SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 0-22384
MICRO COMPONENT TECHNOLOGY, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0985960
----------------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2340 West County Road C, St. Paul, MN 55113-2528
------------------------------------------------------------------------------
(Address of principal executive offices)
(612) 697-4000
--------------------------------------------------
(Registrant's telephone number)
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 ___________
The number of shares outstanding of the Registrant's Common Stock, as of October
22, 1998 was 7,394,300.
Page 1 of 23 pages
Exhibit index on page 12
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF OPERATIONS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
2
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
ITEM 1. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 26, June 27,
ASSETS 1998 1998
- --------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,683 $ 2,532
Accounts receivable, less allowance for doubtful accounts
of $204 and $250, respectively 2,227 3,614
Inventories:
Raw materials 923 878
Work in process 1,505 1,562
Finished goods 1,392 1,390
Other 162 152
---------- ----------
Total current assets 8,892 10,128
Property, plant and equipment 3,945 4,037
Less accumulated depreciation (3,013) (2,990)
---------- ----------
Property, plant and equipment, net 932 1,047
Other assets 48 51
---------- ----------
Total assets $ 9,872 $ 11,226
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------
Current liabilities:
Current portion of long term debt $ 50 $ 50
Accounts payable 1,005 1,227
Other accrued liabilities 1,165 1,466
---------- ----------
Total current liabilities 2,220 2,743
Long-term debt and financing obligations 71 83
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 authorized,
7,394,300 and 7,394,300 issued, respectively 74 74
Additional paid-in capital 44,012 44,012
Cumulative translation adjustment (64) (64)
Accumulated deficit (36,441) (35,622)
---------- ----------
Total stockholders' equity 7,581 8,400
Total liabilities and stockholders' equity $ 9,872 $ 11,226
========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements
3
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
September 26, September 27,
1998 1997
------------- -------------
<S> <C> <C>
Net sales $ 3,668 $ 4,450
Cost of sales 1,935 1,480
----------- -----------
Gross profit 1,733 2,970
Operating expenses:
Selling, general and administrative 1,721 2,151
Research and development 836 923
----------- -----------
Total operating expenses 2,557 3,074
----------- -----------
Loss from operations (824) (104)
Interest income, net 17 50
Other (12) 70
----------- -----------
Total interest and other 5 120
----------- -----------
Net income (loss) $ (819) $ 16
=========== ===========
Net income (loss) per share:
Basic $ (.11) $ .00
=========== ===========
Diluted $ (.11) $ .00
=========== ===========
Weighted average common and common
equivalent shares outstanding:
Basic 7,394 7,054
=========== ===========
Diluted 7,394 7,721
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements
4
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
September 26, September 27,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (819) $ 16
Adjustments to reconcile net income (loss) to net cash
Used by operating activities:
Depreciation and amortization 128 115
Changes in assets and liabilities:
Accounts receivable 1,387 (1,091)
Inventories 10 (2,656)
Other assets (7) (2)
Accounts payable (222) 749
Other accrued liabilities (301) 119
---------- ----------
Net cash provided by (used in) operating activities (176) (2,750)
Cash flows from investing activities:
Maturity of short-term investments -- 295
Additions to property, plant and equipment (13) (155)
---------- ----------
Net cash provided by (used in) investing activities (13) 140
Cash flows from financing activities:
Payments of long-term debt (12) (25)
Proceeds from issuance of stock -- 20
---------- ----------
Net cash used in financing activities (12) (5)
---------- ----------
Net increase (decrease) in cash and cash equivalents 151 (2,615)
Cash and cash equivalents at beginning of period 2,532 5,360
---------- ----------
Cash and cash equivalents at end of period $ 2,683 $ 2,745
========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements
5
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited, condensed, consolidated financial statements
for the three month period ended September 26, 1998 have been prepared in
accordance with the instructions for SEC Form 10-Q and, accordingly, do
not include all disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring accruals
considered necessary for a fair presentation, have been included.
Interim unaudited financial results should be read in conjunction with the
audited financial statements included in the SEC Annual Report, Form 10-K,
for the fiscal year ended June 27, 1998.
The results of operations for the three months ended September 26, 1998
are not necessarily indicative of the operating results to be expected for
the full year.
2. EARNINGS PER SHARE
Earnings per share are computed in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share." Basic earnings
per share are computed using the weighted average number of common shares
outstanding during each period. Diluted earnings per share include the
dilutive effect of common shares potentially issuable upon the exercise of
stock options and warrants outstanding, and the dilutive effect of the
assumed conversion of outstanding Class A preferred stock to common stock.
