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, 1998 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 15, 1998, 4,287,335 shares of common stock were outstanding.
<PAGE>
MICROLOG CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
April 30, October 31,
1998 1997
----------------- -----------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 398,058 $ 3,979,452
Receivables, net of $133,747 and $102,186 allowance
for doubtful accounts 6,693,853 3,882,564
Inventories, net 2,733,557 1,920,983
Deferred tax asset --- 1,200,000
Other current assets 574,070 422,836
----------------- -----------------
Total current assets 10,399,538 11,405,835
Fixed assets, net 3,455,252 3,733,994
Licenses, net 235,096 295,238
Deferred tax asset 2,150,000 950,000
Other assets 103,639 61,395
Goodwill, net 537,830 608,238
----------------- -----------------
Total assets $ 16,881,355 $ 17,054,700
================= =================
Liabilities and Stockholders' Equity:
Current liabilities:
Current portion of long-term debt $ 61,180 $ 61,180
Accounts payable 2,521,128 1,872,200
Accrued compensation and related expenses 2,086,441 1,807,709
Deferred revenue 776,197 695,017
Other accrued expenses 960,017 300,152
----------------- -----------------
Total current liabilities 6,404,963 4,736,258
Long-term debt 141,680 141,680
Deferred officers' compensation 240,510 256,255
Other liabilities --- 32,635
----------------- -----------------
Total liabilities 6,787,153 5,166,828
----------------- -----------------
Stockholders' equity:
Serial preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding --- ---
Common stock, $.01 par value, 10,000,000 shares authorized,
4,889,205 and 4,872,753 shares issued and 4,287,335
and 4,270,883 outstanding 48,892 48,727
Capital in excess of par value 16,417,294 16,293,536
Treasury stock, at cost, 601,870 shares (1,176,537) (1,176,537)
Accumulated deficit (5,195,447) (3,277,854)
----------------- -----------------
Total stockholders' equity 10,094,202 11,887,872
----------------- -----------------
Total liabilities and stockholders' equity $ 16,881,355 $ 17,054,700
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
MICROLOG CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months For The Six Months
Ended April 30, Ended April 30,
1998 1997 1998 1997
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 7,651,341 $ 7,239,214 $ 14,205,970 $ 14,332,716
--------------- --------------- ---------------- ----------------
Costs and expenses:
Cost of sales 5,564,389 4,522,750 10,343,409 8,572,878
Selling, general, and administrative 2,101,634 1,280,812 4,205,073 2,871,432
Research and development 712,246 881,353 1,500,929 1,727,390
--------------- --------------- ---------------- ----------------
8,378,269 6,684,915 16,049,411 13,171,700
--------------- --------------- ---------------- ----------------
Operating (loss) income (726,928) 554,299 (1,843,441) 1,161,016
Net other expense 12,012 33,782 2,755 77,223
--------------- --------------- ---------------- ----------------
(Loss) income before income taxes (738,940) 520,517 (1,846,196) 1,083,793
(Provision) benefit for income taxes (10,000) 95,000 (71,397) 200,545
--------------- --------------- ---------------- ----------------
Net (loss) income (748,940) 615,517 (1,917,593) 1,284,338
Accumulated deficit:
at beginning of period (4,446,507) (6,340,677) (3,277,854) (7,009,498)
--------------- --------------- ---------------- ----------------
at end of period $ (5,195,447) $ (5,725,160) $ (5,195,447) $ (5,725,160)
=============== =============== ================ ================
Basic weighted average shares outstanding 4,285,781 4,208,122 4,279,890 4,200,008
--------------- --------------- ---------------- ----------------
Diluted weighted average shares outstanding 4,285,781 4,540,121 4,279,890 4,542,400
--------------- --------------- ---------------- ----------------
Basic (loss) earnings per share $ (0.17) $ 0.15 $ (0.45) $ 0.31
Diluted (loss) earnings per share $ (0.17) $ 0.14 $ (0.45) $ 0.28
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MICROLOG CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Six Months Six Months
Ended Ended
April 30, 1998 April 30, 1997
---------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,917,593) $ 1,284,338
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation 437,054 402,845
Amortization of goodwill and licensing agreement 130,550 156,893
Deferred tax benefit --- (200,000)
Changes in assets and liabilities:
Receivables (2,811,289) 13,013
Inventories (812,574) 439,416
Other assets (193,478) (153,848)
Accounts payable 648,928 (144,940)
Accrued compensation and related expenses 278,732 19,028
Deferred officers' compensation (15,745) 6,812
Deferred revenue 81,180 ---
Other accrued expenses and liabilities 627,230 (3,964)
---------------------- ----------------------
Net cash (used in) provided by operating activities (3,547,005) 1,819,593
---------------------- ----------------------
Cash flows from investing activities:
Purchases of fixed assets (158,312) (285,733)
---------------------- ----------------------
Net cash (used in) investing activities (158,312) (285,733)
---------------------- ----------------------
Cash flows from financing activities:
Net payments under line-of-credit agreements --- (1,400,000)
Exercise of common stock options 123,923 27,993
---------------------- ----------------------
Net cash provided by (used in) financing activities 123,923 (1,372,007)
---------------------- ----------------------
Cash and cash equivalents:
Net (decrease) increase during period (3,581,394) 161,853
Balance at beginning of period 3,979,452 1,170,603
---------------------- ----------------------
Balance at end of period $ 398,058 $ 1,332,456
====================== ======================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MICROLOG CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1998 (Unaudited) and OCTOBER 31, 1997
General
- -------
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position of Microlog Corporation and
its subsidiaries at April 30, 1998 and October 31, 1997, and the results of
their operations and their cash flows for the three month period ended April 30,
1998. The results of operations presented are not necessarily indicative of the
results that may be expected for the for the fiscal year ending October 31,
1998.
