-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IsWLh6v1JAWP/UOvJWi3o86KCfcnwPZZbt+2ThKNlpCoIB+II3VZGqnTdstDe5FS HmCdWAS72SvdER1Ghe3Q+Q== 0001088127-03-000006.txt : 20030218 0001088127-03-000006.hdr.sgml : 20030217 20030214182310 ACCESSION NUMBER: 0001088127-03-000006 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020326 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 20030218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICRONETICS WIRELESS INC CENTRAL INDEX KEY: 0000820097 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 222063614 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-17966 FILM NUMBER: 03569734 BUSINESS ADDRESS: STREET 1: 26 HAMPSHIRE DR CITY: HUDSON STATE: NH ZIP: 03051 BUSINESS PHONE: 6038832900 MAIL ADDRESS: STREET 1: 26 HAMPSHIRE DRIVE CITY: HUDSON STATE: NH ZIP: 03051 FORMER COMPANY: FORMER CONFORMED NAME: MICRONETICS INC /DE/ DATE OF NAME CHANGE: 19920703 8-K/A 1 form8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A (Amendment No. 2) CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 April 10, 2002 (March 26, 2002) - -------------------------------------------------------------------- Date of Report (Date of earliest reported) MICRONETICS, INC. - -------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-17966 22-2063614 - ----------------------------- ------------- ---------------- (State or other jurisdiction (Commission (I.R.S. Employee incorporation or organization) File Number) Identification No.) 26 Hampshire Drive, Hudson, New Hampshire 03051 - ------------------------------------------- ------------- (Address of principal executive offices ) (Zip Code) Registrant's telephone number, including area code: (603) 883-2900 --------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On March 26, 2002 (the "Closing Date"), Micronetics, Inc. ("Micronetics") acquired Enon Microwave, Inc. ("Enon") through a statutory merger of Enon with and into Vectronics Microwave Corp., a wholly-owned subsidiary of Micronetics (the "Merger"), with Vectronics changing its name to Enon Microwave, Inc. (the "Surviving Corporation"). As a result of the Merger, Enon became a wholly-owned direct subsidiary of Micronetics and the holders of 1,067,817 shares of Enon Common Stock outstanding immediately prior to the Merger (all of which were cancelled upon consummation of the Merger) became entitled to receive (a) .1709 shares of restricted Micronetics Common Stock (the "Common Stock") and (b) $.8659 for each share of Enon Common Stock held. At the closing of the Merger (the "Closing"), the Surviving Corporation entered into agreements with two individuals (who were directors and executive officers of Enon) that provide for them to provide certain services for the Surviving Corporation from the Closing Date until March 26, 2003 and March 26, 2004, respectively. The agreements with these individuals include covenants prohibiting them from engaging in certain activities that may be competitive with the Surviving Corporation's business. In these agreements, the Surviving Corporation has agreed to pay to these individuals compensation in the amount of $75,000 for one year and $110,000 per year for two years, respectively. The amount of the Merger consideration and the compensation payable to the individuals engaged by the Surviving Corporation were determined through arms' length negotiations between Micronetics, on the one hand, and Enon and the individuals, respectively, on the other hand. The entire cost of the Merger, including without limitation the Merger consideration and the fees and expenses incurred by the parties to the Merger, was funded out of Micronetics' cash reserves and a term loan from Banknorth, N.A. Enon designs and manufactures high power, solid state microwave switches, attenuators, limiters, phase shifters, filters and control devices and assemblies. Enon's power capabilities range from 10 watts to 10,000 watts, with average power capabilities as high as 1,600 watts. Enon's customer base includes Lockheed Martin, Northrop Grumman and Raytheon. The Merger was recorded in accordance with Statements of Financial Accounting Standards No. 141, Business Combinations. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired. 1. Enon's financial statements as of December 31, 2001 and for the two years then ended. (b) Pro Forma Financial Information. (c) Exhibits. Number Description - ------ -------------- 2.1 Agreement of Merger dated as of February 14, 2002, among Micronetics, Inc., Vectronics Microwave Corp., and Enon Microwave, Inc. (the "Agreement of Merger").