<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended April 30, 1995 Commission file No. 0-14880
Microlog Corporation
(Exact name of registrant as specified in its charter).
State of Incorporation: Virginia
I.R.S. Employer Identification No.: 52-0901291
20270 Goldenrod Lane
Germantown, Maryland 20876
(Address of principal executive offices).
Registrant's Telephone No., Including Area Code: 301-428-9100
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- -------
As of June 9, 1995 3,880,598 shares of common stock were outstanding.
<PAGE>
MICROLOG CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
April 30, October 31,
1995 1994
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 519,372 $ 1,166,194
Receivables, net 3,084,456 2,617,337
Receivable from related party 131,437 70,237
Inventories 1,202,863 882,184
Other current assets 165,967 157,590
------------ ------------
Total current assets 5,104,095 4,893,542
Fixed assets, net 3,037,517 2,941,925
Licenses, net 580,952 638,095
Other assets 343,148 365,286
Goodwill, net 181,921 217,131
------------ ------------
Total assets $ 9,247,633 $ 9,055,979
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,246,365 $ 1,463,818
Accounts payable 1,281,472 1,083,970
Accrued compensation and related expenses 1,564,637 1,634,278
Other accrued expenses 1,279,109 1,415,480
------------ ------------
Total current liabilities 5,371,583 5,597,546
Long-term debt 0 45,456
Deferred officers' compensation 275,170 269,218
Other liabilities 285,339 394,865
------------ ------------
Total liabilities 5,932,092 6,307,085
------------ ------------
Mandatorily redeemable common stock
102,857 shares issued, redeemable at $2.1875 per share 225,000 225,000
------------ ------------
Commitments and contingencies
Stockholders' equity:
Serial preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued 0 0
Common stock, $.01 par value, 10,000,000 shares authorized,
4,379,611 and 4,379,511 shares issued 43,796 43,795
Capital in excess of par value 14,766,110 14,765,999
Treasury stock, at cost, 601,870 shares (1,176,537) (1,176,537)
Accumulated deficit (10,542,828) (11,109,363)
------------ ------------
Total stockholders' equity 3,090,541 2,523,894
------------ ------------
Total liabilities and stockholders' $9,247,633 $ 9,055,979
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
MICROLOG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
1995 1994 1995 1994
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $5,306,899 $4,421,370 $10,735,705 $8,516,769
---------- ---------- ----------- ----------
Costs and expenses:
Cost of sales 3,008,931 3,319,376 6,344,836 6,266,196
Selling, general and administrative 1,559,988 1,646,453 2,994,256 3,387,689
Research and development 397,643 421,606 775,302 779,258
---------- ---------- ----------- ----------
4,966,562 5,387,435 10,114,394 10,433,143
---------- ---------- ----------- ----------
Operating income (loss) 340,337 (966,065) 621,311 (1,916,374)
Net other income (expense) (37,646) 25,905 (54,776) 7,955
---------- ---------- ----------- ----------
Income (loss) before income taxes 302,691 (940,160) 566,535 (1,908,419)
Provision for income taxes 0 8,816 0 16,747
---------- ---------- ----------- ----------
Net income (loss) 302,691 (948,976) 566,535 (1,925,166)
Accumulated deficit:
- at beginning of period (10,845,519) (7,101,512) (11,109,363) (6,125,322)
---------- ---------- ----------- ----------
- at end of period ($10,542,828) ($8,050,488) ($10,542,828) ($8,050,488)
========== ========== =========== ==========
Weighted average shares outstanding 3,960,301 3,875,448 3,920,399 3,874,636
Income (loss) per common share $ 0.08 ($ 0.24) $ 0.14 ($ 0.50)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
MICROLOG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Six Months Six Months
Ended Ended
April 30, 1995 April 30, 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 566,535 ($1,925,166)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 210,647 384,138
Amortization of goodwill and other 137,356 137,356
Loss/(gain) on sale of fixed assets 0 (42,159)
Changes in assets and liabilities:
Receivables (528,319) 1,240,386
Inventories (320,679) (52,936)
Other current assets (8,377) (119,185)
Accounts payable and accrued expenses (8,510) (106,654)
Other liabilities (103,574) 3,914
-------------- --------------
Net cash used in
operating activities (54,921) (480,306)
-------------- --------------
Cash flows from investing activities:
