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 29, 1997.
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 29, 1997, the registrant had 22,312,524 shares of
Common Stock issued and outstanding.
Total pages 21.
NATIONAL MICRONETICS, INC.
INDEX
Part I. Financial Information:
Consolidated Balance Sheets - March 29, 1997
and June 29, 1996 ................................... 3
Consolidated Statements of Operations - Three Months
and Nine Months Ended March 29, 1997, and
March 23, 1996....................................... 4
Consolidated Statements of Cash Flows
Nine months Ended March 29, 1997 and
March 23, 1996....................................... 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. 29, June 29,
1997 1996
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 86 $ 464
Trade receivables, net 2 233
Inventories 724 902
Other current assets 113 82
Total current assets 925 1,681
Property, plant and equipment, net 2,820 3,136
$3,745 $4,817
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $4,191 $3,752
Long-term debt classified as current - 611
Short-term debt 4,896 4,896
Accounts payable 478 394
Accrued salaries and related expenses 274 212
Other accrued expenses 224 298
Due to related parties, net 2,493 2,587
Total current liabilities 12,556 12,750
Stockholders' equity:
Common stock $.10 par value 2,231 2,231
Additional paid-in capital 58,805 58,805
Accumulated deficit (69,847) (68,969)
Total stockholders'
equity (deficit) (8,811) (7,933)
$ 3,745 $ 4,817
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. 29, Mar. 23, Mar. 29, Mar. 23,
1997 1996 1997 1996
Net Sales $ 723 $ 671 $ 2,206 $ 2,812
Cost and expenses:
Cost of products sold 709 768 2,008 2,406
Research, development
and engineering 58 58 162 174
Selling and administration 61 316 382 669
828 1,142 2,552 3,249
Income (Loss) from
operations (105) (471) (346) (437)
Other deductions (income):
Interest expense 180 96 565 572
Other (income) expense, net (24) (73) (33) (126)
156 23 532 446
Net earnings (loss) $ (261) $ (494) $ (878) $ (883)
Net earnings (loss) per
common and common
equivalent share $ (0.01) $ (0.02) $ (0.04) $ (0.04)
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. 29, Mar. 23,
1997 1996
Cash flows from operating activities:
Net income (loss) $ (878) $ (883)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 316 435
Retirements of property and equipment - 83
Changes in operating assets and liabilities:
Decrease (Increase) in trade receivables 231 89
Decrease (Increase) in inventories 178 87
Decrease (Increase) in other current assets (31) (54)
Increase (Decrease) in accounts payable
and accrued expenses 72 (26)
Increase (Decrease) in due to related parties (94) 557
Net cash provided (used) by
operating activities (206) 288
Cash flows from financing activities:
Repayment on long-term debt (172) (247)
Net cash provided (used) by
financing activities (172) (247)
Net increase (decrease) in cash and cash
equivalents (378) 41
Cash and cash equivalents at beginning
of period 464 538
Cash and cash equivalents at end of period $ 86 $ 579
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
29, 1997 and the results of operations for the three month
periods and nine month periods ended March 29, 1997 and March
23, 1996 and changes in cash flows for the nine month periods
then ended.
The results of operations for the nine month period ended March
29, 1997 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 1996 financial
statements which have been incorporated in form 10-K filed for
the year ended June 29, 1996.
2. Inventories consisted of the following (in thousands):
March 29, 1997 June 29, 1996
Finished goods $ 616 $ 793
Work in process 33 25
Raw materials and supplies 75 84
$ 724 $ 902
3. Debt payments totalling $2,321,000 due during September 1996 and
previously had not been paid to the primary lending
institution.
