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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED JUNE 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 0-22384
MICRO COMPONENT TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0985960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2340 WEST COUNTY ROAD C, ST. PAUL, MINNESOTA 55113
(Address of principal executive offices)
Registrant's telephone number, including area code (612) 697-4000
Securities registered pursuant to Section 12(b) of
the Act: None Securities registered pursuant to
Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates
of the Registrant on August 15, 1997 (based upon the closing price of those
shares on the NASDAQ National Market System) was approximately $19.2 million.
Number of shares outstanding of the Registrant's Common stock, as of August 15,
1997, is 7,057,102.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Definitive Proxy Statement for the annual
meeting of stockholders to be held on November 5, 1997 (the "Proxy Statement"),
and to be filed within 120 days after the Registrant's fiscal year ended June
28, 1997, are incorporated by reference into Part III.
MICRO COMPONENT TECHNOLOGY, INC.
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Business................................................................ 4
ITEM 2. Properties.............................................................. 10
ITEM 3. Legal Proceedings....................................................... 10
ITEM 4. Submission of Matters to a Vote of Security Holders..................... 11
PART II
ITEM 5. Market for Registrant's Common stock and Related Stockholder Matters.... 11
ITEM 6. Selected Financial Data................................................. 13
ITEM 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition................................................. 15
ITEM 8. Financial Statements and Supplementary Data............................. 19
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................ 19
PART III
ITEM 10. Directors and Executive Officers of the Registrant...................... 20
ITEM 11. Executive Compensation.................................................. 20
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.......................................................... 20
ITEM 13. Certain Relationships and Related Transactions.......................... 20
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K............................................................ 20
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................................................ F-1
PART I
This Form 10-K contains certain forward-looking statements. For this
purpose, any statements contained in this Form 10-K that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, including those set forth in the section below entitled
"Risk Factors."
THE COMPANY
ITEM 1. BUSINESS
GENERAL
Unless the context otherwise requires, references in this Annual Report
on Form 10-K to "MCT", "Registrant" and the "Company" refer to Micro Component
Technology, Inc. and its consolidated subsidiaries. MCT was incorporated in
Minnesota on June 20, 1972, was reorganized as a Delaware corporation on June
28, 1983 and reorganized as a Minnesota corporation on November 6, 1996. MCT has
one wholly owned active subsidiary, Micro Component Technology Asia Pte. Ltd.
("MCT Asia"). The Company's principal executive offices are located at 2340 West
County Road C, St. Paul, Minnesota 55113 and its telephone number at that
location is (612) 697-4000.
The Company designs, manufactures, markets, services and distributes
automatic test equipment ("ATE") consisting of both handling and testing
equipment for integrated circuit ("IC") devices manufactured by the
semiconductor industry. Today, IC devices are found in a rapidly increasing
number of items as varied as clock radios, telecommunication products (i.e.,
phones and pagers), automotive electronics and computers.
BACKGROUND
On October 18, 1993 the Company completed an initial public offering of
2,200,000 shares of its Common stock resulting in net proceeds to the Company of
$21.7 million. Simultaneous with the closing, all series of Redeemable Preferred
Stock, Class B Non-voting Common stock, and the outstanding Subordinated
Debentures were exchanged or converted into shares of Common stock.
On November 22, 1994, the Company completed the sale of its 1149 tester
product line to Megatest Corporation. Concurrent with this sale, Megatest
purchased 315,789 shares of the Company's Non-Voting Series A Preferred Stock.
On September 25, 1995, the Company completed the sale of its European
subsidiary, Intertrade Scientific, Inc. ("ITS"). The Company continues to
distribute its products in Europe through another distributor.
The Company's fiscal year ends on the last Saturday of June.
PRODUCTS
HANDLING EQUIPMENT
Handlers are electro-mechanical systems which are connected to a tester
in order to automate the IC testing process. The handlers thermally condition
the IC devices, provide electrical contact between the IC and the tester, and
then sort the IC's based upon the results of the testing. Handlers should
present IC devices to the tester
efficiently to ensure maximum utilization of the tester and should handle the IC
devices without causing damage that would render them unusable. Handlers are
often operated 24 hours a day, seven days a week. As handlers are comprised of
many moving parts, high reliability and ease of maintenance are essential.
Although the most effective handler designs reduce the amount of complex
mechanisms, the industry is characterized by a wide variety of handling
techniques, many of which are extremely complex.
Handler architecture also needs to offer flexibility. While many
manufacturers currently dedicate handlers to a single IC device package over a
long production run, manufacturers want to be able to modify the handlers to
process different types of IC devices to preserve the value of their investment
in handling equipment.
Furthermore, handler designers must consider the contact set, which is
the critical mechanical and electrical interface between the tester and the IC
device under test. While not all handler manufacturers offer contact sets,
higher test performance can be anticipated from those handlers in which contact
sets are fully integrated into the handler design. Additionally, those
manufacturers not providing contact sets require that the customers bear the
burden of integrating testers, contact sets, and handlers.
MCT 4610 SURFACE MOUNT DEVICE HANDLERS
The MCT 4610 Handlers are designed for test handling of surface mount
devices that are transported in tubes. These handlers rely on gravity to move
untested IC devices from the top of the handler, where the temperature of the IC
device is modified, to the test site and out to the output bins. The MCT 4610
Handlers are convertible for use with new types of IC devices through the
purchase of package conversion kits which are available for approximately 20% of
the cost of a new handler. There are currently over 50 different package
conversion kits available. Although it can process certain surface mount IC
devices, the MCT 4610 Handler is not designed to accommodate surface mount IC
devices with package widths of 150/1000 inch or narrower, although such packages
constitute a significant portion of the surface mount IC device market.
High throughput is achieved on the MCT 4610 Handlers through short
intervals between tests, a lower device jam rate and, in the case of the 4610
DUAL Handler, the utilization of two test sites. Dual test sites allow devices
to be tested in parallel or in alternation, which maximizes tester usage by
testing one IC device while another IC device is being moved to the test site.
The comprehensive lead protection system in MCT 4610 Handlers minimizes
device-to-device impact without limiting the throughput of the handler. The
output tracks may be equipped with optional output adapters specific to the
customer's tubes being used to transport devices. This prevents the leads from
being damaged by incorrect tube placement.
MCT 5100 FINE PITCH SURFACE MOUNT DEVICE HANDLER
The MCT 5100 Handler is a new high speed handler for handling small
outline integrated circuits ("SOIC"). The new fine pitch SOIC packages are very
light and are difficult to handle in traditional gravity feed handlers. These
devices range from 0.110 inches wide to 0.300 inches wide and have lead pitch
down to 0.012 inches. The MCT 5100 Handler uses a combination of gravity feed
and pick and place technology to reliably move parts through the handler. The
MCT 5100 Handler is capable of testing one or two devices in parallel with
throughput of 14,400 units per hour with an index time of only .500 seconds.
This makes the MCT 5100 Handler one of the fastest handlers available in the
market today. The system is controlled by a high speed computer that monitors
all functions of the handler and is capable of producing reports to operators
and management describing test efficiency, handler uptime, test yield, operator
identification, lot statistics and other customer defined data. The handler can
be configured with several different kits for varying customer requirements. The
Company began shipping this product in volume in the last half of fiscal 1997,
and this product is expected to represent a significant portion of equipment
sales and growth potential in fiscal 1998.
MCT 7632 FINE PITCH PICK AND PLACE HANDLER
The MCT 7632 Handler is a new handler for high volume manufacturing of
memory and other semiconductor devices. The MCT 7632 Handler can accommodate a
large variety of package types including the traditional PLCC, LCC and PGA
packages and the more difficult to handle SOIC, TSOP, TSSOP, and (mu)BGA
packages. The handler uses pick and place technology to pick up devices from
carriers, move them to the test site, and then move them to the appropriate bin
after test. The MCT 7632 Handler can test from 1 to 32 devices in parallel at
temperatures ranging from -60 degrees Centigrade to +160 degrees Centigrade. The
handler has a unique capability of being able to load and unload devices from
carriers while testing without interrupting system operation. This capability,
called HotSwap(TM), provides for very high throughput and ease of use in a
production environment. Like the MCT 5100 Handler, the MCT 7632 Handler is
controlled by a high speed computer that monitors all functions of the handler
and is capable of producing reports to operators and management describing test
efficiency, handler uptime, test yield, operator identification, lot statistics
and other customer defined data. The Company has shipped two systems for
evaluation and expects this product to begin contributing revenue in the last
half of fiscal 1998.
OTHER HANDLER PRODUCTS
The Company also sells the MCT 3600 Handler and MCT 8000 Handler. These
handlers are dedicated to transporting a variety of dual in-line pin package
("DIP") devices.
TESTING EQUIPMENT
Testers are specialized, computer-controlled electronic systems that
are programmed by a user to perform electrical evaluation of IC devices
including proper functionality, voltage and current characteristics, and
critical timing parameters. During the design and engineering phase of the
development of an IC device, testers serve as precision engineering tools for
design verification, characterization (the process of determining the range and
nature of a device's operating variables) and failure analysis. During
manufacturing, IC devices are tested several times to segregate functional from
nonfunctional devices ("functional test") and to measure the variable parametric
or performance characteristics of the devices ("performance test").
During fiscal 1995, the Company sold its 1149 product line to Megatest
Corporation, allowing the Company to focus upon recapturing its market position
as THE handler company. The Company did retain its mature tester product line,
the MCT 2000 series. The Company performs board repair and maintenance
contracts, refurbishes units and provides spare parts and additional pincards as
a means of supporting the large installed base of equipment.
In addition to the ongoing support, the Company has developed a new
workstation for controlling these test systems. The MCT Workstation 2000 is a
Pentium PC based workstation that provides much greater throughput by reducing
test times up to 60% on certain device types. The Workstation 2000 can be
installed in the field on existing test systems, significantly increasing test
capacity of the installed test systems. Sales of the Workstation 2000 began in
fiscal year 1996.
See Management's Discussion and Analysis of Results of Operations and
Financial Condition for a discussion of certain risk factors related to the sale
of these new products.
MARKETING AND SALES
The Company's marketing and sales efforts are organized around three
regional divisions: the United States and Canada, Asia, and Europe. The Company
markets its products primarily to IC device manufacturers through its own sales
force and, in selected geographical areas, through independent sales
representatives and distributors.
The Company augments its sales efforts with direct customer
support/service engineers based in the field. These engineers are specialists in
the Company's product portfolio and work with the customers to help determine
product requirements, install the Company's equipment, and train the customers'
operators and maintenance technicians on the proper use and care of the
Company's equipment. These engineers also help identify emerging markets for new
products and are supported by the Company's design center at St. Paul,
Minnesota.
MCT ASIA
As semiconductor manufacturers move responsibility for ATE purchasing
to the factory level, the Company's operations in the Pacific Rim region have
become increasingly important. With a presence established more than 15 years
ago, the Company operates MCT Asia Pte., Ltd., and its wholly-owned subsidiary,
MCT Asia (Penang) Sdn. Bhd., with offices in Singapore and Penang, Malaysia
respectively. MCT Asia, the regional headquarters, also controls 85% of a
company, MCT Beijing, in a partnership with the Institute for Integrated Circuit
Testing in Beijing, PROC. To supplement the region's sales and service coverage,
MCT Asia uses sales representative companies and distributors in Singapore,
Thailand, Malaysia, the Philippines, Korea, Taiwan and China.
