-----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, CXCuwPH5DOmmjeTmtmuijCjY04ox22S4BpIxWpWs8dc0Ei3rb63pLQoHgagUpzN7 n/Qyl91YUHfzOrAZbbFaZg== 0000950137-96-000718.txt : 19960517 0000950137-96-000718.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950137-96-000718 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: M WAVE INC CENTRAL INDEX KEY: 0000883842 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 363809819 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19944 FILM NUMBER: 96566747 BUSINESS ADDRESS: STREET 1: 216 EVERGREEN ST CITY: BENSENVILLE ILLINOIS STATE: IL ZIP: 60106 BUSINESS PHONE: 7088603560 MAIL ADDRESS: STREET 1: 216 EVERGREEN STREET CITY: BENSENVILLE STATE: IL ZIP: 60106 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1996 Commission File No. 0-19944 M~WAVE, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-3809819 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 216 Evergreen Street, Bensenville, Illinois 60106 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (708) 860-9542 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 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 registrant has 3,020,375 shares of common stock outstanding at May 6, 1996. 1 2 PART I - FINANCIAL INFORMATION Item 1: Financial Statements M~WAVE, Inc. CONSOLIDATED BALANCE SHEETS (unaudited)
December 31, March 31, 1995 1996 ------------ ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................... $2,403,747 $222,402 Marketable securities....................................... 1,321,358 1,008,615 Accounts receivable,net of allowance for doubtful accounts of $10,000.......................... 4,106,494 4,108,655 Inventories................................................. 3,462,200 2,595,591 Refundable income taxes..................................... 639,112 901,924 Deferred income taxes....................................... 154,682 707,373 Prepaid expenses and other.................................. 331,010 219,293 ------------ ----------- Total current assets.................................... 12,418,603 9,763,853 PROPERTY, PLANT AND EQUIPMENT: Land, buildings and improvements............................ 2,680,882 6,012,230 Machinery and equipment..................................... 10,043,357 10,991,914 ------------ ----------- Total property, plant and equipment..................... 12,724,239 17,004,144 Less accumulated depreciation............................... (2,629,466) (2,973,749) ------------ ----------- Property, plant and equipment-net....................... 10,094,773 14,030,395 GOODWILL........................................................ 873,636 848,190 OTHER ASSETS.................................................... 20,811 23,357 ------------ ----------- TOTAL........................................................... $23,407,823 $24,665,795 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable............................................ $1,734,831 $2,314,096 Accrued expenses............................................ 1,163,692 1,476,976 Current portion of long-term debt........................... 409,338 603,617 ------------ ----------- Total current liabilities............................... 3,307,861 4,394,689 DEFERRED INCOME TAXES........................................... 723,130 723,130 LONG-TERM DEBT.................................................. 11,239 2,308,726 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; authorized, 1,000,000 shares; no shares issued.................................. Common stock, $.01 par value; authorized, 10,000,000 shares; 3,040,375 shares issued and 3,020,375 shares outstanding at December 31, 1995 and March 31, 1996....... 30,404 30,404 Additional paid-in capital.................................. 7,488,422 7,488,422 Retained earnings .......................................... 11,966,767 9,840,424 Treasury stock: 20,000 shares, at cost..................... (120,000) (120,000) ------------ ----------- Total stockholders' equity ............................. 19,365,593 17,239,250 ------------ ----------- TOTAL........................................................... $23,407,823 $24,665,795 ============ ===========
See notes to consolidated financial statements. 2 3 M~WAVE, Inc. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended March 31, ---------------------------- 1995 1996 ---------- ---------- Net sales................................ $8,034,178 $6,256,558 Cost of goods sold....................... 5,498,377 8,090,779 ---------- ---------- Gross profit (loss).................... 2,535,801 (1,834,221) Operating expenses: General and administrative............. 559,036 736,692 Selling and marketing.................. 406,940 483,403 Research and development............... 112,264 121,355 ---------- ---------- Total operating expenses............. 1,078,240 1,341,450 Operating income (loss) ............... 1,457,561 (3,175,671) Other income (expense): Interest income........................ 80,277 29,551 Interest expense....................... (15,999) (58,004) Loss on disposal of assets............. 0 (149,751) ---------- ---------- Total other income (expense) 64,278 (178,204) Income (loss) before income taxes... 1,521,839 (3,353,875) Provision (credit) for income taxes...... 604,788 (1,227,531) ---------- ---------- Net income (loss)........................ $917,051 ($2,126,344) ========== ========== Net income (loss) per share $0.30 ($0.70) Weighted average shares 3,067,867 3,020,375