Earnings per share data for the three month period ended September 27,
1997 have been stated to conform to the provisions of SFAS No. 128. The
following table reconciles the denominators used in computing basic and
diluted earnings per share:
Three months ended
----------------------------
September 26, September 27,
(in thousands) 1998(1) 1997
----------------------------
Weighted average common
shares outstanding 7,394 7,054
Effect of dilutive stock options
and warrants -- 351
Effect of dilutive redeemable
preferred stock (2) -- 316
----------------------------
7,394 7,721
============================
(1) The Company reported a loss for the period. No adjustment made for
the effect of stock options or warrants as effect is anti-dilutive.
(2) Preferred stock converted to common stock in November, 1997.
6
<PAGE>
3. REPORTING OF COMPREHENSIVE NET INCOME OR (LOSS)
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS), No. 130 "Reporting Comprehensive
Income" which establishes standards for the reporting and display of
comprehensive income (loss) and its components in a full set of
general-purpose financial statements. Under this standard, certain
revenues, expenses, gains, and losses recognized during the period are
included in comprehensive income (loss), regardless of whether they are
considered to be results of operations of the period. During the first
quarter of 1999 and 1998 total comprehensive loss equaled net loss as
reported on the Consolidated Statements of Operations.
4. CONTINGENCIES
The Securities and Exchange Commission is conducting an investigation with
respect to certain financial reporting discrepancies announced by the
Company in April 1994 dating back to fiscal 1993 and the first two
quarters of fiscal 1994. The Company has submitted documents to the
Commission pursuant to requests from the Commission, and certain former
officers and certain current and former employees of the Company have been
interviewed by the Commission as part of the investigation. In September
1998, the Company reached a preliminary resolution of this matter with the
staff, which is subject to approval by the Securities and Exchange
Commission. The terms of the preliminary resolution do not have a
significant financial impact on the Company.
5. PREFERRED STOCK
In November 1997, the Company converted 315,789 shares of Class A
preferred stock to common stock on a one-for-one basis. There were no
dividends accrued or paid on the preferred stock. The Company no longer
has shares of preferred stock outstanding. The issuance of the shares of
common stock was exempt from registration pursuant to section 3(a)(9) of
the Securities Act of 1933. No commission or other remuneration was paid
to solicit the conversion.
7
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 26, 1998
Net sales for the first quarter of fiscal 1999, ended September 26, 1998,
decreased $0.8 million or 17.6% to $3.7 million compared to $4.5 million for the
same period the previous year. The weakness in the semiconductor capital
equipment market continued to intensify during the first quarter of the current
year, adversely impacting sales. With the exception of the first shipment of the
7632 handler in the current year, sales across all product lines were below
prior year levels. Net sales are expected to continue to be adversely affected
while the semiconductor market remains soft.
Gross Profit for the first quarter of fiscal 1999 decreased by $1.2 million to
$1.7 million, or 47.2% of sales, from $3.0 million, or 66.7% of sales, for the
same quarter in fiscal 1998. The decrease in gross margin is primarily
attributed to changes in product mix, shifting from older, higher margin
products to products with lower margins. In addition, current years sales
included a large concentration of units under volume purchase discount pricing,
further lowering margins. Margins are expected to return to approximately 50% in
future periods.
Selling, general and administrative expense in the first quarter of fiscal 1999
was $1.7 million compared to $2.2 million for the same quarter in 1998. As a
percentage of net sales, SGA was 46.9% compared to 48.3% for the previous year.
These decreases are the result of lower direct sales expenses associated with
lower sales revenue as well as cost reduction activities initiated by the
Company over the past two quarters.
Research and development expense for the first quarter of fiscal 1999 was $0.8
million, compared to $0.9 million in the previous year. As a percentage of net
sales, R&D expenses increased to 22.8% from 20.7% in the prior year, primarily
due to the decreased sales level in the current year. The Company expects to
continue to make significant investments in new product development, though it
expects second quarter R&D expenses to decrease from current quarter levels,
based upon the projected needs of current and anticipated development projects.
The Company generated net interest income during the quarter of $17,000 as
compared to $50,000 for the same period one year ago. The decrease resulted from
lower levels of interest bearing cash equivalents and short-term investments in
the current year.