* 2.2 Amendment dated as of February 21, 2002 to Agreement of Merger.* 2.3 Second Amendment dated as of March 26, 2002 to Agreement of Merger.* 2.4 Voting Agreement dated January 4, 2002 among Micronetics, Inc. and certain stockholders of Enon Microwave, Inc.* 23.1 Consent of Independent Public Auditor.** ____________________ * Incorporated by reference to the Company's original Current Report on Form 8-K filed on April 10, 2002. ** Since there were no changes to the audited financial statements of Enon in this Current Report on Form 8-K/A (Amendment No. 2), this Consent is Incorporated by reference to the Company's Current Report on Form 8-K/A (Amended No. 1) filed on November 27, 2002. INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION Financial Statements of Enon Microwave, Inc. (Audited) Report of Independent Auditor...................................................... F-1 Balance Sheets as of December 31, 2001 and 2000.............. F-2 Statement of Operations for the years ended December 31, 2001 and 2000............................. F-4 Statement of Changes in Shareholders' Equity for the years ended December 31, 2001 and 2000................... F-5 Statement of Cash Flows for the years ended December 31, 2001 and 2000....................... F-6 Notes to Financial Statements................................ F-7 Pro Forma Consolidated Condensed Financial Statements (Unaudited) Introduction................................................. F-10 Unaudited Pro Forma Consolidated Condensed Balance Sheet as of December 31, 2001................................ F-11 Unaudited Pro Forma Consolidated Condensed Statement of Operations for the nine months ended December 31, 2001......................................................... F-12 Unaudited Pro Forma Consolidated Condensed Statement of Operations for the year ended March 31, 2001..................F-13 Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements......................................... F-14 Signatures................................................... F-16 Exhibit Index................................................ F-17 Paul A. Taylor Certified Public Accountant 62 Pleasant Street Marblehead, MA 01945 Independent Auditors Report To the Board of Directors: ENON MICROWAVE, INC. Topsfield, Massachusetts I have audited the accompanying balance sheets of Enon Microwave, Inc. as of December 31, 2001 and 2000 and the related statements of income (loss) and retained earnings (deficit) and cash flows for years then ended. These financial statements are the responsibility of company management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all materials respects, the financial position of Enon Microwave, Inc. as of December 31, 2001 and 2000, and the results of its operations, changes in its shareholders' equity and its cash flows for the years then ended in conformity with generally accepted accounting principles. Paul Taylor January 23, 2002 ENON MICROWAVE, INC.
Balance Sheet December 31, 2001 and 2000 2001 2000 ------------ ----------- Current Assets: Cash $ 57,376 $ 161,963 Accounts receivable 327,721 149,185 Inventory 750,851 794,940 Prepaid expenses 11,764 16,709 --------- --------- Total current assets 1,147,712 1,122,797 --------- --------- Plant and equipment 1,591,119 1,577,064 Less accumulated depreciation 1,369,548 1,284,343 --------- --------- Total 221,571 292,721 --------- --------- Total Assets $1,369,283 $1,415,518 --------- ---------
The accompanying notes are an integral part of these financial statements. ENON MICROWAVE, INC.
Balance Sheet December 31, 2001 and 2000 Liabilities and Shareholders' Equity 2001 2000 ---------- ---------- Current Liabilities: Current portion of debt $ 60,000 $ 229,092 Accounts payable 46,856 149,088 Other accrued liabilities 52,439 57,430 Customer deposits - 6,604 Accrued income taxes 21,644 966 Shareholder loans - 55,000 -------- -------- Total 180,939 498,180 -------- -------- Long Term Debt: Notes and leases payable 130,000 211,594 Loans payable officers 161,273 161,273 Accrued interest on officers' loans payable 42,264 154,822 -------- -------- 333,537 527,689 -------- -------- Shareholders' Equity: Common stock - $.15 par value 2,000,000 shares authorized, 1,067,813 shares issued and outstanding in 2001 and 2000 160,172 160,172 Additional paid-in capital 457,576 457,576 Retained earnings 237,059 (228,099) --------- --------- 854,807 389,649 --------- --------- Total Liabilities & Shareholders' Equity $1,369,283 $1,415,518 ========= =========
The accompanying notes are an integral part of these financial statements. ENON MICROWAVE, INC.