See notes to consolidated financial statements. 3 4 M~WAVE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three months ended March 31, ---------------------------- 1995 1996 --------- --------- OPERATING ACTIVITIES: Net income (loss).............................................. $917,051 ($2,126,344) Adjustments to reconcile net income (loss) to net cash flows from operating activities: Depreciation and amortization.............................. 256,946 369,729 Deferred income taxes...................................... 144,264 (552,691) Changes in assets and liabilities: Accounts receivable-trade.................................. (1,127,451) (2,161) Insurance proceeds receivable.............................. 400,000 0 Inventories................................................ (885,990) 866,609 Income taxes............................................... 431,680 (262,812) Prepaid expenses and other assets.......................... 38,650 109,171 Accounts payable........................................... 533,992 579,266 Accrued expenses........................................... (363,915) 313,284 --------- --------- Net cash flows from operating activities................ 345,227 (705,949) --------- --------- INVESTING ACTIVITIES: Purchase of property, plant and equipment...................... (1,648,173) (4,279,905) Redemption of marketable securities............................ 0 312,743 Collection of notes receivable................................. 4,678 0 --------- --------- Net cash flows from investing activities................ (1,643,495) (3,967,162) --------- --------- FINANCING ACTIVITIES: Common stock issued upon exercise of stock options............. 17,062 0 Mortgage debt incurred......................................... 2,496,007 Payments on capital leases..................................... (8,738) (4,241) --------- --------- Net cash flows from financing activities................ 8,324 2,491,766 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS........................ (1,289,944) (2,181,345) CASH AND CASH EQUIVALENTS - Beginning of period.................. 6,868,823 2,403,747 --------- --------- CASH AND CASH EQUIVALENTS - End of period........................ $5,578,879 $222,402 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest..................... $58,004
See notes to consolidated financial statements. 4 5 M~WAVE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 1995 filed March 29, 1996. 2. BUSINESS M~Wave, through its wholly-owned subsidiaries, Poly Circuits Inc. and P C Dynamics Corporation (collectively, the "Company"), manufactures microwave frequency components and high frequency circuit boards on Teflon-based laminates for commercial and military wireless communication applications. In 1995, the Company established a division that does contract assembly work for customers. 4. INVENTORIES Substantially all the Company's inventories are in work in process. 5. DEBT The Company has borrowed $2,496,000 at March 31, 1996 against a total financing commitment of $2,954,000 for the construction of the new P C Dynamics Corporation facility in Frisco, Texas. Interest on this mortgage debt is at the prime rate. The loan is payable in monthly installments of principal and interest beginning July 1996 and ending in June 2001. 6. LITIGATION The Company is a party to various actions and proceedings related to its normal business operations. The Company believes that the outcome of this litigation will not have a material adverse effect on the financial position or results of operations of the Company. The Company and Joseph Turek have been named as defendants in Lionheart Partners, Inc., as general partner of Lionheart USA Micro Cap Value, L.P. v. M~Wave, Inc. and Joseph Turek, 5 6 which was filed on or about November 17, 1995 in the United States District Court for the Northern District of Illinois. The case was filed as a purported class action on behalf of all persons who purchased common stock of the Company between August 8, 1995 and October 18, 1995. The complaint alleges that the defendants made materially false and misleading statements and failed to correct public representations which had become materially false and misleading regarding the Company's revenues and earnings. The complaint asserts claims under Sections 10(b) and 20 of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks compensatory damages in an unspecified amount. The Company believes that this action is without merit. On January 5, 1996, the Company filed a motion to dismiss the complaint. On April 26, 1996, this motion to dismiss was denied. 