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 27, 1999.
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.)
P.O. Box 1128, Kingston, New York 12402
678 Aaron Court, 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 27, 1999, the registrant had 22,312,524 shares of
Common Stock issued and outstanding.
NATIONAL MICRONETICS, INC.
INDEX
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statement of Net Liabilities - In
Liquidation - March 27, 1999................... 3
Consolidated Statement of Changes in Net Liabilities
In Liquidation for the three months ended March 27,
1999 and for the period from December 2, 1998 to March
27, 1999........................................... 4
Consolidated Statements of Operations - For the
period from June 28, 1998 to December 1, 1998,
and Nine Month period ended March 28, 1998..........5
Consolidated Statements of Cash Flows - For the
period from June 28, 1998 to December 1, 1998 and
Nine Month period ended March 28, 1998...............6
Notes to Consolidated Financial Statements .......7-9
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations ..10-12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ..................................... 12
Part II. Other Information
Item 1. Legal Proceedings ................................ 12
Item 3. Defaults upon Senior Securities .................. 13
Item 4. Submission of Matters to a Vote of Security Holders.13
Item 6. Exhibits and Reports on Form 8-K ................. 15
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET LIABILITIES
In Process of Liquidation
(In Thousands)
March 27, 1999
(unaudited)
Cost Current
Basis Value Basis
ASSETS
Cash and cash equivalents $ 98 $ 98
Other current assets 50 50
Property, plant and
equipment, net (note 1) 127 127
TOTAL ASSETS $ 275 $ 275
LIABILITIES
Accounts Payable $ 588 $ 588
Current portion of long-term
debt 10 10
Other accrued expenses 106 160
Short-term debt 8,397 8,397
Due to related parties, net 2,434 2,434
Total liabilities $ 11,589 $ 11,589
NET LIABILITIES $ 11,314 $ 11,314
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Net Liabilities
In Process of Liquidation (unaudited)
(In Thousands)
Three Months Ended From Dec. 2, 1998
March 27, 1999 to March 27, 1999
Cost Current Value Cost Current Value
Basis Basis Basis Basis
Net liabilities,
at beginning of period $ 10,482 $ 10,340 $10,414 $10,272
Add:
Salary expense 291 291 338 338
Overhead expense 540 540 639 639
Interest expense 258 258 308 308
$ 1,089 $ 1,089 $ 1,285 $ 1,285
Deduct:
Sale of properties
and others 117 115 127 125
Current value
Adjustments 140 - 225 85
Other adjustment - - 20 20
Funds received from
related parties - - 13 13
$ 257 $ 115 $ 385 $ 243
Net liabilities,
at end of period $ 11,314 $ 11,314 $11,314 $11,314
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share amounts)
From Nine
Jun. 28, Months
1998 to Ended
Dec. 1, Mar. 28,
1998 1998
Net Sales $ - $ 73
Cost and expenses:
Cost of products sold 245 639
Research, development
and engineering 31 59
Selling and administration 98 241
374 939
Income (Loss) from
operations ( 374) (866)
Other deductions (income):
Interest expense 300 577
Other (income) expense,net ( 79)
(323)
$ (221) $ (254)
Net loss $( 595) $(1,120)
Net loss per common share $( .02) $( .05)
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)
From Nine
June 28, Months
1998 to Ended
Dec. 01, Mar. 28,
1998 1998
Cash flows from operating activities:
Net income (loss) $ (595) $(1,120)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 114 284
Retirements of property and equipment 38 111
Changes in operating assets and liabilities:
Decrease (Increase) in inventories - 22
Decrease (Increase) in other current assets 33 (226)
Increase (Decrease) in accounts payable
and accrued expenses 65 118
Increase (Decrease) in due to related parties 298 456
Net cash provided (used) by
operating activities ( 47) (355)
Cash flows from financing activities:
Purchase of plant and equipment ( 306)
Repayment on long-term debt and
capitalized lease obligations (42)
Payment of revolving loan by related party - (2,741)
Increase in short-term debt to related parties 60 3,421
Net cash provided (used) by
financing activities 60 332
Net increase (decrease) in cash and cash
equivalents 13 (23)
Cash and cash equivalents at beginning
of period 22 35
Cash and cash equivalents at end of period $ 35 $ 12
See accompanying notes to consolidated financial statements.