Statement of Operations for the year ended December 31, 2001 and 2000 2001 2000 ---------- ---------- Sales $2,779,138 $2,452,444 Cost of Sales 1,508,058 1,891,683 --------- --------- Gross Profit 1,271,080 560,761 --------- --------- Other Expenses: General and administrative 627,191 582,565 Interest expense 42,400 68,606 Research and development 112,754 104,949 -------- -------- Total 782,345 756,120 -------- -------- Income (Loss) before taxes 488,735 (195,359) State Income Taxes 17,808 2,740 Federal Income Taxes 5,769 - -------- -------- Total Income Taxes 23,577 2,740 -------- -------- Net Income 465,158 (198,099) Retained Earnings beginning of period (228,099) (30,000) -------- -------- Retained earnings (deficit) end of period $ 237,059 $ (228,099) ======== =========
The accompanying notes are an integral part of these financial statements. ENON MICROWAVE, INC.
Statement of Changes in Shareholders' Equity for the Year Ended December 31, 2001 and 2000 Common Stock -------------------- Additional Par Paid-In Retained Shares Value Capital Earnings Total ------- ----- ---------- -------- ----- Balance - December 31, 2000 1,067,813 $160,172 $457,516 $(228,099) $389,649 --------- -------- -------- --------- -------- Net income - - - 456,158 456,158 --------- -------- -------- --------- -------- Balance - December 31, 2001 1,067,813 $160,172 $457,516 $ 237,059 $854,807 ========== ======== ======== ========= ========
The accompanying notes are an integral part of these financial statements. ENON MICROWAVE, INC.
Statement of Cash Flows for the Year Ended December 31, 2001 and 2000 2001 2000 ---------- ------------ Cash Flow from Operating Activities: Net income $ 465,158 $ (198,099) Adjustments to reconcile income to cash provides (applies to) operating activities Depreciation 85,205 105,065 (Increase) decrease in Accounts receivable (178,536) 259,027 Inventories 44,089 287,132 Prepaid expenses 4,945 (5,429) Tax refund receivable - 5,396 Increase (Decrease) in: Accounts payable (102,232) (277,190) Income taxes 20,678 966 Other accrued liabilities (4,991) 18,685 Accrued interest - long term (112,558) 12,902 Customer deposits (6,604) 6,604 --------- --------- Cash provided (applied to operating activities) 215,154 215,059 --------- --------- Cash flow from investing activities addition to equipment (14,055) (28,389) --------- --------- Cash flow from financing activities: Shareholder loans (55,000) - Proceeds from borrowings - 515,122 Repayment of debt (250,686) (543,340) -------- -------- Cash flow from financing activities (305,686) (28,218) -------- -------- Cash flow (104,587) 158,452 Cash - beginning of year 161,963 3,511 -------- -------- Cash - end of year $ 57,376 $ 161,963 ======== ========
The accompanying notes are an integral part of these financial statements. ENON MICROWAVE, INC. Notes to Financial Statements for the Year Ended December 31, 2001 and 2000 Significant Accounting Policies 1. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Certain prior year balances have been reclassified to conform to the current year presentation. 2. Accounts Receivables - No provision is made for doubtful accounts. All receivables are deemed collectable by management as of the Report date. 3. Parts and Finished Goods - Parts and finished goods are valued at lower of cost or market determined by the average cost. The value is $670,614 in 2001 and $612,027 in 2000. 4. Work in Process Inventory - Work in process is recorded at lower of cost or market. Cost is determined as the cost of materials, direct labor and an allocation of overhead expenses based upon the percentage of total direct labor hours per job to the total direct labor hours. Work in process inventory is $80,237 in 2001 and $182,913 in 2000. 