6 7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS FOR THE QUARTER ENDED MARCH 31, 1996 COMPARED TO THE QUARTER ENDED MARCH 31, 1995 NET SALES Net sales were $6,257,000 for the first quarter ended March 31, 1996, a decrease of $1,778,000 or 22% below the first quarter of 1995. The decrease primarily reflects a slowdown in orders from the Company's largest customers as well as first quarter production problems which resulted in higher than expected sales returns. The reduction in orders from key accounts began in 1995 and is continuing in 1996. GROSS PROFIT(LOSS) AND COST OF GOODS SOLD Gross profit decreased to a loss of ($1,834,000) in the first quarter of 1996 from $2,536,000 in the first quarter of 1995. This decrease is primarily attributable to reduced shipments to the Company's largest customers, a shift in product mix, certain price reductions and production problems. The decrease in gross profit includes sales adjustments for pricing and returns of $721,000 and inventory writedowns of $1,295,000 and $665,000 relating to manufacturing scrap and rework and inventory obsolescence, respectively. The Company has begun to make operational changes designed to enhance its quality control and ability to manufacture highly complex products; however, there can be no assurance as to when, or if, these changes will result in improved manufacturing processes. Future production problems would continue to adversely impact the Company's gross margins and profitability, which would also result in decreased liquidity and adversely affect the Company's financial position. OPERATING EXPENSES General and administrative expenses were $737,000 or 11.8% of net sales in the first quarter of 1996 compared to $559,000 or 7.0% of net sales in the first quarter of 1995. The increase is primarily attributable to an increase in legal expenses of $75,000 relating to litigation and regulatory compliance and relocation expense of $50,000 for employees relocating from Poly Circuits to P C Dynamics in Texas. General and administrative expenses consist primarily of salaries and benefits, professional services, depreciation of office equipment, computer systems and occupancy expenses. Selling and marketing expenses were $483,000 or 7.7% of net sales in the first quarter of 1996 compared to $407,000 or 5.1% of net sales in the first quarter of 1995. The increase in selling and marketing expenses relates primarily to a shift in sales from non-commissionable to commissionable. Selling and marketing expenses 7 8 include the cost of salaries, advertising and promoting the Company's products, and commissions paid to independent sales organizations. Research and development expenses were $121,000 or 1.9% of net sales in the first quarter of 1996 compared to $112,000 or 1.4% of net sales in the first quarter of 1995. Research and development costs are expensed as they are incurred. OPERATING INCOME(LOSS) Operating loss was ($3,176,000) in the first quarter of 1996 compared to operating income of $1,458,000 or 18.1% of net sales in the first quarter of 1995, a decrease of $4,633,000. The changes in operating income reflect primarily the changes in net sales, gross profit and cost of goods sold and operating expenses as discussed above. LOSS ON DISPOSAL OF ASSETS The loss of $149,751 relates to unusable equipment disposed of at the P C Dynamics location. INCOME TAXES In the first quarter of 1995 the Company had an effective tax rate of 39.7%. In the first quarter of 1996, the Company had an effective tax credit of 36.6%. LIQUIDITY AND CAPITAL RESOURCES Net cash provided/(used) from operations was ($706,000) in the first quarter of 1996 compared to $345,000 in the first quarter of 1995. A reduction of inventories and increases in accounts payable and accrued expenses partially offset the first quarter 1996 loss from operations. Capital expenditures of $4.3 million in the first quarter of 1996, compared with $1.6 million in the first quarter of 1995, include $3.3 million for the new P C Dynamics facility in Texas. The estimated cost to complete this facility is $0.5 million. The construction expenditures were partially financed through mortgage borrowing's of $2.5 million against a total financing commitment of $2.95 million. Except for completion of the P C Dynamics facility and expenditures required to improve its manufacturing processes, the Company presently has no plans for additional capital expenditures. On January 10, 1996, the Company obtained a construction loan from American National Bank and Trust Company of Chicago in the amount of $2,160,000 to finance the rebuilding of the facility in Frisco, Texas. The loan is payable in monthly installments of principal and interest beginning July 1996 and ending in June 2001. 