NATIONAL MICRONETICS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. On December 1, 1998, the board of directors of the Company
adopted a resolution to approve the dissolution of the Company
and the stockholders voted to approve the proposed dissolution
at the annual meeting of stockholders of the Company on February
26, 1999. As the liquidation is imminent, the Company has
changed its basis of accounting for periods subsequent to
December 1, 1998, from the going-concern basis to the
liquidation basis. Accordingly, the carrying value of the
remaining assets(except for other property, plant and equipment)
as of March 27, 1999, are presented at estimated realizable
values and all liabilities are presented at estimated settlement
amounts. Property, plant and equipment were not adjusted
because, in the opinion of the Company, it was not possible to
estimate their realizable value.
In the opinion of the Company, except for the effect, if any,
of not adjusting the carrying value of property, plant and
equipment as discussed in the proceeding paragraph, the
accompanying unaudited consolidated financial statements contain
all adjustments necessary to present fairly the net liabilities
in liquidation of the Company as of March 27, 1999, the changes
in its net liabilities in liquidation for the three month period
ended March 27, 1999 and for the period from December 2, 1998
to March 27, 1999, and the results of operations and the changes
in cash flow for the five months period from June 29, 1998 to
December 1, 1998 and for the nine months period ended March 28,
1998.
The current value amounts are based on estimates of fair values
at March 27, 1999, as follows:
All assets and liabilities except for property, plant and
equipment - at cost basis amounts that approximate
estimated fair values.
The accounting policies applied for the cost basis amounts are
set forth in Note (1) to the Company's fiscal year 1998
financial statements which have been incorporated in form 10-K
filed for the year ended June 27, 1998.
2. On March 10, 1999, the Company sold part of its real estate for
two million four hundred thousand dollars ($2,400,000.00) in
cash to the City of New York, a New York municipal corporation.
The terms of the transaction are set forth in an agreement of
purchase and sale dated November 4, 1998 between the Company and
the City of New York, Department of Citywide Administrative
Services, a copy of which was filed on February 10, 1999 with
the Securities and Exchange Commission as Exhibit 13 on pages
83 to 95 of the information statement on Schedule 14C of the
Company.
The Company benefitted from the sale of its real estate to the
City of New York primarily by avoiding a foreclosure of the
mortgage which was satisfied out of the proceeds of the sale and
by avoiding a petition in bankruptcy by the Company or by the
creditors of the Company, though the Company can make no
assurances that the remaining creditors of the Company will not
seek to file a petition in bankruptcy against it.
The affiliates of the Company benefitted from the sale of its
real estate to the City of New York primarily because Mr. K. H.
Chung, a director of the Company, Tae Il Media Co., Ltd. and
Newmax Co., Ltd. will not be asked to perform their quarantees
of the term loan note of the Company which was satisfied out of
the proceeds of sale and because the net proceeds of sale would
be available to satisfy debts of the Company to Gigamax
Corporation, Tae Il Magnetics, Co., Ltd., Tae Il U.S.A., Inc.,
Tae Il Media Co., Ltd., Newmax Co., Ltd. or Techmedia
International Corporation, in some of which Mr. K. H. Chung and
Dr. Heehwan Lee, directors of the Company, and Dr. Yoon H. Choo,
a former director of the Company, may be deemed to have an
interest.
3. Over seventeen months of interest payments totaling
approximately $224,302 were due the primary lending institution
at March 10, 1999 in respect of the term loan note, which had
matured on November 26, 1997. The Company repaid the principal
balance of $1,408,000 and accrued interest of the term loan note
on March 10, 1999 with part of the proceeds of sale of part
of
its real estate and satisfied the mortgage on its real estate.
