<PAGE>
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
AND EXCHANGE OF 1934
For the quarter period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 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: (630) 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 September 30, 1996 there were outstanding 421,477 shares of Common
Stock, $.01 par value.
<PAGE>
MICROENERGY, INC.
INDEX
Part 1 - Financial Information
Item 1 - Financial Statements
Condensed Balance Sheet for September 30, 1996 (unaudited)
and June 30, 1996 (audited).
Condensed Statement of Operations (unaudited) for the
quarters ending September 30, 1996 and September 30, 1995.
Condensed Statement of Cash Flows (unaudited) for the three
months ending September 30, 1996 and September 30, 1995.
Notes to Condensed Financial Statements (unaudited)
Item 2 - Management Discussion and Analysis of Financial Condition
and Results of Operations.
<PAGE>
<TABLE>
MICROENERGY, INC.
CONDENSED BALANCE SHEETS
1st Quarter
Ending Year Ended
9/30/96 6/30/96
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 10,000 $ 19,615
Accounts receivable 1,956,446 1,601,989
Inventories 3,479,448 3,364,846
Other current assets 104,384 51,543
Total current assets 5,550,278 5,037,993
Machinery and equipment 5,162,979 5,113,120
Accumulated depreciation (3,367,173) (3,201,432)
1,795,806 1,911,688
Other assets, net 128,479 329,674
$ 7,474,563 $7,279,355
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable $ -- $1,875,373
Current portion of long-term obligations 811,028 2,341,020
Accounts payable 1,223,111 1,918,524
Accrued expenses 373,326 507,201
Total current liabilities 2,407,465 6,642,118
Long-term obligations 2,697,805 874,475
Total liabilities 5,105,270 7,516,593
Stockholders' equity:
8% cumulative Series A preferred stock,
$7.00 liquidation preference, 844,500
shares authorized and outstanding 2,915,503 --
Common stock, $.01 par value - 4,000,000
shares authorized; 421,477 shares
issued in 1996 and 316,560 in 1995 4,215 4,215
Additional paid-in capital 5,842,616 5,842,616
Accumulated deficit (5,004,208) (5,004,208)
Unearned restricted stock compensation (1,388,050) (1,401,550)
Common stock purchase warrants, 75 75
Preferred stock purchase warrants, 112,725 88,000
Preferred stock subscription -- 250,000
Treasury stock, at cost, 1,898 shares (16,386) (16,386)
Current Year Earnings (97,197) --
Total stockholders' equity (note 2) 2,369,293 (237,238)
$ 7,474,563 $7,279,355
</TABLE>
<PAGE>
<TABLE>
MICROENERGY, INC.
STATEMENTS OF OPERATIONS
Three Months Three Months
Ended Ended
9/30/96 9/30/95
<S> <C> <C>
Sales $3,442,990 $3,387,265
Expenses:
Facility, pre-production,
and production 2,743,737 2,628,125
Research and development 311,934 277,139
Selling,General and
Administrative 412,840 340,496
Interest expense, net 71,676 78,288
Net Profit/Loss After Tax (97,197) 63,217
Net earnings (loss) per share $ (.23) $ .20
Weighted average number
of shares of common
stock outstanding 421,477 316,977
</TABLE>
<PAGE>
<TABLE>
MICROENERGY, INC.
STATEMENTS OF CASH FLOWS
Three Months Three Months
Ending Ending
9/30/96 9/30/95
<S> <C> <C>
Cash flows from operating
activities:
Net (losses) earnings $ (97,197) $ 63,217
Adjustments to reconcile net
(losses) earnings to net cash
provided by operations:
Depreciation 165,741 143,560
Changes in assets and
liabilities:
Accounts receivable (354,458) (507,992)
Inventories (114,602) (27,893)
Other current assets 148,355 7,949
Accounts payable (695,413) (34,034)
Accrued expenses (133,875) 41,128
(984,252) (377,282)
Net cash provided (used) by
operating activities (1,081,449) (314,065)
Cash flows (used in) provided by
investing activities:
Additions to equipment (49,859) (159,372)
Cash flows provided by (used in)
financing activities:
Notes Payable (521,019) 452,622
Long-term debt, net of payments(1,061,016) (96,678)
Equity Transactions 2,703,728 13,500
Net cash provided by (used in)
financing activities 1,121,693 369,444
Net increase (decrease) in cash (9,615) (103,993)
Cash at beginning of period 19,615 113,227
Cash at end of period $ 10,000 $ 9,234
</TABLE>
<PAGE>
MICROENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of September 30, 1996, the
consolidated statement of income for the three month periods
ending September 30, 1996 and September 30, 1995 and the
condensed statement of cash flows for the three month period
ending September 30, 1996 and September 30, 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
September 30, 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, 1996 10K report. The results
of operations for the period ended September 30, 1996 are not
necessarily indicative of the operating results for the full
year.
