<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 December 31, 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 December 31, 1996 there were outstanding 421,477 shares of Common
Stock, $.01 par value.
MICROENERGY, INC.
INDEX
Part 1 - Financial Information
Item 1 - Financial Statements
Condensed Balance Sheet
December 31, 1996 (unaudited) and June 30, 1996
Condensed Statement of Operations (unaudited) for the
quarter and six months ended December 31, 1996 and
December 31, 1995.
Condensed Statements of Cash Flows (unaudited) six months
ended December 31, 1996 and December 31, 1995.
Notes to condensed Financial Statements (unaudited)
Item 2 - Management Discussion and Analysis of Financial Condition
and Results of Operations.
MICROENERGY, INC.
CONDENSED BALANCE SHEETS
2nd Quarter
Ended Year Ended
12/31/96 6/30/96
(unaudited) (audited)
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ASSETS
Current assets:
Cash $ 10,000 $ 19,615
Accounts receivable 1,970,827 1,601,989
Inventories 3,482,420 3,364,846
Other current assets 195,364 51,543
Total current assets 5,658,611 5,037,993
Machinery and equipment 5,395,874 5,113,120
Accumulated depreciation (3,512,914) (3,201,432)
1,882,960 1,911,688
Other assets, net 205,999 329,674
$ 7,747,570 $7,279,355
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Notes payable $ -- $1,875,373
Current portion of long-term obligations 740,076 2,341,020
Accounts payable 1,478,445 1,918,524
Accrued expenses 314,286 507,201
Total current liabilities 2,532,807 6,642,118
Long-term obligations 2,774,029 874,475
Total liabilities 5,306,836 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 (1,374,550) (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) (39,256) --
Total Stockholders' Equity (note 2) 2,440,734 (237,238)
$ 7,747,570 $7,279,355
</TABLE>
MICROENERGY, INC.
STATEMENTS OF OPERATIONS
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
12/31/96 12/31/95 12/31/96 12/31/95
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Sales $ 4,262,401 $ 3,334,156 $ 7,705,391 $ 6,721,421
Expenses:
Facility, pre-
production and
production 3,432,205 2,667,806 6,175,942 5,295,931
Research and
Development 330,971 239,538 642,905 516,677
Selling, Gen and
Administrative 371,741 305,792 784,581 646,288
Interest exp, net 69,543 81,967 141,219 160,255
Net Profit\(Loss)
After Tax 57,941 39,053 (39,256) 102,270
Net Earnings/(Loss)
per share $ 0.14 $ 0.12 $ (0.09) $ 0.32
Weighted avg number
of shares of
common stock 421,477 317,640 421,477 317,640
</TABLE> MICROENERGY, INC.
STATEMENTS OF CASH FLOWS
Six Months Six Months
Ended Ended
12/31/96 12/31/95
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Cash flows from operating
activities:
Net (losses) earnings $ (39,256) $ 102,270
Adjustments to reconcile net
(losses) earnings to net cash
provided by operations:
Depreciation 311,482 287,221
Changes in assets and
liabilities:
Accounts receivable (368,838) (306,705)
Inventories (117,574) (321,011)
Other current assets (20,146) 22,034
Accounts payable (440,079) 247,740
Accrued expenses (192,915) (192,627)
Net cash provided (used) by
operating activities (867,326) (161,078)
Cash flows (used in) provided by
investing activities:
Additions to equipment (282,754) (248,679)
Cash flows provided by (used in)
financing activities:
Notes Payable (296,019) 541,029
Long-term debt,net of payments (1,280,744) (270,190)
Equity Transactions 2,717,228 35,309
Net cash provided by (used in)
financing activities 1,140,465 306,148
Net increase (decrease) in cash (9,615) (103,609)
Cash at beginning of period 19,615 113,227
Cash at end of period $ 10,000 $ 9,618
</TABLE>
MICROENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED FINANCIAL STATEMENTS
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The condensed Balance Sheet as of December 31, 1996, the Consolidated
Statement of Income for the three and six month periods ended
December 31, 1996 and December 31, 1995 and the Condensed Statement of
Cash Flows for the six month period ended December 31, 1996 and December 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 December 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, 1996 Form 10K report.