As a result of a formal Demand for Payment issued by the bank,
the Company made a principal payment of $161,000 on November 15,
1996. The Company arranged for renewal of a stand-by letter of
credit as loan collateral on November 19, 1996. The bank
rescinded the Demand for Payment upon the occurrence of the two
events noted. Loan agreement amendments were entered into
effective November 26, 1996. The amendments will lower the
interest rate by 1% and there will be no required principal
payments before the November 26, 1997 maturity date. The loans
can be extended through November 26, 2001 if the Company
continues to obtain a new irrevocable letter of credit each year
and does not default on other loan terms. Based upon terms, all
debt payments are due within one year and have been classified
as 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 29, 1997 and March 23, 1996 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
1997 1996 from 1996-1997
Net Sales 100% 100% (22%)
Cost of products sold 91 86 (17)
Gross Profit (loss) 9 14 (51)
Research, development & engineering 8 6 (7)
Selling and administration 17 23 (43)
Other deductions (income) 24 16 19
Net earnings (loss) (40)% (31)% 1%
Sales volume has decreased 22% 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 7% 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 decreased 43% from the prior year and represents 17% of net sales
as a result of the historically low volume. The prior year included
very high bad debt expense whereas the current quarter includes a
recovery of $72,000 of receivables previously written off.
The consolidated balance sheet at March 29, 1997 reflects an
approximate decrease of $562,000 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, accounts
receivable decreased by $231,000 reflecting fewer sales to unrelated
parties. Inventories decreased by $178,000 as the level of finished
goods is being reduced. The total long-term debt decreased by
$172,000 due to payments made. Cash decreased by $378,000 as a
result of the above.
Liquidity and Capital Resources
The consolidated balance sheet at March 29, 1997 reflects a $172,000
reduction of total long-term debt for the nine month period. The
Company is in compliance with its amended lending agreements as of
March 29, 1997.
The Company had not made payments totalling $2,231,000 due the
primary lender periodically since June 30, 1995. As a result of a
formal Demand for Payment issued by the bank, the Company made a
principal payment of $161,000 on November 15, 1996. The Company
arranged for renewal of a stand-by letter of credit as loan
collateral on November 19, 1996. The bank rescinded the Demand for
Payment upon the occurrence of the two events noted. The Company has
subsequently negotiated acceptable terms with the bank and entered
into revised term loan and revolving credit agreements effective
November 26, 1996.
The loan agreement amendments reduce the interest rate on the
revolving credit from prime to prime -1% and on the term loan from
prime plus 1% to prime. The revised loans require no principal
payments and mature on November 26, 1997. The maturity dates can be
extended to November 26, 2001 if the Company continues to obtain a
new irrevocable letter of credit each year and does not default on
other loan terms.
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 2. Changes in Securities
See "Liquidity and Capital Resources" above for a discussion of
amended loan agreements.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits -
Exhibit No. Description Page
4.1 Amended Term Note dated November 26, 1996 in the 10
maximum principal amount of $1,450,000 payable by
the Company to Shinhan Bank New York Branch.
4.2 First Amendment to Term Loan Agreement between the 13
Company and Shinhan Bank New York Branch dated
November 26, 1996.
4.3 Amended Revolving Credit Note dated November 19, 16
1996 in the principal amount of $2,741,000 payable
by the Company to Shinhan Bank New York Branch.
4.4 Second Amendment to Revolving Credit Agreement 19
between the Company and Shinhan Bank New York Branch
dated November 19, 1996.
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
President, Chief
Executive Officer
and Treasurer
(Principal Financial
Officer)
Dated: May 1, 1997
Exhibit 4.1
AMENDED TERM NOTE
NOTICE TO BORROWER:
THIS DOCUMENT CONTAINS PROVISIONS
FOR A VARIABLE INTEREST RATE
$1,450,000Date: November 26, 1996
1. For value received, undersigned promises to pay to the
order of Shinhan Bank New York Branch ("Bank") at its banking offices
in New York the principal amount of One Million Four Hundred Fifty
Thousand ($1,450,000) Dollars with interest from the date hereof on
the unpaid principal balance at the rate per annum equal to the rate
of interest publicly announced by Citibank, N.A., in New York, New York
from time to time as its prime rate (the "Initial Interest Rate"),
payable in interest payments only commencing on December 1, 1996 and
continuing on the first day of each and every month thereafter until
November 26, 1997 when the entire unpaid principal balance, together
with accrued interest on this Note shall become due and payable.