2. SECURITIES OFFERING
On July 16, 1996, the Company sold 494,500 shares of Series A
Cumulative Preferred Stock, $.01 par value, at $7.00 per share,
and 247,250 Redeemable Class A Warrants for Series A Preferred
Stock, at $.10 per warrant. Dividends on the Preferred Stock are
cumulative from the issue date and are payable semi-annually at
the rate of 8% per annum. At the company's option, the dividends
may be paid in cash or in shares of the Company's Common Stock.
Each Class A Warrant entitles the holder to purchase one share of
the Company Series A Preferred Stock at an exercise price of
$7.00, subject to adjustment, from July 10, 1997 through July 9,
2000.
<PAGE>
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 September 30, 1996, were
$3,442,940, not significantly different from sales of $3,387,265
posted in the prior year quarter ending September 30, 1995. A net
loss of $97,197 was incurred for the current quarter, as compared
to a profit of $63,217 in the prior year period. The Company
increased its fixed costs from the 1995 prior year quarter in
anticipation of higher revenues. The anticipated sales increase
was delayed primarily due to the delay in completion of the
Company's public offering from its planned closing date in April,
1996 to the middle of July, 1996. Certain of the Company's
customers delayed placing firm orders until the offering was
completed, and also the Company experienced certain material
shortages as it was delinquent on some of its vendor payments
until the offering was completed.
Manufacturing costs increased to 79.7% of revenues as compared to
77.5% in the prior year. In the non-direct cost areas, total
costs for Research & Development and SG&A increased by $107,000,
or 17%. The reason for the increase was the investment in the
development of new programs for both existing customers and new
customers. The Company expects revenues to grow as a result of
this investment. Interest cost for the quarter declined by $7,000
on a year to year basis for the quarter.
Liquidity and Capital Resources
In the quarter ended September 30, 1996 the Company completed a
public offering of 494,500 shares of Series A Cumulative
Preferred Stock, $.01 par value, and 247,250 Redeemable Class A
Warrants for Series A preferred Stock. The gross amount of the
offering was $3.5 million and approximately $2.7 million net.
The net amount of Stockholders' Equity at September 30, 1996 was
$2.4 million versus negative $0.2 million at June 30, 1996, and
negative $0.9 million at September 30, 1995. In conjunction with
the public offering the Company developed a new banking
relationship. A new revolving line of credit for up to $3.0
million replaced the prior facility of $2.0 million, and a fixed
asset five year term loan of $0.8 million was obtained. The net
proceeds of these financings were used to pay down debt and
supply working capital.
The Company at September 30, 1996, had positive working capital
of $2.9 million as compared to a negative position of $1.6
million at the end of the fiscal year June 30, 1996. In
addition, the Company has $1.2 million available on its revolving
line of credit as of September 30, 1996. Accounts Receivable are
$350,000 higher than the fiscal year end balance. This increase
is mainly due to the increasing level of sales towards the end of
the quarter. Inventories have remained relatively flat as
compared to the fiscal year end balances.
The 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.
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 November 1, 1996 By(s) Robert G. Gatza
Robert G. Gatza
President and CEO
Date November 1, 1996 By(s) Robert J. Fanella
Robert J. Fanella
Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 10,000
<SECURITIES> 0
<RECEIVABLES> 2,006,446
<ALLOWANCES> 50,000
<INVENTORY> 3,479,448
<CURRENT-ASSETS> 5,550,278
<PP&E> 5,162,979
<DEPRECIATION> 3,367,173
<TOTAL-ASSETS> 7,474,563
<CURRENT-LIABILITIES> 2,407,465
<BONDS> 0
0
2,915,503
<COMMON> 4,215
<OTHER-SE> 112,725
<TOTAL-LIABILITY-AND-EQUITY> 7,474,563
<SALES> 3,442,990
<TOTAL-REVENUES> 3,442,990
<CGS> 2,743,737
<TOTAL-COSTS> 3,468,511
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,676
<INCOME-PRETAX> (97,197)
<INCOME-TAX> 0
<INCOME-CONTINUING> (97,197)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