The Company has stationed service engineer personnel in Singapore and
Penang, Malaysia for rapid response to any customer problem in the Far East.
Additionally, a complete board-repair facility in Penang, Malaysia provides the
Company's Asian customers with local board service and repair capabilities.
WORLDWIDE SUPPORT
Through its foreign subsidiary and sales representative companies and
distributors, the Company maintains customer support centers in 19 offices
worldwide, located in the U.S., the Far East, and Europe. The Company believes
that its direct sales, service and applications personnel add significant value
to its products, thereby enhancing their marketability and fostering long-term
customer loyalty. The sales staff encourages "partnering" relationships in which
the Company's sales and engineering personnel are assigned to work closely with
the Company's major customers to determine the most cost-effective solutions for
their ATE needs. As a result, the customer gains detailed insight into the
benefits of the Company's product offerings and the Company has an opportunity
to demonstrate its products as optimized for that customer.
The Company offers initial applications development and comprehensive
installation support at no additional charge, thereby eliminating a portion of
the customer's overhead associated with installing a piece of capital equipment.
Additionally, when the Company's engineers install equipment, they are able to
verify that the overall performance of the customer's system is optimized by (1)
mechanically adjusting all handler mechanisms to the positions enabling the
smoothest operation, and by (2) properly calibrating the handler temperature
systems to ensure accurate temperature control. The Company's engineers then run
a test of the customer's IC devices and analyze the results to verify that the
handler meets all performance specifications. The Company typically provides a
one-year warranty against defects for its handlers and related system
components.
As with pre-sale support, continuing maintenance and service enhance
customer satisfaction by ensuring maximum uptime, yield and tester utilization.
These support services also generate significant revenues for the Company.
SEASONALITY IN QUARTERLY OPERATING RESULTS
During each quarter, the Company customarily sells a relatively small
number of systems which carry a high average selling price. The majority of
shipments in a quarter are typically booked during the same quarter. Although
the Company believes its sales are not seasonal in nature, a small change in the
number of products
ordered and/or shipped in a quarter can have a significant impact on results of
operations for that particular quarter. Moreover, production difficulties could
delay shipments. Accordingly, the Company's operating results may vary
significantly from quarter to quarter and could be adversely affected for a
particular quarter if shipments for that quarter were lower than anticipated.
The Company's quarterly operating results may also be affected by, among other
factors, the timing of new product introductions, fluctuations in the
semiconductor market and the actions of competitors.
CUSTOMERS
The Company expends substantial efforts to maintain its relationships
with its existing major customers in order to increase the likelihood that these
manufacturers will continue to select the Company's testers and/or handlers for
their future generations of IC devices. However, it is difficult to obtain
significant new ATE customers.
The Company's largest customer for each of the past three years,
SGS-Thomson Micro Electronic, Inc. ("SGS"), accounted for approximately 17%, 24%
and 15% of the Company's sales in 1997, 1996 and 1995, respectively. In
addition, sales to one other customer related to a specific contract which was
completed in 1997 accounted for approximately 11% of sales in 1997. The Company
does not anticipate sales to this customer to continue at that level in the
future and does not anticipate a significant adverse impact as a result.
The Company expects SGS will continue to be a large customer, but
expects that sales to SGS will decrease as a percentage of its net sales as the
Company's product mix shifts to the newer products. The loss of a major customer
or any reduction in orders by such a customer, including reductions due to
market or competitive conditions in the semiconductor industry, would have an
adverse effect on the Company's results of operations. In addition, the
Company's ability to increase its net sales will depend in part upon its ability
to obtain orders from new customers. No assurance can be given that the Company
will be able to do so.
BACKLOG
As of June 28, 1997, the Company's backlog of unfilled orders was $2.6
million, compared with $1.6 million as of June 29, 1996. Substantially all of
the backlog as of June 28, 1997 is expected to be shipped in the first half of
fiscal year 1998. Since a large majority of the shipments made in a given
quarter are usually made during the latter part of the quarter, and since a
significant portion of shipments in a given quarter are booked during that same
quarter, backlog as of a date in the middle of the quarter will typically be
greater than backlog at quarter end. The Company includes in backlog only those
orders to which a purchase order number has been assigned by the customer and
for which a delivery schedule has been specified. All orders are subject to
cancellation by the customer with limited charges. The Company's backlog at a
particular date is not necessarily indicative of actual sales for any succeeding
period.
RESEARCH AND DEVELOPMENT
As an important element of its business strategy, the Company works
closely with its customers to develop new products and enhancements of existing
products to meet the evolving needs of the ATE market, particularly with respect
to emerging IC devices, while providing the lowest cost of test. The Company
relies primarily on its internal engineering capabilities to develop new
products and existing product enhancements. The Company may participate in
joint-development arrangements when it believes a higher quality, lower cost
product would result. An ongoing goal of the Company's research and development
activities is to reduce the time required to develop new products and bring them
to market. As handlers become increasingly complex, the development of improved
software for the Company's products becomes increasingly important. The Company
currently develops all
software in-house and plans to expand its expertise in this area subject to the
availability of financial and personnel resources.
For fiscal years 1995, 1996 and 1997, the Company's expenses relating
to research and development were $3.7 million, $4.3 million and $3.9 million,
respectively.
PATENTS
The Company attempts to protect the proprietary aspects of its products
with patents and copyrights, and through trade secret laws and internal
nondisclosure safeguards. The source code for all software contained in the
Company's products is protected as a trade secret and as unpublished copyrighted
work. In addition, the Company has entered into nondisclosure and invention
assignment agreements with each of its key employees. Despite these
restrictions, it may be possible for competitors or customers to copy aspects of
the Company's products or to obtain information which the Company regards as a
trade secret. Moreover, because of the rapid pace of technological changes in
the ATE industry, the Company believes that patent, trade secret and copyright
protections are less significant to its competitive position than factors such
as the technical competence and creative skills of the Company's personnel, the
rapid development of new products, frequent product enhancements, the Company's
name recognition and ongoing reliable product maintenance and support.
Other companies and inventors may receive patents that contain claims
applicable to the Company's products. The sale of the Company's products covered
by such patents could require licenses that may not be available on acceptable
terms.
MANUFACTURING AND SUPPLY
The Company's principal manufacturing activities consist of assembly
and final test. The Company's components, selected subassemblies and machine
parts are manufactured by third parties in the United States. However, the
Company maintains its own machine shop, primarily for handling special materials
and product development.
COMPETITION
The IC device ATE industry is highly competitive. The Company faces
substantial competition throughout the world, primarily from ATE manufacturers
in the United States and Japan. The Company's primary competitors in the handler
market are Advantest, ASECO Corporation, Aetrium Incorporated (including its
Sym-Tek Systems, Inc. and FSA subsidiaries), Cohu, Inc., Kuwano, Multi-Test GmbH
and Tesec. Many of these competitors are considerably larger and have
considerably greater financial resources than the Company.
From time to time, the Company's older generation handlers are sold as
used equipment at prices substantially below the prices of new handlers sold by
the Company. This may materially and adversely affect the Company's sales of new
handlers. Used equipment is sold by original owners of the equipment and by a
number of used equipment dealers. It is also sold as refurbished equipment with
a limited warranty by the Company's Singapore office, MCT Asia.
The principal elements of competition in the Company's markets include
versatility, price, product performance and throughput capability, quality and
reliability, customer service and support and the ability to deliver on
schedule. Although the Company believes that it competes favorably with respect
to each of these factors, new product introductions by the Company's competitors
could cause a decline in sales or loss of market acceptance of the Company's
existing products. In addition, increased competitive pressure could lead to
intensified
price-based competition, resulting in lower prices and adversely affecting the
Company's operating results. In particular, at the end of a product life cycle
and as competitors introduce more technologically advanced products, pricing
pressure for that product typically becomes more intense.
EMPLOYEES
As of June 28, 1997, the Company had a total of 156 employees and 11
contract personnel, including 71 (or 43%) engaged in manufacturing, 40 (or 24%)
in engineering and research and development, 32 (or 19%) in sales, marketing and
service, and 24 (or 14%) in administration. Many of the Company's employees are
highly skilled, and the Company believes its future success will depend in large
part on its ability to attract and retain such employees. None of the Company's
employees is covered by a collective bargaining agreement, and the Company has
experienced no work stoppages. The Company considers its employee relations to
be good.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company operates in three geographic areas. Summarized data for the
Company's operations is included in Note 8 of Notes to Consolidated Financial
Statements, included elsewhere herein.
ITEM 2. PROPERTIES
The Company's principal executive and administrative offices as well as
its manufacturing operations utilize approximately 69,000 square feet in a
facility in St. Paul, Minnesota. This facility is leased through April 2007.
ITEM 3. LEGAL PROCEEDINGS
The Securities and Exchange Commission is conducting an investigation
with respect to certain financial reporting discrepancies announced by the
Company in April 1994 dating back to fiscal 1993 and the first two quarters of
fiscal 1994. The Company has submitted documents to the Commission pursuant to
requests from the Commission, and certain former officers and certain current
and former employees of the Company have been interviewed by the Commission as
part of the investigation. Management is currently not able to predict the
financial impact, if any, that may result from the outcome of the investigation.
On December 28, 1995, University/Joseph Associates, the former landlord
of Sym-Tek Systems, Inc. ("Sym-Tek"), filed a lawsuit against the Company in
Superior Court in San Diego, California, seeking payment by the Company of
$500,000. The landlord alleged in the lawsuit that the Company agreed to pay
Sym-Tek's rent during the period in 1994 in which the Company and Sym-Tek were
negotiating a possible merger. The merger was not concluded, and the Company
denied any liability to the landlord. However, to settle the matter and avoid
further costs of litigation, the Company agreed, in August 1997, to make a
payment to the landlord for an amount within the previously recorded reserve for
this matter.
On September 25, 1995 the Company sold all of the outstanding stock of
the Company's European subsidiary, Intertrade Scientific, Inc. ("ITS") to
Cardine & Levy, a company based in France. In July 1996 Cardine & Levy initiated
an arbitration proceeding in Geneva, Switzerland under the rules of the
International Chamber of Commerce claiming damages from the Company related to
the discontinuation of a distribution relationship between ITS and one of its
significant equipment suppliers. In August 1997, the Company and Cardine & Levy
settled the dispute through reduction of future payments due to the Company from
ITS related to the original sale. The settlement had no impact on the Company's
current financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter ended June 28, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
From October 18, 1993 until September 15, 1994, the Company's common
stock was traded on NASDAQ's National Market System. From September 15, 1994
until October 23, 1995 it was traded on the OTC Bulletin Board. From October 23,
1995 until June 19, 1996 the stock was traded on the NASDAQ Small Cap Market.
The stock resumed trading on the NASDAQ National Market System on June 19, 1996.
The following table sets forth the high and low prices for the
Company's common stock as reported by NASDAQ and the OTC Bulletin Board for the
periods indicated:
Fiscal 1997 Fiscal 1996
-------------------- --------------------
High Low High Low
---- --- ---- ---
First Quarter $3 1/2 $1 7/8 $7 3/8 $3
Second Quarter $3 $1 3/4 $8 $6 1/2
Third Quarter $3 3/4 $2 3/8 $6 7/8 $4
Fourth Quarter $3 7/8 $2 1/4 $5 1/8 $3 3/8
The above prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
The approximate number of holders of record of the common stock as of August 15,
1997 was 279.
