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 January 31, 2000 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 March 10, 2000, 6,990,635 shares of common tock were outstanding.
<PAGE>
MICROLOG CORPORATION
INDEX
------
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of January 31, 2000
and October 31, 1999 1
Consolidated Statements of Operations for the Three
Months ended January 31, 2000 and January 31, 1999 2
Consolidated Statements of Cash Flows for the Three
Months ended January 31, 2000 and January 31, 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
i
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MICROLOG CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
JANUARY 31, OCTOBER 31,
2000 1999
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 1,932 $ 3,425
Receivables, net 1,967 1,155
Inventories, net 467 375
Other current assets 524 301
-------- --------
Total current assets 4,890 5,256
Fixed assets, net 865 917
Licenses, net 65 100
Other assets 161 153
======== ========
Total assets $ 5,981 $ 6,426
Liabilities and Stockholders' Equity:
Current liabilities:
Current portion of long-term debt $ 74 $ 74
Accounts payable 308 388
Accrued compensation and related expenses 1,554 1,965
Deferred revenue 417 447
Other accrued expenses 566 564
-------- --------
Total current liabilities 2,919 3,438
Deferred officers' compensation 146 151
Other liabilities 25 33
-------- --------
Total liabilities 3,090 3,622
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,
7,592,505 and 7,575,597 shares issued and 6,990,635
And 6,973,727 outstanding 76 76
Capital in excess of par value 20,531 20,517
Treasury stock, at cost, 601,870 shares Accumulated deficit (1,177) (1,177)
(16,539) (16,612)
-------- --------
Total stockholders' equity 2,891 2,804
-------- --------
Total liabilities and stockholders' equity $ 5,981 $ 6,426
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
MICROLOG CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
FOR THE THREE MONTHS
ENDED JANUARY 31,
2000 1999
-------- --------
Net sales $ 4,167 $ 4,891
Costs and expenses:
Cost of sales 2,986 3,518
Selling, general and administrative 823 1,676
Research and development 331 963
-------- --------
4,140 6,157
-------- --------
Operating income (loss) 27 (1,266)
Net other (expense) income (10) 78
-------- --------
Income (loss) before income taxes 17 (1,188)
Benefit (provision) for income taxes 56 (11)
-------- --------
Net income (loss) 73 (1,199)
Accumulated deficit:
at beginning of period (16,612) (11,919)
-------- --------
at end of period $(16,539) $(13,118)
======== ========
Basic weighted average shares outstanding 6,979 4,288
-------- --------
Diluted weighted average shares outstanding 6,979 4,288
-------- --------
Basic income (loss) per share $ 0.01 $ (0.28)
Diluted income (loss) per share $ 0.01 $ (0.28)
See accompanying notes to consolidated financial statements.
2
<PAGE>
MICROLOG CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS
ENDED ENDED
JANUARY 31, 2000 JANUARY 31, 1999
---------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 73 $(1,199)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation 97 178
Amortization of goodwill and licensing agreement 35 29
Gain on disposition of fixed assets (47)
Provision for inventory reserves 50
Changes in assets and liabilities:
Receivables (812) (61)
Inventories (92) 35
Other assets (231) (429)
Accounts payable (80) 441
Accrued compensation and related expenses (411) 82
Deferred revenue (30) (16)
Other accrued expenses (6) (229)
Deferred officers' compensation (5) 2
------- -------
Net cash used in operating activities (1,462) (1,164)
------- -------
Cash flows from investing activities:
Purchases of fixed assets (45) (192)
------- -------
Net cash used in investing activities (45) (192)
------- -------
Cash flows from financing activities:
Exercise of common stock options 14 79
------- -------
Net cash provided by financing activities 14 79
------- -------
Cash and cash equivalents:
Net decrease during period (1,493) (1,277)
Balance at beginning of period 3,425 2,340
------- -------
Balance at end of period $ 1,932 $ 1,063
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MICROLOG CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 (UNAUDITED) AND OCTOBER 31, 1999
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 January 31, 2000 and October 31, 1999, and the results of
their operations and their cash flows for the three month period ended January
31, 2000. The results of operations presented are not necessarily indicative of
the results that may be expected for the fiscal year ending October 31, 2000.