5. Plant and Equipment - Plant and Equipment is recorded at cost and depreciated over their estimated useful lives using the straight line method. December 31, December 31, 2001 2000 ----------- ------------ Shop equipment $ 142,433 $ 132,742 Test equipment 883,046 881,766 Office F&F 29,237 29,237 Computer equipment 71,591 68,507 Leasehold improvements 111,170 111,170 Leased equipment 353,642 353,642 --------- --------- Total 1,591,119 1,577,064 Less accumulated depr. 1,369,548 1,284,343 --------- --------- Total $ 221,571 $ 292,721 --------- --------- ENON MICROWAVE, INC. Notes to Financial Statements for the Year Ended December 31, 2001 and 2000 (Continued) Depreciation expense totals $85,205 in 2001 and $105,065 in 2000. Estimated useful lives are: Shop, test, office and computer equipment 5-7 years Leasehold improvements 5-10 years Leased equipment 5-7 years 6. Research and Development Cost - Research and development costs are costs incurred in engineering and new product development, over and above amounts funded by contract programs. These costs are for initial design and prototypes. The Company has been awarded Federal Grants to develop new products. The receipts under these grants are offset against the expenses incurred in such development. 7. Income Taxes - Income taxes are accounted for by the asset and liability approach in accordance with statement of financial accounting standards No. 109. Deferred taxes would represent the expected tax consequences when the reported amounts of assets and liabilities are recovered or paid. They arise from temporary differences between taxable and book income and the future tax impact of unused credits. The Company has a research and development tax credit available of $47,517 available through 2010 that would calculate to a deferred tax asset of approximately $14,255. However, the valuation allowance would be the same amount leaving a deferred tax asset of $0. Current federal tax liability for 2001 is $5,769. There was no tax liability for 2000. 8. Note payable to Bank - At December 31, 2001, the Company had available a line of credit which provides for borrowings up to $250,000 in 2001 and $150,000 in 2000. Borrowings under the agreement are secured by certain assets of the Company. Outstanding amounts under the line of credit bear interest at 1.50 percent above the bank's prime rate. The amount of the line of credit outstanding at December 31, 2001 and 2000 are $0 and $150,000, respectively. ENON MICROWAVE, INC. Notes to Financial Statements for the Year Ended December 31, 2001 and 2000 (Continued) The Company also has a term loan that was established in 2000 for $300,000. The loan is payable over 60 months at $5,000 per month plus interest at the base rate currently 4.25%. Both of these credit facilities are secured by certain assets of the Company. Officer/shareholders, who have guaranteed this loan, have granted a second mortgage on the property rented by the Company to secure their guaranty. In conjunction with a debt refinancing, property rented by the Company which is owned by a related party was remortgaged during 2000. The mortgage has a term of 60 months. Repayment is based on a 240 month principal amortization together with interest at 9.7%. The proceeds from this new mortgage were used to pay the note payable to MBDC (see Note 9) in 2000. 9. Note Payable to MBDC - Due in monthly installments of $2,292 per month plus interest at prime plus 2-3/4%, through April 1, 2004, secured by equipment. The note was repaid in 2000. $25,000 of this loan was repaid by the Company. The remaining debt of $96,436 was repaid by a related party owning the premises rented by the Company. 10. Commitments - The Company rents office and manufacturing facilities under non-cancelable operating lease agreements from one related party and one unrelated party. Future minimum lease payments on operating leases are as follows: 2002 120,700 2003 73,000 Rent expense was $113,500 and $103,207 in fiscal years 2001 and 2000 respectively. 11. 401(k) Savings and Retirement Plan - The Company has a 401(k) savings and retirement plan for all employees. Under provisions of the plan, employees may voluntarily contribute up to 15% of their compensation up to the statutory limit. In addition, the Company can make a matching contribution at its discretion. There was no Company match in 2001 and 2000. 12. Interest on Officer Loans - Subsequent to the issuance of financial statements dated February 21, 2000, it was discovered that officer loans were subject to interest provisions since 1988. Interest expense and the accrual of accrued interest liability had not been provided for in any financial statements ENON MICROWAVE, INC. Notes to Financial Statements for the Year Ended December 31, 2001 and 2000 (Continued) through December 31, 1999 due to covenants in prior loan agreements. The effect of this is to reduce income by $12,902 in 2000. There is no income tax effect on the correction of this interest accrual. Federal Tax Law requires that interest expense be paid by the entity to shareholder/officers in order for it to be deductible by the corporation. 