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, 1997.
<TABLE>
<CAPTION>
Note 1 - Inventories (Unaudited)
- -------------------- April 30, October 31,
Inventories consist of the following: 1998 1997
------------------ ------------------
<S> <C> <C>
Components $ 2,360,614 $ 1,474,629
Work-in-process and finished goods 1,120,931 791,576
------------------ ------------------
3,481,545 2,266,205
Less: reserve for obsolescence (747,988) (345,222)
------------------ ------------------
$ 2,733,557 $ 1,920,983
================== ==================
</TABLE>
Note 2 - Fixed Assets
<TABLE>
<CAPTION>
(Unaudited)
Fixed assets consist of the following: April 30, October 31,
1998 1997
------------------ ------------------
<S> <C> <C>
Land $ 520,000 $ 520,000
Building 2,511,266 2,511,266
Office furniture and equipment 3,609,694 3,451,382
Vehicles 23,642 23,642
Leasehold improvements 176,096 176,096
------------------ ------------------
6,840,698 6,682,386
Less: accumulated depreciation and amortization (3,385,446) (2,948,392)
------------------ ------------------
$ 3,455,252 $ 3,733,994
================== ==================
</TABLE>
Accumulated amortization on the Company's intangible assets was $1,516,995 and
$1,386,445 at April 30, 1998 and October 31, 1997, respectively.
5
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Microlog Corporation designs, develops, markets, and supports a complete line of
UNIX and DOS-based voice processing systems and applications solutions 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 INTELA and RETAIL SOLUTION (APRS(R)) and VCS 3500
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"), a prime contractor 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 consolidated statements of income
and retained earnings:
PERCENTAGE OF TOTAL REVENUES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Voice processing 59.8% 57.1% 57.1% 59.7%
Performance analysis and support services 40.2% 42.9% 42.9% 40.3%
--------- ------ ---------- -------
Total 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Cost of sales 72.7% 62.5% 72.8% 59.8%
Selling, general, and administrative 27.5% 17.6% 29.6% 20.0%
Research and development 9.3% 12.2% 10.6% 12.1%
--------- ------ ---------- -------
Total 109.5% 92.3% 113.0% 91.9%
--------- ------ ---------- -------
Operating (loss) income (9.5)% 7.7% (13.0)% 8.1%
Net other (expense) income (0.2)% 0.5% 0.0% 0.5%
--------- ------ ---------- -------
(Loss) income before income taxes (9.7)% 7.2% (13.0)% 7.6%
(Provision) benefit for income taxes (0.1)% 1.3% (0.5)% 1.4%
--------- ------ ---------- -------
Net (loss) income (9.8)% 8.5% (13.5)% 9.0%
========= ======= ========== ======
</TABLE>
6
<PAGE>
RESULTS OF OPERATIONS
The Company had a net loss of $749,000 (($.17) per basic share and ($.17) per
diluted share) for the quarter ended April 30, 1998 and a net loss of $1,918,000
(($.45) per basic share and ($.45) per diluted share) for the six months ended
April 30, 1998. By comparison, the Company had net income of $616,000 ($.15 per
basic share and $.14 per diluted share), and $1,284,000 ($.31 per basic share
and $.28 per diluted share) for the comparable periods in fiscal 1997. The
Company is now reporting basic and diluted earnings per share as required under
Statement of Financial Accounting Standards (SFAS No.128), "Earnings per Share",
which became effective for the Company in the first quarter of 1998.