The $2,741,000 revolving credit loan was in default before its
maturity on November 18, 1997. The amount of interest in
default and in arrears is $439,000 at March 27, 1999 in respect
of the revolving credit note and the amount of the principal
balance of the revolving credit note is $2,741,000. The
institutional lender completed collection proceedings against
a Korean bank letter of credit in the amount of $2,789,000
securing payment of the revolving credit note. An affiliated
company which had provided a mortgage on its Korean real estate
as collateral for that Korean bank letter of credit will become
entitled to assert a claim against the Company for all amounts
collected from it by the institutional lender out of the pledge
of its assets. It may be possible that the two year moratorium
on collection of certain debts from certain affiliated companies
of the Company, as approved by a Korean court during September,
1998, may prolong those collection efforts.
4. Loss per common share has been determined on the basis of the
weighted average number of common shares outstanding during the
respective quarters. At March 27, 1999 and March 28, 1998 there
was no dilutive effect from common stock options or warrants.
5. The Company is a defendant in a lawsuit brought as the result
of an accident involving a Company automobile. The total of the
damages claimed in the causes of action is $7,700,000. The
summons designates the Supreme Court State of New York, County
of New York, as the place of trial. The Company's insurer has
assumed responsibility and is defending the Company; however
the damages claimed exceed the $300,000 policy limits.
Depositions are scheduled for May 1999, but were postponed and
no new date was scheduled. After consulting with counsel the
Company has determined that it is not possible, at this time,
to estimate the amount of damage, if any, that may ultimately
be incurred. Accordingly no provision has been made in the
financial statements of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Material Changes in 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. On December 1, 1998, the
Company decided to discontinue all business operations, to wind up
its affairs and to dissolve, and stockholder approval was obtained
on February 26, 1999.
Nine Months Ended March 28, 1998
Five Months Ended December 1, 1998
Income and Expense
Items as percent Percent Change
of sales in dollars
1999 1998 from 1998-1999
Net Sales 0% 100% (100)%
Cost of products sold N/A 875 (N/A)
Gross Profit (loss) N/A (775) (N/A)
Research, development & engineering N/A 81 (N/A)
Selling and administration N/A 330 (N/A)
Other deductions (income) N/A 348
Net earnings (loss) N/A %(1,534)% (N/A)%
Material Changes in Financial Condition
The consolidated statement of net liabilities at March 27, 1999 shows
$2,434,000 of due to related parties. This balance increased since
fiscal year end by $599,000 as a result of increases in interest
expense on related party debt remaining unpaid.
Liquidity and Capital Resources
Revolving Credit Loan Agreement. The Company entered into a
revolving credit loan agreement with a lending institution on May 10,
1991. On April 30, 1992 this loan was converted from a $4,000,000
one year renewable loan to a loan with a fixed repayment plan. On
November 19, 1996 the lending institution agreed to a modification
of repayment terms resulting in payment due November 18, 1997. This
loan has been collateralized by a Newmax Co., Ltd. affiliate
(guarantor) named Tae Il Magnetics Co., Ltd.
Default of Revolving Credit Loan. The $2,741,000 loan was in default
before its maturity on November 18, 1997. The amount of interest in
default and in arrears was $439,000 at March 27, 1999 and $456,000
at April 30, 1999 in respect of the revolving credit note and the
amount of the principal balance of the revolving credit note is
$2,741,000. The institutional lender completed collection
proceedings against a Korean bank letter of credit in the amount of
$2,789,000 securing payment of the revolving credit note. An
affiliated company named Tae Il Magnetics, Co., Ltd. which had
provided a mortgage on its Korean real estate as collateral for the
Korean bank letter of credit will become entitled to assert a claim
against the Company for all amounts collected from it by the
institutional lender out of the pledge of its assets. It may be
possible that the two year moratorium on collection of certain debts
from certain affiliated companies of the Company, as approved by a
Korean court during September, 1998, may prolong those collection
efforts.
Term Loan Agreement. The Company entered into a $3,000,000 term loan
agreement with the same lending institution on November 5, 1991. On
November 26, 1996 the lending institution agreed to a modification
of repayment terms resulting in no principal payments due until the
November 26, 1997 maturity.