The Company has never declared or paid any cash dividends on its common
stock and does not anticipate paying any cash dividends in the foreseeable
future. No dividends may be paid on the Company's common stock while any
cumulative dividend remains accrued and unpaid on the Company's Non-Voting
Series A Preferred Stock. The Company currently intends to retain future
earnings to fund the development and growth of its business.
During the past three fiscal years, the Company made the following sales of
unregistered securities:
On July 14, 1994, the Company issued a warrant to purchase 30,000
shares of its common stock at $5.00 per share to a supplier in connection with
the settlement of litigation between the parties. The sale was exempt from
registration under Section 4(2) of the Securities Act.
On November 22, 1994, the Company sold 315,789 shares of non-voting
preferred stock to Megatest Corporation for $4.75 per share. The sale was exempt
from registration under Section 4(2) of the Securities Act.
On March 21, 1995, the Company issued 25,000 shares of common stock to
a former officer in satisfaction of $36,441 of indebtedness owed to the former
officer. The sale was exempt from registration under Section 4(2) of the
Securities Act.
On May 31, 1995, the Company issued 40,000 shares of common stock to a
former chief executive officer, and also agreed to pay him $20,000, in full
payment and satisfaction of all debts, liabilities and obligations of the
Company under his severance agreement. The issuance was exempt from registration
under Section 4(2) of the Securities Act.
On August 17, 1995, the Company sold 1,500,000 shares of common stock,
for $3.125 per share, to a group of accredited investors. The sale was exempt
from registration under Rules 505 and 506 of Regulation D under the Securities
Act of 1933, and met all of the requirements for sales under those rules.
Between September 26, 1995, and November 3, 1995, Hambrecht & Quist
Guaranty Finance, L.P. and its affiliates surrendered a total of 301,177
warrants in exchange for 165,102 shares of common stock pursuant to a "cashless
exercise" provision in the warrants. The sales were exempt from registration
under Section 4(2) of the Securities Act.
On December 29, 1995, the Company issued 200,000 shares of common
stock, with a total value of $1,100,000, pursuant to settlement of a
shareholders' lawsuit. The issuance was exempt from registration pursuant to
Section 3(a)(10) of the Securities Act because it was pursuant to a
court-approved settlement of claims.
On February 1, 1996, the Company sold 160,000 shares of common stock to
Hambrecht & Quist Guaranty Finance, L.P. and its affiliates for $3.125 per share
pursuant to the terms of a warrant agreement. The sale was exempt from
registration under Section 4(2) of the Securities Act.
The Company paid no discounts or commissions on any of the above sales.
All sales made pursuant to the exemption under Section 4(2) of the Securities
Act were made to a limited number of sophisticated investors, who had access to
current information about the Company, who were purchasing for investment, and
whose certificates contained legends referring to applicable restrictions on
transfer.
ITEM 6. SELECTED FINANCIAL DATA
MICRO COMPONENT TECHNOLOGY, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
June 26, June 25, June 24, June 29, June 28,
1993 (1) 1994 (1) 1995 (1) 1996 (1) 1997
-------- -------- -------- -------- -------
STATEMENT OF OPERATIONS DATA - YEAR ENDED:
Net sales......................................... $ 33,104 $ 31,324 $ 23,635 $ 22,318 $ 16,129
Gross profit ..................................... 17,462 14,328 10,739 12,999 9,219
Income (loss) from operations..................... 3,398 (12,203) 1,923 2,330 (1,836)
Income (loss) from continuing operations.......... 1,435 (13,639) 1,566 2,568 (1,563)
Discontinued operations (2)....................... (1,357) (1,750) (3,897) 652 -
Income (loss) before extraordinary item........... 78 (15,389) (2,331) 3,220 (1,563)
Extraordinary item (3)............................ 156 - 1,005 - -
Net income (loss)...................................... 234 (15,389) (1,326) 3,220 (1,563)
Dividends on preferred stock...................... 540 158 - - -
Net income (loss) applicable to common
stock........................................... $ (306) $ (15,547) $ (1,326) $ 3,220 $ (1,563)
Per Share Data:
Income (loss) from continuing operations.......... $ 0.77 $ (3.34) $ 0.30 $ 0.35 $ (0.22)
Discontinued operations........................... (0.73) (0.43) (0.74) 0.09 -
Extraordinary item (3)............................ 0.08 - 0.19 - -
Net income (loss) per share ...................... $ (0.17) $ (3.80) $ (0.25) $ 0.44 $ (0.22)
Weighted average common and common
equivalent shares outstanding................... 1,852 4,087 5,240 7,246 7,030
SELECTED BALANCE SHEET DATA:
Working capital (deficit)......................... $ 4,145 $ (6,599) $ 2,839 $ 12,638 $ 11,008
Net assets of discontinued operations (2)......... 1,063 2,764 977 - -
Total assets...................................... 21,434 31,796 11,532 16,980 15,792
Current obligations under debt facilities and
financing obligations........................... 681 10,146 363 352 300
Long-term debt and financing
obligations..................................... 17,213 25 41 183 133
Redeemable convertible preferred
stock.......................................... 9,756 - 1,500 1,500 1,500
Total stockholders' equity (deficit)................... $(14,519) $ 3,898 $ 4,618 $ 13,709 $ 12,219
(1) Includes unusual and non-recurring items primarily comprised of: 1993 -
$468,000 gain on settlement of delinquent property taxes, $108,000
reduction of accrued and unpaid vacation and a $261,000 reversal of
1991 and prior accruals; 1994 - $3,999,000 of costs incurred in the
proposed acquisition of SymTek Systems, Inc. and $1,175,000 provision
for settlement of shareholder lawsuit; 1995 - $5,194,000 gain on the
sale of the 1149 tester product line, $1,948,000 gain on the settlement
with SymTek Systems, $752,000 charge for severance costs for the
Company's former Chief Executive Officer, and a $212,000 charge for
closing a Japanese facility; 1996 - $1,524,000 gain on the resolution
of the escrow fund created from the sale of the 1149 tester product
line.
(2) In fiscal year 1995, the Company initiated a formal plan to sell the
Company's European subsidiary, Intertrade Scientific, Inc. (ITS). A
provision for the loss on the sale of approximately $3.0 million was
recorded in the results of operations for the year ended June 24, 1995.
The net assets of ITS are reflected as "net assets of discontinued
operations" on the June 24, 1995 balance sheet and are primarily cash,
accounts receivable, inventory, property, plant and equipment, accounts
payable, and accrued liabilities. As a result of the final sales
agreement, the Company realized a net gain of $0.7 million on the
disposal of ITS, which was completed in fiscal 1996.
(3) In fiscal year 1993 the Company issued 20,000 shares of Series C
Convertible Preferred stock with an estimated fair value of $44,000 in
settlement of $200,000 of outstanding trade payables. The difference
between the trade payables and the fair value of the stock issued
resulted in an extraordinary gain of $156,000. In fiscal year 1995, the
Company used $3.5 million of the proceeds from the sale of the 1149
tester product line in settlement of approximately $4.5 million of
outstanding trade payables, not including the payables assumed by
Megatest as part of the sale transaction. The difference between the
trade payables and the cash used resulted in an extraordinary gain of
approximately $1.0 million, net of $21,000 provision for taxes.
QUARTERLY RESULTS, FISCAL 1996 AND 1997
The following table presents selected unaudited quarterly operating
results for the Company for the eight fiscal quarters ended June 28, 1997.
(in thousands, except per share data)
Three-Month Periods Ended
Sept. 30, Dec. 30, Mar. 30, June 29, Sept. 28, Dec. 28, Mar. 29, June 28,
1995(2) 1995(1) 1996 1996(2) 1996 1996 1997 1997
------- ------- ------- ------- ------- ------- ------- -------
Net sales .................. $ 6,890 $ 5,484 $ 5,756 $ 4,188 $ 2,631 $ 3,972 $ 4,706 $ 4,820
Gross profit ............... 4,198 3,033 3,367 2,401 1,411 2,078 2,755 2,975
Income (loss) from
operations ............. 1,115 1,896 33 (714) (1,207) (766) 70 67
Income (loss) from
continuing operations .. 1,001 2,002 109 (544) (1,128) (679) 92 152
Gain on disposal of ITS .... 474 - - 178 - - - -
Net income (loss) .......... $ 1,475 $ 2,002 $ 109 $ (366) $(1,128) $ (679) $ 92 $ 152
Per share data:
Income (loss) from
continuing operations $ 0.16 $ 0.26 $ 0.01 $ (0.07) $ (0.15) $ (0.09) $ 0.01 $ 0.02
Discontinued operations 0.08 - - 0.02 - - - -
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)
per share ............ $ 0.24 $ 0.26 $ 0.01 $ (0.05) $ (0.15) $ (0.09) $ 0.01 $ 0.02
======= ======= ======= ======= ======= ======= ======= =======
(1) Income from operations includes unusual and non-recurring income of
approximately $1.5 million which the Company received as resolution of
the escrow fund created from the sale of the 1149 tester product line.
(2) In fiscal year 1995, the Company initiated a formal plan to sell the
Company's European subsidiary, Intertrade Scientific, Inc. (ITS). A
provision for the loss on the sale of approximately $3.0 million was
recorded in the results of operations for the year ended June 24, 1995.
As a result of the final sales agreement, the Company realized a net
gain totaling $0.7 million on the disposal of ITS, which was recorded
in the first and fourth quarters of fiscal 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF CONTINUING OPERATIONS
As previously discussed in this report, the Company sold its European
subsidiary, ITS, on September 25, 1995. The following discussion and analysis of
continuing operations excludes the results of ITS, which are reported as
discontinued operations.
The following table sets forth, for the periods indicated, certain
items in the Company's statements of operations as a percentage of net sales:
Year Ended
----------
June 24, June 29, June 28,
1995 1996 1997
----- ----- -----
Net sales ................................ 100.0% 100.0% 100.0%
Cost of sales ............................ 54.6 41.8 42.8
----- ----- -----
Gross margin ............................. 45.4 58.2 57.2
Operating expenses:
Selling, general and administrative . 47.7 35.5 44.2
Research and development ............ 15.8 19.1 24.4
Unusual and non-recurring items ..... (26.2) (6.8) -
----- ----- -----
Total operating expenses ....... 37.3 47.8 68.6
----- ----- -----
Income (loss) from operations ............ 8.1 10.4 (11.4)
Other income (expense), net ......... 1.1 (1.1) 1.7
----- ----- -----
Income (loss) before income taxes ........ 7.0 11.5 (9.7)
Income tax provision ..................... 0.4 - -
----- ----- -----
Income (loss) from continuing operations . 6.6 11.5 (9.7)
Income (loss) from discontinued operations (16.5) 2.9 -
Extraordinary item ....................... 4.3 - -
----- ----- -----
Net income (loss) ........................ (5.6)% 14.4% (9.7)%
===== ===== =====
FISCAL YEARS ENDED JUNE 28, 1997 AND JUNE 29, 1996
NET SALES. Net sales for fiscal year 1997 were $16.1 million, down $6.2 million
or 27.8%, compared to $22.3 million in fiscal year 1996. The weakness in the
semiconductor capital equipment market during the current year, most pronounced
in the first half of fiscal 1997, was the primary factor in the decrease in
sales from the previous year. In addition, sales of the newer generation 5100
handler did not begin to contribute significant revenues until the third quarter
of the current year. Thus, the Company was mainly relying on sales of older
generation products during the first two quarters of the current year.