Each payment shall be credited first on interest then due and
the remainder on principal; and interest thereupon ceases upon the
principal so credited.
2. Variable rate; standard. The undersigned agrees that the
Initial Interest Rate shall be increased and decreased from time to
time in accordance with increases and decreases in the prime rate of
Citibank, N.A., in New York (the "Standard"). Any change in such
interest rate shall be effective on the date a change in such rate
occurs. Subject to the following provisions, the increases and
decreases shall be effected in such manner as to maintain the same
margin above or below the Initial Interest Rate as the last published
Standard is above or below the last published standard on the date of
this Note.
(a) Decreases. Decreases in the interest rate shall be
mandatory and increases shall be optional with the Bank, but the fact
that the Bank may not have invoked a permissible increase, in whole or
in part, shall not be deemed a waiver of the Bank's right to invoke
such increase at any time thereafter within the limits herein provided.
(b) Notices. Notices of any change in interest rate or amount
of the monthly installment shall be deemed given by the Bank when
deposited in the United States mail, postage prepaid, addressed to the
Borrower as its name and address appears on the Bank's records at the
time of giving notice.
(c) Usury Ceiling. The rate of this note will never exceed the
maximum rate which is permitted by law. But, if maximum rate permitted
by law should change, the rate of this note will change without notice
to undersigned, on the same day that the maximum rate permitted by law
changes. Interest after maturity or demand shall be at a rate per
annum equal to 2% above that rate charged on the date of such maturity
or demand. When undersigned is a corporation, interest shall be
calculated on the basis of a 360-day year for actual days elapsed.
3. Standard. The last published standard on the date of this
Note is 8.25%.
4. Mortgage. This Note is secured by a Mortgage made by the
undersigned to the Bank on property located at 71 Smith Avenue,
Kingston, New York.
5. Default. Upon the occurrence, with respect to the
undersigned, or of any of the following: default in payment of this
Note or any other obligation of any nature or description to Bank
including a default under the Loan Agreement, General Loan and Security
Agreement, Revolving Credit Note or Revolving Credit Agreement between
the Bank and the undersigned. (this note and such other obligations of
undersigned and/or Guarantor, hereinafter, "Obligations"); calling a
meeting of creditors; the filing of a voluntary or involuntary petition
for an order of relief under the Bankruptcy Code; the filing for relief
under any state or Federal insolvency statute; the appointment of a
custodian, trustee, assignee or receiver to take possession of any
property; the taking of possession of any property thereof by a
custodian, receiver or trustee; generally failing to pay when due any
obligations to others; insolvency; entry of judgment against any of
them; failure to pay or remit any tax when assessed or due; death;
dissolution; making or sending notice of intended bulk transfer;
suspension or liquidation of usual business; failing to furnish
financial information or to permit inspection of books or records;
making any misrepresentation to Bank in obtaining credit; or, in Bank's
opinion, impairment of financial responsibility of any of them; then,
Obligations shall be due and payable immediately without notice or
demand. Bank shall have a continuing lien and/or right of set-off on
deposits (general and special) and credits with Bank of undersigned and
guarantor, and may apply all or part of same to Obligations (whether
contingent or unmatured), at any time or times, without notice. Bank
shall have a continuing lien on all property of undersigned and
guarantor and the proceeds thereof held or received by or for Bank for
any purpose. Any notice of disposition of property shall be deemed
reasonable if mailed at least 5 days before such disposition to the
last address of undersigned or guarantor on Bank's records.
Undersigned agrees that if an attorney is used to enforce Obligations,
reasonable attorneys fees and expenses shall be payable by each of them
against whom Obligations or rights hereunder are enforced or declared.