Default of Term Loan. Monthly interest payments had not been made
since August 1997. The amount of interest that was in default and
in arrears pursuant to the term loan note, which had matured on
November 26, 1997 was $224,302 as of March 10, 1999. The rate of
interest of the term loan note was the prime rate of Citibank, N.A.
until the earlier of November 26, 1997 which was its maturity date,
or December 16, 1997, which was the date of the demand for payment
and thereafter became two percent (2%) above the interest rate of
eight and one half percent (8.5%) in affect on that date. The
Company has satisfied the principal balance and accrued interest of
the term loan as of March 10, 1999. The Company has sold to the City
of New York part of the real estate which had been collateral for
the mortgage which had secured the term loan note at a price of
$2,400,000.00 which enabled the Company to satisfy the term loan
note.
Debt Restructuring Proceedings in Korea. The Company has been
advised that Newmax Co., Ltd. and Tae Il Media Co., Ltd. on October
14, 1997 had obtained waivers of defaults in the payment of amounts
due pursuant to their indebtedness from their institutional lenders
and on November 8, 1997 had filed for reorganization pursuant to
bankruptcy laws in Korea so that they might become entitled to a
two-year moratorium on the repayment of certain obligations to
certain
creditors. The debt restructuring plan of Tae Il Media Co., Ltd. was
accepted by its creditors and was approved by Suwon District Court
in Korea on September 4, 1998. The debt restructuring plan of Newmax
Co., Ltd. was accepted by its creditors and was approved by Cheongju
District Court in Korea on September 15, 1998.
Lack of Working Capital. Working capital consists of very little
current assets. Current assets will remain very low, since on
December 1, 1998 the Company decided not to commence battery
production and not to seek orders for other products. Related party
assistance has been necessary to finance working capital needs while
the Company is liquidating its assets and the net proceeds from the
sale of certain real estate of the Company to the City of New York
provided a reserve of $100,000 for working capital needs.
Sources of Liquidity. The Company is hopeful that funds generated
by facility sales proceeds and received from Newmax or other
affiliated companies will be adequate to fund debt service and other
winding up needs. Although there is no firm commitment and
experience since December 1, 1998 reflects serious difficulty and
delays in obtaining funds for the Company, affiliated parties and
parents are expected to advance funds on a short-term as needed basis
to offset operational cash shortfalls. The Company will not commence
production on its former sealed lead acid battery manufacturing
line.
Management believes that the combination of sales of real estate,
reduction in overhead spending and continued cooperation of parent
companies and their affiliates will enable the Company to remain
viable for the next three months.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
According to Item 305(e) of Regulation S-K and Rule 12b-2, the
Company need not provide the information required by Item 305 about
quantitative and qualitative disclosures about market risk, because
the Company is a small business issuer.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See note 5 to the consolidated financial statements included herein
on pages 7 to 9 for a discussion of current legal proceedings. See
pages 22 to 24 of the Information statement on Schedule 14C of the
company filed of February 10, 1999, Commission file Number 0-7207.
The Company and Herzog Supply Company, Inc. a/k/a Herzog Supply Co.,
Inc., Bank Bros. Plumbing & Heating Inc. and J & J Sass Electric,
Inc., which had held three mechanics liens aggregating approximately
$51,000 against the Company, had been defendants in a lawsuit which
has been discontinued to collect an alleged $10,556.50 unpaid account
brought by Robert Carey Company, Inc., a fourth mechanics lien
holder. The suit had commenced on January 29, 1999 in the Supreme
Court of the State of New York for the County of Ulster in order to
prevent the expiration of the lien obtained. The Company has
satisfied those four mechanics liens and the lawsuit has been
discontinued.
See pages 24 to 25 of the information statement on Schedule 14C of
the Company filed on February 10, 1999, Commission File Number
0-7207, for a description of the status of the Company as a
potentially
responsible party in an Environmental Protection Agency superfund
site in Southington, Connenticut.
Item 3. Defaults Upon Senior Securities.
In 1997 the Company defaulted on the payment of accrued interest with
respect to its term loan note to its institutional lender. The
amount of interest in default and in arrears was $224,302 as of March
10, 1999 when the term note was satisfied. The amount of $1,408,000
of principal of the term loan note has been immediately due and
payable since the maturity date of November 26, 1997, which was
followed by a notice of default on December 16, 1997. The Company
has satisfied the principal amount and accrued interest as of March
10, 1999. The Company has sold part of its real estate to the City
of New York for $2,400,000, which gave the Company the funds
necessary to satisfy the principal amount and accrued interest upon
settlement.