As detailed in Note 8 of Notes to Consolidated Financial Statements,
sales decreased year to year across all three primary geographic regions in
which the Company operates. Sales decreased to a lesser extent in the Far East,
where the Company has a strong sales and service presence and a broad customer
base. Sales decreased most notably in Europe, where one customer represents a
significant portion of the Company's sales in that region.
GROSS PROFIT. Gross profit in fiscal year 1997 decreased 29.1% or $3.8 million
to $9.2 million from $13.0 million in fiscal year 1996, primarily as a result of
the decrease in revenues. As a percentage of net sales, gross margin decreased
to 57.2% in fiscal 1997 from 58.2% in the previous year. The decrease in gross
margin occurred from
unabsorbed overhead costs early in the year and product mix differences, and was
partially offset by lower charges for inventory obsolescence.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
("SG&A") expense in fiscal year 1997 decreased by $0.8 million or 10.2%, to $7.1
million from $7.9 million in the prior. As a percentage of net sales, the SG&A
expense increased to 44.2% in the current year versus 35.5% in fiscal year 1996.
The decrease in current year expenses resulted from cost reduction measures and
from lower direct selling expenses corresponding to the lower sales levels.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development ("R&D") expense
decreased by $326,000, or 7.6%, to $3.9 million in the current year from $4.3
million in fiscal year 1996. As a percentage of net sales, R&D expense increased
to 24.4% from 19.1% for last year.
The Company chose to maintain its level of R&D spending during the
downturn in business to ensure that it could bring the newer generation 5100 and
7632 handlers to market, as well as continue to fund other product development
projects.
These efforts are allowing the Company to enter market segments and
attract customers not previously served by the Company. However, the success of
the 5100 and 7632 products, as well as any potential product offering in the
future, is subject to various risks and uncertainties, including customer
acceptance, fluctuations in the semiconductor market, technology changes and the
possible adverse impact of competition.
UNUSUAL AND NON-RECURRING INCOME. In fiscal year 1996, the Company received
approximately $1.5 million from the resolution of disputes concerning the $2.0
million escrow fund created to cover certain contingencies in connection with
the November 1994 sale of the 1149 tester product line to Megatest Corporation.
Under the terms of the settlement, all disputes between the parties have been
resolved. The Company classified this amount as an unusual and non-recurring
gain in the results of operations for fiscal year 1996.
NET INTEREST INCOME /(EXPENSE). Net interest income increased during the current
year due to increased holdings of interest bearing cash equivalents and
short-term investments throughout the year.
INCOME TAX PROVISION. During fiscal years 1997 and 1996, the Company incurred
minimal tax liabilities primarily related to foreign taxes. The Company has
recorded valuation allowances against all benefits associated with net operating
loss carryforwards due to uncertainty regarding their ultimate realization.
INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from continuing operations for
fiscal year 1996 was $2.6 million, inclusive of an unusual and non-recurring
gain of $1.5 million. There were no unusual and non-recurring items in the
current fiscal year.
DISCONTINUED OPERATIONS. Upon consummation of the disposal of the Company's ITS
subsidiary in fiscal year 1996, the Company recorded $0.7 million of income,
representing the residual from the $3.3 million loss booked in the previous year
at the time of management's decision to dispose of ITS.
NET INCOME. Net loss attributable to common stock for fiscal year 1997 was $1.6
million, a $4.8 million decrease from the prior year net income of $3.2 million.
Fiscal year 1996 included income for discontinued operations and unusual and
non-recurring gains of $.07 million and $1.5 million, respectively.
FISCAL YEARS ENDED JUNE 29, 1996, AND JUNE 24, 1995
NET SALES. Net sales for fiscal year 1996 were $22.3 million, down $1.3 million
or 5.6%, compared to $23.6 million in fiscal year 1995. Fiscal year 1995
included sales of the 1149 tester product line which was sold in November 1994.
Offsetting that decrease were sales generated from the Company's upgrade for its
2000 series tester, higher sales volumes of the Company's standard handler
products, its original 2000 series test system and its spare parts.
GROSS PROFIT. Gross profit in fiscal year 1996 increased 21.5% or $2.3 million
to $13.0 million from $10.7 million in fiscal year 1995. As a percentage of net
sales, gross margin improved to 58.2% in fiscal 1996 from 45.4% in fiscal 1995.
The improvement in gross margin was generated from changes in product mix,
manufacturing efficiencies and lower charges for inventory obsolescence.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
("SG&A") expense in fiscal year 1996 decreased $3.4 million or 30.1%, to $7.9
million from $11.3 million in fiscal year 1995. As a percentage of net sales,
the SG&A expense decreased from 47.7% in fiscal year 1995 to 35.5% in fiscal
year 1996. The first six months of fiscal 1995 contained expenses associated
with the 1149 tester product line which was sold in November 1994. Therefore,
headcount reductions due to the sale of the 1149 tester product line decreased
SG&A expenses in fiscal 1996. Additionally, professional fees were lower.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense increased
$0.6 million, or 16.2%, to $4.3 million from $3.7 million in fiscal year 1995.
As a percentage of net sales, R&D expense increased to 19.1% from 15.8% for last
fiscal year. The increase is due to the Company's development of its 7632 and
5100 handler products.
UNUSUAL AND NON-RECURRING INCOME. In fiscal year 1996, the Company received
approximately $1.5 million from the resolution of disputes concerning the $2.0
million escrow fund created to cover certain contingencies in connection with
the November 1994 sale of the 1149 tester product line to Megatest Corporation.
Under the terms of the settlement, all disputes between the parties have been
resolved. The Company has classified this amount as an unusual and non-recurring
gain in the results of operations for fiscal year 1996. In fiscal year 1995,
unusual and non-recurring income and expense items consisted of a $5.2 million
gain on the sale of the 1149 tester product line, a $1.9 million gain on the
settlement with Sym-Tek, a $0.8 million charge for costs associated with the
severance of the Company's Chief Executive Officer, and a $0.2 million charge
for closing a Japanese facility.
INTEREST INCOME AND EXPENSE. Interest expense decreased $0.4 million in fiscal
year 1996 due to decreased debt. The Company generated interest income of $0.3
million due to increased cash balances in fiscal year 1996. During fiscal year
1995, proceeds from the sale of the Company's 1149 tester product line were used
to reduce debt. Funds received in the private placement and from the escrow
settlement have reduced the need for new debt.
INCOME TAX PROVISION. During fiscal years 1996 and 1995, the Company incurred
minimal tax liability primarily related to foreign taxes. The Company has
recorded valuation allowances against all benefits associated with net operating
loss carryforwards due to uncertainty regarding their ultimate realization.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for fiscal
year 1996 was $2.6 million, inclusive of an unusual and non-recurring gain of
$1.5 million. Income from continuing operations for fiscal year 1995 was $1.6
million which included an unusual and non-recurring gain of $6.2 million
principally relating to the sale of the Company's 1149 tester product line and a
gain on the settlement with Sym-Tek Systems.
DISCONTINUED OPERATIONS. In fiscal year 1995, the Company recorded a $3.3
million loss for the disposal of ITS, based on management's plan to sell at May
31, 1995, and a letter of intent signed in August of 1995. As a result of the
final signed sales agreement, during fiscal year 1996, the Company recorded $0.7
million of income resulting from additional information on the disposal of ITS.
NET INCOME. Net income attributable to common stock for fiscal year 1996 was
$3.2 million, a $4.5 million increase over the net loss of $1.3 million in
fiscal year 1995. The loss in fiscal year 1995 included extraordinary income of
$1.0 million relating to the gain on settlement of trade payables.
LIQUIDITY AND CAPITAL RESOURCES
In August of 1995 the Company completed a private placement offering of
1,500,000 shares of Common stock resulting in net proceeds of $4.6 million from
several accredited investors. In December of 1995, the Company received $1.5
million in settlement of the escrow agreement established with Megatest
Corporation in connection with the sale of the 1149 tester product line which
occurred in November of 1994. In February of 1996, the Company received $500,000
from Hambrecht & Quist Guaranty Finance L.P. ("H&Q") pursuant to its exercise of
stock purchase warrants for 160,000 shares of the Company's common stock. H&Q
had earned these warrants under a previous financing agreement it had entered
into with the Company. The proceeds are being used for working capital and the
unused portion is currently held in interest bearing cash equivalents and
short-term investments.
Cash used in operations was $5.9 million, $0.3 million and $0.7 million
in fiscal years 1995, 1996 and 1997, respectively. The net loss was the primary
use of cash in the current year. Payments of accounts payable and accrued
liabilities were the primary uses of cash in fiscal 1996 and 1995.
Capital expenditures totaled $24,000, $0.6 million and $0.5 million in
fiscal years 1995, 1996 and 1997, respectively. Capital purchases have been
primarily for production and computer equipment and leasehold improvements.
At June 28, 1997, the Company had cash and cash equivalents of $5.4
million and short-term investments of $1.2 million, compared to $7.8 million and
$0, respectively, at June 29, 1996. The current ratio was 4.2 and working
capital was $11.0 million at June 28, 1997, compared to 5.1 and $12.6 million,
respectively, at June 29, 1996.
Management believes that cash, cash equivalents and investments at June
28, 1997, and funds available through establishing a bank line of credit will
sustain the Company's continuing operations at their current level. The
Company's anticipated capital needs for fiscal 1998 are expected to be
comparable to current year levels and concentrated in development of additional
handler products and upgrading its management information systems.
FEDERAL TAX MATTERS
The Company paid only nominal federal and state income taxes in fiscal
years 1995, 1996 and 1997. At June 28, 1997, the Company had federal net
operating loss carryforwards for tax reporting purposes of approximately $26.9
million, a portion of which is subject to annual limitation under Section 382 of
the Internal Revenue Code. See Note 4 of Notes to Consolidated Financial
Statements.
FOREIGN CURRENCY EFFECTS
The vast majority of the Company's transactions are denominated in U.S.
dollars; as such, fluctuations in foreign currency exchange rates have
historically had little impact on the Company.
EFFECTS OF INFLATION
Inflation has not been a significant factor in the Company's operations
over the last three fiscal years, and it is not expected to affect operations in
the future.
IMPACT OF ACCOUNTING STANDARDS
In February 1997, Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share" was issued which is required to be adopted for the
quarter ending December 27, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating basic earnings per
share, the dilutive effect of stock options, stock warrants and convertible
securities will be excluded. The calculation of diluted earnings per share will
remain similar to the current method. The impact of SFAS No. 128 on the
calculation primary and fully diluted earnings per share is not expected to be
material.
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" was issued which is required to be adopted
for the fiscal year beginning June 28, 1998. At that time, the Company will be
required to disclose certain financial and descriptive information about its
operating segments as redefined by SFAS No. 131. The Company has not yet
completed its analysis of which operating segments it will be required to report
on.