8 9 On March 31, 1996, the Company obtained a construction loan from American National Bank and Trust Company that permits borrowing up to $794,000 to finance the rebuilding of the facility in Frisco, Texas. As of March 31, 1996, $336,000 was outstanding. The loan is payable in monthly installments of principal and interest beginning July 1996 and ending in June 2001. As of March 31, 1996, the Company has $2,912,000 of debt and $1,231,000 of cash and investments. Management believes that funds generated from operations, coupled with the Company's cash and investment balances and its capacity for debt will be sufficient to fund current business operations. The Company's ability to fund its activities is directly dependent upon its sales, its ability to improve its manufacturing processes, the effective utilization of the Company's manufacturing resources and the Company's ability to access external sources of financing. The Company anticipates additional debt financing during 1996. There can be no assurances that such additional debt financing can be obtained and, if obtained, at reasonable terms. INFLATION Management believes inflation has not had a material effect on the Company's operation or on its financial position. FOREIGN CURRENCY TRANSACTIONS All of the Company's foreign transactions are negotiated, invoiced and paid in United States dollars. ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS As a supplier to microwave manufacturers, the Company is dependent upon the success of its customers in developing and successfully marketing end-user microwave systems. The Company is currently working on several development programs for its customers. The development of commercial applications for microwave systems and the timing and size of production schedules for these programs is uncertain and beyond the control of the Company. There can be no assurance that these development programs will have a favorable impact on the Company's operating results. Although management believes some of these products and programs may ultimately develop into successful commercial applications, such developments could result in periodic fluctuations in the Company's operating results. As a result of these considerations, the Company has historically found it difficult to project operating results. The Company expects that a small number of customers will continue to account for a substantial majority of its sales and that the relative dollar amount and mix of products sold to any of these customers can change significantly from year to year. 9 10 There can be no assurance that the Company's major customers will continue to purchase products from the Company at current levels, or that the mix of products purchased will be in the same ratio. The loss of one or more of the Company's major customers or a change in the mix of product sales could have a material adverse effect on the Company. In addition, future results may be impacted by a number of other factors, including the Company's dependence on suppliers and subcontractors for components; the Company's ability to respond to technical advances; successful award of contracts under bid; design and production delays; cancellation or reduction of contract orders; the Company's effective utilization of existing and new manufacturing resources; and pricing pressures by key customers. The Company's future success is highly dependent upon its ability to manufacture products that incorporate new technology and are priced competitively. The market for the Company's products is characterized by rapid technology advances and industry-wide competition. This competitive environment has resulted in downward pressure on gross margins. In addition, the Company's business has evolved towards the production of relatively smaller quantities of more complex products, the Company expects that it will at times encounter difficulty in maintaining its past yield standards. There can be no assurance that the Company will be able to develop technologically advanced products or that future pricing actions by the Company and its competitors will not have a material adverse effect on the Company's results of operations. 10 11 PART II - OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS The Company and Joseph Turek have been named as defendants in Lionheart Partners, Inc., as general partner of Lionheart USA Micro Cap Value, L.P. v. M~Wave, Inc. and Joseph Turek, which was filed on or about November 17, 1995 in the United States District Court for the Northern District of Illinois. The case was filed as a purported class action on behalf of all persons who purchased common stock of the Company between August 8, 1995 and October 18, 1995. The complaint alleges that the defendants made materially false and misleading statements and failed to correct public representations which had become materially false and misleading regarding the Company's revenues and earnings. The complaint asserts claims under Sections 10(b) and 20 of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks compensatory damages in an unspecified amount. The Company believes that this action is without merit. On January 5, 1996, the Company filed a motion to dismiss the complaint. On April 26, 1996, this motion to dismiss was denied. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (b) The Company was not required to file any reports on Form 8-K during the quarter ended March 31, 1996. 