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, 1999.
<TABLE>
<CAPTION>
Note 1 - Inventories (in thousands) (UNAUDITED)
- ----------------------------------- JANUARY 31, OCTOBER 31,
Inventories consist of the following: 2000 1999
----------- -----------
<S> <C> <C>
Components $ 763 $ 730
Work-in-process and finished goods 173 133
----------- -----------
936 863
Less: reserve for obsolescence (469) (488)
----------- -----------
$ 467 $ 375
=========== ===========
Note 2 - Fixed Assets (in thousands)
(UNAUDITED)
Fixed assets consist of the following: JANUARY 31, OCTOBER 31,
2000 1999
----------- -----------
Office furniture and equipment $ 3,022 $ 2,977
Vehicles 10 10
Leasehold improvements 22 22
----------- -----------
3,054 3,009
Less: accumulated depreciation and amortization (2,189) (2,092)
----------- -----------
$ 865 $ 917
=========== ===========
</TABLE>
4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Microlog Corporation has two major subdivisions: the Voice Processing division
and the Old Dominion Systems division. The Voice Processing division is a
software development and systems integration services company. The charter of
the division is to help Microlog's customers serve their customers better
through the use of technology in formal and informal corporate contact centers.
Specifically, Microlog builds custom self-service and customer interaction
solutions that manage telephony type contacts, a historical focus and strength
of Microlog, and Internet-based contacts, sometimes known in the industry as
"new media types". In providing these solutions, Microlog uses its products,
primarily core voice and data platforms and toolkits, combined with its
professional services offerings. This means that Microlog's products and
solutions address interactive voice response (IVR), inbound and outbound phone
calls, e-mail, fax, world-wide Web interactions, chat, Web bulletin board, and
voice-over-IP types of contacts. Services associated with this business include
technology assessment, project management, application and software development,
telephony integration, installation, system administration, quality assurance
testing, and on-going maintenance and support. While the scope of this business
has expanded far beyond the simple processing of telephone calls, the area has
traditionally been identified as Voice Processing, and will be identified as
such throughout the remainder of this Quarterly Report on Form 10-Q.
Through its Old Dominion Systems division, Microlog provides performance
analysis and technical and administrative support services to the Applied
Physics Laboratory (APL), a prime contractor to the U.S. Navy. Although this
segment of the business has historically provided a stable source of sales and
profits, Microlog believes that its principal opportunities for growth are in
the Voice Processing area, specifically related to customer contact centers.
Microlog has been concentrating its investments and efforts on the Voice
Processing area.
The following table sets forth for the periods indicated the percentage of
revenues of certain items from Microlog's consolidated statements of income and
retained earnings:
<TABLE>
<CAPTION>
Three Months Ended
January 31,
2000 1999
---- ----
<S> <C> <C>
Revenues
Voice processing.......................................... 46.4% 50.0%
Performance analysis and support services................. 53.6% 50.0%
------ ------
Total 100.0% 100.0%
Costs and expenses
Cost of sales............................................. 71.7% 71.9%
Selling, general, and administrative...................... 19.8% 34.3%
Research and development.................................. 7.9% 19.7%
------ ------
Total................................................... 99.4% 125.9%
Operating income (loss) ................................... 0.6% (25.9)%
Net other (expense) income ................................ (0.2)% 1.6%
------ ------
Income (loss) before income taxes.......................... 0.4% (24.3)%
Benefit (provision) for income taxes....................... 1.4% (0.2)%
------ ------
Net income (loss) ......................................... 1.8% (24.5)%
</TABLE>
5
<PAGE>
Results of Operations
Microlog had net income of $73,000 ($.01 per basic and diluted share) for the
quarter ended January 31, 2000. By comparison, Microlog had a net loss of $1.2
million ($.28 per basic and diluted share), for the quarter ended January 31,
1999. The net income of $73,000 for the first quarter of fiscal year 2000 was
primarily attributable to reduced expenses in all areas of Microlog's voice
processing operations due to the restructuring program implemented in fiscal
year 1999. The net loss of $1.2 million for the first quarter of fiscal year
1999 was attributable to Microlog's voice processing operations. This loss was
due primarily to insufficient voice processing revenues of approximately $1.4
million offset in part by $0.2 million of net income generated from Microlog's
performance analysis and supports services operations.