The results of operations for the period ended December 31, 1996 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.
</TABLE>
Part 1
Item 2
MICROENERGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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Since the completion of its public offering in July 1996, the Company has
been working with key customers in developing new and expanding existing
programs. This has resulted in a modest increase in sales during the first
six months of fiscal 1997, offset by significant increases in expenses in
anticipation of increased sales volume. The result has been a small loss
for the first six months of fiscal 1997. However, the Company expects to
remain in a continuing growth phase for the foreseeable future, with
improving profitability for the remaining two quarters of fiscal 1997, as a
result of this investment in each of the cost areas. There remain
uncertainties and risk factors, however, with respect to general market
conditions, continued customer acceptance, and market competition that
could mitigate anticipated growth in the remainder of fiscal 1997.
Net sales for the three months and six months ended December 31, 1996 were
$4,262,401 and $7,705,391 respectively, as compared to $3,334,156 and
$6,721,421 for the comparable periods in the prior year. The improved
sales were a direct result of an expansion in production levels attributable
to new programs released during the past six months. A net profit of
$57,941 ($.14 per share) was realized for the current quarter;
correspondingly the net loss for the six month period was reduced to $39,256
($.09 per share). This compares with income of $39,053 ($.12 per share) and
$102,270 ($.32 per share) for the prior year comparable periods.
Manufacturing costs for the six month period increased to $6.175,942 as
compared to $5,295,931 in the prior year. The primary reason for the cost
increase of approximately $880,000 was the additional expenditures required
for the start-up phase of several new programs. The Research & Development
and the SG&A cost areas grew approximately $130,000 mainly due to the
support of the aforementioned programs and the incremental expenses of
sourcing new business.
Interest expense for the six month period declined by approximately $20,000
to $141,219 on a year to year basis.
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Liquidity and Capital Resources
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At December 31, 1996, the Company had positive working capital of
$3,125,000 as compared to a working capital deficit of $1,604,000 at June
30, 1996. The company has $.9 million available on its revolving line of
credit as of December 31, 1996. Accounts receivable are $370,000 higher
than the fiscal year end balance. This increase is mainly due to the
increased sales. Inventories have remained relatively flat, increasing
approximately 3% over the six month period. The Company does not expect
the levels of inventory to increase dramatically over the remainder of the
fiscal year.
During fiscal 1997, the Company intends to invest approximately $800,000
in capital equipment. To finance the capital additions, the Company has
arranged for a four year term loan for $700,000 with its primary lender.
The Company has already expended about $200,000 from its line of credit,
including $100,000 in deposits for custom equipment. When the loan is
closed in February, approximately $100,000 will be used to paydown the
revolving line of credit.
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.
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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 February 5, 1997 By(s) Robert G. Gatza
Robert G. Gatza
President and CEO
Date February 5, 1997 By(s) Robert J. Fanella
Robert J. Fanella
Chief Financial Officer
and Treasurer
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<ARTICLE> 5
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,000
<SECURITIES> 0
<RECEIVABLES> 2,020,827
<ALLOWANCES> (50,000)
<INVENTORY> 3,482,420
<CURRENT-ASSETS> 5,658,611
<PP&E> 5,395,874
<DEPRECIATION> (3,512,914)
<TOTAL-ASSETS> 7,747,570
<CURRENT-LIABILITIES> 2,532,807
<BONDS> 0
0
2,915,503
<COMMON> 4,215
<OTHER-SE> 112,725
<TOTAL-LIABILITY-AND-EQUITY> 7,747,570
<SALES> 7,705,391
<TOTAL-REVENUES> 7,705,391
<CGS> 6,175,942
<TOTAL-COSTS> 7,603,428
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,219
<INCOME-PRETAX> (39,256)
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,256)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