The loss for the second quarter of fiscal 1998 and the six months ended April
30, 1998 was primarily attributable to lower than expected sales in the
Company's voice processing operations, particularly to commercial customers; a
change in the sales mix in the Company's voice processing operations and an
increased level of staffing in the sales and marketing departments and expanded
marketing programs and activities. Voice processing sales for the comparable
quarters, as well as the comparable six month periods, included a higher
percentage of product sales in 1998 than in 1997, which had a higher percentage
of software and services sales. Product sales have a significantly higher cost
of sales than software and services sales, resulting in reduced profit margins.
NET SALES
Net sales for the quarter ended April 30, 1998 were $7.7 million, which
represented an increase of 7% as compared to $7.2 million of net sales for the
quarter ended April 30, 1997. Net sales for the six months ended April 30, 1998
were $14.2 million, which represented a decrease of 1% as compared to $14.3
million of net sales for the six months ended April 30, 1997. The increase for
the quarter was primarily attributable to an increase in voice processing net
sales. The flat revenues for the six month periods resulted from a slight
decline in voice processing sales offset by a slight increase in performance
analysis and support services net sales.
VOICE PROCESSING NET SALES
Voice processing net sales for the quarter ended April 30, 1998 were $4.6
million, which represented an increase of 12% as compared to $4.1 million of net
sales for the quarter ended April 30, 1997. The net sales for the six months
ended April 30, 1998 were $8.1 million, which represented a decrease of 5% as
compared to $8.5 million of net sales for the six months ended April 30, 1997.
The increase in sales for the comparable quarters was primarily attributable to
an increase of 18% in sales to government customers and an increase of 22% in
sales to international customers. The decrease in sales for the comparable six
month periods was primarily due to a decrease of 41% in sales to commercial
customers, and partially offset by an increase of 136% in sales to international
customers. The decrease in commercial sales was primarily due to delays or loss
of two anticipated orders totaling approximately $1.2 million. The Company's
commercial sales are subject to increased competition, including from internal
MIS departments of potential customers. The Company is attempting to move into a
different product line to increase its commercial sales. The increase in
international sales was primarily due to a large sale of $1.6 million to a
subsidiary of KPN Telecom of the Netherlands.
As of April 30, 1998, the Company had a backlog of existing orders for voice
processing systems totaling $3.1 million. The backlog, as of April 30, 1997, was
$2.0 million. The Company has experienced fluctuations in its backlog at various
times during the past two fiscal years attributable primarily to the seasonality
of government purchases. Of the $3.1 million of backlog at April 30, 1998,
approximately $1.0 million will be recognized as sales beyond fiscal 1998.
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.
7
<PAGE>
PERFORMANCE ANALYSIS AND SUPPORT SERVICES NET SALES
Performance analysis and support services net sales for the quarter ended April
30, 1998 were $3.1 million, as compared to $3.1 million of net sales for the
quarter ended April 30, 1997. The net sales for the six months ended April 30,
1998 were $6.1 million, which represented an increase of 5% as compared to $5.8
million of net sales for the six months ended April 30, 1997. This increase was
attributable to the addition of new contracts as well as increases in the level
of work authorized under existing contracts from the John Hopkins University
Applied Physics Laboratory (APL), the company's principal customer for these
services.
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 changes in defense priorities or spending will result in
any material adverse affect over the next 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, 1998, the Company had a backlog of funding on existing contracts
for performance analysis and support services totaling $2.7 million. By
comparison, the backlog as of April 30, 1997 was $2.7 million. Of the $2.7
million of backlog at April 30, 1998, approximately $1.0 million will be
recognized as sales beyond fiscal 1998. 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 this has not occurred.
COSTS AND EXPENSES
Cost of sales was $5.6 million or 72.7% of net sales for the quarter ended April
30, 1998 as compared to $4.5 million or 62.5% of net sales for the quarter ended
April 30, 1997. Cost of sales was $10.3 million or 72.8% of net sales for the
six months ended April 30, 1998 as compared to $8.6 million or 59.8% of net
sales for the six months ended April 30, 1997. The increase in cost of sales for
the comparable quarters, as well as for the comparable six month periods, was
primarily attributable to a higher percentage of voice processing product sales
than services sales. Product sales have a significantly higher cost of sales
than services sales. The first six months of 1997 included sales of software
licenses of $3.1 million, which have significantly lower costs than product
sales, as compared to the first six months of 1998 which had no sales of
software licenses.