Over the past two years, Microlog has been experiencing reduced demand,
increased competition, and reduced margins in the voice processing area, which
Microlog attributes to market forces. Microlog believes that interactive voice
response systems in general, and certain vertical sub-segments of this market in
particular, are in the maturing phase of market evolution for stand-alone
systems. Accordingly, competition has increased, margins have been reduced, and
it has become more difficult to sell these products. In addition, governmental
customers have been procuring large IVR systems as part of major procurements
from larger vendors, which has required Microlog to work through prime
contractors, also resulting in increased margin pressure and greater difficulty
in making sales directly. Microlog's response to this has been to increase its
R&D in both the uniQue(TM) and TIVRA products to expand its interactive response
offerings to include Internet-based interactions, and to offer professional
turnkey services to the integration of modern customer contact centers. This
response addresses not only traditional voice types of contacts, but also
e-mail, fax, Web callback, IP telephony, chat, Web bulletin board, and hardcopy
mail, thereby expanding Microlog's addressable market. We believe this approach
yields sales potential due to the trend in corporate process re-engineering in
customer relationship management, and in outsourcing of related transactions and
application development.
In fiscal year 2000, Microlog's strategy for addressing the market trends will
be to expand its professional services offerings to provide more comprehensive
solutions to its customers, inclusive of Microlog's products. The objective of
these solution services is for Microlog to help its customers to better serve
their customers. Microlog plans to accomplish this through the implementation of
self service and customer interaction applications utilizing: the TIVRA voice
processing platform, enabled by speech recognition; the uniQue contact
processing platform, for media processing, Web interfaces, and contact
prioritization; and services based on the analysis, development, and integration
skills developed over the years by the staff of Microlog and its Old Dominion
Systems division.
Microlog is subject to the risk that its new strategy will not be successful.
The new strategy is dependent on market acceptance of Microlog's new focus and
new products, ongoing research and development efforts and sales activities over
the near term. In addition, the new strategy is also dependent on Microlog's
ability to successfully retain and recruit skilled personnel.
Net Sales
Net sales for the quarter ended January 31, 2000 were $4.2 million, which
represented a decrease of 14%, compared to $4.9 million of net sales for the
quarter ended January 31, 1999. This decrease was attributable to a decrease in
voice processing net sales of $0.5 million and a decrease of $0.2 million in
performance analysis and support services sales.
Voice Processing Net Sales
Voice processing net sales decreased 21% for the quarter ended January 31, 2000
to $1.9 million, compared to $2.4 million for the quarter ended January 31,
1999. This decrease was attributable to a decrease in sales to commercial
customers from $1.0 million to $0.2 million, a decrease in sales to
international customers from $0.5 million to $0.1 million, offset in part by an
increase in sales to government customers from $0.9 million to $1.6 million. The
decrease in commercial sales was primarily due to sales in the first quarter of
fiscal year 1999 of Microlog's APRS product to Microlog's principal customer in
the retail pharmacy market, which were not replaced in the first quarter of
fiscal year 2000. The decrease in international sales was due to the sale of the
voice
6
<PAGE>
processing operations of Microlog Europe in September 1999. The increase in
government sales was primarily due to increased sales to existing customers as
well as a relatively large sale of $0.5 million to a new customer.
As of January 31, 2000, Microlog had a backlog of existing orders for voice
processing systems totaling $2.6 million. The backlog, as of January 31, 1999,
was $1.5 million. Microlog has experienced fluctuations in its backlog at
various times in the past primarily to the seasonality of governmental
purchases. Microlog anticipates that all of the outstanding orders at January
31, 2000 will be shipped and the sales recognized during fiscal year 2000.
