M-Wave Announces Its Strategic Operating Alliance and a Major Restructuring Of
Its Balance Sheet
WEST CHICAGO, Ill., Feb. 10 /PRNewswire/ -- M-Wave, Inc. today announced a
major restructuring of its balance sheet and its operating model that includes
the sale of its West Chicago plant and equipment to firms associated with the
signing of a Strategic Operating Alliance (SOA) agreement with Franklin Park, IL
based American Standard Circuits, Inc. (ASC). In connection with the asset
sales and signing of the SOA agreement, M-Wave also announced retirement of its
$2.422M debt to Bank One, NA that included releases of liens on the collateral
securing the note. It further indicated that delinquent balances to trade
creditors would be reduced in line with its previously negotiated terms.
M-Wave, Inc., through its wholly owned manufacturing subsidiary, Poly Circuits,
Inc., historically has been a value-added, domestic producer and international
service provider of high performance printed circuit boards (PCBs) used in a
variety of digital and high frequency communications (RF) applications.
M-Wave's restructuring began in May 2003, necessitated by a continued and
unprecedented fall of the telecom sector, with the resultant 70% loss of its
sales. It was determined that the company could not absorb its direct and
administrative costs based on then current and projected business levels, nor
could it efficiently manufacture digital and RF PCB's. "M-Wave would never have
achieved profitability or positive cash flow with its level of sales given its
debt, operating inefficiencies and administrative cost structure. Its skill-sets
were not strong in digital manufacturing and the fact was that direct
manufacturing had to be immediately overhauled," stated Jim Mayer, Managing
Member of Credit Support International (CSI), M-Wave's Chief Restructuring
Advisor.
The heart of M-Wave's business model is not to be a low-cost domestic
manufacturer, but to operate a low-cost, high performance supply chain
"pipeline" that offers middle market customers a "cradle-to-grave" approach to
digital and RF PCB procurement, beginning with the birth of a product that
requires domestic quick-turn, proto-types, pilot production runs, and that
evolves into mass production in Asia. The company had, from its Singapore
office, achieved working partnerships with more than 20 Asian manufacturers
where M-Wave extended its procurement and supply-chain services for its
middle-market customers, a process referred to as "Virtual Manufacturing" (VM). "In the U.S., M-Wave's challenge was to do the same thing, but dissimilarly, to
remain hands-on with the manufacturing process without absorbing the risks or
the direct costs -- not an easy task from any perspective," stated Mayer.
In response to the challenge, M-Wave management and advisors developed the
Strategic Operating Alliance (SOA) concept under which the company, after
significant due diligence and investigation of several local PCB producers, has
teamed with a "best-in-class" local manufacturer: American Standard Circuits,
Inc. (ASC) of Franklin Park, IL ( http://www.asc-i.com/ ). Under the SOA
agreement, within the West Chicago facility, production will transition from
M-Wave to ASC, in a blending of a traditionaloutsourcing and a joint venture in
one vehicle.
"The SOA agreement enables ASC to immediately take over manufacturing at the
company's facility, and, simultaneously acquire certain assets, allowing us to
free up cash, reduce debt, while assuming jointtenancy in West Chicago with
ASC, in a seamless transition that expands the company's Far East VM model to a
domestic strategy as well," stated Joe Turek, M-Wave's CEO.
"I am very gratified to partner with M-Wave, and I think we will bring greater
strength and sales to our respective firms in the future," stated Gordhan Patel,
ASC's chief executive. Bob Duke, Director of Sales, in-turn remarked, "In our
pre-SOA testing, ASC more than satisfied our expectations for turnaround time
and quality production, and has put us in a good position to exploit future
sales." Further Highlights of Realignment, Restructuring and SOA (a) Under the SOA, ASC will provide the domestic manufacturing required
by M-Wave's customers and be paid for finishproduct as a supplier to
the company. M-Wave will maintain the sales, support, manufacturing
oversight, and logistics for its customers. The term of the SOA
agreement is initially two years.