Purchases of fixed assets (309,248) (253,786)
Proceeds from sale of fixed assets 3,009 58,638
Other assets (22,865) (154,901)
-------------- --------------
Net cash used in
investing activities (329,104) (350,049)
-------------- --------------
Cash flows from financing activities:
Reduction of long-term debt (262,909) (182,291)
Issuance of common stock 112 3,113
-------------- --------------
Net cash used in financing activities (262,797) (179,178)
-------------- --------------
Cash and cash equivalents:
Net increase (decrease) during period (646,822) (1,009,533)
Balance at beginning of period 1,166,194 2,612,794
-------------- --------------
Balance at end of period $ 519,372 $ 1,603,261
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
MICROLOG CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1995 (unaudited) and OCTOBER 31, 1994
Note 4 - Restructuring of Operations
General
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position of Microlog
Corporation (the Company) as of April 30, 1995 and October 31, 1994, and the
results of their operations and cash flows for the three and six months periods
ended April 30, 1995 and 1994. The results of operations presented are not
necessarily indicative of the results that may be expected for the fiscal
Restructuring Reserves
The significant accounting principles and practices followed by the Company are
set forth in the Notes to Consolidated Financial Statements in Microlog
Corporation's Annual Report on Form 10-K for the year ended October 31,1994.
<TABLE>
<CAPTION>
Note 1 - Inventories
Inventories consist of the following: (Unaudited)
April 30, October 31,
1995 1994
------------- -----------
<S> <C> <C>
Components and finished goods $1,971,997 $ 1,726,615
Work-in-process 375,560 300,263
------------- -----------
2,347,557 2,026,878
Less: reserve for obsolescence (1,144,694) (1,144,694)
------------- -----------
$ 1,202,863 $ 882,184
============= ===========
Note 2 - Fixed Assets
The cost of property and equipment consists of the following:
(Unaudited)
April 30, October 31,
1995 1994
------------- -----------
Land $ 520,000 $ 520,000
Buildings and improvements 2,523,100 2,523,100
Furniture and equipment 2,761,508 3,229,416
Vehicles 23,642 34,772
Leasehold improvements 201,270 52,702
------------- -----------
6,029,520 6,359,990
Less: accumulated depreciation (2,992,003) (3,418,065)
------------- -----------
$ 3,037,517 $ 2,941,925
============= ===========
</TABLE>
Note 3 - Debt
As of June 14, 1995, the Company's mortgage loan was $948,000. The Company and
the bank negotiated an extension of the due date of the mortgage note until June
30, 1995.
<PAGE>
Note 4 - Restructuring of Operations
The following table sets forth the Company's restructuring reserves for the
six months ended April 30, 1995.
Restructuring Reserves
<TABLE>
<CAPTION>
Employee Asset
Separations Writedowns Facilities Other Total
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reserve balance, October 31,1994 $89,039 $31,206 $250,133 $142,388 $512,766
Cash payments (60,534) ---- (32,579) (44,965) (138,078)
- -------------------------------------------------------------------------------------------
Reserve balance, April 30,1995 $28,505 $31,206 $217,554 $97,423 $374,688
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Microlog Corporation designs, assembles, markets, and services a series of
microprocessor-based voice processing systems which allow users to store,
retrieve and transmit digitized voice messages and to access information on
computer data bases. The Company's voice processing products include the VCS
3500 and CallStar models, which are comprised of specially configured
microprocessor-based hardware platforms and versatile proprietary applications
software that enables the systems to perform multiple voice processing
applications.
The Company also provides performance analysis and technical and administrative
support services ("performance analysis") through its wholly-owned subsidiary,
Old Dominion Systems Inc. of Maryland, primarily to the Applied Physics
Laboratory ("APL") and American Telephone and Telegraph (AT&T), both prime
contractors to the U.S. Navy.
The percentage of the Company's sales generated by the Company's two business
segments has varied significantly from period to period, but the Company
anticipates that any significant growth in sales will be derived primarily from
increases in sales from voice processing operations.