Bank and undersigned and guarantor, in any litigation (whether or not
relating to Obligations) in which Bank and any of them shall be adverse
parties, waive trial by jury, and, undersigned and guarantor waives the
rights to interpose any set-off or counterclaim of any nature or
description. Time for payment extended by law shall be included in the
computation of interest. This note shall be governed by and construed
in accordance with the laws of New York State.
6. Prepayment. This Note may be prepaid in whole or in part
without penalty at any time.
NATIONAL MICRONETICS, INC.
By: Hee Hwan Lee
Name: Hee Hwan Lee
Title: Vice President
Exhibit 4.2
FIRST AMENDMENT
TO
TERM LOAN AGREEMENT
First Amendment, dated as of November 26, 1996, to the Term Loan
Agreement (the "Loan Agreement"), dated as of November 5, 1991, by and
between National Micronetics, Inc., (the "Borrower"), a Delaware
corporation, and Shinhan Bank New York Branch, a banking corporation
organized under the laws of Korea and licensed to operate a branch
under the laws of New York (the "Bank").
R E C I T A L S :
A. Pursuant to the Loan Agreement the Bank loaned the Borrower the
principal amount of $3,000,000 as a term loan. The term loan is
evidenced by a Promissory Note, dated November 5, 1991 (the "Term
Note") issued by the Borrower to the Bank. The principal amount
outstanding under the Term Note as of the date of this First Amendment
is $1,450,000. The Term Note is secured by a Mortgage, dated November
5, 1991 (the "Mortgage") in the amount of $7,000,000 against real
property and improvements thereon located at 71 Smith Avenue, Kingston,
New York.
B. Pursuant to a Revolving Credit Agreement, dated May 10, 1991,
Borrower borrowed $4,000,000 from the Bank. The revolving credit loan
is evidenced by a promissory note, dated May 10, 1991 (the "Revolving
Credit Note"), in the amount of $4,000,000 issued by the Borrower to
the Bank. The principal amount outstanding under the Revolving Credit
Note as of the date of this First Amendment is $2,741,000
C. The Borrower has requested the Bank to extend the maturity date
of payment of principal and reduce the rate of interest. The Bank has
agreed to these changes provided the Borrower complies with the terms
of this First Amendment.
NOW, THEREFORE, the Loan Agreement is hereby amended as follows:
Section 1. Section 1.03 of the Loan Agreement is amended to
provide that the principal amount outstanding as of the date of this
First Amendment shall be due and payable, together with accrued
interest thereon, on November 26, 1997 (the "Maturity Date"). The Bank
will extend the Maturity Date for four (4) additional one year periods
if and only if each and every one of the following conditions is
satisfied as of the date one day prior to the Maturity Date in each
year.
i) Borrower shall not be in default in the payment of any financial
obligation to the Bank, whether such obligation arises out of
the Revolving Credit Agreement, the Loan Agreement, the Term
Note, the Revolving Credit Note, or otherwise. As used in this
sub-section (i), a default shall exist notwithstanding the
existence of any un-expired curing period under any document or
agreement.
(ii) No other event of default shall exist under the Revolving Credit
Agreement, Loan Agreement, Term Note, Revolving Credit Note or
Mortgage. As used in the sub-section (i), a default shall exist
notwithstanding the existence of any unexpired curing period
under the document or agreement.
(iii) Bank shall have received an irrevocable stand-by letter of
credit in its favor, with an expiry date of November 19, 1997
which shall secure the payment of principal and interest in the
amount of $2,789,000 due to Bank under the Revolving Credit
Agreement and Revolving Credit Note. This letter of credit
shall provide that the Bank may draw down the entire amount of
the credit in the event Borrower fails to make the principal
payment required to be made under the Revolving Credit Agreement
and Revolving Credit Note.
(iv) In each subsequent year, Bank shall have received a new
irrevocable letter of credit in the same amount, or a lesser
amount if any principal payments have been made by Borrower, and
substantially the same terms so that throughout the period of
any extension of the Maturity Date, the Revolving Credit Note
shall always be secured by an irrevocable letter of credit in
favor of Bank for the amount of outstanding principal and
interest to the Maturity Date.
