PAGE
<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 quarterly period ended March 31, 1997
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 March 31, 1997 there were outstanding 525,707 shares of Common Stock,
$.01 par value.
MICROENERGY, INC.
INDEX
Part 1 - Financial Information
Item 1 - Financial Statements
Condensed Balance Sheet
March 31, 1997 (unaudited) and June 30, 1996
Condensed Statements of Operations (unaudited) for the
quarter and nine months ended March 31, 1997 and
March 31, 1996.
Condensed Statements of Cash Flows (unaudited) nine months
ended March 31, 1997 and March 31, 1996.
Notes to condensed Financial Statements (unaudited)
Item 2 - Management Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
<PAGE>
MICROENERGY, INC.
CONDENSED BALANCE SHEETS
3rd Quarter
Ended Year Ended
3/31/97 6/30/96
(unaudited) (audited)
<TABLE>
<S> <C> <C>
ASSETS
Current assets:
Cash $ 9,700 $ 19,615
Accounts receivable 2,390,354 1,601,989
Inventories 3,509,580 3,364,846
Other current assets 224,744 51,543
Total current assets 6,134,378 5,037,993
Machinery and equipment 6,082,824 5,113,120
Accumulated depreciation (3,678,655) (3,201,432)
2,404,169 1,911,688
Other assets, net 155,047 329,674
$ 8,693,594 $7,279,355
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Notes payable $ $1,875,373
Current portion of long-term obligations 902,770 2,341,020
Accounts payable 1,330,502 1,918,524
Accrued expenses 336,044 507,201
Total current liabilities 2,569,316 6,642,118
Long-term obligations 3,727,550 874,475
Total liabilities 6,296,866 7,516,593
Stockholders' equity:
8% Cumulative Series A Preferred Stock,
$7.00 liquidation preference, 844,500
shares authorized and outstanding 2,838,896 --
Common Stock, $.01 par value - 4,000,000
shares authorized; 525,707 shares
issued in 1996 and 316,560 in 1995 5,257 4,215
Additional paid-in capital 6,050,034 5,842,616
Accumulated deficit (5,212,668) (5,004,208)
Unearned restricted stock compensation (1,361,050) (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/(Loss) (20,155) --
Total Stockholders' Equity (note 2) 2,396,728 (237,238)
$ 8,693,594 $7,279,355
/TABLE
<PAGE>
MICROENERGY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
3 Months 3 Months 9 Months 9 Months
Ended Ended Ended Ended
03/31/97 03/31/96 03/31/97 03/31/96
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<S> <C> <C> <C> <C>
Sales $ 4,135,276 $ 3,997,190 $11,840,667 $10,718,611
Expenses:
Facility, pre-
production and
production 3,293,167 3,216,572 9,469,109 8,512,503
Research and
Development 316,815 296,613 959,720 813,290
Selling, Gen and
Administrative 424,575 353,900 1,209,180 1,000,188
Operating Income\(Loss) 100,719 130,105 202,658 392,630
Interest Expense 81,594 81,067 222,813 241,322
Net Profit\(Loss)
Before extraordinary 19,125 49,038 (20,155) 151,308
item
Extraordinary item-gain
on debt restructuring 0 1,000,561 0 1,000,561
Net Profit\(Loss) 19,125 1,049,599 (20,155) 1,151,869
Preferred Dividends 104,230 0 312,690 0
Net Profit\(Loss)
Available to
Common Shareholders (85,105) 1,049,599 (332,845) 1,151,869
Net Profit\(Loss)
per share:
Before Extraordinary $ (0.162) $ 0.140 $ (0.633) $ 0.432
Extraordinary item $ 0 $ 2.858 $ 0 $ 2.858
Total $ (0.162) $ 2.998 $ (0.633) $ 3.290
Weighted avg number
of shares of
common stock 525,707 350,141 525,707 350,141
</TABLE>
MICROENERGY, INC.
STATEMENTS OF CASH FLOWS
Nine Months Nine Months
Ended Ended
03/31/97 03/31/96
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Cash flows from operating
activities:
Net (losses) earnings $ (20,155) $1,151,869
Adjustments to reconcile net
(losses) earnings to net cash
provided by operations:
Depreciation 477,223 430,882
Changes in assets and
liabilities:
Accounts receivable (788,365) (381,390)
Inventories (144,734) (736,242)
Other current assets 1,426 (59,439)
Accounts payable (588,022) 389,423
Accrued expenses (171,157) (199,094)
Net cash provided (used) by
operating activities (1,233,784) 596,009
Cash flows (used in) provided by
investing activities:
Additions to equipment (969,704) (452,221)
Cash flows provided by (used in)
financing activities:
Notes Payable (1,875,373) 486,554
Long-term debt, net of payments 1,414,825 (1,120,379)
Equity Transactions 2,654,121 386,810
Net cash provided by (used in)
financing activities 2,193,573 (247,015)
Net increase (decrease) in cash ( 9,915) (103,227)
Cash at beginning of period 19,615 113,227
Cash at end of period $ 9,700 $ 10,000
/TABLE
<PAGE>
MICROENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED FINANCIAL STATEMENTS
The condensed Balance Sheet as of March 31, 1997, the Consolidated
Statements of Income for the three and nine month periods ended March 31,
1997 and March 31, 1996 and the Condensed Statements of Cash Flows for the
nine month period ended March 31, 1997 and March 31, 1996 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, 1997 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 Form 10K report.