The following table sets forth for the periods indicated the percentage of
revenues of certain items from the Company's condensed consolidated statements
of income and retained earnings:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
Three Months Ended Six Months Ended
April 30, April 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Voice processing 59.6% 56.2% 60.2% 55.9%
Performance analysis 40.4% 43.8% 39.8% 44.1%
------- ------- ------- -------
Total 100.0% 100.0% 100.0% 100.0%
------ ------- ------ ------
Costs and expenses
Cost of sales 56.7% 75.1% 59.1% 73.6%
Selling, general and administrative 29.4% 37.2% 27.8% 39.8%
Research and development 7.5% 9.5% 7.3% 9.1%
-------- --------- -------- -------
Total 93.6% 121.9% 94.2% 122.5%
------- -------- ------- -------
Operating income (loss) 6.4% (21.9%) 5.8% (22.5%)
Interest and other income (expense), net (0.7%) 0.6% (0.5%) 0.1%
--------- -------- --------- -------
Income (loss) before income taxes 5.7% (21.3%) 5.3% (22.4%)
Provision for income taxes 0.0% 0.2% 0.0% 0.2%
-------- -------- ------- -------
Net income (loss) 5.7% (21.5%) 5.3% (22.6%)
======= ========= ====== =========
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS
The Company had a net income of $303,000 ($.08 per share) for the quarter ended
April 30, 1995 and a net income of $566,000 ($.14 per share) for the six months
ended April 30, 1995. This compares to net a loss of $949,000 ($.24 per share)
and $1,925,000 ($.50 per share) for the comparable periods in fiscal 1994. The
improvement in earnings is primarily attributable to a restructuring of the
Company's voice processing operations in the third quarter of fiscal 1994 and an
increase in voice processing net sales.
The Company was in default under its mortgage loan covenants at January 31,
1994, April 30, 1994, and July 31, 1994 and received waivers from its bank of
these covenants through July 31, 1994. In connection with these waivers, the
maturity date of the loan was accelerated by agreement with the bank to
September 30, 1994. The bank subsequently extended the due date of the mortgage
loan until December 31, 1994, in return for which the Company paid an extension
fee of 1% of the mortgage note balance at September 30, 1994 and made additional
principal payments of $100,000 on September 30, 1994 and $50,000 payments on
each of October 15, 1994, November 15, 1994, and December 15, 1994. The Company
has obtained an additional extension of the due date of the mortgage note, which
now has a principal amount of approximately $948,000, until June 30, 1995. This
extension will require the Company to pay additional principal payments of
$37,500 per month starting in February 1995. The Company believes, based upon
its recent financial results and discussions with its bank, that it will be able
to obtain an additional extension beyond June 30, 1995 from the bank, if
required. Failure to do so may have a material adverse effect on the Company's
cash balance and its financial position.
The Company continues in discussions with potential lenders to secure new credit
facilities to replace its current mortgage loan and to supply additional working
capital. There is no assurance that financing will be available to the Company,
and failure to obtain new financing may have a material adverse effect on the
Company's cash balance and its financial position.
NET SALES
Net sales for the quarter ending April 30, 1995 were $5.3 million, which
represented an increase of 20% as compared to $4.4 million of net sales in the
quarter ending April 30, 1994. Net sales were $10.7 million for the six months
ended April 30, 1995, which represented a 26% increase from net sales for the
six months ended April 30, 1994 of $8.5 million. The increase in net sales is
primarily attributable to increases in voice processing net sales.
VOICE PROCESSING NET SALES
Net sales of voice processing products were $3.2 million for the quarter ended
April 30, 1995, which represented a 28% increase from voice processing net sales
of $2.5 million for the quarter ended April 30, 1994. Net sales were $6.5
million for the six months ended April 30, 1995, which represented a 35%
increase from voice processing net sales for the six months ended April 30, 1994
of $4.8 million. The increase in sales is primarily attributable to increases in
sales of the Company's products to large multiple unit customers and to
international customers.
The Company is pursuing a strategy that it believes will increase its voice
processing sales. This strategy includes the introduction of enhanced products
with additional features not previously offered by the Company's VCS 3500
products, pursuit of large government procurements and other large multi-unit
customers, targeting of select industries or vertical markets with special voice
processing applications and entering into arrangements with large resellers or
distributors. Microlog introduced a new product in March 1994, the VCS Intela
("Intela"), which uses a multi-tasking UNIX operating system and offers
additional features that the Company believes will improve the competitiveness
of its VCS product line. Microlog believes that customers are particularly
interested in the latest technological features, and that continual improvements
to its products and development of new products are essential if the Company is
to increase its voice processing revenues.