13. Revenue Recognition - Revenues are recognized when there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed and determinable, and collectability is reasonable assured. This generally occurs when products are shipped and the risk of loss has passed. Revenue related to products shipped subject to customers' evaluation, if any, is recognized upon final acceptance within a reasonable amount of time. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Introductory Note On March 26, 2002, the Company acquired Enon for an aggregate purchase price of $1,843,561, consisting of $924,623 in cash, the issuance of 182,447 shares of Common Stock valued at $675,053 and $243,885 (estimated) in costs directly attributable to the purchase (primarily of banking and legal fees). The fair value of the Common Stock ($3.70 a share) was determined based on the average market price of the stock on NASDAQ for ten days prior and ten days after the closing. The acquisition was recorded in accordance with the "purchase method" of accounting and, accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the estimated fair values at the date of acquisition. The excess of the estimated purchase price over the fair value of the net assets acquired was approximately $1,048,607 and has been recorded as goodwill. SFAS No. 141 requires that the balance of the purchase price first be allocated to identifiable intangible assets apart from goodwill. Since there were no other identifiable intangible assets in the acquisition, i.e. trademarks, patents, customer lists etc., the excess was allocated to goodwill. There were covenants not to compete with two officers of Enon but the Company has assigned no value to those covenants due to the small likelihood that established customers of Enon would change vendors, the limited value assigned to them in the negotiations for the purchase of Enon and the stated intentions of the holders of these covenants to retire or work for the Company and then retire.
The following table sets forth the allocation of the estimated purchase price. The Book Value numbers are derived from Enon's audited December 31, 2001 Balance Sheet. Book Fair Value Adjustments Value ----- ----------- ----- Cash $ 57,376 - $ 57,376 Accounts Receivable 327,721 (16,386) 311,335 Inventory 750,851 (112,628) 638,223 Prepaid expenses 11,764 - 11,764 Property and equipment net 221,571 - 221,571 Deferred tax asset - 47,517 47,517 Accrued liabilities (514,476) 21,644 (492,832) Adjusted fair value - - 794,954 Purchase price - - 1,843,561 Balance of purchase price allocated to goodwill - - $1,048,607
The adjustments to accounts receivable and inventory were to reduce accounts receivable by uncollectible accounts and the write- off of obsolete inventory that were negotiated as part of the purchase price. Also, the Company recognized a deferred tax asset of $47,517 which represents a tax credit carry-forward of Enon. There was also a reduction of accrued expenses of $21,644 which represents a write-off of accrued income taxes. The following unaudited pro forma consolidated condensed financial statements as of March 31, 2001 and for the nine months ended December 31, 2001 give effect to the acquisition of Enon Microwave, Inc. ("Enon"). The pro forma consolidated condensed balance sheet presents Micronetics, Inc.'s ("Micronetics") financial position as if the acquisition of Enon had occurred on December 31, 2001. The pro forma consolidated condensed statements of operations present Micronetics results as if the acquisition of Enon had occurred on April 1, 2000. Micronetics fiscal year end is March 31 and Enon's fiscal year end is December 31. Micronetics third quarter of its current fiscal year ended on December 31, 2001. The pro forma consolidated condensed balance sheet as of December 31, 2001 is based upon Micronetics historical balance sheet as of December 31, 2001, which has been adjusted for the effects of the Enon acquisition. The pro forma consolidated condensed statement of operations for the nine months ended December 31, 2001 is based upon Micronetics historical results and the pro forma statement of operations for Enon for the nine months ended September 30, 2001. The pro forma