FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-17966
MICRONETICS WIRELESS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2063614
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
26 Hampshire Drive, Hudson NH 03051
(Address of principal executive offices)
(Zip Code)
(603) 883-2900
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of
1934 during the past 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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date:
As of February 4, 2000, 3,849,214 shares of the Issuer's
common stock, par value $.01 per share, were outstanding.
Transitional Small Business Disclosure Format (check one);
Yes No X
MICRONETICS WIRELESS, INC.
INDEX
Page No.
Part I. Financial Information.
Item 1. Financial Statements.
Condensed Balance Sheets -
December 31, 1999 and March 3-4
31, 1999
Condensed Statements of Operations-
Three Months Ended December 31, 1999
and 1998 5
Condensed Statements of Operations - 6
Nine Months Ended December 31, 1999
and 1998
Condensed Statement of Cash Flows - 7-8
Nine Months Ended December 31, 1999
and 1998
Notes to Condensed Financial 9
Statements
Item 2. Management's Discussion and Analysis 10-11
of Financial Condition and
Results of Operations.
Part II. Other Information.
Item 2. Changes in Securities and Use of Proceeds. 12
Item 6. Exhibits and Reports on Form 8-K. 12
Signature 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Assets
December 31, March 31,
1999 1999
Current assets:
Cash $ 1,113,121 $1,164,661
Receivables (net of
allowance for doubtful
accounts) 1,094,353 913,272
Inventories 2,020,256 1,738,128
Prepaid expenses 80,177 50,144
Deferred tax asset 6,102 18,102
Other current assets 148,689 70,106
Total current assets 4,462,098 3,954,413
Fixed assets:
Land 162,000 162,000
Building and improvements 855,969 855,969
Furniture, fixtures and
equipment 1,964,692 1,830,908
Capitalized leases 182,588 182,588
Gross fixed assets 3,165,249 3,031,465
Accumulated depreciation and
amortization (1,530,884) (1,376,840)
Total (net) fixed assets 1,634,365 1,654,625
Other assets:
Deposits 4,487 765
Intangibles (net of amortization) 70,997 75,497
Goodwill 331,056 337,380
Total other assets 406,540 413,662
Total assets $6,503,603 $6,022,680
MICRONETICS WIRELESS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
Liabilities and Shareholders' Equity
December 31, March 31,
1999 1999
Current liabilities:
Short-term loans and capitalized
leases $ 201,259 $ 225,534
Accounts payable 176,403 196,321
Accrued expenses and taxes, other
than income taxes 245,940 243,930
Income taxes payable 37,896 17,153
Total current liabilities 661,498 682,938
Long-term debt:
Capitalized leases 18,212 52,053
Notes payable - bank 719,321 782,450
Notes payable - other 81,328 81,328
Total long-term debt 818,861 915,831
Shareholders' equity:
Common stock 38,459 37,628
Additional paid - in capital 3,294,476 3,094,153
Retained earnings 1,690,309 1,292,130
Total shareholders' equity 5,023,244 4,423,911
Total liabilities and
shareholders' equity $ 6,503,603 $6,022,680
<PAGE>
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended December 31,
1999 1998
Operating revenues $4,495,300 $3,297,823
Cost of operations 2,804,457 1,989,724
Gross profit 1,690,843 1,308,099
Selling, general and
administrative expenses 1,175,964 799,528
Research and development
expense 99,546 109,705
Operating income 415,333 398,866
Other income (expense):
Rental income 43,300 46,504
Interest income 25,789 28,265
Interest (expense) (57,089) (58,855)
Other income 17,846 15,585
Total 29,846 31,499
Income before taxes 445,179 430,365
Provision for income taxes 47,000 87,466
Net income $ 398,179 $ 342,899
Net income per share $ 0.11 $ 0.10
Weighted average number
of shares outstanding 3,788,800 3,403,688
MICRONETICS WIRELESS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended December 31,
1999 1998
Operating revenues $1,665,769 $1,095,089
Cost of operations 1,097,519 675,522
Gross profit 568,250 419,567
Selling, general and
administrative expenses 395,006 277,923
Research and development expense 62,902 21,027
Operating income 110,342 120,617
Other income (expense):
Rental income 11,200 16,050
Interest income 8,087 8,949
Interest (expense) (18,578) (19,054)
Other income (expense) 5,615 3,821
Total 6,324 9,766
Income before taxes and
extraordinary item 116,666 130,383
Provision for income taxes (27,000) 15,470
Net income $ 143,666 $ 114,913
Net income per share $ .04 $ 0.03
Weighted average number
of shares outstanding 3,788,800 3,403,688
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended December 31,
1999 1998
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Operating
Activities:
Net income $ 398,179 $342,899
Adjustments to reconcile net
income to net cash provided
by operating activities:
Decrease in deferred tax asset 12,000 43,302
Depreciation and amortization 164,868 134,991
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, inventories, prepaid
expenses and other current assets (571,825) (70,597)
(Increase) decrease in security
deposits (3,722) 2,796
(Decrease) increase in accounts
payable, accrued liabilities,
notes payable and other current
liabilities 2,835 (199,275)
Net cash provided
by operating activities $ 2,335 $254,116
<PAGE>
MICRONETICS WIRELESS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended December 31,
1999 1998
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash Flows from Investment
Activities:
(Additions) to fixed assets (133,784) $ (36,090)
Net cash provided (used) by
investment activities (133,784) $ (36,090)
Cash Flows from Financing
Activities:
(Reduction) of debt
and capitalized leases (121,245) $ (87,860)
Proceeds from stock options
exercised 312,772 5,564
Purchase of treasury stock (111,618) 0
Net cash provided (used)
by financing activities $ 79,909 $ (82,296)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (51,540) $ 135,730
Cash and cash equivalents, at
beginning of year 1,164,661 1,031,625
CASH AND CASH EQUIVALENTS, AT
END OF QUARTER $1,113,121 $1,167,355
<PAGE>
MICRONETICS WIRELESS, INC.