Although Microlog 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, Microlog'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 decreased 12% for the
quarter ended January 31, 2000 to $2.2 million, compared to $2.5 million for the
quarter ended January 31, 1999. Microlog has experienced increased competition
for retention of its employees from the John Hopkins University Applied Physics
Laboratory (APL), the customer who the employees work for. As a result of the
tight labor market and changes in hiring policies at APL, Microlog is
experiencing increased employee attrition to APL. Microlog expects this trend to
continue and possibly accelerate through fiscal year 2000. Each employee hired
directly by APL, and removed from our contract(s), decreases our revenue and
profit potential from that source. Microlog's strategy for addressing this trend
will be to replace the profits, but not necessarily the revenue, by providing
additional services to APL. Microlog is subject to the risk that its strategy
will not be successful.
As of January 31, 2000, Microlog had a backlog of funding on existing contracts
for performance analysis and support services totaling $0.4 million. By
comparison, the backlog as of January 31, 1999 was $0.1 million. Microlog's
contracts consist primarily of indefinite delivery, indefinite quantity (IDIQ)
contracts which generally do not have a funding amount and, therefore, are not
included in backlog. Microlog estimates that the entire $0.4 million of backlog
at January 31, 2000 will be recognized as sales in fiscal year 2000. Because of
the delays inherent in the government contracting process or possible changes in
defense priorities or spending, Microlog's backlog as of any particular date may
not be indicative of actual sales for any future period. Although Microlog
believes that its backlog of funding on existing contracts is firm, the
possibility exists that funding for some contracts on which Microlog is
continuing to work, in the expectation of renewal, may not be authorized. In
addition, the Government has the right to cancel contracts, whether funded or
not funded, at any time, although to date this has not occurred.
Costs and Expenses
Cost of sales was $3.0 million or 71.7% of net sales for the quarter ended
January 31, 2000, compared to $3.5 million or 71.9% of net sales for the quarter
ended January 31, 1999. The decrease in cost of sales, in dollar amount, was
primarily due to the restructuring program implemented in fiscal year 1999 in
Microlog's voice processing operations as well as reduced sales from performance
analysis and support services.
Selling, general and administrative expenses were $0.8 million or 19.8% of net
sales, for the quarter ended January 31, 2000, compared to $1.7 million, or
34.3% of net sales, for the quarter ended January 31, 1999. The decrease in
selling, general, and administrative expenses, in dollar amount and as a
percentage of revenue, was primarily due to the restructuring program
implemented in fiscal year 1999 in Microlog's voice processing operations.
7
<PAGE>
Research and development expenses reflect costs associated with the development
of applicable software and product enhancements for Microlog's voice processing
systems. Microlog believes that the process of establishing technological
feasibility with its new products is completed approximately upon release of the
products to its customers. Accordingly, Microlog does not anticipate
capitalizing research and development costs. Research and development expenses
were $331,000, or 7.9% of net sales, for the quarter ended January 31, 2000,
compared to $963,000, or 19.7% of net sales, for the quarter ended January 31,
1999. The decrease in research and development expenses, in dollar amount and as
a percentage of revenue, was primarily due to the restructuring program
implemented in fiscal year 1999 in Microlog's voice processing operations.
The uniQue development activities will be the major focus in fiscal year 2000
for Microlog's research and development efforts. In fiscal year 1999, research
and development was focused on the uniQue and TIVRA products. uniQue V 2.0 was
announced and substantially completed as a product offering available for
customer trial in the contact center market. uniQue V 2.0 was the second in a
series of offerings Microlog developed to provide a comprehensive range of
solutions within the contact center market. This open, standards-based product
enables companies to route and prioritize phone calls, e-mails, web contacts,
faxes, and hardcopy mail and other contact types to the appropriate skilled
agent for handling. A significant amount of custom engineering is undertaken by
Microlog in providing special features, application development, and system
integration services to our customers.