The institutional lender completed collection proceedings against the
letter of credit in the amount of $2,789,000 securing payment of the
revolving credit note, which had matured on November 18, 1997. The
amount of interest in default and in arrears as of March 27, 1999 is
$439,000 and as of April 30, 1999 is $456,000 in respect of the
revolving credit note and the amount of the principal balance of the
revolving credit note is $2,741,000. An affiliated company, Tae Il
Magnetics, Co., Ltd., which had provided a mortgage on its real
estate in Korea as collateral for that Korean bank letter of credit
will become entitled to assert a claim against the Company for any
amounts which may be collected from it by the institutional lender
out of the pledge of its assets. It may be possible that the two
year moratorium on collection of certain debts from certain
affiliated companies of the Company, as approved by a Korean court
during September, 1998, may prolong those collection efforts.
See note 3 on page 8 and the caption Liquidity and Capital Resources
on page 10 to 12 for additional discussions concerning defaults on
the revolving credit and term loan.
Item 4. Submission of Matters to a Vote of Security Holders.
Date of Annual Meeting. The 1999 annual meeting of stockholders
of the Company was held on February 26, 1999 pursuant to a notice of
meeting and an information statement on Schedule 14C dated February
5, 1999 filed with the Securities and Exchange Commission on February
10, 1999.
Names of Directors Elected. Mr. K. H. Chung and Dr. Heehwan
Lee were elected as the only two directors of the Company to serve
until the next annual Meeting and until their successors are elected
and quality.
Election of Directors. Affirmative votes of 12,102,650 shares
were cast for the election of Mr. K. H. Chung as a director of the
Company. Affirmative votes of 12,102,650 shares were cast for the
election of Dr. Heehwan Lee as a director of the Company. Thus
affirmative votes were cast by all of the 12,102,650 shares present
or represented at the meeting, which were more than 54 percent of the
22,314,524 shares issued and outstanding as of the close of business
on January 8, 1999, which was the record date. Those 12,102,650
shares constituted a quorum of a majority of the issued and
outstanding shares which were eligible to receive notice of and to
vote at the 1999 annual meeting of stockholders of the Company
according to the by-laws of the Company and the General Corporation
Law of the State of Delaware. Those 12,102,650 affirmative votes
constituted the plurality required by the by-laws of the Company and
the General Corporation Law of the State of Delaware to elect each
director.
Ratification of Independent Public Accountant. Affirmative
votes of 12,102,650 shares were cast for the ratification of the
selection of Mr. Sung I. Rhee, C.P.A., 440 West Third Street, Fort
Lee, New Jersey, as independent public accountant of the Company for
the fiscal year ending June 26, 1999. Those 12,106,650 affirmative
votes constituted the majority of the stockholders present in person
or represented by proxy at the meeting required by the by-laws of the
Company and the General Corporation Law of the State of Delaware to
ratify the selection of Mr. Sung I. Rhee as the independent public
accountant of the Company.
Sale of Certain Real Estate to the City of New York.
Affirmative votes of 12,102,650 share were cast for the approval of
the sale of certain real estate of the Company to the City of New
York. Those 12,102,650 affirmative votes constituted the majority
of the issued and outstanding shares of common stock of the Company
required by the General Corporation Law of the State of Delaware to
approve the sale of substantially all of the assets of the Company.
On February 10, 1999, the Company filed an Information Statement on
Schedule 14C with the Securities and Exchange Commission in order to
describe the proposed sale of certain real estate to the City of New
York on pages 39 to 74. On March 23, 1999, the Company filed a
Current Report on Form 8-K with the Securities and Exchange
Commission in order to describe its sale of certain real estate to
the City of New York on March 10, 1999.
Sale of Remaining Property and Assets of the Company.