NOTES TO BE CONDENSED FINANCIAL STATEMENTS
Note 1. In the opinion of the Company, the accompanying
unaudited consolidated condensed financial statements
contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the
financial position as of December 31, 1999 and 1998,
the results of operations for the three and nine month
periods ended December 31, 1999 and 1998 and cash
flows for the nine month periods ended December 31,
1999 and 1998.
While the Company believes that the disclosures
presented are adequate to make the information not
misleading, it is suggested that these consolidated
condensed financial statements be read in conjunction
with the Company's Annual Report on Form 10-KSB for
its fiscal year ended March 31, 1999.
The results of operations for the three and nine month
periods ended December 31, 1999 are not necessarily
indicative of the results of the full year.
Note 2. Inventories are summarized below:
December 31, 1999 March 31, 1999
Raw materials and
work-in-process $1,709,201 $1,517,966
Finished goods 311,059 220,162
Total $2,020,256 $1,738,128
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
The Company had revenues of $1,665,769 and $1,095,089 for the
three months ended December 31, 1999 and 1998, respectively. For
the three months ended December 31, 1999, the Company's sales
included revenues from its acquisition of Microwave & Video
Systems, Inc. (MVS) and increased revenues from its
Microwave/Equipment Group, as compared to the prior period. The
Company's net income increased to $143,666, or $.04 per share, as
compared with net income of $114,913, or $.03 per share, for the
three month periods ended December 31, 1999 and 1998, respectively.
This is based on an increased weighted average number of shares
outstanding of 3,788,800 during the current period as compared to
3,403,688 in the year ago period.
The Company had revenues of $4,495,300 and $3,297,823 for the
nine months ended December 31, 1999 and 1998, respectively. The
Company had net income of $398,179, or $.11 per share, and $342,989
or $.10 per share, for the nine month periods ended December 31,
1999 and 1998, respectively.
Gross profit as a percent of net sales for the three and nine
month periods ended December 31, 1999 were 34.1% and 37.6%,
respectively, as compared to 38.4% and 39.7%, respectively, during
the corresponding periods of the prior fiscal year. This was
largely due to product mix. Selling, general and administrative
("SG&A") expenses as a percent of net sales for the three months
ended December 31, 1999 was 23.7% as compared to 25.4% in the prior
year. This was due to spreading out SG&A expenses over a larger
sales base during the current period. For the nine month period
ended December 31, 1999, SG&A as a percent of net sales was 26.2%
as compared to 24.2% for the prior period. Research and
development ("R&D") expense increased to 3.8% of net sales from
under 2% of net sales for the three months ended December 31, 1999
as compared to the prior year. For the nine month period ended
December 31, 1999, R&D expenses were 2.2% of net sales as compared
to 3.3% of net sales in the corresponding period of the prior year.
Financial Condition
The Company's working capital at December 31, 1999 was
$3,801,200. It was $3,271,475 at March 31, 1999. The Company's
current ratio at December 31, 1999 was 6.7 to 1, and at March 31,
1999 it was 5.8 to 1.
Net cash provided by operations in the nine months ended
December 31, 1999 was $2,335 as compared to $254,116 in the prior
year. This decline was largely due to increases in accounts
receivable and inventory during the current period. Net cash
utilized from investment activities was $133,784 during the nine
months ended December 31, 1999 as compared to $36,090 used in the
prior year. This increase was primarily due to the purchase of new
demonstration units during the current period. Net cash provided
by financing activities during the nine months ended December 31,
1999 was $79,909, as compared to $82,296 used during the prior
year. This was largely due to proceeds from the exercise of stock
options offset partially by increased repayment of debt and
repurchase of treasury stock during the current period.
Safe Harbor Statement
Statements which are not historical facts, including
statements about the Company's confidence and strategies and its
expectations about new and existing products, technologies and
opportunities, market and industry segment growth, demand and
acceptance of new and existing products are forward looking
statements that involve risks and uncertainties. These include,
but are not limited to, product demand and market acceptance risks;
the impact of competitive products and pricing; the results of
financing efforts; the loss of any significant customers of any
business; the effect of the Company's accounting policies; the
effects of economic conditions and trade, legal, social, and
economic risks, such as import, licensing, and trade restrictions;
the results of the Company's business plan and the impact on the
Company of its relationship with its lenders.
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c) Recent Sales of Unregistered Securities.
On August 16, 1999 the Company issued a five-year non-incentive
stock option to purchase 25,000 shares of
Common Stock to a key employee. The option was
exercisable at $1.32 per share of Common Stock and was
immediately exercisable. This option was exercised in
full.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Certificate of Incorporation of the Company, as amended,
incorporated by reference to Exhibit 3.1 to Registration
Statement No. 83-16453 (the "Registration Statement").
3.2 By-Laws of the Company incorporated by reference to
Exhibit 3.2 of the Registration Statement.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1999, the
registrant did not file any reports on Form 8-K.
<PAGE>
SIGNATURE
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.
MICRONETICS WIRELESS, INC.
(Registrant)
Dated: February 7, 2000 By:s/Richard S. Kalin
Richard S. Kalin,
President
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