Selling, general and administrative expenses were $2.1 million or 27.4% of net
sales for the quarter ended April 30, 1998 as compared to $1.3 million or 17.6%
of net sales for the quarter ended April 30, 1997. Selling, general and
administrative expenses were $4.2 million or 29.6% of net sales for the six
months ended April 30, 1998 as compared to $2.9 million or 20.0% of net sales
for the six months ended April 30, 1997. The increase in selling, general, and
administrative expenses was primarily attributable to increased staffing in the
sales and marketing departments as well as expanded marketing programs and
activities.
Research and development expenses reflect costs associated with the development
of applicable software and product enhancements for the Company's voice
processing systems. 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 research and development costs.
8
<PAGE>
Research and development expenses were $712,000 or 9.3% of net sales for the
quarter ended April 30, 1998 as compared to $881,000 or 12.2% of net sales for
the quarter ended April 30, 1997. Research and development expenses were $1.5
million or 10.6% of net sales for the six months ended April 30, 1998 as
compared to $1.7 million or 12.1% of net sales for the six months ended April
30, 1997. The decrease in expenses for the comparable quarters, as well as for
the comparable six month periods, was primarily attributable to the completion
of a product for the retail pharmacy industry. Research and development expenses
for fiscal 1998 are focused on Intela and APRS.
The Company has assessed the impact of the Year 2000 on its internal and
external software, and has determined that any modification to the software will
not have a material impact on the Company or its results of operations or
financial condition.
NET OTHER EXPENSE
Net other expense was $12,000 and $3,000 for the quarter and six months ended
April 30, 1998 as compared to $34,000 and $77,000 for the comparable periods in
fiscal 1997. Net other expense consisted primarily of interest expense on short
term borrowings.
PROVISION FOR INCOME TAXES
For the quarter ended April 30, 1998, the provision for income taxes of $10,000
relates to state income taxes. For the quarter ended April 30, 1997, the Company
recorded a tax benefit of $95,000. At April 30, 1998, the Company has a deferred
tax asset of $2.2 million reflecting the benefit of approximately $5.5 million
in loss carryforwards. Although realization is not assured, management believes
that it is more likely than not that all of the deferred tax asset will be
realized.
The Company has exhausted its ability to carry losses back for income tax
refunds. Net operating loss and tax credit carry forwards for income tax
reporting purposes of approximately $7.1 million and $293,000, respectively,
will be available to offset taxes generated from future taxable income through
2011 and 2012, respectively. Management believes that the realization of
approximately $5.5 million of future tax benefits associated with its net
operating loss carryforwards is more likely than not. Accordingly, benefit of
$2.2 million related to this future tax benefit has been reflected in the
Financial Statements and classified as long term due to the fact that these net
operating losses are not expected to be realized, at the earliest, until fiscal
1999.
FACTORS THAT MAY EFFECT FUTURE RESULTS OF OPERATIONS
Various paragraphs of this Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results could differ materially from those projected in the
forward-looking statements as a result of the factors set forth below and
elsewhere in this document.
The Company believes that in the future its results of operations could be
affected by factors such as the introduction by the Company of new and enhanced
products and services, market acceptance of new voice processing products and
enhancements of existing products, growth in the voice processing market in
general, competition, commitments to automation by potential large purchasers of
the Company's Retail Solutions products, fluctuations in the buying cycles of
governmental customers, changes in general economic conditions, and changes in
the U.S. defense industry and their impact on the prime contractor for which the
Company provides performance analysis and support services.
9
<PAGE>
The Company believes that its ability to meet revenue targets will primarily
determine the Company's profitability for each fiscal quarter. The Company's
backlog on a quarterly basis generally will not be large enough to assure that
the Company will meet its revenue targets for a particular quarter, and delivery
of backlog depends upon a number of factors, as discussed above. Further, a
large percentage of any quarter's shipments have traditionally been booked in
the last month of the quarter. Consequently, quarterly revenues and operating
results will depend on the volume and timing of new orders received during a
quarter, which is difficult to predict.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of April 30, 1998 was $4.0 million as compared to $6.7
million as of October 31, 1997. The decrease in working capital was primarily
attributable to a decrease in cash and cash equivalents of $3.6 million, the
reclassification of the current portion of the deferred tax asset of $1.2
million to long term, and an increase of current liabilities of $1.7 million,
offset by an increase in accounts receivable of $2.8 million and an increase in
inventories of $800,000.
Cash and cash equivalents were $400,000 as of April 30, 1998 as compared to $4.0
million as of October 31, 1997. The decrease was primarily due to the net loss
in the first six months of the year and an increase in accounts receivable.