11 12 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. M~WAVE, INC. Date: May 13, 1996 /s/ PAUL H. SCHMITT ------------------------ Paul H. Schmitt Chief Financial Officer 12 13 EXHIBIT INDEX Exhibit No Description ------- ------------------------------------------------------ 10.8 Construction loan Note, dated March 31, 1996, by and among the Company, P C Dynamics and American National Bank and Trust Company of Chicago 27 Financial Data Schedule 13 EX-10.8 2 CONSTRUCTION LOAN NOTE 1 Exhibit 10.8 - -------------------------------------------------------------------------------- INSTALLMENT NOTE (SECURED) - -------------------------------------------------------------------------------- $794,000.00 Chicago, Illinois March 31, 1996 Due June 30, 2001 FOR VALUE RECEIVED, the undersigned (jointly and severally if more than one) ("Borrower"), promises to pay to the order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Bank"), at its principal place of business in Chicago, Illinois or such other place as Bank may designate from time to time hereafter, the principal sum of Seven Hundred Ninety Four Thousand and 00/100 Dollars, which sum shall be due on June 30, 2001, and shall be payable as follows: accrued interest shall be payable by Borrower to Bank on the last Business Day of each month, commencing with the last Business Day of April,1996 and successively thereafter until June, 1996 then monthly installments of principal in the amount of $4,411.00 plus accrued interest as hereinafter provided below; with the final installment equal to the balance of all amounts due hereunder. The first installment shall be due on the 31st day of July, 1996, and successive installments shall be paid on the same day of each month thereafter until paid. "Business Day" means any day of the year on which Bank is open for business in Chicago, Illinois. Borrower's obligations and liabilities to Bank under this Note, and all other obligations and liabilities of Borrower to Bank (including without limitation all debts, claims and indebtedness) whether primary, secondary, direct, contingent, fixed or otherwise, including those evidenced in rate hedging agreements designed to protect the Borrower from the fluctuation of interest rates, heretofore now and/or from time to time hereafter owing, due or payable, however evidenced, created, incurred, acquired or owing and however arising, whether under this Note, any agreement, instrument or document heretofore, now or from time to time hereafter executed and delivered to Bank by or on behalf of Borrower, or by oral agreement or operation of law or otherwise shall be defined and referred to herein as "Borrower's Liabilities." The unpaid principal balance of Borrower's Liabilities due hereunder shall bear interest from the date of disbursement until paid, computed as follows: at a daily rate equal to the daily rate equivalent of 0.0% per annum (computed on the basis of a 360-day year and actual days elapsed) in excess of the rate of interest announced or published publicly from time to time by Bank as its prime or base rate of interest (the "Base Rate"); provided however, that in the event that any of Borrower's Liabilities are not paid when due, the unpaid amount of Borrower's Liabilities shall bear interest after the due date until paid at a rate equal to the sum of the rate that would otherwise be in effect plus 3%. The rate of interest to be charged by Bank to Borrower shall fluctuate hereafter from time to time concurrently with, and in an amount equal to, each increase or decrease in the Base Rate, whichever is applicable. Borrower warrants and represents to Bank that Borrower shall use the proceeds represented by this Note solely for proper business purposes and consistently with all applicable laws and statues. To secure the prompt payment to Bank of Borrower's Liabilities and the prompt, full and faithful performance by Borrower of all of the provisions to be kept, observed or performed by Borrower under this Note and/or any other agreement, instrument or document heretofore, now and/or from time to time hereafter delivered by or on behalf of Borrower to Bank, Borrower grants to Bank a security interest in and to the following property: (a) all of Borrower's now existing and/or owned and hereafter arising or acquired monies, reserves, deposits, deposit accounts and interest or dividends thereon, securities, cash, cash equivalents and other property now or at any time or times hereafter in the possession or under the control of Bank or its bailee for any purpose; (b) investment property, more specifically described as the first one (1) million dollars of the certain municipal bonds pledged to the Bank, held in Safekeeping Account No. 318856 and any and all renewals, replacements or substitutions thereof pursuant to Security Agreement Specific dated 1/2/96; (c) all substitutions, renewals, improvements, accessions or additions thereto, replacements, offspring, rents, issues, profits, returns, products and 1 2 proceeds thereof, including without limitation proceeds of insurance policies insuring the foregoing collateral (all of the foregoing