As of April 30, 1995, the Company had a backlog of existing orders for voice
processing systems totaling $3.3 million. By comparison, the backlog as of April
30, 1994 was $3.1 million. The Company has experienced fluctuations in its
backlog at various times during the past two fiscal years attributable primarily
to the seasonality
8
<PAGE>
of governmental purchases. In addition, the Company has observed a lengthening
of the period between the date of booking an order and the date of shipment,
with the shipment depending on any customer delivery schedules and any
customization needed for VCS 3500 or VCS Intela applications. The Company
anticipates that most of the outstanding orders at April 30, 1995 will be
shipped and the sales recognized during fiscal 1995. Although the Company
believes that its entire backlog of orders consists of firm orders, because of
the possibility of customer changes in delivery schedules and delays inherent in
the government contracting process, the Company's backlog as of any particular
date may not be indicative of actual sales for any future period.
PERFORMANCE ANALYSIS AND SUPPORT SERVICES NET SALES
Net sales from performance analysis and support services were $2.1 million for
the quarter ended April 30, 1995 as compared to $1.9 million for the same period
in fiscal 1994. Net sales were $4.3 million for the six months ended April 30,
1995, which represents a 13% increase from net sales for the six months ended
April 30, 1994. This increase resulted from the addition of new contracts as
well as increases in the level of work authorized under existing contracts from
Johns Hopkins Applied Physics Laboratory (APL), the Company's principal customer
for these services.
In mid-May 1995, the Company was notified by APL that 14 Company employees were
to be terminated as a result of a laboratory-wide reduction in force. These
employees represented approximately 10% of the Company's performance analysis
work-force and approximately $675,000 (approximately 8%) of annual net sales of
performance analysis and support services. During the most recent quarter the
Company lost an additional 7 employees who were hired directly by APL. These
employees represented approximately 5% of the Company's performance analysis
work-force and approximately $365,000 (approximately 4%) of annual net sales of
performance analysis and support services. The Company did not incur any
significant severance costs in connection with these employee terminations and
expects its pre-tax income to decline by approximately $160,000 annually as a
result of the expected decline in net sales. The Company is not aware of any
additional employee terminations at APL. However, there is no assurance that
additional terminations will not occur during the fiscal year or thereafter.
The Company is seeking to diversify its operations for performance analysis and
support services by seeking contracts in non-defense related areas. Because of
the lower profit margins allowed on contracts for performance analysis and
support services and the Company's limited success to date in obtaining new
contracts with contractors and agencies other than APL or AT&T, the Company
believes that this segment of its business is not likely to generate a
substantial increase in profitability. Nevertheless, the Company believes that
its performance analysis contracts are likely to continue to provide a stable
source of sales for the Company. The Company does not anticipate that any
additional changes in defense priorities or spending will result in any material
adverse affect over the remainder of this fiscal year on its net sales from
performance analysis and support services nor alter the manner in which it
procures contracts for such services. However, there is no assurance that
changes in defense priorities or continuing budget reductions will not cause
such an effect during the fiscal year or thereafter.
As of April 30, 1995, the Company had a backlog of funding on existing contracts
for performance analysis and support services totaling $3.1 million. By
comparison, the backlog as of April 30, 1994 was $6.3 million. The decrease in
backlog is attributable primarily to a reduction in the remaining term of a
significant multi-year contract. The Company anticipates that these services
will be provided during the next three fiscal years. Of the $3.1 million of
backlog at April 30, 1995, $1.8 million will be recognized as sales beyond
fiscal 1995. Because of the delays inherent in the government contracting
process or possible changes in defense priorities or spending, the Company's
backlog as of any particular date may not be indicative of actual sales for any
future period. Although the Company believes that its backlog of funding on
existing contracts is firm, the possibility exists that funding for some
contracts on which the Company is continuing to work, in the expectation of
renewal, may not be authorized (and the Government has the right to cancel
contracts at any time), although to date such a possibility has not been
realized. See "Liquidity and Capital Reserves."
