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
December 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 December 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 - December 23, 1995
and June 24, 1995 ................................... 3
Consolidated Statements of Operations - Three Months
and Six Months Ended December 23, 1995, and
December 24, 1994.................................... 4
Consolidated Statements of Cash Flows
Six months Ended December 23, 1995 and
December 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)
Dec. 23, June 24,
1995 1995
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 645 $ 538
Trade receivables, net 75 125
Inventories 713 814
Other current assets 178 78
Total current assets 1,611 1,555
Property, plant and equipment, net 3,463 3,845
$5,074 $5,400
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and lease obligations $2,363 $1,358
Long-term debt classified as current 2,031 3,170
Short-term debt 4,896 4,896
Accounts payable 633 675
Accrued salaries and related expenses 209 212
Other accrued expenses 210 205
Due to related parties, net 2,107 1,845
Total current liabilities 12,449 12,361
Long-term debt and lease obligations, less
current portion 73 98
Total liabilities 12,522 12,459
Stockholders' equity:
Common stock $.10 par value 2,231 2,231
Additional paid-in capital 58,343 58,343
Accumulated deficit (68,022) (67,633)
Total stockholders'
equity (deficit) (7,448) (7,059)
$ 5,074 $ 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 Six Months Ended
Dec. 23, Dec. 24, Dec. 23, Dec. 24,
1995 1994 1995 1994
Net Sales $ 1,123 $ 799 $ 2,141 $ 2,533
Cost and expenses:
Cost of products sold 881 750 1,638 2,324
Research, development
and engineering 56 59 116 130
Selling and administration 176 163 353 356
1,113 972 2,107 2,810
Income (Loss) from 10 (173) 34 (277)
operations
Other deductions (income):
Interest expense 239 228 476 451
Other (income) expense, net (21) 18 (53) (31)
218 246 423 420
Net earnings (loss) $ (208) $ (419) $ (389) $ (697)
Net earnings (loss) per
common and common
equivalent share $ (.01) $ (.02) $ (.02) $ (.03)
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)
Six Months Ended
Dec. 23, Dec. 24,
1995 1994
Cash flows from operating activities:
Net income (loss) $ (389) $ (697)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 300 350
Retirements of property and equipment 94 211
Changes in operating assets and liabilities:
Decrease (Increase) in trade receivables 50 17
Decrease (Increase) in inventories 101 144
Decrease (Increase) in other current assets (100) 16
Decrease (Increase) in other assets - 17
Increase (Decrease) in accounts payable
and accrued expenses (40) (728)
Increase (Decrease) in due to related parties 262 (543)
Net cash provided (used) by
operating activities 278 (1,213)
Cash flows from financing activities:
Purchases of equipment (12) -
Sale of assets to a related party - 1,090
Repayment on long-term debt and
capitalized lease obligations (159) (7)
Net cash provided from (used by)
financing activities (171) 1,083
Net increase (decrease) in cash and cash
equivalents 107 (130)
Cash and cash equivalents at beginning
of period 538 172
Cash and cash equivalents at end of period $ 645 $ 42
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
December 23, 1995 and the results of operations for the three
month periods and six month periods ended December 23, 1995 and
December 24, 1994 and changes in cash flows for the six month
periods then ended.
The results of operations for the six month period ended
December 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 fourth
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):
December 23, 1995 June 24, 1995
Finished goods $ 564 $ 667
Work in process 46 61
Raw materials and supplies 103 86
$ 713 $ 814
3. Debt payments totalling $987,000 due during June, September
and December 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 December 23, 1995 and December 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.
Six Months Ended In December
Income and Expense
Items as percent Percent Change
of sales in dollars
1995 1994 from 1994-1995
Net Sales 100% 100% (15%)
Cost of products sold 77 92 (30)
Gross Profit (loss) 23 8 141
Research, development & engineering 5 5 (11)
Selling and administration 16 14 -
Other deductions (income) 20 17 -
Net earnings (loss) (18)% (28)% 44%
Sales volume has decreased 15% 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 11% 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
represents 16% of net sales as a result of the historically low
volume.
The consolidated balance sheet at December 23, 1995 reflects no
change in net working capital since fiscal year-end. Within the
components of working capital, due to related parties increased by
$262,000 as a result of amounts due for interest expense on related
party debt remaining unpaid. Cash increased by $107,000 as a result
of timing of payments to vendors.
Liquidity and Capital Resources
The consolidated balance sheet at December 23, 1995 reflects a
$159,000 reduction of long-term debt for the six month period. The
Company has not made payments of $329,000 each due June 30, 1995,
September 30, 1995 and December 31, 1995. The Company is not in
compliance with its amended lending agreements as of December 23,
1995 and continues to negotiate revised payment terms with the
lending institution.
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
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: February 1, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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