property is referred to herein individually and collectively as "Collateral"). Regardless of the adequacy of the Collateral, any deposits or other sums at any time credited by or payable or due from Bank to Borrower, or any monies, cash, cash equivalents, securities, instruments, documents or other assets of Borrower in the possession or control of Bank or its Bailee for any purpose, may be reduced to cash and applied by Bank to or setoff by Bank against Borrower's Liabilities. Borrower agrees to deliver to Bank immediately upon Bank's demand, such additional collateral as Bank may request from time to time should the value of the Collateral (in Bank's Sole and exclusive opinion) decline, deteriorate, depreciate or become impaired, or should Bank deem itself insecure for any reason whatsoever, including without limitation a change in the financial condition of Borrower or any party liable with respect to Borrower's Liabilities, and does hereby grant to Bank a continuing security interest in such other collateral, which shall be deemed to be a part of the Collateral. Borrower shall execute and deliver to Bank, at any time upon Bank's demand therefor, all agreements, instruments, documents and other written matter that Bank may request, in form and substance acceptable to Bank, to perfect and maintain perfected Bank's security interest in the Collateral or any additonal collateral. Borrower agrees that a carbon, photographic or photostatic copy, or other reproduction, of this Note or of any financing statement, shall be sufficient as a financing statement. Bank may take, and Borrower hereby waives notice of, any action from time to time that Bank may deem necessary or appropriate to maintain or protect the Collateral, and Bank's security interest therein, and in particular Bank may at any time (i) transfer the whole or any part of the Collateral into the name of the Bank or its nominee, (ii) collect any amounts due on Collateral directly from persons obligated thereon, (iii) take control of any proceeds and products of Collateral, and/or (iv) sue or make any compromise or settlement with respect to any Collateral Borrower hereby releases Bank from any and all causes of action or claims which Borrower may now or hereafter have for any asserted loss or damage to Borrower claimed to be caused by or arising from: (a) Bank's taking any action permitted by this paragraph; (b) any failure of Bank to protect, enforce or collect in whole or in part any of the Collateral; and/or (c) any other act or omission to act on the part of the Bank, its officers, agents or employees, except for willful misconduct. The occurrence of any one of the following events shall constitute a default by the Borrower ("Event of Default") under this Note: (a) if Borrower fails to pay any of Borrower's Liabilities when due and payable or declared due and payable (whether by scheduled maturity, required payment, acceleration, demand or otherwise); (b) if Borrower or any guarantor of any of Borrower's Liabilities fails or neglects to perform, keep or observe any term provision, condition, covenant, warranty or representation contained in this Note: (c) occurrence of a default or an event of default under any agreement, instrument or document heretofore, now or at any time hereafter delivered by or on behalf of Borrower to Bank; (d) occurrence of a default or an event of default under any agreement, instrument or document heretofore, now or at any time hereafter delivered to Bank by any guarantor of Borrower's Liabilities or by any person or entity which has granted to Bank a security interest or lien in and to some or all of such person's or entity's real or personal property to secure the payment of Borrower's Liabilities; (e) if the Collateral or any other of Borrower's assets are attached, seized, subjected to a writ, or are levied upon or become subject to any lien or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors; (f) if a notice of lien, levy or assessment is filed of record or given to Borrower with respect to all or any of Borrower's assets by any federal, state or local department or agency; (g) if Borrower or any guarantor of Borrower's Liabilities becomes insolvent or generally fails to pay or admits in writing its inability to pay debts as they become due, if a petition under Title ll of the United States Code or any similar law or regulation is filed by or against Borrower or any such guarantor, if Borrower or any such guarantor shall make an assignment for the benefit of creditors, if any case or proceeding is filed by or against Borrower or any such guarantor for its dissolution or liquidation, or if Borrower or any such guarantor is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business affair; (h) the death or incompetency of Borrower or any guarantor of Borrower's Liabilities, or the appointment of a conservator for all or any portion of Borrower's assets or the Collateral; (i) the revocation, termination or cancellation of any guaranty of Borrower's Liabilities without written consent of Bank; (j) if a contribution failure