9
<PAGE>
COSTS AND EXPENSES
Cost of sales was $3.0 million or 56.7% of net sales for the quarter ended April
30, 1995, and $6.3 million or 59.1% of net sales for the six months ended April
30, 1995. By comparison, cost of sales was $3.3 million or 75.1% of net sales
for the quarter ended April 30, 1994, and $6.3 million or 73.6% of net sales for
the six months ended April 30, 1994. The decrease in cost of sales, as a
percentage of net sales, is primarily attributable to the higher percentage of
voice processing net sales for the quarter as compared to performance analysis
and support services net sales. Performance analysis and support services has a
significantly higher cost of sales compared to voice processing.
Selling, general and administrative expenses decreased to $1.6 million or 29.4%
of net sales for the quarter ended April 30, 1995, as compared to $1.7 million
or 37.2% of net sales for the quarter April 30, 1994. For the six months ended
April 30, 1995, selling, general and administrative expenses decreased to $3.0
million or 27.8% of net sales as compared to $3.4 million or 39.8% of net sales
for the same six month period last year. The decrease, as a percent of net
sales, was attributable primarily to an increase in voice processing net sales
and to cost cutting measures and the restructuring of the Company's voice
processing operations.
Research and development expenses reflect costs associated with the development
of applicable software and product enhancements for the Company's voice
processing systems. Research and development expenses were $398,000 or 7.5% of
net sales for the quarter ended April 30, 1995, as compared to $422,000 or 9.5%
of net sales for the quarter ended April 30, 1994. For the six months ended
April 30, 1995, research and development expenses were $775,000 or 7.3% of net
sales as compared to $779,000 or 9.1% of net sales for the comparable six months
ended April 30, 1994. The decrease was, as a percentage of net sales,
attributable primarily to an increase in voice processing net sales and to cost
cutting measures and the restructuring of the Company's voice processing
operations. The Company expects that research and development expenses during
fiscal 1995 will be more than those incurred in fiscal 1994 as the Company
continues to develop new products and enhance its existing products. The Company
believes that the process of establishing technological feasibility with its new
products is completed approximately upon release of the products to its
customers. Hence, the Company does not anticipate capitalizing engineering
development costs.
RESTRUCTURING COSTS
In the quarter ended July 31, 1994, the Company's voice processing operations
were restructured extensively at a cost of approximately $550,000. This is the
third such restructuring in the past four years, and resulted from the Company's
on-going significant losses during three of the past four years due to declines
in revenues for voice processing products and/or failure to increase such
revenues to keep pace with planned increases in expenditures. The Company
believes that the restructuring will have a positive impact on the results of
fiscal 1995 by reducing employment, overhead and ongoing costs of approximately
$1.4 million annually, and the Company does not believe that any further
cutbacks will be necessary over its next fiscal year.
NET OTHER EXPENSE
Net other income (expense) was ($38,000) and ($55,000) for the quarter and six
months ended April 30, 1995 as compared to $26,000 and $8,000 for the same
periods last year. For the quarter ended April 30, 1994, the Company realized a
$42,000 gain on the sale of one of its two office condominium units. Without
this gain, the Company would have had a net other (expense) of ($34,000) for the
six months ended April 30, 1994. Net other expense consisted primarily of
interest expense.
PROVISION FOR INCOME TAXES
The Company has exhausted its ability to carry losses back for income tax
refunds. However, net operating loss and tax credit carry forwards for income
tax reporting purposes of approximately $10.3 million and $156,000,
respectively, at October 31, 1994, will be available to offset taxes generated
from future taxable income. These potential future tax benefits have not been
reflected in the financial statements since realization is not assured. Tax
expense for the
10
<PAGE>
three months and six months ended April 30, 1995 was fully offset by a related
reduction in the deferred tax asset valuation allowance in the period.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of April 30, 1995 was a negative $267,000 as compared to a
negative $ 704,000 as of October 31, 1994. The increase in working capital is
primarily attributable to the net income in the first and second quarter of
fiscal 1995. Cash and cash equivalents as of April 30, 1995 were $519,000 as
compared to $1.2 million as of October 31, 1994. The decline in cash is
primarily attributable to reductions of debt of $263,000, consisting principally
of payments of principal under the Company's mortgage loan, and an increase in
accounts receivables resulting from the higher voice processing revenues. As
discussed below, the Company is seeking additional financing for working capital
purposes.