Net Other (Expense) Income
Microlog had net other expense of $10,000 for the quarter ended January 31,
2000, compared to net other income of $78,000 for the quarter ended January 31,
1999. Net other expense for the quarter consisted primarily of interest expense.
Net other income for the quarter ended January 31, 1999 consisted primarily of
the recognition of the deferred gain on the sale of Microlog's office building
in August 1998.
Benefit (Provision) For Income Taxes
For the quarter ended January 31, 2000, the benefit for income taxes of $56,000
relates to refunds of federal and state income taxes. For the quarter ended
January 31, 1999, the provision for income taxes of $11,000 relates to state
income taxes.
Microlog 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 $16.9 million and $0.4 million, respectively, will be
available to offset taxes generated from future taxable income through 2019. If
certain substantial changes in Microlog's ownership should occur, there would be
an annual limitation on the amount of the carryforwards which can be utilized.
Cautionary Note Regarding Forward-Looking Statements
This section (Management's Discussion and Analysis of Financial Condition and
Results of Operations) contains 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. Microlog intends the
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in these sections. All statements regarding
Microlog's expected financial position and operating results, business strategy,
financing plans, forecasted trends relating to our industry, its ability to
realize anticipated cost savings and similar matters are forward-looking
statements. These statements can sometimes be identified by the use of
forward-looking words such as "may," "will," "anticipate," "estimate," "expect,"
"believe" or "intend." Microlog cannot promise you that our expectations in such
forward-looking statements will turn out to be correct. Some important factors
that could cause our actual results to be materially different from our
expectations include those discussed under the caption "Factors That May Effect
Future Results of Operations."
8
<PAGE>
Factors That May Effect Future Results Of Operations
Microlog believes that its results of operations will be affected by factors
such as the timing of introduction by Microlog of new and enhanced products and
services, market acceptance of new voice processing products and enhancements of
existing products, continuation of market trends in the voice processing market,
growth in the voice processing market in general, competition, ability to secure
and retain adequate financing, commitments to automation by potential customers,
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 Microlog provides performance analysis and
support services.
Microlog has experienced increased competition for retention of its employees
from the John Hopkins University Applied Physics Laboratory (APL). As a result
of the tight labor market and changes in hiring policies at APL, Microlog is
experiencing increased employee attrition to APL. Microlog expects this trend to
continue and possibly accelerate through fiscal year 2000. Each employee hired
directly by APL, and removed from our contract(s), decreases our revenue and
profit potential from that source.
Microlog is subject to the risk that its business strategy will not be
successful. The new strategy is dependent on market acceptance of Microlog's new
focus, services and products, ongoing research and development efforts, and
sales activities over the near term. In addition, the strategy is dependent upon
Microlog's ability to match costs proportionately with revenue. Microlog's
fiscal 2000 operating budget includes significant expenditures related to its
development and marketing of its new professional services, uniQue product line,
and TIVRA product line. If Microlog is unable to sustain and grow the associated
revenue, Microlog is subject to the risk that it may not make the necessary
decisions to reduce expenditures in enough time to avoid severe adverse
consequences.
Liquidity and Capital Resources
Microlog had net income of $73,000 for the quarter ended January 31, 2000, but
has an accumulated deficit of $16.5 million at January 31, 2000. Microlog's
continued existence is dependent upon its ability to generate sufficient cash
flows from internal and external sources to meet its operating needs. Management
took several steps to meet its liquidity requirements for the foreseeable
future, including restructuring operations to reduce operating expenses to
levels commensurate with revenues and attracting capital through a private
placement transaction. Microlog anticipates that existing cash and cash
equivalents generated from fiscal year 2000 operations will be sufficient to
meet its working capital needs. Microlog has, in the past, been able to secure
additional financing to meet its operating requirements, although there can be
no assurance that it will be able to continue to do so.
Working capital as of January 31, 2000 was $2.0 million as compared to $1.8
million as of October 31, 1999. The increase in working capital was primarily
attributable to an increase in accounts receivable of $0.8 million, an increase
in inventories and other current assets of $0.3 million, a decrease in current
liabilities of $0.5 million, offset by a decrease in cash and cash equivalents
$1.5 million.