Accounts receivable was $6.7 million as of April 30, 1998 as compared to $3.9
million as of October 31, 1997. The increase was primarily due to the timing of
shipments during the quarter and a large international sale made in the first
quarter of fiscal 1998. In May and June of 1998, payments totaling $3.1 million
were received including the large international sale made in the first quarter.
Inventories were $2.7 million as of April 30, 1998 as compared to $1.9 million
as of October 31, 1997. The increase was primarily due to the build up of
inventory in anticipation of receipt of large orders in the commercial and
government sectors. The reserve for inventory obsolescence was $748,000 as of
April 30, 1998 as compared to $345,000 as of October 31, 1998. The increase was
primarily due to additional reserves required due to the aging of inventory
associated with the Company's retail solution products.
Goodwill as of April 30, 1998 was $538,000 as compared to $608,000 at October
31, 1997. Net fixed assets as of April 30, 1998 were $3.5 million as compared to
$3.7 million as of October 31, 1997.
In February, 1998, the Company renewed its line-of-credit facility with its bank
which allows the Company to borrow up to 70% of its eligible receivables to a
maximum of $2,000,000. The line-of-credit bears interest at the bank's prime
rate plus 1.25% (9.75% at April 30, 1998), and contains a 0.5% commitment fee on
the average unused portion of the line. The line expires on February 28, 1999
and subjects the Company to a number of restrictive covenants, including a
requirement to maintain a minimum consolidated tangible net worth, a maximum
ratio of total liabilities to tangible net worth, and a minimum current ratio.
There are restrictions on mergers or acquisitions, payment of dividends, and
certain restrictions on additional borrowings. The line is secured by all of the
Company's tangible assets. At April 30, 1998, there was no outstanding debt
against this line-of-credit.
In February, 1998, the Company also renewed its $1,000,000 loan facility. The
loan facility bears interest at the bank's prime rate plus 0.5% (9.00% at April
30, 1998), and contains a 0.5% commitment fee on the average unused portion. The
loan agreement expires on February 28, 2000, and contains the same restrictive
covenants as the line-of-credit, and the agreements for the line-of-credit and
loan facility contain cross default provisions. The loan agreement allows the
Company, at its option, to make monthly interest-only payments on the
outstanding principal balance, but all outstanding amounts are due in full on
February 28, 2000. The loan facility is secured by the Company's principal
headquarters building. At April 30, 1998, there was no outstanding debt against
this loan facility.
In May 1998, the Company entered into a 15 year lease commitment, commencing on
or about June 1999, for office space intended to consolidate the Company's
headquarters, warehouse, and training facilities. Total rental payments under
this lease agreement are approximately $10.6 million over the lease term. The
Company has entered into a contract to sell its current headquarters facility,
and has committed to lease back the facility prior to
10
<PAGE>
its occupation of the new leased space. The sale is expected to be completed by
the end of the third quarter of fiscal 1998. Following the sale of the
headquarters facility, the $1,000,000 loan facility will be terminated.
The Company believes that, through management of its cash and cash equivalents,
and its line of credit, it will not need additional financial resources beyond
those presently expected to be available during fiscal 1998.
ITEM 1 Legal Proceedings
None
ITEM 2 Changes in Securities None.
ITEM 3 Submission of Matters to a Vote of Security Holders None.
ITEM 4 Other Information
None.
ITEM 5 Exhibits and Reports on Form 8-K
None.
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/ Richard A. Thompson
--------------------------------------------
Richard A. Thompson
Chief Executive Officer
BY /s/ Steven R. Delmar
--------------------------------------------
Steven R. Delmar
Executive Vice President and Chief Financial
Officer
June 15, 1998
---------------
DATE
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<EXCHANGE-RATE> 1
<CASH> 398,058
<SECURITIES> 0
<RECEIVABLES> 6,927,600
<ALLOWANCES> 233,747
<INVENTORY> 2,733,557
<CURRENT-ASSETS> 10,399,538
<PP&E> 6,840,698
<DEPRECIATION> 3,358,446
<TOTAL-ASSETS> 16,881,355
<CURRENT-LIABILITIES> 6,404,963
<BONDS> 0
48,892
0
<COMMON> 0
<OTHER-SE> 10,045,310
<TOTAL-LIABILITY-AND-EQUITY> 16,881,355
<SALES> 7,651,341
<TOTAL-REVENUES> 7,651,341
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<OTHER-EXPENSES> 12,012
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<INTEREST-EXPENSE> 13,770
<INCOME-PRETAX> (738,940)
<INCOME-TAX> 10,000
<INCOME-CONTINUING> (748,940)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (748,940)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