Affirmative votes of 12,102,650 shares were cast for the sale of the
remaining property and assets of the Company, including, without any
limitation as to the generality of the foregoing, the real property
owned by the Company and located in the City of Kingston, the County
of Ulster, the State of New York, the goodwill of the Company and
the corporate franchises of the Company, at whatever prices, for
whatever consideration and on whatever terms and conditions may be
negotiated by the officers of the Company pursuant to a plan of
complete liquidation of the Company. Those 12,102,650 affirmative
votes constituted the majority of the issued and outstanding shares
of common stock of the Company required by the General Corporation
Law of the State of Delaware to approve the sale of substantially all
of the assets of the Company. On February 10, 1999, the Company
filed an Information Statement on Schedules 14C with the Securities
and Exchange Commission in order to describe the proposed sale of
its remaining property and assets on pages 74 to 78.
Dissolution of the Company. Affirmative votes of 12,102,150
share were cast for the dissolution of the Company and negative votes
of 500 shares were cast against the dissolution of the Company.
Those 12,106,150 affirmative votes constituted the majority of the
issued and outstanding shares of common stock of the Company required
by the General Corporation Law of the State of Delaware to approve
the dissolution of the Company. On February 10, 1999, the Company
filed an Information Statement on Schedule 14C with the Securities
and Exchange Commission in order to describe the proposed dissolution
of the Company on page 78 to 80.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description
2 Agreement of purchase and sale dated
November 4, 1998 between National
Micronetics, Inc. and the City of New
York, Department of Citywide
Administrative Services, which is
incorporated by reference to Exhibit
13 on Pages 83 to 95 of the information
statement on Schedule 14C of the Company
filed on February 10, 1999, Commission
File Number 0-7207, CIK Number
0000070333.
20 Information Statement on Schedule 14C of
the Company filed on February 10, 1999,
Commission File Number 0-7207, CIK Number
0000070333.
27 Financial data schedule.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on March 23, 1999
in order to report under Item 2, Acquisition or Disposition of
Assets, the sale of substantially all of the assets of the Company
on March 10, 1999 and to file under Item 7, Financial Statements and
Exhibits, the following:
Pro forma financial information.
Unaudited consolidated condensed pro forma statement of net
liabilities of the Company and its subsidiaries as of December
26, 1998.
Unaudited consolidated condensed pro forma statement of changes
in net liabilities of the Company and its subsidiaries for the
period from December 2, 1998 to December 26, 1998.
Unaudited consolidated condensed pro forma statement of
operations of the Company and its subsidiaries for the period
from June 28, 1998 to December 1, 1998.
Unaudited consolidated condensed pro forma statement of
operations of the Company and its subsidiaries for the fiscal
year ended June 27, 1998.
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. Heehwan Lee
Dr. Heehwan Lee
President, Chief
Executive Officer
and Treasurer
(Principal Financial
Officer)
Dated: May 5, 1999
May 5, 1999
Dr. Heehwan Lee
President
National Micronetics, Inc.
71 Smith Avenue
Kingston, NY 12401
Dear Dr. Lee:
This letter is in response to your inquiry regarding the basis of
presentation of the financial statements of an enterprise in
financial difficulty.
The basis of presentation depends on the circumstances. AICPA
Accounting Principles Board (APB) Statements No. 4, Basic Concepts
and Accounting Principles Underlying Financial Statements of Business
Enterprises, states that if liquidation of an entity appears
imminent, financial information may be prepared on the assumption
that liquidation will occur.
If an enterprise has adopted a plan of liquidation or liquidation is
imminent, it should change its accounting basis from the
going-concern basis to the liquidation basis. The statements should
present assets at their estimated net realizable value and
liabilities at their estimated settlement amounts.
If you need more help to this matter, please contact me.
Very truly yours,
Sung I. Rhee, CPA
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-END> MAR-27-1999
<CASH> 98
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 148
<PP&E> 127
<DEPRECIATION> 0
<TOTAL-ASSETS> 275
<CURRENT-LIABILITIES> 11,589
<BONDS> 0
0
0
<COMMON> 2,231
<OTHER-SE> (13,545)
<TOTAL-LIABILITY-AND-EQUITY> 275
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 657
<TOTAL-COSTS> 657
<OTHER-EXPENSES> 229
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 608
<INCOME-PRETAX> (1,494)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,494)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,494)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