Cash and cash equivalents were $1.9 million as of January 31, 2000 as compared
to $3.4 million as of October 31, 1999. The decrease was primarily due to an
increase in accounts receivable of $0.8 million, an increase in other current
assets and inventories of $0.3 million and a decrease in accrued compensation
and related expenses of $0.4 million. The Company does not anticipate using the
same amount of cash in subsequent quarters of fiscal year 2000 as it used in the
first quarter ended January 31, 2000. Accounts receivable were $2.0 million as
of January 31, 2000 as compared to $1.2 million as of October 31, 1999. The
increase was primarily attributable to increased sales in voice processing for
the quarter as well as the timing of shipments during the quarter.
In fiscal year 1999, Microlog closed and drew on a revolving line-of-credit
facility which allows Microlog to borrow up to 75% of its eligible receivables
to a maximum of $2,000,000, subject to the right of the financial institution to
make loans only in its discretion. The line-of-credit bears interest at the
bank's prime rate plus 2.25% (10.75% at January 31, 2000), and contains a 0.025%
fee on the average unused portion of the line as well as a
9
<PAGE>
monthly collateral fee and a 1% upfront commitment fee. The loan subjects
Microlog to a restrictive covenant of not exceeding 115% of its consolidated
planned quarterly losses for its second and third quarters of fiscal year 1999,
and a requirement for consolidated profitability beginning in the fourth quarter
of fiscal year 1999. The line also subjects Microlog to a number of restrictive
covenants, including restrictions on mergers or acquisitions, payment of
dividends, and certain restrictions on additional borrowings. The line is
secured by all of Microlog's assets. Microlog was not in compliance with the
restrictive covenant in the second quarter of fiscal year 1999, but obtained a
waiver from the bank. Microlog was not in compliance with the restrictive
covenant in the fourth quarter of fiscal year 1999 for which a forbearance
agreement has been obtained. The forebearance agreement waives the lenders right
under an event of default to terminate the loan. This line of credit expires on
March 23, 2000 and Microlog and the bank are in the process of renewal
discussions. There was no outstanding debt against this line-of-credit at
January 31, 2000.
In June 1996, Microlog entered into a contract to purchase a new management
information system including a five-year maintenance plan. The purchase,
including maintenance, is being financed by the vendor over a five-year term at
an annual interest rate of 8%. The financing terms require five annual payments
of $140,000 each, including interest, beginning on June 30, 1996. Three annual
payments have been made to date. The final payment is due on June 30, 2000.
Part II. OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
(a) Microlog files herewith the following exhibit:
27.1 Financial Data Schedule
(b) A current report on form 8-K was filed on February 22, 2000
reporting the resignation of Microlog's Chief Executive
Officer on February 16, 2000.
SIGNATURES
MICROLOG CORPORATION
By: /s/ John C. Mears
------------------------------
John C. Mears
Managing Director, Chief Operating Officer
By: /s/ Kirk E. Isenbart
------------------------------
Kirk E. Isenbart
Principal Accounting Officer and Controller
Date: March 13, 2000
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 000792094
<NAME> Microlog Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 1,932,000
<SECURITIES> 0
<RECEIVABLES> 2,082,000
<ALLOWANCES> 115,000
<INVENTORY> 467,000
<CURRENT-ASSETS> 4,890,000
<PP&E> 3,054,000
<DEPRECIATION> 2,189,000
<TOTAL-ASSETS> 5,981,000
<CURRENT-LIABILITIES> 2,919,000
<BONDS> 0
0
0
<COMMON> 76,000
<OTHER-SE> 2,815,000
<TOTAL-LIABILITY-AND-EQUITY> 5,981,000
<SALES> 4,167,000
<TOTAL-REVENUES> 4,167,000
<CGS> 2,986,000
<TOTAL-COSTS> 4,140,000
<OTHER-EXPENSES> (10,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,000
<INCOME-PRETAX> 17,000
<INCOME-TAX> 56,000
<INCOME-CONTINUING> 73,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,000
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