Section 2. Section 1.04 of the Loan Agreement is hereby amended
by reducing the rate of interest payable by the Borrower to the rate
per annum equal to the rate of interest publicly announced from time
to time by Citibank, N.A. as its Prime Rate.
Section 3. As partial consideration for the extension of the
Maturity Date and reduction in the rate of interest described herein,
Borrower shall execute and deliver to Bank a certificate as to no
defaults and other matters in form and substance satisfactory to Bank's
legal counsel.
Section 4. This First Amendment to the Loan Agreement is
expressly made supplemental to and part of the Loan Agreement. Except
to the extent modified by the First Amendment, all of the terms and
conditions and provisions of the Loan Agreement shall be and remain in
full force and effect.
Section 5. Borrower agrees to pay on demand all of the Bank's
fees, costs and expenses, out-of-pocket expenses and other
disbursements of counsel to the Bank in connection with the
negotiation, execution and amendment to the Loan Agreement and related
documents.
IN WITNESS WHEREOF, the Bank and the Borrower have caused this First
Amendment to be executed in their respective names by their duly
authorized officers and all as of the date first above written.
NATIONAL MICRONETICS, INC.
By: Hee Hwan Lee
Name: Hee Hwan Lee
Title: Vice President
SHINHAN BANK NEW YORK BRANCH
By: Bae Rok Oh
Name: Bae Rok Oh
Title: Loan Officer
Exhibit 4.3
AMENDED REVOLVING CREDIT NOTE
NOTICE TO BORROWER:
THIS DOCUMENT CONTAINS PROVISIONS
FOR A VARIABLE INTEREST RATE
$2,741,000Date: November 19, 1996
1. For value received, undersigned promises to pay to the
order of Shinhan Bank New York Branch ("Bank") at its banking offices
in New York the principal amount of Two Million Seven Hundred Forty
One Thousand ($2,741,000) Dollars with interest from the date hereof
on the unpaid principal balance at the rate per annum equal to one
percentage point below the rate of interest publicly announced by
Citibank, N.A., in New York, New York from time to time as its prime
rate (the "Initial Interest Rate"), payable in interest payments only
commencing on December 1, 1996 and continuing on the first day of each
and every month thereafter until November 18, 1997 when the entire
unpaid principal balance, together with accrued interest on this Note
shall become due and payable.
Each payment shall be credited first on interest then due and
the remainder on principal; and interest thereupon ceases upon the
principal so credited.
2. Variable rate; standard. The undersigned agrees that the
Initial Interest Rate shall be increased and decreased from time to
time in accordance with increases and decreases in the prime rate of
Citibank, N.A., in New York (the "Standard"). Any change in such
interest rate shall be effective on the date a change in such rate
occurs. Subject to the following provisions, the increases and
decreases shall be effected in such manner as to maintain the same
margin above or below the Initial Interest Rate as the last published
Standard is above or below the last published standard on the date of
this Note.
(a) Decreases. Decreases in the interest rate shall be
mandatory and increases shall be optional with the Bank, but the fact
that the Bank may not have invoked a permissible increase, in whole or
in part, shall not be deemed a waiver of the Bank's right to invoke
such increase at any time thereafter within the limits herein provided.
(b) Notices. Notices of any change in interest rate or amount
of the monthly installment shall be deemed given by the Bank when
deposited in the United States mail, postage prepaid, addressed to the
Borrower as its name and address appears on the Bank's records at the
time of giving notice.
(c) Usury Ceiling. The rate of this note will never exceed
the maximum rate which is permitted by law. But, if maximum rate
permitted by law should change, the rate of this note will change
without notice to undersigned, on the same day that the maximum rate
permitted by law changes. Interest after maturity or demand shall be
at a rate per annum equal to 2% above that rate charged on the date of
such maturity or demand. When undersigned is a corporation, interest
shall be calculated on the basis of a 360-day year for actual days
elapsed.