The results of operations for the period ended March 31, 1997 is 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. On January 1, 1997, the Company issued 104,230 shares of
Common Stock as the initial semi-annual dividend on the Preferred 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
Quarter Ended March 31, 1997 versus March 31, 1996
Revenues for the quarter ended March 31, 1997 increased 3.4% to $4,135,276
compared to $3,997,190 for the comparable quarter in 1996. Manufacturing
costs increased 2.4% to $3,293,167 from 3,216,572 as a result of the
introduction of new programs and increasing production. Research &
Development expenses increased to $316,185 from $296,613 in the same
quarter a year earlier. Selling, General & Administrative expenses
increased to $424,575 from $353,900 in the same quarter a year earlier. The
increases in Research & Development and Selling, General & Administrative
reflect strategic investments made in support of new programs. Interest
expense remained flat at $81,594 compared to $81,067 for the quarter ended
March 31, 1996. As a result of the foregoing, net income before
extraordinary gain totaled $19,125 versus the prior year amount of $49,038.
During the three months ended March 31, 1996, the Company realized an
extraordinary gain of $1,000,561 on debt compromise.
Nine Months Ended March 31, 1997 versus March 31,1996
Revenues for the nine months totaled $11,840,667 compared to $10,718,611,
representing an increase of 10.4%. The improved sales were the direct
result of an expansion in business attributable to new programs released
during the fiscal year. Manufacturing costs rose 11.2% to $9,469,109 from
$8,512,503 for the comparable period last year. The increase was
attributable to a combination of the start-up phase of new programs and the
increased level of production. As a percentage of sales, manufacturing
costs remained relatively constant at 80.0% and 79.4% respectively.
Research & Development expenses rose by 18.0%, or $146,430 reflecting the
increased allocation of financial resources to enhancing existing products
and developing new products. These development initiatives are the driving
component in new business development. Overall, the Company has five new
programs in various stages of development. These new programs, if accepted
by our customers and sales prospects, could yield approximately $9 million
in additional sales. The Company believes that its future competitive
position will depend in large part on its ability to develop new programs
quickly and cost effectively, maintain and enhance its current line and
meet an ever expanding range of customer needs. In addition to customer
driven research and development, the Company invests limited resources in
advanced research to explore new applications of its core technology.
Selling, General & Administrative expenses (SG&A) increased $208,992 to
$1,209,180 from $1,000,188 for the comparative nine month period last year.
As a percentage of sales, SG&A increased to 10.2% from 9.3% over the same
period. The dollar increase results from higher commissions, salaries, and
benefits, and other related expenses incurred to strengthen the Company's
operating strategies. As a result of the foregoing, the Company recorded
operating income of $202,658 compared to operating income of $392,630 last
year. Operating income decreased by $189,972 primarily as a result of
increased activity in the pre-production phase of preparing for production
of new systems. Net interest expense totaled $222,813 compared to the
prior year amount of $241,322. The Company realized an extraordinary gain
of $1,000,561 in the period last year from debt compromise on debt
restructuring. Net loss for the period totaled $20,155 or $0.038 per share
prior to the dividend impact of $312,690 for the Series A Preferred Stock.
Net Income for the calculation of earnings per share was adjusted downward
to reflect the impact of the dividend, resulting in an earnings per share
loss of $0.63 per share.
Liquidity and Capital Resources
At March 31, 1997, the Company had a working capital surplus of $3,565,062
as compared to a working capital deficit of $1,604,125 at June 30, 1996.
The primary reasons for the improvement have been the completion of a
public offering of securities in July 1996 and the use of long-term debt to
finance a reduction of short-term borrowing and an increase in accounts
receivable. Accounts Receivable are $788,365 higher than the fiscal year
end balance. This increase is mainly due to the increased sales.
Inventories have increased $144,734, or approximately 4% over the nine
month period, reflecting an increase in business volume.
During the first three quarters of fiscal 1997, the Company has invested
approximately $1,000,000 in capital equipment. To finance the capital
additions, the Company obtained a four year term loan for $750,000 from its
primary lender.
During the quarter the Company satisfied its first semi-annual dividend
payout to its Series A Preferred Stock shareholders, by issuing a stock
dividend in lieu of a cash dividend. The cash savings helped to improve
the Company's working capital by $208,460.
The Company is current with all of its debt obligations, and has
approximately $.9 million available on its revolving line of credit as of
March 31, 1997 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 1
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no market rate sensitive instruments.
<PAGE>
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 2, 1997 By(s) Robert G. Gatza
Robert G. Gatza
President and CEO
Date May 2, 1997 By(s) Robert J. Fanella
Robert J. Fanella
Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,700
<SECURITIES> 0
<RECEIVABLES> 2,390,354
<ALLOWANCES> (50,000)
<INVENTORY> 3,509,580
<CURRENT-ASSETS> 6,134,378
<PP&E> 6,082,824
<DEPRECIATION> (3,678,655)
<TOTAL-ASSETS> 8,693,594
<CURRENT-LIABILITIES> 2,569,316
<BONDS> 0
0
2,838,896
<COMMON> 5,257
<OTHER-SE> 112,725
<TOTAL-LIABILITY-AND-EQUITY> 8,693,594
<SALES> 11,840,667
<TOTAL-REVENUES> 11,840,667
<CGS> 11,638,009
<TOTAL-COSTS> 11,860,822
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 222,813
<INCOME-PRETAX> (20,155)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,155)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