RISK FACTORS
Except for the historical information contained herein, certain of the
matters discussed in this annual report are "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995. These
"forward-looking statements" involve certain risks and uncertainties, including,
but not limited to, the following: (1) fluctuations and periodic downturns in
the semiconductor market which often have had a disproportionately negative
effect on manufacturers of semiconductor capital equipment; (2) rapid changes in
technology and in tester and handler products, which the Company must respond to
successfully in order for its products to avoid becoming noncompetitive or
obsolete; (3) customer acceptance of the Company's new products, including the
MCT 5100 and MCT 7632 handlers; (4) possible loss of any of the Company's key
customers, who account for a substantial percentage of the Company's business;
and (5) the possible adverse impact of competition in markets which are highly
competitive. All forecasts and projections in this report are "forward-looking
statements," and are based on management's current expectations of the Company's
near-term results, based on current information available pertaining to the
Company, including the risk factors discussed above. Actual results could differ
materially.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K. The financial information by Quarter is included in Item 6
of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
This Item is not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning the Company's
directors and executive officers is incorporated by reference from the Company's
Proxy Statement to be filed no later than 120 days following the close of the
fiscal year ended June 28, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is hereby incorporated by
reference from the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is hereby incorporated by
reference from the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is hereby incorporated by
reference from the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. CONSOLIDATED FINANCIAL STATEMENTS PAGE
Index to Consolidated Financial Statements....................................................... F-1
Independent Accountants' Report.................................................................. F-2
Consolidated Balance Sheets as of June 29, 1996, and June 28, 1997............................... F-3
Consolidated Statements of Operations for the Years Ended June 24,
1995, June 29, 1996, and June 28, 1997...................................................... F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the Years Ended June 24, 1995, June 29, 1996, and June 28,
1997........................................................................................ F-7
Consolidated Statements of Cash Flows for the Years Ended June
24, 1995, June 29, 1996, and June 28, 1997.................................................. F-8
Notes to Consolidated Financial Statements....................................................... F-9
(a)2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation Reserves for Fiscal Years 1995, 1996 and 1997.............. S-2
(a)3. EXHIBITS
3A. Bylaws of the Company. (11)
3B. Articles of Incorporation of the Company. (11)
4. Specimen Certificate of Common stock. (1)
10A. Agreements between the Company and Hambrecht & Quist Guaranty Finance.
10A.i. Warrant Purchase Agreement dated July 22, 1992. (1)
10A.ii. Second Common stock Warrant Purchase Agreement dated August
10, 1993. (1)
10A.iii. First Amendment to Restated Financing Agreement dated August
24, 1994, with attached Amendment to Warrant Purchase
Agreement and Warrants. (2)
10A.iv. Warrant Amendment Agreement dated October 31, 1995. (7)
10B. Incentive Stock Option Plan as amended through June 27, 1996. (9)
10C. Incentive Bonus Plan adopted by the Board of Directors of the Company
on May 26, 1993. (1)
10D. Form of Non-Competition Agreement between the Company and certain
senior executive officers. (1)
10E. Asset Purchase Agreement and Preferred Stock Purchase Agreement between
the Company and Megatest Corporation dated November 22, 1994. (3)
10F. Stock Purchase Agreement and Commission Agreement entered into between
the Company and Cardine & Levy, dated September 25, 1995. (6)
10G. Employment Agreement with Roger E. Gower dated March 28, 1995. (4)
10H. Stock Option Agreement between the Company and Bentley Hall & Company
dated April 19, 1994. (5)
10I. Employment Agreement with Dennis Nelson dated May 30, 1996. (9)
10J. Employee Stock Purchase Plan. (8)
10K. Stock Option Plan for Outside Directors. (8)
10L. Lease for the Company's corporate headquarters dated October 16, 1996.
(10)
11. Computation of Earnings Per Common and Common Equivalent Share for the
fiscal years ended June 24, 1995, June 29, 1996 and June 28, 1997.
(filed herewith)
21. Revised Listing of Subsidiaries of the Company. (7)
23. Consent of Deloitte & Touche LLP. (filed herewith)
27. Financial Data Schedule (filed herewith)
- --------------------------------------------------------------------------------
(1) Incorporated by reference to the exhibits to the registration statement
on Form S-1 filed by the Company on August 24, 1993, as amended, SEC
File Number 33-67846.
(2) Incorporated by reference to the exhibits to the report on Form 10-K
filed by the Company for the fiscal year ended June 25, 1994, file
number 0-22384.
(3) Incorporated by reference to the report on Form 8-K filed by the
Company on December 8, 1994, file number 0-22384.
(4) Incorporated by reference to the report on Form 10-Q filed by the
Company for the quarter ended March 25, 1995, file number 0-22384.
(5) Incorporated by reference to the report on Form 10-K filed by the
Company for the fiscal year ended June 24, 1995, file number 0-22384.
(6) Incorporated by reference to the report on Form 10-Q filed by the
Company for the quarter ended September 30, 1995, file number 0-22384.
(7) Incorporated by reference to the exhibits to the Registration Statement
on Form S-1 filed by the Company on November 2, 1995, as amended, SEC
File Number 33-98940.
(8) Incorporated by reference to the exhibits to the Registration Statement
on Form S-8 filed by the Company on October 31, 1994, as amended, SEC
File Number 33-85766.
(9) Incorporated by reference to the exhibits to the report on Form 10-K
filed by the Company for the fiscal year ended June 29, 1996, file
number 0-22384.
(10) Incorporated by reference to the report on Form 10-Q filed by the
Company for the quarter ended September 28, 1996, file number 0-22384.
(11) Incorporated by reference to the exhibits to the post-effective
amendment #1 to the Registration Statement on Form S-1 filed by the
Company on November 18, 1996, file number 33-98940.
(b) REPORTS ON FORM 8-K
There was no Form 8-K filed during the fourth quarter of fiscal 1997.
MICRO COMPONENT TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
a.) CONSOLIDATED FINANCIAL STATEMENTS PAGE
Independent Accountants' Report................................................. F-2
Consolidated Balance Sheets as of June 29, 1996 and June 28, 1997............... F-3
Consolidated Statements of Operations for the Years Ended June 24, 1995,
June 29, 1996, and June 28, 1997....................................... F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the Years Ended June 24, 1995, June 29, 1996, and June 28, 1997.... F-7
Consolidated Statements of Cash Flows for the Years Ended June 24, 1995,
June 29, 1996, and June 28, 1997....................................... F-8
Notes to Consolidated Financial Statements...................................... F-9
b .) CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation Reserves for Fiscal Years 1995, 1996 and 1997........... S-2
INDEPENDENT ACCOUNTANTS' REPORT
To the Stockholders and Board of Directors of Micro Component Technology, Inc.:
We have audited the accompanying consolidated balance sheets of Micro
Component Technology, Inc. and its subsidiaries (the Company) as of June 29,
1996, and June 28, 1997, and the related consolidated statements of operations,
changes in stockholders' equity (deficit) and cash flows for each of the three
years in the period ended June 28, 1997. Our audits also included the schedule
listed in the Index at Item 14(a)2. These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company at June 29,
1996, and June 28, 1997, and the results of their operations and their cash
flows for each of the three years in the period ended June 28, 1997, in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
August 22, 1997
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
June 29, June 28,
1996 1997
------- -------
ASSETS
- --------------------------------------------------
Current Assets:
Cash and cash equivalents ................... $ 7,793 $ 5,360
Short-term investments .................... - 1,169
Accounts receivable, less allowance for
doubtful accounts in 1996 and 1997 of $585
and $109, respectively .................... 4,171 4,028
Inventories ................................. 3,013 3,594
Other ....................................... 749 297
------- -------
Total current assets ............... 15,726 14,448
Property, Plant and Equipment:
Leasehold improvements ...................... 205 129
Machinery and equipment ..................... 3,503 3,356
Furniture and fixtures ...................... 955 862
------- -------
4,663 4,347
Less accumulated depreciation ............. 3,485 3,103
------- -------
Property, plant and equipment, net 1,178 1,244
Other Assets ..................................... 76 100
------- -------
Total Assets ..................................... $16,980 $15,792
======= =======
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(in thousands, except share and per share amounts)
June 29, June 28,
1996 1997
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ............................... $ 352 $ 300
Accounts payable ................................................ 1,044 1,563
Accrued compensation ............................................ 679 714
Customer prepayments and unearned service revenue ............... 324 249
Accrued severance ............................................... 170 -
Other accrued liabilities ....................................... 519 614
-------- --------
Total current liabilities ..................................... 3,088 3,440
Long-term Debt ....................................................... 183 133
Commitments and Contingencies (Note 6)
Stockholders' Equity:
Common, $.01 par value, 20,000,000 authorized,
7,187,244 and 7,047,102 issued, respectively .................. 72 70
Redeemable convertible preferred stock, $.01 par value, 1,000,000
authorized, 315,789 issued (liquidation value $4.75 per share) 1,500 1,500
Additional paid-in capital ...................................... 43,461 42,474
Cumulative translation adjustment ............................... (82) (82)
Accumulated deficit ............................................. (26,934) (31,743)
Treasury stock, 176,074 common shares at cost ................... (4,308) -
-------- --------
Total stockholders' equity .................................... 13,709 12,219
-------- --------
Total Liabilities and Stockholders' Equity ........................... $ 16,980 $ 15,792
======== ========
See Notes to Consolidated Financial Statements.
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended
--------------------------------
June 24, June 29, June 28,
1995 1996 1997
-------- -------- --------
Net sales ..................................................... $ 23,635 $ 22,318 $ 16,129
Cost of sales ................................................. 12,896 9,319 6,910
-------- -------- --------
Gross profit .................................................. 10,739 12,999 9,219
Operating expenses:
Selling, general and administrative ...................... 11,267 7,933 7,121
Research and development ................................. 3,727 4,260 3,934
Unusual and non-recurring items .......................... (6,178) (1,524) -
-------- -------- --------
Total operating expenses ............................... 8,816 10,669 11,055
-------- -------- --------
Income (loss) from operations ................................. 1,923 2,330 (1,836)
Other income (expense):
Interest income (expense), net ........................... (272) 246 329
Other expense ............................................ - - (56)
-------- -------- --------
Income (loss) before income taxes ............................. 1,651 2,576 (1,563)
Income tax provision .......................................... 85 8 -
-------- -------- --------
Income (loss) from continuing operations ...................... 1,566 2,568 (1,563)
Discontinued operations (Note 11):
Income (loss) from operations of discontinued
ITS subsidiary ....................................... (632) - -
Income (loss) on disposal of ITS, including provision
of $227 in fiscal year 1995 for operating losses during
phase-out period ...................................... (3,265) 652 -
-------- -------- --------
Income (loss) before extraordinary item ....................... (2,331) 3,220 (1,563)
Extraordinary item (less applicable income taxes of $21) ...... 1,005 - -
-------- -------- --------
Net income (loss) ............................................. $ (1,326) $ 3,220 $ (1,563)
======== ======== ========
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(in thousands, except per share data)
Year Ended
----------------------------------
June 24, June 29, June 28,
1995 1996 1997
--------- --------- ---------
Per Share Data:
Income (loss) from continuing operations ........... $ 0.30 $ 0.35 $ (0.22)
Discontinued operations ............................ (0.74) 0.09 -
--------- --------- ---------
Income (loss) before extraordinary item ............ (0.44) 0.44 (0.22)
Extraordinary item ................................. 0.19 - -
--------- --------- ---------
Net income (loss) per share ........................ $ (0.25) $ 0.44 $ (0.22)
========= ========= =========
Weighted average common and common equivalent shares
outstanding ...................................... 5,240 7,246 7,030
========= ========= =========
See Notes to Consolidated Financial Statements.