3. Standard. The last published standard on the date of this
Note is 8.25%.
4. Letter of Credit. This Note is secured by an irrevocable
letter of credit in favor of Bank in the amount of $2,789,000 with an
expiry date November 19, 1997.
5. Default. Upon the occurrence, with respect to the
undersigned, or of any of the following: default in payment of this
Note or any other obligation of any nature or description to Bank
including a default under the Loan Agreement, General Loan and Security
Agreement, Revolving Credit Note or Revolving Credit Agreement between
the Bank and the undersigned. (this note and such other obligations of
undersigned and/or Guarantor, hereinafter, "Obligations"); calling a
meeting of creditors; the filing of a voluntary or involuntary petition
for an order of relief under the Bankruptcy Code; the filing for relief
under any state or Federal insolvency statute; the appointment of a
custodian, trustee, assignee or receiver to take possession of any
property; the taking of possession of any property thereof by a
custodian, receiver or trustee; generally failing to pay when due any
obligations to others; insolvency; entry of judgment against any of
them; failure to pay or remit any tax when assessed or due; death;
dissolution; making or sending notice of intended bulk transfer;
suspension or liquidation of usual business; failing to furnish
financial information or to permit inspection of books or records;
making any misrepresentation to Bank in obtaining credit; or, in Bank's
opinion, impairment of financial responsibility of any of them; then,
Obligations shall be due and payable immediately without notice or
demand. Bank shall have a continuing lien and/or right of set-off on
deposits (general and special) and credits with Bank of undersigned and
guarantor, and may apply all or part of same to Obligations (whether
contingent or unmatured), at any time or times, without notice. Bank
shall have a continuing lien on all property of undersigned and
guarantor and the proceeds thereof held or received by or for Bank for
any purpose. Any notice of disposition of property shall be deemed
reasonable if mailed at least 5 days before such disposition to the
last address of undersigned or guarantor on Bank's records.
Undersigned agrees that if an attorney is used to enforce Obligations,
reasonable attorneys fees and expenses shall be payable by each of them
against whom Obligations or rights hereunder are enforced or declared.
Bank and undersigned and guarantor, in any litigation (whether or not
relating to Obligations) in which Bank and any of them shall be adverse
parties, waive trial by jury, and, undersigned and guarantor waives the
rights to interpose any set-off or counterclaim of any nature or
description. Time for payment extended by law shall be included in the
computation of interest. This note shall be governed by and construed
in accordance with the laws of New York State.
6. Prepayment. This Note may be prepaid in whole or in part
without penalty at any time.
NATIONAL MICRONETICS, INC.
By: Hee Hwan Lee
Name: Hee Hwan Lee
Title: Vice President
Exhibit 4.4
SECOND AMENDMENT
TO
REVOLVING CREDIT AGREEMENT
Second Amendment, dated as of November 19, 1996, to the Revolving
Credit Agreement (the "Revolving Credit Agreement"), dated as of May
10, 1991, by and between National Micronetics, Inc., (the "Borrower"),
a Delaware corporation, and Shinhan Bank New York Branch, a banking
corporation organized under the laws of Korea and licensed to operate
a branch under the laws of New York (the "Bank").
R E C I T A L S :
A. Pursuant to the Revolving Credit Agreement, Borrower borrowed
$4,000,000 from the Bank (the "Revolving Credit Loan"). The Revolving
Credit Loan is evidenced by a promissory note, dated May 10, 1991, in
the amount of $4,000,000 (the "Revolving Credit Note"). The
outstanding principal balance under the Revolving Credit Note as of the
date of this Second Amendment is $2,741,000.
