SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE OF 1934
For the Quarter ended Commission File No.
03/31/96 0-12595
MicroENERGY, Inc.
(Exact Name of Registrant as specified in its Charter)
Delaware 36-3262274
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
350 Randy Road, Carol Stream, IL 60188
(Address of Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (708) 653-5900
Indicated 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 report(s), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
As of March 31, 1996 there were outstanding 149,451,563 shares of Common
Stock, $.001 par value.
MICROENERGY, INC.
INDEX
Part 1 - Financial Information
Item 1 - Financial Statements
Condensed Balance Sheet
March 31, 1996 (unaudited) and June 30, 1995
Condensed statement of Operations (unaudited) for the
quarter and nine months ending March 31, 1996 and March 31, 1995.
Condensed Statement of Cash flows (unaudited) nine
months ending March 31, 1996 and March 31, 1995.
Notes to condensed Financial Statements (unaudited)
Item 2 - Management discussion and analysis of financial condition
and results of operations.
Part 2
Item 2 - Changes in SecuritiesMICROENERGY, INC.
CONDENSED BALANCE SHEETS
3rd Quarter
Ending Year Ended
03/31/96 6/30/95
(unaudited) (audited)
ASSETS
Current assets:
Cash $ 10,000 $ 113,227
Accounts receivable 1,575,385 1,193,995
Inventories 3,448,466 2,712,224
Other current assets 73,091 53,725
Total current assets 5,106,942 4,073,171
Machinery and equipment 4,842,737 4,390,516
Accumulated depreciation (3,035,215) (2,604,333)
1,807,522 1,786,183
Other assets, net 329,250 289,177
$ 7,243,714 $6,148,531
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable 1,693,731 1,165,211
Current portion of long-term obligations 908,958 858,808
Accounts payable 1,539,010 1,149,587
Accrued expenses 257,112 456,206
Total current liabilities 4,398,811 3,629,812
Long-term obligations 2,301,514 3,514,009
Total liabilities 6,700,325 7,143,821
Stockholders' equity:
Convertible preferred stock, no par value -
800 shares authorized; 769 issued and
converted
Preferred Stock Subscription 250,000
Common stock, $.001 par value - 180,000,000
shares authorized in 1995 and 1994;
149,451,563 shares issued in 1996 and
114,111,563 in 1995 149,452 113,961
Additional paid-in capital 5,692,079 5,678,919
Accumulated deficit(5,356,650)(5,356,650)
Unearned restricted stock compensation (1,415,050) (1,455,550)
Common stock purchase warrants, 88,075 75
Treasury stock, at cost, 850,659 shares (16,386) (16,386)
Unrealized gain on marketable securities 40,341
Current Year Earnings 1,151,869
Total Stockholders' equity 543,389 (1,339,375)
$ 7,243,714 $6,301,874
MICROENERGY, INC.
STATEMENTS OF OPERATIONS
3 Months 3 Months 9 Months 9 Months
Ended Ended Ended Ended
03/31/96 03/31/95 03/31/96 03/31/95
Sales $ 3,997,190 $ 3,328,308 $10,718,611 $10,996,535
Expenses:
Facility, pre-
production and
production 3,283,572 2,686,498 8,713,503 8,983,789
Research and
Development 239,613 193,764 642,290 558,743
Sellg, Gen and
Admin 343,900 340,116 970,188 1,058,878
Interest exp, net 81,067 82,706 241,322 248,955
Debt Compromise(gain) (1,000,561) -- (1,000,561) --
Net Profit After Tax 1,049,599 25,224 1,151,869 146,170
Net earnings/(loss)
per share $ .008 $ .001 $ .009 $ .001
Weighted avg number
of shares of
common stock 126,050,810 114,111,563 126,050,810 114,111,563
MICROENERGY, INC.
STATEMENTS OF CASH FLOWS
9 Months 9 Months
Ending Ending
03/31/96 03/31/95
Cash flows from operating
activities:
Net (losses) earnings $1,151,869 $ 146,170
Adjustments to reconcile net
(losses) earnings to net cash
provided by operations:
Depreciation 430,882 430,083
Changes in assets and
liabilities:
Accounts receivable (381,390) (410,496)
Inventories (736,242) (74,045)
Other current assets (59,439) (51,950)
Accounts payable 389,423 280,732
Accrued expenses (199,094) (90,225)
Net cash provided (used) by
operating activities 596,009 230,269
Cash flows (used in) provided by
investing activities:
Additions to equipment (452,221) (141,709)
Cash flows provided by (used in)
financing activities:
Notes Payable 486,554 75,777
Long-term debt, net of payments (1,120,379) (240,629)
Equity Transactions 386,810 40,500
Net cash provided by (used in)
financing activities (247,015) (124,352)
Net increase (decrease) in cash (103,227) (35,792)
Cash at beginning of year 113,227 45,792
Cash at end of period $ 10,000 $ 10,000
MICROENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of March 31, 1996, the consolidated
statement of income for the three and nine month periods ending
March 31, 1996 and March 31, 1995 and the condensed statement of
cash flows for the nine month period ending March 31, 1996 and
March 31, 1995 have been prepared by the Company, without audit.