Under the SOA, M-Wave issued 5-year warrants to Mr. Patel for the
purchase of 500,000 shares of its common stock at $1.35 per share,
which vest on the first anniversary of the SOA agreement or upon an
earlier sale of M-Wave, and was granted by ASC the right to receive
8% of the gain over book value arising from a sale of ASC occurring
on or after the first anniversary of the SOA agreement.
(b) M-Wave sold its West Chicago plant to an affiliate of ASC for a cash
price of approximately $2,000,000. ASC has leased the manufacturing
portion of that plant from the new owner to enable it to manufacture
as required under the SOA.
(c) M-Wave has leased a portion of the West Chicago facility to maintain
its offices from which it will operate its domestic and international
VM, supply chain management, and consulting businesses in close
proximity to the domestic manufacturing being performed for its
customers by ASC.
(d) M-Wave sold the major portion of its manufacturing equipment at the
West Chicago facility to a newly formed limited liability company
(LLC) for a cash price of $800,000 and a 20% preferred and secured
interest in that entity. ASC is the other member of the LLC and has
leased the use of the equipment from it. M-Wave's preferred interest
enables it to receive, in any liquidation, the cash proceeds of the
present value of the equipment in excess of the $800,000 already
received (approximately $775,000) before ASC receives any
distribution, and distributions are thereafter made 80% to ASC and
20% to M-Wave.
Continuing with its restructuring strategy, M-Wave confirms its intention to
sell its prior plant and improvements located in Bensenville, Illinois as soon
as practicable. The proceeds of any such sale will be applied, together with
other cash on hand or available from working capital financing, to satisfy
outstanding delinquent obligations to third-party vendors and for operating
needs as part of the company's restructuring.
The company expects to make further announcements as developments occur.
About M-Wave
Established in 1988 and headquartered in the Chicago suburb of West Chicago,
Illinois, M-Wave is a value-added service provider of high performance circuit
boards. The Company's products are used in a variety of telecommunications and
industrial electronics applications. M-Wave services customers like Federal
Signal on digital productsand Celestica - Nortel and Remec with its patented
bonding technology, Flexlink II(TM), and its supply chain management services
including Virtual Manufacturing (VM) and the Virtual Agent Procurement Program
(VAP) whereby customers are represented in Asia either on an exclusive or
occasional basis in sourcing and fulfilling high volume and technology circuit
board production in Asia through the Company's Singapore office. The Company
trades on the Nasdaq National market under the symbol "MWAV." Visitthe Company
on its web site at http://www.mwav.com/ .
About CSI Established in 1991 by a European-American joint venture between Groupe Warrant
of Belgium and DiversiCorp, Inc. of Dallas, Texas, CSI provided cross- border
collateral control that linked lenders to their assets located both inside the
U.S. and Western Europe. In 1998 CSI was split off from the two partner
companies and evolved into a specialized consulting firm devoted to transitional
and troubled middle market companies. Jim Mayer, its Managing Member, has 18
years of experience including 12 years as CEO of DiversiCorp, Inc. and has
managed or directed more than 50 engagements with troubled companies and
provided a variety of services directly to clients including: due diligence,
workout, collateral control, corporate restructuring, bankruptcy support,
cross-border secured finance and interim management. Mayer has served on several
boards of directors including the Turnaround Management Association.
This news release contains predictions and other forward-looking statements that
involve a number of risks and uncertainties. While this outlook represents our
current judgment on the future direction of the business, such risks and
uncertainties could cause actual results to differ materially from any future
performance suggested above. Such risks and uncertainties include those factors
detailed in the company's annual report on Form 10-K and other reports filed by
the company with the U.S. Securities and Exchange Commission. DATASOURCE: M-Wave, Inc.
CONTACT: Paul Schmitt, Chief Financial Officer of M-Wave, Inc., +1-630-562-4720, or Jim Mayer, Managing Member of Credit Support International, +1-630-440-1515 Web site: http://www.mwav.com/ http://www.asc-i.com/
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