consolidated statement of operations for the year ended March 31, 2001 is based on Micronetics' historical statement of operations and the pro forma statement of operations of Enon for the year ended December 31, 2001, as adjusted. As set forth below, since the date of Enon's most recent fiscal year is more than 93 days after the date of Micronetics' most recent fiscal year end in accordance with applicable rules, we have subtracted the information in Enon's most recent fiscal year that occurred from April 1, 2001 through December 31, 2001 and added the information from Enon's prior fiscal year that occurred from April 1, 2000 through December 31, 2000. As a result of this adjustment, we have included financial information for the period January 1, 2001 through March 31, 2001 from Enon in both the pro forma Consolidated Statement of Operations for the year ended March 31, 2001 and proforma consolidated statement of operations for the nine months ended December 31, 2001. The pro forma consolidated condensed financial statements include, in management's opinion, all material adjustments necessary to reflect the acquisition of Enon. The pro forma consolidated condensed financial statements do not represent the Company's actual results of operations, including the acquisition, nor do they purport to predict or indicate Micronetics' financial position or results of operations at any future date or for any future period. MICRONETICS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED) Assets ------ Micronetics Enon Pro December 31, December 31, Forma Micronetics 2001(a) 2001(b) Adjustments(c) Pro Forma ------------ ---------- -------------- ----------- Cash $2,141,743 $ 57,376 $ (924,623)(6) $ 1,274,496 Accounts receivable 1,697,337 327,721 (16,386)(5) 2,008,672 Inventories 2,374,928 750,851 (112,628)(5) 3,013,151 Other current assets 80,154 11,764 - 91,918 Property and equipment - net 1,947,455 221,571 - 2,169,026 Deferred tax asset - - 47,517(3) 47,517 Intangibles and other assets 459,136 - 1,100,810(5) 1,559,946 --------- --------- --------- ---------- Total assets $8,700,753 $1,369,283 $ 42,487 $10,164,726 ========= ========= ========= ========== Liabilities and Shareholders' Equity Total current liabilities $ 732,422 $ 180,939 $ 300,384(2) $ 1,187,645 Long-term debt 739,857 333,537 675,213 1,073,388 Shareholders' equity: Common stock 41,423 160,172 (158,347)(1)(4) 43,248 Additional paid - in capital 3,774,859 457,576 215,812 (1)(4) 4,448,247 Retained earnings 3,515,461 237,059 (237,059)(1)(4) 3,515,461 Treasury stock (103,263) - - (103,263) --------- --------- -------- ---------- Total liabilities and shareholders' equity $8,700,753 $1,369,283 $ 601,374 $10,164,726 ========= ========= ======= ==========
The accompanying notes to the pro forma consolidated condensed financial statements are an integral part of these pro forma financial statements. MICRONETICS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS NINE MONTHS ENDED DECEMBER 31, 2001 (UNAUDITED) Pro Forma Micronetics Micronetics(d) Enon(e) Adjustments(f) Pro Forma -------------- ------- -------------- ----------- Revenues $5,644,680 $2,132,134 - $7,776,814 Cost of revenues 3,155,186 1,156,971 - 4,312,157 --------- --------- ----------- ---------- Gross profit 2,489,494 975,163 - 3,464,657 Selling, general and administrative expense 1,490,383 470,393 - 1,960,776 Research and development 295,951 84,565 - 380,516 --------- --------- ---------- ---------- Operating income 703,160 420,205 - 1,123,365 Other income (expense) 26,479 (31,800) - (5,321) --------- --------- --------- ----------- Income before provision for taxes $ 729,639 $ 388,405 - $1,118,044 Provision for income taxes 117,931 18,400 $ 84,000 220,331 --------- -------- --------- --------- Net income $ 611,708 $ 370,005 $ 84,000 $ 897,713 ========= ========= ========= ========= Net income per share .14 .35 - .20 ========= ========= ========= ========= Weighted average number of shares outstanding 4,222,909 1,067,813 - 4,405,399 ========= ========= ========= =========