Accounts receivable as of April 30, 1995 were $3.2 million, as compared to $2.7
million as of October 31, 1994. Included in the April 30, 1995 balance is a
related party receivable of $131,000 relating to the sale of voice processing
products and services to American Computer, of which a former member of the
Board of Directors is an executive officer and of which a member of the Board of
Directors until recently has been a director.
Net fixed assets as of April 30, 1995 were $3.0 million, as compared to $2.9
million as of October 31, 1994. Goodwill as of April 30, 1995 was $182,000 as
compared to $217,000 at October 31, 1994.
The Company was in default of its mortgage loan on its principal corporate
headquarters which was due on December 31, 1994. The mortgage note is due in
monthly installments and has an interest rate at the bank's prime rate of
interest plus one-half percent. The mortgage loan is collateralized by the
headquarters building and is subject to a covenant requiring a minimum
consolidated tangible net worth. In addition, the bank has asserted (as a result
of a cross default provision with a prior line of credit with the bank) that the
mortgage loan is also collateralized by accounts receivable and inventory of the
Company and is subject to a number of additional restrictive covenants,
including a requirement to maintain a fixed charge coverage ratio, prohibitions
on mergers or acquisitions, sale of stock (other than stock issued pursuant to
the Company's stock option plan) and payment of dividends, and certain
restrictions on additional borrowing.
The Company was in default of its mortgage loan covenants at January 31, 1994,
April 30, 1994 and July 31, 1994 and received waivers from its bank of these
covenants through July 31, 1994. In connection with these waivers, the maturity
date of the loan was accelerated by agreement with the bank to September 30,
1994. The bank subsequently extended the due date of the mortgage loan until
December 31, 1994, in return for which the Company paid an extension fee of 1%
of the mortgage note balance at September 30, 1994 and made additional principal
payments of $100,000 on September 30, 1994 and $50,000 payments on each of
October 15, 1994, November 15, 1994 and December 15, 1994. The Company has
obtained an additional extension of the due date of the mortgage note, which now
has a principal amount of approximately $948,000, until June 30, 1995. This
extension will require the Company to pay additional principal payments of
$37,500 per month starting in February 1995. The Company believes, based upon
its recent financial results and discussions with its bank, that it will be able
to obtain an additional extension beyond June 30, 1995 from the bank, if
required. Failure to do so may have a material adverse effect on the Company's
cash balance and its financial position.
The Company continues in discussions with potential lenders to secure new credit
facilities to replace its current mortgage loan and to supply additional working
capital. There is no assurance that financing will be available to the Company,
and failure to obtain new financing may have a material adverse effect on the
Company's cash balance and its financial position.
ITEM 1 Legal Proceedings
-----------------------
None
ITEM 2 Changes in Securities
-----------------------
None.
11
<PAGE>
ITEM 3 Defaults Upon Senior Securities
-------------------------------------
The Company was in default under a $1.2 million mortgage loan
due on December 31, 1994. The Company and the bank negotiated
an extension of the mortgage note until June 30, 1995. See
"Liquidity and Capital Resources."
ITEM 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held its annual meeting of stockholders on April
29, 1995. At the meeting, J. Graham Hartwell was appointed to
serve for a three year term as director by a vote of 3,619,645
for, with 25,505 shares withholding authority. Also appointed
to a three year term as director was Joe J. Lynn, by a vote of
3,603,612 for, with 41,538 shares withholding authority. The
appointment by the Board of Directors of the firm Price
Waterhouse LLP as independent accountants of the Company for
the fiscal year ending October 31, 1995 was ratified by a vote
of 3,621,143 in favor, with 14,300 shares voting against such
ratification and 9,707 shares abstaining.
ITEM 5 Other Information
-------------------
None.
ITEM 6 Exhibits and Reports on Form 8-K
--------------------------------
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICROLOG CORPORATION
BY /s/ Joe J. Lynn
----------------------------------------
Joe J. Lynn
Chief Executive Officer
BY /s/ Richard A. Thompson
----------------------------------------
Richard A. Thompson
President and Chief Operating Officer
June 14, 1995
- -------------
DATE
13
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