occurs with respect to any pension plan maintained by Borrower or any corporation, trade or business that is, along with Borrower, a member of a controlled group of corporations or a controlled group of trades of businesses (as described in Section 414(b) and 2 3 (c) of the Internal Revenue Code of 1986 or Section 4001 of the Employee Retirement Income Security Act of 1974, as amended, "ERISA") sufficient to give rise to a lien under Section 302(f) of ERISA; (k) if Borrower or any guarantor of Borrower's Liabilities is in default in the payment of any obligations, indebtedness or other liabilities to any third party and such default is declared and is not cured within the time, if any, specified therefor in any agreement governing the same; (l) if any material statement, report or certificate made or delivered by Borrower, any of Borrower's partners, officers, employees or agents or any guarantor of Borrower's Liabilities is not true and correct; or (m) if Bank is reasonably insecure. Upon the occurrence of an Event of Default, at Bank's option, without notice by Bank to or demand by Bank of Borrower: (i) all of Borrower's Liabilities shall be immediately due and payable; (ii) Bank may exercise any one or more of the rights and remedies accruing to a secured party under the Uniform Commercial Code of the relevant jurisdiction and any other applicable law upon default by a debtor: (iii) Bank may enter, with or without process of law and without breach of the peace, any premises where the Collateral is or may be located, and may seize or remove the Collateral from said premises and/or remain upon said premises and use the same for the purpose of collecting, preparing and disposing of the Collateral; and/or (iv) Bank may sell or otherwise dispose of the Collateral at public or private sale for cash or credit, provided, however, that Borrower shall be credited with the net proceeds of any such sale only when the same are actually received by Bank. Upon an Event of Default, Borrower, immediately upon demand by Bank, shall assemble the Collateral and make it available to Bank at a place or places to be designated by Bank which is reasonably convenient to Bank and Borrower. All of Bank's rights and remedies under this Note are cumulative and non-exclusive. The acceptance by Bank of any partial payment made hereunder after the time when any of Borrower's Liabilities become due and payable will not establish a custom or waive any rights of Bank to enforce prompt payment hereof. Bank's failure to require strict performance by Borrower of any provision of this Note shall not waive, affect or diminish any right of Bank thereafter to demand strict compliance and performance therewith. Any waiver of an Event of Default hereunder shall not suspend, waive or affect any other Event of Default hereunder. Borrower and every endorser waive presentment, demand and protest and notice of presentment, protest, default, non-payment, maturity, release, compromise settlement, extension or renewal of this Note and hereby ratify and confirm whenever Bank may do in this regard. Borrower further waives any and all notice or demand to which Borrower might be entitled with respect to this Note by virtue of any applicable statute or law (to the extent permitted by law.) Borrower agrees to pay, immediately upon demand by Bank, any and all costs, fees and expenses (including reasonable attorneys' fees, costs and expenses) incurred by Bank (i) in enforcing any of Bank's rights hereunder, and (ii) in representing Bank in any litigation, contest, suit or dispute, or to commence, defend or intervene or to take any action with respect to any litigation, contest, suit or dispute (whether instituted by Bank, Borrower or any other person) in any way relating to this Note, Borrower's Liabilities or the Collateral, and to the extent not paid the same shall become part of Borrower's Liabilities hereunder; This Note shall be deemed to have been submitted by Borrower to Bank and to have been made at Bank's principal place of business. This Note shall be governed and controlled by the internal laws of the State of Illinois and not the law of conflicts. TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH. BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN 3 4 CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 215 Park Street PC Dynamics Corporation - ------------------------------- ------------------------------- Print or Type Name of Borrower Bensenville, IL 60106 - ------------------------------- ------------------------------- Address Signature Joseph Turek, President - ------------------------------- ------------------------------- FEIN OR SSN Title 4 EX-27 3 FINANCIAL DATA SCHEDULE
5 0000883842 M-WAVE 1 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 222,402 1,008,615 4,108,655 0 2,595,591 9,763,853 17,004,144 (2,973,749) 24,665,795 4,394,689 2,308,726 30,404 0 0 17,208,846 24,665,795 6,256,558 0 8,090,779 1,341,450 (178,204) 0 0 (3,353,875) (1,227,531) (2,126,344) 0 0 0 (2,126,344) (0.70) 0
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