The accompanying notes to the pro forma consolidated condensed financial statements are an integral part of these pro forma financial statements. MICRONETICS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED MARCH 31, 2001 (UNAUDITED) Pro Forma Micronetics Micronetics(g) Enon(h) Adjustments(i) Pro Forma -------------- ---------- -------------- ----------- Net sales $ 7,793,306 $3,056,973 - $10,850,279 Cost of sales 5,315,344 2,227,717 - 7,543,061 --------- --------- ---------- ---------- Gross Profit 2,477,962 829,256 - 3,307,218 Selling, general and administrative expense 1,196,874 711,631 - 1,908,505 Research and development 270,484 112,871 - 383,355 --------- --------- --------- ---------- Income (loss) from operations 1,010,604 4,754 - 1,015,358 Other income (expense) 77,428 (80,943) - (3,515) --------- --------- --------- ---------- Income before provision for income taxes $ 1,088,032 $ (76,189) - $ 1,011,843 Provision for income taxes 214,800 7,132 $ (9,000) 212,932 --------- -------- --------- ---------- Net Income (loss) $ 873,232 $ (83,321) $ (9,000) $ 798,911 ========= ======== ========= ========= Basic and diluted earnings (loss) per common share: Net income - Basic $ .22 $ (.08) - $ .19 Net income - Diluted $ .21 $ (.08) - $ .18 Weighted average shares outstanding: Basic 4,025,701 1,067,817 - 4,208,191 Diluted 4,216,739 1,067,817 - 4,399,229
The accompanying notes to the pro forma consolidated condensed financial statements are an integral part of these pro forma financial statements. MICRONETICS, INC. AND SUBSIDIARIES NOTES TO THE PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (a) Reflects the historical financial position of Micronetics at December 31, 2001. (b) Reflects the historical financial position of Enon at December 31, 2001. (c) Pro Forma adjustments to the pro forma consolidated condensed balance sheet were made to record the acquisition as of December 31, 2001 and reflect: (1) An increase in equity of approximately $675,213 relating to the issuance of 182,490 shares of Common Stock. The Common Stock was valued at $3.70 per share. (2) An increase in accrued expenses of approximately $222,081 relating to the incurrence of transaction costs by Micronetics and Enon of an aggregate of $243,725 and a reduction of income taxes of $21,644 accrued by Enon. (3) An increase in deferred tax assets of $47,517 to reflect research and development credit carryforwards of Enon. (4) A decrease in equity of approximately $850,000 relating to the elimination of Enon's historical shareholders' equity. (5) The preliminary allocation of the excess of the $1,843,561 purchase price over the fair value of net assets acquired to: Goodwill in the amount of $1,048,607; Write-down of accounts receivable in the amount of $16,386; and Write-down of inventories in the amount of $112,628. (6) The reduction of $924,623 of cash used to finance the acquisition of Enon. MICRONETICS, INC. AND SUBSIDIARIES NOTES TO THE PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued) (d) Reflects the historical operating results of Micronetics for the nine months ended December 31, 2001. Outstanding share and per share information has been adjusted to reflect the issuance of additional shares of Micronetics in the acquisition. (e) Reflects the historical operating results of Enon for the nine months ended September 30, 2001. (f) Pro Forma adjustments to the pro forma consolidated condensed statement of operations for the nine months ended December 31, 2001 to record the merger include an increase of $84,000 in income taxes provided at a 34% tax rate. (g) Reflects the historical operating results of Micronetics for the year ended March 31, 2001. Outstanding share and per share information has been adjusted to reflect the issuance of additional shares of Micronetics in the acquisition. (h) Reflects the historical operating results of Enon for the year ended March 31, 2001 (by March 31, 2001 (by inclusion of financial information from Enon's prior fiscal year for the period April 1, 2000 through December 31, 2000 and exclusion of financial information from its current fiscal year for the period April 1, 2001 through December 31, 2001). (i) Pro forma adjustments to the pro forma consolidated condensed statement of operations for the year ended March 31, 2001 to record the merger include a decrease of $9,000 in income taxes provided at a 34% tax rate. 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 hereunto duly authorized. Dated: February 14, 2003 MICRONETICS, INC. By:/s/Richard S. Kalin -------------------------- Name: Richard S. Kalin, Title: President (Principal executive and financial officer) -----END PRIVACY-ENHANCED MESSAGE-----