of the historically low volume.
The consolidated balance sheet at March 25, 1995 reflects an
approximate increase of $4,000,000 in net working capital since
fiscal year-end. This increase is primarily due to the
reclassification of long-term debt from current to long-term based
upon renegotiated payment terms with the primary lender and sale of
fixed assets to related parties. Within the components of working
capital, due to related parties increased by $679,000 primarily as
a result of increases in interest expense on related party debt
remaining unpaid. Accounts payable decreased by $457,000 as overall
vendor activity decreased. Funds amounting to $500,000 which will
be needed to make long and short-term debt payments have been
deposited in a short-term certificate of deposit. Cash increased by
$20,000 as a result of the above.
Liquidity and Capital Resources
The consolidated balance sheet at March 25, 1995 reflects a $7,000
reduction of total long-term debt for the nine month period. The
Company is in compliance with its amended lending agreements as of
March 25, 1995.
The Company is hopeful that funds generated by operations and
received from Newmax will be adequate to fund debt service and other
operational needs. A significant percentage of cash generated from
recent equipment sales will be used to reduce debt. 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 - 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
President, Chief
Executive Officer
and Treasurer
(Principal financial
Officer)
Dated: May 1, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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