In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and changes in financial position at
March 31, 1996 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed statements be read in conjunction with the financial statements
and notes thereto included in the Company's June 30, 1995 10K report.
The results of operations for the period ended March 31, 1996 is not
necessarily indicative of the operating results for the full year.
2. DEBT COMPROMISE
The Company on January 31, 1996, came to an agreement with one of its
noteholders. The noteholder agreed to accept payment of $1.3 million
for the outstanding balance of $2.3 million. The Statement of Operations
shows the $1.0 million gain on the financial statement line labeled Debt
Compromise; and the Balance Sheet reflects the $1.0 million reduction in
Long-term Obligations.
Part 1
Item 2
MICROENERGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months ended March 31, 1996, were $3,997,190
versus net sales of $3,328,308 in the prior year period. Net sales for the
nine month period were $10,718,611 versus $10,996,535 the prior year period.
Net profit for the three month period was $1,049,599 versus $25,224 in the
prior year. Net profit for the nine month period was $1,151,869 versus
$146,170 the prior year nine month period. The 20% increase in sales for
the three month period was a direct result of new business and continued
strong sales on existing customer products. For the nine month period, the
sales are down 277,924 (3%). The shortfall in sales compared to fiscal 1995
is expected to be eliminated in the final quarter of this fiscal year.
Manufacturing costs for the nine month period were 81.3% of sales as
compared to 81.7% in the prior year period. Research & development cost was
increased by $83,547 for the nine month period as the Company has experienced
a large influx of new business and the demands on the R& D sector have
increased to support these new requirements. Offsetting this increase
is a reduction of $88,690 in SG&A for the nine month period. Interest
cost has remained relatively constant for the two nine month periods.
In the quarter ending 3/31/96, the Company came to agreement with one of its
major debtholders on a compromise payment. The outstanding balance of this
note was $2.3 million due in payments over the next 6.5 years. The noteholder
has agreed to accept one payment of $1.3 million in full satisfaction of the
note. The resultant gain of $1.0 million is shown on the Statement of
operations on the line denoted "Debt Compromise."
Liquidity and Capital Resources
The Company at March 31, 1996, has working capital of $708,131 versus a
working capital level of $443,359 at the end of the fiscal year ending
June 30, 1996. The Company's primary source of operating funds has been
its credit line. The primary bank lender has an asset based loan facility
of up to $2,000,000 dependent on predetermined formulas involving the
Company's accounts receivable and inventories. The balance outstanding
on the credit line at March 31, 1996 was $1,693,730. The total amount
available to borrow at that date was $1,723,886. The Company is currently
expecting to arrange new equity financing and to obtain a new and larger
credit line in the next fiscal year.
The Company's accounts receivable at March 31, 1996, totalled $1,575,385,
which is a $381,390 increase over the fiscal year end. This increase is a
result of the increasing sales during the quarter. The inventory levels
have increased by $736,242. This increase is the result of the Company's
decision to bring in some raw materials earlier than normal so that certain
items could be manufactured earlier than required. This was done with the
intention of creating the extra capacity that would be required to introduce
and build new products, which consume more production time for start-up
runs. The Company expects it inventory levels to get back in line over the
next two fiscal quarters.
Company is current with all of its debt obligations. Management expects
that its current cash and working capital position combined with cash
expected to be generated from operations will be sufficient to service
the Company's debt and fund the Company for the coming fiscal year.
Part 2
Item 2
CHANGES IN SECURITIES
On May 7, 1996, the Company's stockholders approved a 99.722% reverse stock
split of the Company's Common Stock. The shareholders also approved an
increase in the post-split authorized shares to 4,000,000 shares of Common
Stock, $.01 par value, and 4,000,000 shares of open-ended Preferred Stock,
no par value.
The Effective Time of the reverse stock split was 3:00 p.m. E.S.T. on
May 10, 1996. This 1-for-360 reverse split of the Common Stock was
implemented in the following manner: (a) 1 share of Common Stock
(the "New Common Stock") will be issued for each 360 shares of Common Stock
which was issued and outstanding as of the Effective Time (the "Old Common
Stock"), (b) the number of shares of new Common Stock to which a stockholder
is entitled will be rounded to the nearest integer such that (i) holders of
a fractional share of .50 shares or greater will receive 1 additional
share in lieu of the fractional share, and (ii) holders of a fractional share
of less than .50 shares will receive no share in lieu of the fractional
share, and (c) any holder of fewer than 360 shares of Old Common Stock will
receive 1 share of New Common Stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date May 14, 1996 By(s) Robert G. Gatza
Robert G. Gatza
President and CEO
Date May 14, 1996 By(s) Robert J. Fanella
Robert J. Fanella
Chief Financial Officer
and Treasurer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date By(s)
Robert G. Gatza
President and CEO
Date By(s)
Robert J. Fanella
Chief Financial Officer
and Treasurer