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
Preferred Stock Common Stock Treasury Stock
---------------- -------------------------- Receivables -------------------
Add'l from Cum. Accum-
Par Paid-In Stock- Transl. ulated Class A Common
Shares Value Shares Value Capital Holders Adj. Deficit Shares Cost
------- ------ -------- ---- ------- ----- ----- ------- -------- ------
Balance at June 25, 1994 - $ - 5,000,160 $ 50 $ 35,491 $ (159) $ 252 $(28,828) 36,074 $ (2,908)
Net loss (1,326)
Common stock issued 70,982 1 191
Receivables written off 159
Shares issued on exercise
of options 55,000 1 167
Treasury stock purchased (1) 1,401 140,000 (1,400)
Preferred stock issued 315,789 1,500
Translation adjustment 27
------- ------ -------- ---- ------- ----- ----- ------- -------- ------
Balance at June 24, 1995 315,789 1,500 5,126,142 51 37,250 - 279 (30,154) 176,074 (4,308)
Net income 3,220
Common stock issued 1,700,000 17 5,618
Shares issued on exercise
of options 36,000 1 97
Shares issued on exercise
of warrants 325,102 3 496
Translation adjustment (361)
------- ------ -------- ---- ------- ----- ----- ------- -------- ------
Balance at June 29, 1996 315,789 1,500 7,187,244 72 43,461 - (82) (26,934) 176,074 (4,308)
Net loss (1,563)
Shares issued on exercise
of options 20,000 40
Shares issued through
employee stock
purchase plan 15,932 33
Retirement of treasury
shares (176,074) (2) (1,060) (3,246) (176,074) 4,308
------- ------ -------- ---- ------- ----- ----- ------- -------- ------
Balance at June 28, 1997 315,789 $ 1,500 7,047,102 $ 70 $ 42,474 $ - $ (82) $(31,743) - $ -
======= ======= ========= ===== ======== ======= ======= ======== ======== ======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
-----------------------------
June 24, June 29, June 28,
-----------------------------
1995 1996 1997
------- ------- -------
Cash flows from operating activities:
Net income (loss) .................................... $(1,326) $ 3,220 $(1,563)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Extraordinary item .............................. (1,026) - -
Depreciation and amortization ................... 903 463 469
Unusual and non-recurring ....................... (6,178) (1,524) -
Proceeds from Sym-Tek Settlement ................. 1,325 - -
Other, net ...................................... (381) (4) (12)
Changes in assets and liabilities:
Accounts receivable ......................... 1,022 (170) 143
Inventories ................................. 6,033 19 (581)
Other assets ................................ (779) 927 428
Accounts payable ............................ (6,223) (747) 519
Other accrued liabilities ................... (1,583) (1,927) (115)
Discontinued operations ..................... 2,272 (595) -
------- ------- -------
Net cash used in operating activities ................... (5,941) (338) (712)
Cash flows from investing activities:
Additions to property, plant and equipment ........... (24) (619) (523)
Proceeds from sale of product line ................... 9,529 1,524 -
Purchase of short-term investments ................... - - (1,169)
Discontinued operations .............................. 6 1,401 -
------- ------- -------
Net cash provided by (used in) investing activities ..... 9,511 2,306 (1,692)
Cash flows from financing activities:
Payments under credit agreements ..................... (1,950) - -
Payments of long-term debt ........................... (2,715) (102) (102)
Proceeds from issuance of stock ...................... 1,500 5,132 73
Discontinued operations .............................. (121) - -
------- ------- -------
Net cash provided by (used in) financing activities ..... (3,286) 5,030 (29)
Effects of exchange rate changes .......................... 27 (361) -
------- ------- -------
Net increase (decrease) in cash and cash equivalents .... 311 6,637 (2,433)
Cash and cash equivalents at beginning of period .......... 845 1,156 7,793
------- ------- -------
Cash and cash equivalents at end of period ................ $ 1,156 $ 7,793 $ 5,360
======= ======= =======
See Notes to Consolidated Financial Statements.
MICRO COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Company designs, manufactures, markets and services automatic test
equipment consisting of both handling and testing equipment for the
semiconductor industry. The Company's handlers are designed to handle most
integrated circuit ("IC") device packages currently in production. The Company's
testers are used to test logic, mixed signal, microprocessor, microperipheral
and application-specific IC devices. The Company's major customers include
SGS-Thomson Micro Electronics, Inc., Philips Semiconductors, Intel, Advanced
Micro Devices and Motorola Incorporated.
The Company's customers are supported by a network of offices and
representatives across the United States, Europe, and the Far East. The Company
was formed in 1972 and is headquartered in St. Paul, Minnesota.
CONSOLIDATION
The consolidated financial statements include the accounts of the
parent company and its subsidiary after elimination of all significant
intercompany balances and transactions. The significant subsidiary is 100%
owned.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may differ from those estimates.
FISCAL YEAR
The Company's fiscal year is 52 or 53 weeks, ending on the last
Saturday in June.
CASH EQUIVALENTS
Cash equivalents are all highly liquid temporary cash investments
available for sale, purchased with original maturities of three months or less.
The fair market value of such investments approximates cost.
SHORT-TERM INVESTMENTS
Short-term investments include commercial debt, which the Company
considers to be available for sale. These investments, purchased with an
original maturity greater than three months and less than one year, are stated
at cost which approximates fair market value.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out ("FIFO") method. Provision for
obsolescence is made based on estimates of future sales and the related value of
component parts.
REVENUE RECOGNITION
Revenue for product sales is recognized upon shipment if all conditions
precedent to the sale have been met or are assured of being met. If significant
conditions regarding acceptance and right of return exist, revenue is not
recognized until such conditions are met. Service revenue is deferred and
amortized to earnings on a straight-line basis over the life of the service
contract.
INCOME OR LOSS ON COMMON STOCK
Income or loss per share data is computed using the weighted average
number of shares of common stock outstanding. Common equivalent shares are not
included in the per share calculations when the effect of their inclusion would
be antidilutive.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is
provided primarily by the straight-line method over the estimated useful lives
of the assets for financial reporting and accelerated methods for tax purposes.
Estimated lives used in computing depreciation are as follows:
Leasehold improvements............................ 3 to 10 years
Machinery and equipment........................... 2 to 5
Furniture and fixtures............................ 3 to 5
PRODUCT WARRANTY
Estimated costs of warranty obligations to customers are charged to
expense and a related accrual is established at the time the product is sold.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for
Income Taxes." Deferred income tax benefits and deferred income taxes are
recorded based on differences in the bases of assets and liabilities between the
financial statements and the tax returns.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the foreign subsidiary are translated to U.S.
dollars at year-end rates, and the statements of operations are translated at
average exchange rates during the year. Translation adjustments arising from the
translation of the foreign affiliates' net assets into U.S. dollars are recorded
as a separate component of stockholders' equity.
NEW ACCOUNTING STANDARDS
In February 1997, SFAS No. 128, "Earnings per Share" was issued which
is required to be adopted for the quarter ending December 27, 1997. At that
time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating basic earnings per share, the dilutive effect of
stock options, stock warrants and convertible securities will be
excluded. The calculation of diluted earnings per share will remain similar to
the current method. The impact of SFAS No. 128 on the calculation primary and
fully diluted earnings per share is not expected to be material.
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" was issued which is required to be adopted
for the fiscal year beginning June 28, 1998. At that time, the Company will be
required to disclose certain financial and descriptive information about its
operating segments as redefined by SFAS No. 131. The Company has not yet
completed its analysis of which operating segments it will be required to report
on.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for new product development are
charged to expense as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
All financial instruments, primarily short-term investments and
long-term debt, are carried at their estimated fair value as determined based
upon their short-term nature or stated interest rates.
RECLASSIFICATIONS
Certain prior year balance sheet amounts have been reclassified to
conform with the current year presentation.
NOTE 2 - INVENTORIES
Major components of inventories are as follows (in thousands):
1996 1997
---- ----
Raw materials............... $ 1,215 $ 1,110
Work-in-process............. 484 1,420
Finished goods.............. 1,314 1,064
-------- --------
$ 3,013 $ 3,594
======= =======
Additions to inventory reserves of approximately $2.6 million, $0.8
million and $0 million are included in cost of sales for fiscal years 1995, 1996
and 1997, respectively. During fiscal year 1995, provisions for obsolescence
were primarily due to component parts purchased and assembled in anticipation of
customized sales which did not occur due to lack of customer commitments and
failure of the Company to meet design specifications. Product design changes to
enhance market acceptance also resulted in significant obsolescence of
previously purchased and assembled inventory.
NOTE 3 - LONG-TERM DEBT
Long-term debt and financing obligations consist of the following (in
thousands):
1996 1997
---- ----
Notes payable (a) ............................... $303 $252
Equipment lease agreements (b) .................. 218 175
Other ........................................... 14 6
---- ----
Total long-term debt and financing obligations 535 433
Less current obligations ........................ 352 300
---- ----
Total long-term debt ............................ $183 $133
==== ====
(a) Notes payable consist of a 6% fixed rate note and a variable rate note
(7% at June 28, 1997), both maturing in fiscal 1998. Interest is due
monthly on both notes. In connection with the issuance of the variable
rate note, the Company issued a warrant to purchase 10,000 shares of
Common stock at an exercise price of $10.00 per share. The warrant
expires March 5, 1998. The Company no longer has possession of the
equipment securing these notes. This represents an event of default
under the terms of the agreements, making them due and payable on
demand. As a result, the outstanding principal balance was also
classified as current at June 29, 1996.
(b) The Company has two equipment lease agreements, bearing interest at
approximately 7% for two Fadal Machining Centers used in the Company's
manufacturing process. Capitalized lease amounts included in Property,
Plant and Equipment at June 29, 1996 and June 28, 1997 were $220,000
and $173,000, respectively, net of accumulated depreciation of $13,000
and $60,000, respectively.
Cash paid for interest was $613,000, $30,000 and $33,000 for fiscal
years 1995, 1996 and 1997, respectively.
Payments due under debt obligations at June 28, 1997 are as follows:
1998 - $300,000; 1999 - $50,000; 2000 - $51,000; and, 2001 - $32,000.
NOTE 4 - INCOME TAXES
The income tax provisions consist of the following (in thousands):
1995 1996 1997
---- ----- ----
Current:
Federal.................... $ -- $ -- $ --
State...................... -- -- --
Foreign........................... 85 8 --
---- ----- ----
Total $ 85 $ 8 $ --
===== ===== ====
The Company has recorded a total valuation reserve against
approximately $12.2 million and $12.5 million at June 29, 1996 and June 28,
1997, respectively, of deferred tax assets related primarily to operating loss
carryforwards due to the uncertainty of their ultimate realization.
The provision for income taxes varied from the federal statutory rate
as follows:
Year Ended June
---------------------
1995 1996 1997
---- ---- ----
Tax (benefit) at statutory rate ............. 35.0% 35.0% (35.0)%
Effect of graduated tax rates ............... (1.0) (1.0) 1.0
Foreign subsidiary losses with no tax benefit 9.6 11.9 11.3
Foreign loss carryforward benefit ........... (6.8) (4.7) (0.6)
Adjustment to valuation allowance ........... (33.2) (41.9) 23.3
State tax ................................... -- 1.2 --
Other ....................................... 1.5 (0.2) --
---- ---- ----
5.1% 0.3% 0.0%
==== ==== ====
As of June 28, 1997, operating loss carryforwards ("NOL") of
approximately $26.9 million and tax credit carryforwards of approximately
$118,000 are available for future U.S. federal and state tax returns. Tax loss
carryforwards of certain foreign operations in the aggregate of $1.9 million are
available for tax and financial reporting purposes. Such tax loss carryforwards
begin to expire in the year 2004.
The Company believes that its initial public offering, combined with
prior events, resulted in an "ownership change" of the Company as defined in
Section 382 of the Internal Revenue Code and the Regulations issued thereunder
(Section 382). Pursuant to Section 382, the Company's ability to use its NOLs
originating prior to the initial public offering would be subject to an annual
limitation of approximately $918,000. Losses incurred subsequent to the initial
public offering are available without annual limitation to offset future income.
