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 23, 1996.
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 23, 1996, 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 23, 1996
and June 24, 1995 ................................... 3
Consolidated Statements of Operations - Three Months
and Nine Months Ended March 23, 1996, and
March 25, 1995....................................... 4
Consolidated Statements of Cash Flows
Nine months Ended March 23, 1996 and
March 25, 1995....................................... 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. 23, June 24,
1996 1995
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 55 $ 538
Certificate of deposit 524 -
Trade receivables, net 36 125
Inventories 727 814
Other current assets 132 78
Total current assets 1,474 1,555
Property, plant and equipment, net 3,327 3,845
$4,801 $5,400
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and lease obligations $3,058 $1,358
Long-term debt classified as current 1,321 3,170
Short-term debt 4,896 4,896
Accounts payable 575 675
Accrued salaries and related expenses 258 212
Other accrued expenses 233 205
Due to related parties, net 2,402 1,845
Total current liabilities 12,743 12,361
Long-term debt and lease obligations, less
current portion - 98
Total liabilities 12,743 12,459
Stockholders' equity:
Common stock $.10 par value 2,231 2,231
Additional paid-in capital 58,343 58,343
Accumulated deficit (68,516) (67,633)
Total stockholders'
equity (deficit) (7,942) (7,059)
$ 4,801 $ 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 Nine Months Ended
Mar. 23, Mar. 25, Mar. 23, Mar. 25,
1996 1995 1996 1995
Net Sales $ 671 $ 428 $ 2,812 $ 2,961
Cost and expenses:
Cost of products sold 768 629 2,406 2,953
Research, development
and engineering 58 55 174 185
Selling and administration 316 185 669 541
1,142 869 3,249 3,679
Income (Loss) from
operations (471) (441) (437) (718)
Other deductions (income):
Interest expense 96 225 572 676
Interest income (26) - (26) -
Other (income) expense, net (47) (56) (100) (87)
23 169 446 589
Net earnings (loss) $ (494) $ (610) $ (883) $(1,307)
Net earnings (loss) per
common and common
equivalent share $ (0.02) $ (0.03) $ (0.04) $ (0.06)
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. 23, Mar. 25,
1996 1995
Cash flows from operating activities:
Net income (loss) $( 883) $(1,307)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 435 518
Retirements of property and equipment 83 213
Changes in operating assets and liabilities:
Increase in certificate of deposit (524) (500)
Decrease (Increase) in trade receivables 89 (49)
Decrease (Increase) in inventories 87 41
Decrease (Increase) in other current assets (54) (7)
Decrease (Increase) in other assets - 17
Increase (Decrease) in accounts payable
and accrued expenses (26) (638)
Increase (Decrease) in due to related parties 557 679
Net cash provided (used) by
operating activities (236) (1,033)
Cash flows from financing activities:
Sale of assets to a related party - 1,060
Repayment on long-term debt and
capitalized lease obligations (247) (7)
Net cash provided (used) by
financing activities (247) 1,053
Net increase (decrease) in cash and cash
equivalents (483) 20
Cash and cash equivalents at beginning
of period 538 172
Cash and cash equivalents at end of period $ 55 $ 192
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
23, 1996 and the results of operations for the three month
periods and nine month periods ended March 23, 1996 and March
25, 1995 and changes in cash flows for the nine month periods
then ended.
The results of operations for the nine month period ended March
23, 1996 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):
March 23, 1996 June 24, 1995
Finished goods $ 624 $ 667
Work in process 54 61
Raw materials and supplies 49 86
$ 727 $ 814
3. Debt payments totalling $1,316,000 due from June 1995 through
March 1996 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 March 23, 1996 and March 25, 1995 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
1996 1995 from 1995-1996
Net Sales 100% 100% 5%
Cost of products sold 86 100 (23)
Gross Profit (loss) 14 0 4,975
Research, development & engineering 6 6 (6)
Selling and administration 23 18 24
Other deductions (income) 16 20 (24)
Net earnings (loss) (31)% (44)% 32%
Sales volume has increased 5% 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 6% 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 increased 24% from the prior year and represents 23% of net sales
as a result of the historically low volume and high bad debt expense
in the current year.
The consolidated balance sheet at March 23, 1996 reflects an
approximate decrease of $463,000 in net working capital since fiscal
year-end. This decrease is primarily due to the losses for the
current period. Within the components of working capital, due to
related parties increased by $557,000 primarily as a result of
increases in interest expense on related party debt remaining unpaid
and purchases of inventory for resale which remain unpaid. Accounts
payable decreased by $100,000 as overall vendor activity decreased.
The total current portion of long-term debt decreased by $149,000 due
to payments made. Funds amounting to $524,000 which will be needed
to make long and short-term debt payments have been deposited in a
short-term certificate of deposit. Cash decreased by $483,000 as a
result of the above.
Liquidity and Capital Resources
The consolidated balance sheet at March 23, 1996 reflects a $247,000
reduction of total long-term debt for the nine month period. The
Company is not in compliance with its amended lending agreements as
of March 23, 1996.
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: May 1, 1996
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