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 March 31, 1999
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, 1998 there were outstanding 1,966,064 shares of Common
Stock, $.01 par value.
MICROENERGY, INC.
INDEX
Part 1 - Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets
March 31, 1999 (unaudited) and June 30, 1998
Condensed Statements of Operations (unaudited) for the
quarter and nine months ended March 31, 1999 and
March 31, 1998.
Condensed Statements of Cash Flows (unaudited) for the
nine months ended March 31, 1999 and March 31, 1998.
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
MICROENERGY, INC.
CONDENSED BALANCE SHEETS
3rd Quarter
Ended Year Ended
03/31/99 6/30/98
(unaudited) (audited)
ASSETS
Current assets:
Cash $ 1,926 $ 134,303
Accounts receivable 1,266,376 1,610,145
Inventories 2,117,685 2,073,735
Other current assets 49,353 22,735
Total current assets 3,435,340 3,840,918
Machinery and equipment 4,763,099 4,732,401
Accumulated depreciation (3,671,867) (3,455,867)
1,091,232 1,276,534
Other assets, net 38,935 32,513
Total Assets $ 4,565,507 $5,149,965
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations 3,705,062 4,236,926
Accounts payable 1,073,009 467,444
Accrued expenses 612,757 295,274
Total current liabilities 5,390,828 4,999,644
Long-term obligations 76,382 97,262
Total liabilities 5,467,210 5,096,906
Stockholders' equity:
8% Cumulative Series A Preferred Stock,
$7.00 liquidation preference, 4,000,000
shares authorized and 494,500 outstanding 2,605,282 2,605,282
Common Stock, $.01 par value - 4,000,000
shares authorized; 1,966,064 shares
outstanding in 1999 and 1,966,064 in 1998 19,661 19,661
Additional paid-in capital 4,642,842 4,642,842
Accumulated deficit (7,311,140) (7,311,140)
Common Stock Purchase Warrants, 75 75
Preferred Stock Purchase Warrants, 112,725 112,725
Treasury Stock, at cost, 1,898 shares (16,386) (16,386)
Current Year Earnings/(Loss) (954,762) --
Total Stockholders' Equity (901,703) 53,059
Total Liabilities & Stockholders Equity $ 4,565,507 $5,149,965
MICROENERGY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
3 Months 3 Months 9 Months 9 Months
Ended Ended Ended Ended
03/31/99 03/31/98 03/31/99 03/31/98
Sales $ 2,073,299 $ 2,717,830 $ 5,987,554 $ 9,562,830
Expenses:
Facility, pre-
production and
production 1,542,684 2,773,062 4,979,828 8,328,137
Research and
Development 164,243 344,038 743,377 1,048,211
Selling, Gen and
Administrative 344,274 476,079 962,938 1,257,069
Operating Income/(Loss) 22,098 (875,349) (698,589) (1,070,587)
(Loss) on Sale of
Subsidiary - (236,901) - (236,901)
Interest Expense 72,986 115,655 256,173 333,508
Net Loss (50,888) (1,227,905) (954,762) (1,640,996)
For Earnings Per Share Calculation:
Net Loss $ (50,888) $(1,227,905) $(954,762) $(1,640,996)
Preferred Stock
Dividend (69,230) (69,230) (207,690) (207,690)
Net Loss
available to common
shareholders $(120,118) $(1,297,135) $(1,162,452) $(1,848,686)
Net Loss per
Common share $( .061) $( .643) $( .591) $( .916)
Weighted avg number
of shares of
common stock 1,966,064 2,018,531 1,966,064 2,018,531
MICROENERGY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Nine Months
Ended Ended
03/31/99 03/31/98
Cash flows from operating
activities:
Net Losses $ (954,762) $(1,640,996)
Adjustments to reconcile net
Losses to net cash provided
By operations:
Depreciation 216,000 535,302
Changes in assets and
liabilities:
Accounts receivable 343,769 388,608
Inventories (43,950) 1,266,605
Other current assets (33,040) 566,076
Accounts payable 605,565 (938,147)
Accrued expenses 317,483 (292,206)
Net cash provided (used) by
operating activities 451,065 (114,758)
Cash flows (used in) provided by
investing activities:
Additions to equipment (30,698) (192,592)
Cash flows provided by (used in)
financing activities:
Long-term debt, net of payments (552,744) 201,942
Net increase (decrease) in cash (132,377) (105,408)
Cash at beginning of period 134,303 110,086
Cash at end of period $ 1,926 $ 4,678
MICROENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED FINANCIAL STATEMENTS
The condensed Balance Sheet as of March 31, 1999, the Consolidated
Statements of Income for the three and nine month periods ended March 31,
1999 and December 31, 1998 and the Condensed Statements of Cash Flows for
the nine month periods ended March 31, 1999 and March 31, 1998 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, 1999 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, 1998 Form 10K report.