Cash paid during the year for taxes was $106,000, $149,000 and $63,000
for fiscal years 1995, 1996, and 1997, respectively.
NOTE 5 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
Concurrent with the sale of the 1149 tester product line, Megatest
purchased 315,789 shares of the Company's Non-voting Series A Preferred stock,
at $4.75 per share, for a total of $1.5 million.
The Preferred stock provides for an annual cumulative dividend of five
percent which begins to accrue in November 1997. No dividends may be paid on the
Company's Common stock while any cumulative dividend remains accrued and unpaid.
In the event of liquidation of the Company, holders of the Preferred
stock are entitled to a preference of $4.75 per share, plus any accrued
dividends, before any amount can be paid on the Common stock. The Preferred
stock is redeemable at the option of the Company at any time six months after
the issuance date at $4.75 per share, plus accrued dividends. The Preferred
stock is convertible into shares of Common stock, on a one-for-one basis, at the
option of the holder at any time six months after the issuance date, or at the
option of the Company at any time beginning on November 23, 1997. The
liquidation preference, the redemption amount, and the conversion ratio are all
subject to adjustment in the event of changes affecting the Company's capital
structure and in the event of certain distributions to stockholders.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Company leases certain facilities and equipment under various
operating leases. Effective April 1997, the Company entered into an operating
lease agreement and relocated its headquarters to a new facility in St. Paul,
Minnesota, coinciding with the expiration of the operating lease at its previous
headquarters facility. Under the terms of the new agreement which extends
through April 2007, the Company is responsible for base rent and all operating
expenses associated with the portion of the facility which it occupies. The
agreement provides the Company with a one-time option to cancel the lease after
seven years, at which time the Company would only be responsible for certain
unamortized build-out costs incurred by the landlord.
Total rent expense charged to operations, primarily for facilities and
equipment was $855,000, $1,014,000, and $1,149,000 in fiscal years 1995, 1996
and 1997, respectively.
The future minimum rental payments at June 28, 1997, due under
noncancelable operating leases, are as follows: 1998 - $771,000; 1999 -
$660,000; 2000 - $607,000; 2001 - $446,000; 2002 - $448,000; thereafter -
$2,236,000.
The Company has an employment agreement with its Chief Executive
Officer which may be terminated upon 60 days written notice by either party. If
the agreement is terminated by the Company, the Company shall continue to pay
the officer's salary in effect at date of termination for 12 months thereafter.
The Company also has an agreement with one other officer which provides for
severance pay and other remuneration if employment is terminated without cause
or if the individual should resign following a change of control.
CONTINGENCIES
The Securities and Exchange Commission is conducting an investigation
with respect to certain financial reporting discrepancies announced by the
Company in April 1994 dating back to fiscal 1993 and the first two quarters of
fiscal 1994. The Company has submitted documents to the Commission pursuant to
requests from the Commission, and certain former officers and certain current
and former employees of the Company have been interviewed by the Commission as
part of the investigation. Management is currently not able to predict the
financial impact, if any, that may result from the outcome of the investigation.
NOTE 7 - STOCK OPTION AND BONUS PLANS AND WARRANTS TO PURCHASE
COMMON STOCK
In May 1995 and August 1995, the Board of Directors amended the April
1993 Incentive Stock Option Plan for key employees and reserved an additional
500,000 shares and 250,000 shares respectively for a total of 1,250,000 shares
of Common stock for issuance under the Plan at fair market value at the date of
grant. The shareholders have approved these amendments. The options expire five
years from the date of grant and generally vest over a two-year or four-year
period. If an individual ceases employment, he/she has one month to exercise
vested options granted prior to June 8, 1994 or 90 days for options granted on
or after June 8, 1994. Options granted in excess of the $100,000 annual IRS
limitations become non-qualified.
In April 1994, the Company granted an option for 45,000 shares to a
financial advisor for consulting services provided. In May 1995, the Board of
Directors reserved 150,000 shares of Common stock for the grant of non-qualified
stock options for outside directors, consultants and advisors.
In fiscal 1996, the Board of Directors and the shareholders approved
the Stock Option Plan for Outside Directors and reserved 300,000 shares of
Common stock for issuance under the Plan. Each person who becomes an outside
director will automatically be granted an option to purchase 10,000 shares. In
addition, each outside director will also automatically be granted an option to
purchase 10,000 shares immediately upon each reelection as a director, or on the
anniversary of the prior year's grant in any year in which there is no meeting
of the stockholders at which directors are elected. The period within which an
option must be exercised will be the earlier of (1) five years from the date of
the grant, or (2) the date which is one year after the director ceases to be a
director for any reason. The exercise price for each option will be the fair
market value of the stock on the date of grant, and each option will generally
vest over a two-year period at 50 percent per year.
Shares subject to option under these plans during fiscal year 1995,
1996 and 1997 were as follows:
WEIGHTED
AVERAGE
EXERCISE PRICE PER
OPTIONS SHARES PRICE RANGE SHARE
------- ------- ----------- -----
Outstanding, June 25, 1994 799,000 $3.00 to $7.00 $4.82
Granted 920,000 $2.00 to $4.25 $2.45
Exercised (55,000) $3.00 $3.00
Expired (663,000) $3.00 to $7.00 $4.85
---------
Outstanding, June 24, 1995 1,001,000 $2.00 to $7.00 $2.73
Granted (valued at $1.54 per share) 180,000 $3.375 to $7.50 $3.86
Exercised (36,000) $2.00 to $4.25 $2.74
Expired (294,500) $2.00 to $4.25 $2.47
---------
Outstanding June 29, 1996 850,500 $2.00 to $7.50 $3.00
Granted (valued at $0.98 per share) 232,000 $2.0625 to $3.3125 $2.48
Exercised (20,000) $2.00 $2.00
Expired (167,500) $2.00 to $4.25 $2.97
---------
Outstanding June 28, 1997 895,000 $2.00 to $7.50 $2.89
=========
Exercisable at June 28, 1997 563,000 $2.00 to $7.50 $2.82
=========
Options outstanding at June 28, 1997 had exercise prices ranging from
$2.00 to $7.50 per share as summarized in the following table:
Number Weighted Weighted Number
Range of Outstanding Average Average Exercisable
Exercise at June 28, Remaining Exercise at June 28,
Prices 1997 Life Price Per Share 1997
------ ---- ---- --------------- ----
$2.00 to $2.625 572,000 3.5 years $2.10 390,000
$3.00 to $3.75 228,000 4.0 years $3.44 83,000
$5.00 40,000 1.0 year $5.00 40,000
$7.00 to $7.50 55,000 2.0 years $7.09 50,000
------- -------
$2.00 to $7.50 895,000 3.5 years $2.89 563,000
======= =======
In February 1996, the Board of Directors adopted the Employee Stock
Purchase Plan and reserved 300,000 shares for issuance under the Plan. Eligible
employees can elect under the Plan to contribute between two percent and ten
percent of their base pay each plan year (June 1 - May 31) to purchase shares of
Common stock at a price per share equal to 85 percent of market value on the
first day of the plan year or the last day of the plan year, whichever is lower.
Employee contributions are deducted from their regular salary or wages. The
maximum number of shares which can be purchased by an employee in any plan year
is 1,000 shares. During fiscal year 1997, 15,932 shares were issued under the
plan at prices ranging from $1.59 to $2.34, at a weighted average price of $2.25
per share. Approximately 284,000 shares remain reserved for future issuance.
In May 1993, the Board of Directors approved an Incentive Bonus Plan
commencing in fiscal year 1994 which provides for payment of discretionary
annual bonuses to employees of up to 5% of the Company's pretax income. Eighty
percent of the bonus is to be paid in cash and twenty percent to the Company's
qualified 401(k) retirement plan. No bonus payments were made under the Plan in
fiscal years 1995, 1996 or 1997.
In fiscal 1997, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." As permitted by SFAS No. 123, the Company has elected
to continue following the guidance of APB No. 25 for measurement and recognition
of stock-based transactions with employees. Because stock options have been
granted at exercise prices at least equal to the fair market value of the stock
at the grant date, no compensation cost has been recognized for stock options
issued to employees under the stock option plans. If compensation cost for the
Company's stock option and employee stock purchase plans had been determined
based on the fair value at the grant dates, consistent with the method provided
in SFAS No. 123, the Company's net income (loss) and earnings (loss) per share
would have been as follows:
1996 1997
Net income (loss), in thousands
As reported $ 3,220 $ (1,563)
Pro forma $ 3,116 $ (1,752)
Earnings (loss) per share
As reported $ 0.44 $ (0.22)
Pro forma $ 0.43 $ (0.25)
The fair value of options granted under the stock option and employee
stock purchase plans during fiscal 1996 and 1997 was estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions and results:
Dividend yield 0%
Expected volatility 46.25%
Risk-free interest rate 6.0%
Expected life of options 3.5 years
The following summarizes all warrants outstanding to purchase shares of
the Company's common stock at June 28, 1997:
Exercise Expiration
Shares Price Date
------ ----- ----
169,807 $3.125 December 31, 1999
30,000 $4.00 December 31, 1999
68,500 $5.00 December 31, 1999
10,000 $10.00 March 5, 1998
NOTE 8 - SEGMENT, GEOGRAPHIC, CUSTOMER INFORMATION AND CONCENTRATION OF
CREDIT RISK
The Company operates in one industry segment supplying integrated
circuit handlers and testers to the semiconductor industry.
The Company operates in three geographic areas. Summarized data for the
Company's continuing operations by geographic area are as follows (in
thousands):
U.S. EUROPE FAR EAST CONSOLIDATED
---- ------ -------- ------------
1995
- ----
Sales to unaffiliated customers........................ $11,099 $2,208 $10,328 $23,635
Inter-area sales to affiliates......................... 8,686 - 1,048 9,734
Operating profit (loss)................................ 2,302 - (379) 1,923
Identifiable assets.................................... 7,003 977 3,552 11,532
Export Sales: United States............................ - - 1,048 1,048
1996
- ----
Sales to unaffiliated customers........................ $ 9,494 $ 3,764 $ 9,060 $22,318
Inter-area sales to affiliates......................... 7,448 - 927 8,375
Operating profit (loss)................................ 2,790 - (460) 2,330
Identifiable assets.................................... 13,587 - 3,393 16,980
Export Sales: United States............................ - - 927 927
1997
- ----
Sales to unaffiliated customers........................ $ 6,842 $ 759 $ 8,528 $16,129
Inter-area sales to affiliates......................... 5,100 - 100 5,200
Operating profit (loss)................................ (1,374) - (462) (1,836)
Identifiable assets.................................... 12,569 - 3,223 15,792
Export Sales: United States............................ - - 100 100
Sales to the Company's customers in fiscal year 1997 exceeding 10% of
net sales are as follows:
1995 1996 1997
---- ---- ----
Customer A 15% 24% 17%
B - - 11%
During fiscal year 1996, two other customers accounted for
approximately 11% and 10% of net sales and during fiscal year 1995 one other
customer accounted for approximately 14% of net sales.
The Company's sales and accounts receivable balances are concentrated
in one industry, the integrated circuit manufacturers. The Company's historical
credit losses have not been significant.
