FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 2000
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: 0-15486
MIKRON INSTRUMENT COMPANY, INC.
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(Exact Name of Registrant as Specified in its Charter)
NEW JERSEY 22-1895668
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
16 Thornton Road, Oakland, New Jersey 07436
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(Address of Principal Executive Office) (Zip Code)
(201) 405-0900
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(Registrant's telephone number including area code)
Indicate 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 reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The number of shares of registrant's Common Stock, $.003 par value, outstanding
as of June 13, 1999 was 4,288,200 shares.
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MIKRON INSTRUMENT COMPANY, INC.
INDEX
Page No.
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PART I - FINANCIAL INFORMATION:
Balance Sheet - April 30, 2000 3
Statement of Operations - Three and six months ended April 30,
2000 and 1999 4
Statement of Cash Flows - Six months ended April 30,
2000 and 1999 5
Notes to Financial Statements 6
Management's Discussion And Analysis Of
Financial Condition And Results Of Operations 7
PART II - OTHER INFORMATION 10
SIGNATURES 11
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MIKRON INSTRUMENT COMPANY, INC.
BALANCE SHEET
April 30, 2000
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(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 867,979
Trade accounts receivable, less allowance for
doubtful accounts of $152,817 1,772,134
Inventories 2,406,915
Prepaid expenses and other current assets 96,734
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TOTAL CURRENT ASSETS 5,143,762
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PROPERTY AND EQUIPMENT, net 287,716
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OTHER ASSETS 192,218
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$5,623,696
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $1,169,036
Current portion of capital lease obligation 2,350
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TOTAL CURRENT LIABILITIES 1,171,386
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LONG TERM LIABILITIES
Capital lease obligation 1,502
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1,172,888
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STOCKHOLDERS' EQUITY
Common stock, $.003 par value;
Authorized - 15,000,000 shares; issued and
Outstanding - 4,285,700 shares 12,858
Additional paid-in capital 4,051,393
Retained earnings 386,557
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TOTAL STOCKHOLDERS' EQUITY 4,450,808
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$5,623,696
==========
See notes to financial statements
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MIKRON INSTRUMENT COMPANY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
--------------------------- ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 2,524,198 $ 1,467,033 $ 5,009,206 $ 3,171,540
Royalties 48,123 46,000 94,237 74,000
----------- ----------- ----------- -----------
TOTAL REVENUES 2,572,321 1,513,033 5,103,443 3,245,540
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of goods sold 1,427,680 710,439 2,613,889 1,526,684
Selling, general and administrative 753,456 844,647 1,663,268 1,670,971
Research and development 245,786 178,890 485,863 352,309
----------- ----------- -----------
TOTAL COSTS AND EXPENSES 2,426,922 1,733,976 4,763,020 3,549,964
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS 145,399 (220,943) 340,423 (304,424)
----------- ----------- ----------- -----------
OTHER INCOME:
Investment and interest income 7,614 4,946 24,874 9,110
----------- ----------- ----------- -----------
NET INCOME (LOSS) BEFORE PROVISION
FOR TAXES (Note A) 153,013 (215,997) 365,297 (295,314)
PROVISION FOR INCOME TAXES 52,118 -- 52,118 --
----------- ----------- ----------- -----------
NET INCOME (LOSS) 100,895 (215,997) 313,179 (295,314)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - BASIC $ .02 $ (0.06) $ 0.07 $ (0.08)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - FULLY DILUTED $ .02 $ (0.06) $ 0.07 $ (0.08)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES 4,436,811 3,785,700 4,436,250 3,698,033
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
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MIKRON INSTRUMENT COMPANY, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
----------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 313,179 $ (295,314)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 45,947 38,397
Amortization 13,605 --
Changes in assets and liabilities:
Decrease (increase) in trade accounts receivable (811,607) 305,729
Decrease (increase) in inventories (206,182) 91,223
Decrease (increase) in prepaid and other current assets (18,834) 50,000
Decrease (increase) in other assets (95,403) (44,802)
Increase (decrease) in accounts payable and accrued liabilities 419,674 (150,071)
----------- -----------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES (339,621) (4,838)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (19,352) (9,585)
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NET CASH USED IN INVESTING ACTIVITIES (19,352) (9,585)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of capital lease obligation (2,674) (10,835)
Sale of stock pursuant to exercise of stock options -- 150,239
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,674) 139,404
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (361,647) 124,981
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 1,229,626 415,400
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 867,979 $ 540,381
=========== ===========
</TABLE>
See notes to financial statements
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MIKRON INSTRUMENT COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(Unaudited)
1. BASIS OF PRESENTATION
Our unaudited interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial statements and
should be read in conjunction with our October 31, 1999 Annual Report on Form
10-KSB.
Our unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of our management, necessary
to present a fair statement of financial position as of April 30, 2000 and the
results of operations and cash flows for the period then ended. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
2. EARNINGS PER SHARE
In February 1997, the Financial Standards Accounting Board issued Statement on
Financial Accounting Standards No. 128, "Earnings Per Share" (FAS No. 128) which
became effective for both interim and annual financial statements for the
periods ending December 15, 1997. FAS No. 128 requires a presentation of "basic"
and (where applicable "diluted" earnings per share. Generally, basic earnings
per share are computed on only the weighted average number of common shares
actually outstanding during the period and the diluted computation considers
potential shares issuable upon exercise or conversion of other outstanding
instruments where dilution would result. Furthermore, FAS No. 128 requires the
restatement of the prior period reported earnings to conform to the new
standard.