B. Pursuant to a Term Loan Agreement dated November 5, 1991 (the
"Term Loan Agreement") the Bank loaned the Borrower the principal
amount of $3,000,000 as a term loan. The term loan is evidenced by a
Promissory Note, dated November 5, 1991 (the "Term Note"). The
principal amount outstanding under the Term Note as of the date of this
Second Amendment is $1,450,000. The Term Note is secured by a
Mortgage, dated November 5, 1991 (the "Mortgage") in the amount of
$7,000,000 against real property and improvements thereon located at
71 Smith Avenue, Kingston, New York.
C. The Borrower has requested the Bank to extend the maturity date
of payment of principal and reduce the rate of interest. The Bank has
agreed to these changes provided the Borrower complies with the terms
of this Second Amendment.
NOW, THEREFORE, the Revolving Credit Agreement is hereby amended as
follows:
Section 1. Section 1.04 of the Revolving Credit Agreement is
amended to provide that the principal amount outstanding as of the date
of this Second Amendment shall be due and payable, together with
accrued interest thereon, on November 18, 1997 (the "Maturity Date").
The Bank will extend the Maturity Date for four (4) additional one year
periods if and only if each and every one of the following conditions
is satisfied as of the date one day prior to the Maturity Date in each
year.
(i) Borrower shall not be in default in the payment of any financial
obligation to the Bank, whether such obligation arises out of
the Revolving Credit Agreement, the Term Loan Agreement, the
Term Note, the Revolving Credit Note, or otherwise. As used in
this sub-section (i), a default shall exist notwithstanding the
existence of any un-expired curing period under any document or
agreement.
(ii) No other event of default shall exist under the Revolving Credit
Agreement, Term Loan Agreement, Term Note, Revolving Credit Note
or Mortgage. As used in the sub-section (i), a default shall
exist notwithstanding the existence of any unexpired curing
period under the document or agreement.
(iii) Bank shall have received an irrevocable stand-by letter of
credit in its favor, with an expiry date of November 19, 1997
which shall secure the payment of principal and interest in the
amount of $2,789,000 due to Bank under the Revolving Credit
Agreement and Revolving Credit Note. This letter of credit
shall provide that the Bank may draw down the entire amount of
the credit in the event Borrower fails to make the principal
payment required to be made under the Revolving Credit Agreement
and Revolving Credit Note.
(iv) In each subsequent year, Bank shall have received a new
irrevocable letter of credit in the same amount, or a lesser
amount if any principal payments have been made by Borrower, and
substantially the same terms so that throughout the period of
any extension of the Maturity Date, the Revolving Credit Note
shall always be secured by an irrevocable letter of credit in
favor of Bank for the amount of outstanding principal and
interest to the Maturity Date.
Section 2. Section 1.04 of the Revolving Credit Agreement is
hereby amended by reducing the rate of interest payable by the Borrower
to the rate per annum equal to one percentage point below the rate of
interest publicly announced from time to time by Citibank, N.A. as its
Prime Rate.
Section 3. As partial consideration for the extension of the
Maturity Date and reduction in the rate of interest described herein,
Borrower shall execute and deliver to Bank a certificate as to no
defaults and other matters in form and substance satisfactory to Bank's
legal counsel.
Section 4. This Second Amendment to the Revolving Credit
Agreement is expressly made supplemental to and part ofthe Revolving
Credit Agreement. Except to the extent modified by the First Amendment
and this Second Amendment, all of the terms and conditions and
provisions of the Revolving Credit Agreement shall be and remain in
full force and effect.
Section 5. Borrower agrees to pay on demand all of the Bank's
fees, costs and expenses, out-of-pocket expenses and other
disbursements of counsel to the Bank in connection with the
negotiation, execution and amendment to the Revolving Credit Agreement
and related documents.
IN WITNESS WHEREOF, the Bank and the Borrower have caused this Second
Amendment to be executed in their respective names by their duly
authorized officers and all as of the date first above written.
NATIONAL MICRONETICS, INC.
By: Hee Hwan Lee
Name: Hee Hwan Lee
Title: Vice President
SHINHAN BANK NEW YORK BRANCH
By: Bae Rok Oh
Name: Bae Rok Oh
Title: Loan Officer
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