NOTE 9 - NONCASH TRANSACTIONS
Between September 26, 1995 and November 3, 1995, Hambrecht & Quist
Guaranty Finance L.P. ("H&Q") and its affiliates surrendered a total of 301,177
warrants in exchange for 165,102 shares of common stock pursuant to a "cashless
exercise" provision in the warrants. This provision allows the warrant holders
to surrender the warrants and receive in exchange a number of shares equal to
the percentage determined by dividing (a) the difference between the current
market price of the common stock and the warrant exercise price by (b) the
current market price of the common stock.
In December 1995, the Company issued 200,000 shares of common stock
with a value of $1.1 million in accordance with the settlement agreement for the
shareholders' lawsuit.
NOTE 10 - UNUSUAL AND NON-RECURRING ITEMS
The Company incurred the following unusual and non-recurring items
reflected in income (loss) from operations (in thousands):
1995 1996
------- ------
Subsequent settlement of proposed Sym-Tek acquisition $ 1,948 $ --
Gain on sale of 1149 tester product line ............ 5,194 1,524
Severance costs ..................................... (752) --
Costs of closing Japan facility ..................... (212) --
------- ------
Total ............................................... $ 6,178 $1,524
======= ======
In connection with a potential merger with Sym-Tek in fiscal 1994, the
Company reserved costs of $4.0 million related to a securitized loan to Sym-Tek
and certain other costs and liabilities incurred related to the proposed merger.
In fiscal 1995, a settlement was reached which resulted in a gain of $1.9
million.
On November 22, 1994, the Company completed the sale of its 1149 tester
product line to Megatest Corporation ("Megatest"). The sale resulted in a gain
of $5.2 million. An additional $2.0 million was placed in escrow pursuant to the
sale agreement to provide for defined contingencies related to the 1149 tester
product line. This amount was deferred until definitive resolution of the
defined contingencies. In December 1995, the Company received approximately $1.5
million from the resolution of disputes concerning the $2.0 million escrow fund.
Under the terms of the settlement, all disputes between the parties have been
resolved. The Company has classified these amounts as unusual and non-recurring
gains in the results of operations for fiscal 1995 and 1996.
In fiscal 1995, the Company accrued $752,000 for severance costs due to
the former Chief Executive Officer.
A provision of $212,000 was made in fiscal 1995 which covered the costs
of closing the Company's sales and service operations in Japan.
NOTE 11 - DISCONTINUED OPERATIONS
On May 31, 1995, the Board of Directors initiated a formal plan to sell
the Company's European subsidiary, Intertrade Scientific, Inc. ("ITS"). A
provision for the loss on the sale of $3.0 million was recorded in the results
of operations for the year ended June 24, 1995. In August 1995, the Company
received a letter of intent to purchase all of the outstanding shares of ITS
stock. As a result of the final signed sales agreement, the Company realized a
net gain of $0.7 million on the disposal of ITS. The completion of the sale
occurred during the first quarter of fiscal 1996.
This subsidiary has been reflected as a discontinued operation for all
periods presented. Net sales of discontinued operations were $15.4 million for
fiscal year 1995.
NOTE 12 - EXTRAORDINARY GAIN FROM EXTINGUISHMENT OF DEBT
During the second quarter of fiscal 1995, the Company used $3.5 million
of the proceeds from the sale of the 1149 tester product line in settlement of
approximately $4.5 million of outstanding trade payables, not including the
payables assumed by Megatest as part of the sale transaction. The difference
between the trade payables and the cash used resulted in an extraordinary gain
of $1.0 million, net of $21,000 provision for taxes.
NOTE 13 - DEBT RESTRUCTURING AND FINANCING AGREEMENTS
In July 1992, the Company entered into a financing agreement with H&Q.
The agreement consisted of a sale-leaseback transaction of the Company's former
headquarters facility which was treated as a financing transaction for financial
reporting purposes. In consideration for the financing package, stock purchase
warrants were originally issued to H&Q allowing them to purchase up to 190,000
shares of the Company's common stock for $4.00 per share (See Note 7).
As part of the financing agreement, the mortgagee of the Company's
former headquarters facility agreed to forgive approximately $0.9 million of
past due accrued interest and receive 140,000 shares of common stock in exchange
for settlement of $1.4 million of the mortgage. The remaining mortgage balance
of $5.0 million was then assumed on a non-recourse basis by H&Q upon the
purchase of the facility from the Company. The 140,000 shares of Common stock
could be put back to the Company by the mortgagee for $1.4 million. These shares
were repurchased by the Company for $1.4 million in December 1994. The Company
also entered into a new lease agreement with H&Q in December 1994. This amended
agreement has been accounted for as a sale-leaseback transaction. Accordingly,
the land, building and financing obligation have been removed from the
consolidated balance sheet. The resulting gain of $366,000 was deferred and
recognized over the life of the operating lease which expired in April 1996. The
Company also prepaid all future lease payments, future estimated maintenance
costs and future estimated property tax payments as part of the new lease
agreement. These costs were also amortized over the life of the lease.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of St.
Paul, State of Minnesota, on September 23, 1997.
MICRO COMPONENT TECHNOLOGY, INC.
By: /s/ Roger E. Gower
-----------------------------------
Roger E. Gower
President, Chief Executive Officer,
Chairman of the Board and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on September 23, 1997.
Signature Capacity
--------- --------
President, Chief Executive Officer,
/s/ Roger E. Gower Chairman of the Board and Director
- ---------------------------------------
Roger E. Gower
/s/ Jeffrey S. Mathiesen Vice President of Finance/
- --------------------------------------- Administration, Chief Financial
Jeffrey S. Mathiesen Officer, Treasurer
/s/ D. James Guzy Director
- ---------------------------------------
D. James Guzy
/s/ David M. Sugishita Director
- ---------------------------------------
David M. Sugishita
/s/ Donald R. VanLuvanee Director
- ---------------------------------------
Donald R. VanLuvanee
/s/ Patrick Verderico Director
- ---------------------------------------
Patrick Verderico
SCHEDULE II
MICRO COMPONENT TECHNOLOGY, INC. AND SUBSIDIARIES
VALUATION RESERVES
FOR FISCAL YEARS 1995, 1996 AND 1997
(IN THOUSANDS)
Balance at Balance at
Beginning End
Description of Year Additions Deductions of Year
- ----------- ------- --------- ---------- -------
Reserves deducted from assets to which
they apply
NOTES AND ACCOUNTS RECEIVABLE
Year ended June 24, 1995 $ 244 $ (144)(1) $ - (2) $ 100
======= ======== ======== ========
Year ended June 29, 1996 $ 100 $ 485 (1) $ - (2) $ 585
======= ======== ======== ========
Year ended June 28, 1997 $ 585 $ (344)(1) $ 3 (2) $ 238 (3)
======= ======== ======== ========
INVENTORIES
Year ended June 24, 1995 $ 4,488 $ 2,613 (4) $ 2,354 (5) $ 4,747
======= ======== ======== ========
Year ended June 29, 1996 $ 4,747 $ 814 (4) $ 520 (5) $ 5,041
======= ========= ======== ========
Year ended June 28, 1997 $ 5,041 $ - $ 2,346 (5) $ 2,695
======= ========= ======== ========
DEFERRED INCOME TAXES
Year ended June 24, 1995 $14,200 $ - $ 300 (6) $ 13,900
======= ======== ======== ========
Year ended June 29, 1996 $13,900 $ - $ 1,700 (6) $ 12,200
======= ======== ======== ========
Year ended June 28, 1997 $12,200 $ 300 (6) $ - $ 12,500
======= ======== ======== ========
Notes: (1) Provision charged to selling, general and administrative
expense.
(2) Uncollectible accounts written off, less recoveries.
(3) $109 applies to trade accounts receivable, $129 applies to
other miscellaneous receivables.
(4) Provision charged to cost of sales.
(5) Inventory written off.
(6) Generated from differences in basis of certain assets for book
vs. tax reporting.
INDEX TO EXHIBITS Page Numbers
3A. Bylaws of the Company. (11)
3B. Articles of Incorporation of the Company. (11)
4. Specimen Certificate of Common stock. (1)
10A. Agreements between the Company and Hambrecht &
Quist Guaranty Finance.
10A.i. Warrant Purchase Agreement dated July 22,
1992. (1)
10A.ii. Second Common stock Warrant Purchase
Agreement dated August 10, 1993. (1)
10A.iii. First Amendment to Restated Financing
Agreement dated August 24, 1994, with
attached Amendment to Warrant Purchase
Agreement and Warrants. (2)
10A.iv. Warrant Amendment Agreement dated October
31, 1995. (7)
10B. Incentive Stock Option Plan as amended through June
27, 1996. (9)
10C. Incentive Bonus Plan adopted by the Board of
Directors of the Company on May 26, 1993. (1)
10D. Form of Non-Competition Agreement between the
Company and certain senior executive officers. (1)
10E. Asset Purchase Agreement and Preferred Stock
Purchase Agreement between the Company and Megatest
Corporation dated November 22, 1994. (3)
10F. Stock Purchase Agreement and Commission Agreement
entered into between the Company and Cardine &
Levy, dated September 25, 1995. (6)
10G. Employment Agreement with Roger E. Gower dated
March 28, 1995. (4)
10H. Stock Option Agreement between the Company and
Bentley Hall & Company dated April 19, 1994. (5)
10I. Employment Agreement with Dennis Nelson dated May
30, 1996. (9)
10J. Employee Stock Purchase Plan. (8)
10K. Stock Option Plan for Outside Directors. (8)
10L. Lease for the Company's corporate headquarters
dated October 16, 1996. (10)
11. Computation of Earnings Per Common and Common
Equivalent Share for the fiscal years ended June
24, 1995, June 29, 1996 and June 28, 1997. (filed
herewith)
21. Revised Listing of Subsidiaries of the Company. (7)
23. Consent of Deloitte & Touche LLP. (filed herewith)
27. Financial Data Schedule (filed herewith)
- --------------------------------------------------------------------------------
(1) Incorporated by reference to the exhibits to the registration statement
on Form S-1 filed by the Company on August 24, 1993, as amended, SEC
File Number 33-67846.
(2) Incorporated by reference to the exhibits to the report on Form 10-K
filed by the Company for the fiscal year ended June 25, 1994, file
number 0-22384.
(3) Incorporated by reference to the report on Form 8-K filed by the
Company on December 8, 1994, file number 0-22384.
(4) Incorporated by reference to the report on Form 10-Q filed by the
Company for the quarter ended March 25, 1995, file number 0-22384.
(5) Incorporated by reference to the report on Form 10-K filed by the
Company for the fiscal year ended June 24, 1995, file number 0-22384.
(6) Incorporated by reference to the report on Form 10-Q filed by the
Company for the quarter ended September 30, 1995, file number 0-22384.
(7) Incorporated by reference to the exhibits to the Registration Statement
on Form S-1 filed by the Company on November 2, 1995, as amended, SEC
File Number 33-98940.
(8) Incorporated by reference to the exhibits to the Registration Statement
on Form S-8 filed by the Company on October 31, 1994, as amended, SEC
File Number 33-85766.
(9) Incorporated by reference to the exhibits to the report on Form 10-K
filed by the Company for the fiscal year ended June 29, 1996, file
number 0-22384.
(10) Incorporated by reference to the report on Form 10-Q filed by the
Company for the quarter ended September 28, 1996, file number 0-22384.
(11) Incorporated by reference to the exhibits to the post-effective
amendment #1 to the Registration Statement on Form S-1 filed by the
Company on November 18, 1996, file number 33-98940.