3. INCOME TAXES
Through January 31, 2000, we recorded a full valuation allowance against
deferred tax assets based upon our management's expectations regarding
realization of the related tax benefit. As a result of the income generated
during the second quarter of fiscal 2000 and management's projections regarding
future periods, management concluded that there would be sufficient taxable
income in the future to realize the majority of our deferred tax assets
(including net operating loss carryforwards of $235,000). As such, an income tax
benefit of $94,000 was recorded in the second quarter associated with the
release of the valuation allowance.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis provides information which our management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. This discussion should be read in
conjunction with the financial statements and notes thereto appearing elsewhere
herein.
Results of Operations
Net sales for the quarter ended April 30, 2000 were $2,524,198, a 72.0% increase
over our net sales of $1,467,033 for the quarter ended April 30, 1999. For the
six months ended April 30, 2000, our net sales were $5,009,206, a 57.9% increase
over our net sales of $3,171,540 for the comparable six months of fiscal 1999.
These increases resulted primarily from the successful introduction of our new
portable thermal imaging camera (Model TH7102) and increased demand for our
blackbody calibration sources.
Our cost of sales as a percentage of net sales for the six and three month
periods ended April 30, 2000 were 51% and 56%, respectively, as compared to 48%
for both the six and three month periods ended April 30, 1999. These increases
primarily resulted from reduced margins on thermal imaging products due to our
sales of demonstration units to our sales representatives at or close to cost.
Selling, general and administrative expenses for the three and six month periods
ended April 30, 2000 were $753,456 and $1,663,268, as compared to $844,647 and
$1,670,971 for the comparable periods of fiscal 1999. The comparative 11%
decrease in SG&A during the three month periods was primarily due to a reduction
in advertising expenditures. However, our SG&A for the six month periods ended
April 30, 2000 and 1999 were approximately the same because the additional cost
of new senior management which came on board in May 1999 ($150,000 for the six
month period ended April 30,2000) offset such cost reductions.
Research and Development expenses for the quarter ended April 30, 2000 increased
by 37.4% to $245,786 as compared to $178,890 for the quarter ended April 30,
1999. As for the six month period ended April 30, 2000, R&D expenses increased
by 37.9% to $485,863 as compared to $352,309 for the same period last year. Such
increases were due primarily to the addition of three new engineers through our
acquisition of Texas Infrared in October 1999.
Royalty income for the three and six months ended April 30, 2000, were $48,123
and $94,237 as compared to $46,000 and 74,000 for the three and six month
periods ended April 30, 1999. These increases were due to greater sales of
products by third parties which incorporate
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technologies licensed by us over the sales of such products made by those third
parties during the same periods of fiscal 1999.
Our income before the provision for income taxes for the three months and six
months ended April 30, 2000 were $153,013 and $365,297 respectively. This
compares quite favorably to the losses of $215,997 and $295,314 that we incurred
during the three and six month periods ended April 30, 1999.
Through January 31, 2000, we recorded a full valuation allowance against
deferred tax assets based upon our management's expectations regarding
realization of the related benefit. As a result of the income generated during
our second quarter of fiscal 2000, and management's projections regarding future
periods, management concluded that there would be sufficient taxable income in
the future to realize the majority of our deferred tax assets (including net
operating loss carryforwards of $235,000). As such, an income tax benefit of
$94,000 was recorded in the second quarter associated with the release of the
valuation allowance.
Our effective tax rate for the three and six month periods ended April 30, 2000
were 34% and 14%, respectively, which reflect the benefit of the release of the
valuation allowance. Our effective tax rate in fiscal 1999 and the first quarter
of fiscal 2000 was 0% inasmuch as we did not record a benefit for losses
generated.
Liquidity and Capital Resources
At April 30, 2000, we held $867,979 in cash and short term investments, and we
had $1,772,134 in accounts receivable. The decrease in cash and short term
investments resulted primarily from our investment in inventory.
Our working capital as of April 30, 2000 was $3,972,376 as compared to
$3,714,400 at year end October 31, 1999. This increase primarily was a result of
the increase in our accounts receivable, offset in part by the increase in our
accounts payable.
In April, 2000, we increased the working capital line of credit that had been
extended to us by our bank to $1,000,0000. The principal outstanding under the
line is payable on demand. As of April 30, 2000, there were no amounts
outstanding under the agreement.
At the same time we entered into a $1,000,000 term loan agreement with the same
bank for the purpose of financing our acquisition of E Square Technology
Corporation. Under the terms of that agreement, the loan must be repaid in 36
monthly installments of principal commencing June 1, 2000 and continuing through
May 3, 2003. As of April 30, 2000, there were no amounts outstanding under that
loan agreement.
As collateral security for our indebtedness under the working capital line of
credit and our obligation under the term loan agreement, we have granted a
security interest to the bank which covers virtually all of our assets. The term
loan agreement also contains a number of financial and other covenants which, if
not satisfied, could result in an acceleration of the maturity of our
indebtedness to the bank.
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Subsequent Event
In May 2000, we acquired the outstanding shares of E Square Technology, Inc. for
$1,022,000 in cash which was adjusted post-closing to $893,182. The acquisition
was accounted for as a purchase and cost will be assigned to the net assets
acquired based on their estimated fair values at the date of acquisition.
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PART II - OTHER INFORMATION
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The exhibits listed below are filed as part of this report.
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
for which this report has been filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
June 14, 2000
MIKRON INSTRUMENT COMPANY, INC.
By: /s/ Gerald D. Posner
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Gerald D. Posner, President (Principle
Executive Officer), as Registrant's duly
authorized officer
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