The results of operations for the period ended March 31, 1999 is not
necessarily indicative of the operating results for the full year.
2. Cumulative Dividend Non-payment
On January 1, 1999 the dividend of $138,430 was due on the 8% Cumulative
Series A preferred Stock. As a result of a depressed common stock price at
the payable date, the Board of Directors determined that it was appropriate
to accrue the dividend expense and make a determination at a future date
regarding a distribution. At January 1, 1999, $415,380 of cumulative
preferred stock dividends are in arrears.
The Earnings Per Share Calculation does include the impact of the
Preferred Dividend.
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 and nine months ended March 31, 1999 were
$2,073,299 and $5,987,554 respectively, as compared to $2,717,830 and
$9,562,830, respectively, for the comparable periods in the prior year,
representing decreases of 24% ($644,531) and 37% ($3,575,276) for the
quarter and nine months, respectively. Approximately $2.3 million of the
nine month net sales decline was the result of a decline in business from
one of the Company's major customers. The sales to this customer for the
remainder of this fiscal year will be negligible. Approximately $1.2
million of the Net sales decline is related to the divestiture of the
previously wholly owned subsidiary, Tru-Way. The subsidiary was divested
at the end of the third fiscal quarter of the prior year. The Company is
diligently working to obtain new customers in an effort to rebuild its
sales base and operating performance. A net loss of $50,888 was incurred
for the current quarter as compared to a loss$1,227,905 in the prior
year quarter. In reaction to the lower sales, the Company has instituted a
company wide cost reduction program. The net loss for the third fiscal
quarter was $193,559 less then the net loss in the second fiscal quarter
ended December 31, 1998. The loss for the nine month period is $954,762 as
compard to a net loss of $1,640,996 for the prior year nine months period
ended March 31, 1998. As a result of new customer activity and the cost
reduction program the Company had a $22,098 Operating Income before
Interest Expense. The current year loss is a direct loss of the lower
revenues offset by the reduced cost levels.
Manufacturing costs for the quarter and nine month period declined
$1,230,378 and $3,348,309, mainly due to the lower volume. Research &
Development costs declined $179,795 and $304,834 for the three and nine
month periods. Selling, General, & Administrative costs were reduced by
$131,805 and $294,131 for the two periods. The declines in the cost levels
were a direct result of the cost reduction plan and productivity
improvements instituted at the end of the first fiscal quarter.
Interest cost for the quarter and nine month periods were $72,986 and
$256,173 as compared to $115,655 and $333,508 for the prior year periods.
Liquidity and Capital Resources
The Company had a working capital deficit of approximately $2.0 million at
March 31, 1999, as compared to approximately $1.2 million working capital
deficit at the end of the fiscal year June 30, 1998. The working capital
deficit is a result of the Company's term loans, of approximately $3.8
million, from its major lender which were reclassed to current liabilities
at June 30, 1998 due to debt covenant violations. During the prior quarter
the Company finalized a formal arrangement with its major lender requiring
it to make monthly payments toward principal of $500,000 by November 1,
1999. As of March 31, 1999 the Company is current with this plan. The
Company expects to renegotiate a continuation of its relationship with its
major lender prior to November 1, 1999. At this time there are no
additional funds available on the Company's revolving line of credit.
The Company is current with all of its debt obligations. In the nine month
period, total debt was reduced by $552,744 Management expects with its
agreement with its major lender that its current cash 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.
Year 2000 Preparedness
As reported in the Company's 10K filing for June 30, 1998, the Company has
reviewed its exposure to the Year 2000 software readiness problem and does
not anticipate it will incur any significant costs in that regard, and that
the year 2000 issues will not materially effect the Company's business, its
results of operations, or its financial condition.
Forward Looking Statements; Potential Fluctuations in Operating Results
This report contains certain forward looking statements. While these
statements reflect the good faith judgement of the Company's management,
such statements can only be based on facts and factors currently known by
the Company. Consequently, forward looking statements are inherently
subject to risks and uncertainties and actual outcomes may differ
materially.
The Company's revenues and operating results have varied significantly in
the past and may do so in the future. The Company expects that these
fluctuations will continue, therefore, the Company believes that period-to-
period comparisons of its financial results should not be relied on as an
indication of future performance.
Part 1
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no market rate sensitive instruments.
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 11, 1999 By(s) Robert G. Gatza
Robert G. Gatza
President and CEO
Date May 11, 1999 By(s) Robert J. Fanella
Robert J. Fanella
Chief Financial Officer
and Treasurer