Net loss for the first quarter of fiscal 1999 was $819,000, or $0.11 per share
as compared to net income of $16,000, and $0.00 per share for the first quarter
of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 26, 1998, the Company had cash and cash equivalents of $2.7 million
compared to $2.5 million at June 27, 1998. Cash provided by operations of $0.2
million during the current year resulted from collection of accounts receivable,
offset by the net loss and reduced accounts payable and accrued liabilities.
8
<PAGE>
During the prior year, cash used in operations of $2.8 million resulted from
increased accounts receivable from higher sales levels and increased inventory
levels to support new product offerings.
Current assets at September 26, 1998 were $8.9 million, a decrease of $1.2
million from June 27, 1998. Decreases in accounts receivables of $1.4 million
were partially offset by an increase in cash and cash equivalents. The current
ratio was 4.0 and working capital was $6.7 million as of September 26, 1998,
compared to 3.7 and $7.4 million, respectively, as of June 27, 1998.
The Company maintains a $5 million secured line of credit with a bank, which was
unused at September 26, 1998. Management believes that cash and cash equivalents
at September 26, 1998 and funds available through its bank line of credit will
sustain the Company's continuing operations at their current levels, for the
foreseeable future.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. When year 2000 begins,
these computers may interpret "00" as the year 1900 and could either stop
processing date related computations or could process them incorrectly.
Beginning in the year 2000, these date code fields will need to accept
four-digit entries to distinguish 21st century dates from 20th century dates to
be year compliant.
The Company has completed an initial assessment of its internal information
systems and has determined that most of the application software and internal
information systems, other than the Company's primary manufacturing and
accounting system: (1) are year 2000 compliant; (2) can be upgraded to be year
2000 compliant without significant cost or effort; or (3) do not pose a
significant issue to the Company if left uncorrected. With regard to the
Company's primary manufacturing and accounting system, the Company has
contracted with the software vendor and related hardware supplier to bring these
systems compliant prior to end of fiscal 1999. The upgrade process began in the
4th quarter of fiscal 1998, and approximately 40% of the up-front costs have
been paid to date. Total costs to upgrade the Company's internal information
systems are not material to the operations of the Company, and are expected to
be less than $100,000.
The Company is in the process of assessing non-IT systems within the Company to
determine if they are year 2000 compliant. The Company expects to have the
assessment completed by the end of 1998. Although the Company is not aware of
any material operational issues or costs associated with preparing its internal
systems for the year 2000, there can be no assurance that the Company will not
experience serious unanticipated negative consequences and/or material costs
caused by undetected errors or defects in the technology used in its internal
operating systems, which are composed predominately of third party software and
hardware technology.
The Company is in the process of determining the impact those parties that are
not year 2000 compliant may have on the operations of the Company.
Non-compliance by any of the Company's major distributors, suppliers, customers,
vendors, or financial organizations could result in business disruptions that
could have a material adverse affect on the Company's results
9
<PAGE>
of operations, liquidity and financial condition. The Company plans on
developing a contingency plan once it has completed its assessment of
significant party compliance. The contingency plan will be developed to minimize
the Company's exposure to work slowdowns or business disruptions and any adverse
affects on the Company's results of operations. The contingency plan should be
completed by the end of 1998.
The Company is currently in the process of assessing and testing the software
components of its products for year 2000 compliance. The Company does not
believe that its products contain undetected errors or defects associated with
year 2000 date functions that may result in material costs to the Company,
including repair costs and costs incurred in litigation due to any such defects;
however, there can be no assurance that such errors or defects do not exist.
Many commentators have stated that a significant amount of litigation will arise
out of year 2000 compliance issues. Because of the unprecedented nature of such
litigation, there can be no assurance that the Company will not be materially
adversely affected by claims related to year 2000 compliance.
RISK FACTORS
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. These "forward-looking
statements" involve certain risks and uncertainties, including, but not limited
to, the following: (1) fluctuations and periodic downturns in the semiconductor
market, as currently being experienced, which often have had a
disproportionately negative effect on manufacturers of semiconductor capital
equipment; (2) rapid changes in technology and in tester and handler products,
which the Company must respond to successfully in order for its products to
avoid becoming noncompetitive or obsolete; (3) customer acceptance of the
Company's new products, including the MCT 5100, MCT 5200 and MCT 7632 handlers,
in which the Company has invested significant amounts of inventory; (4) possible
loss of any of the Company's key customers, who account for a substantial
percentage of the Company's business; (5) the possible adverse impact of
competition in markets which are highly competitive, including increased
pressure on pricing and payment terms which may adversely affect net sales and
gross margins and increase the Company's exposure to credit risk; (6) the
possible adverse impact of economic or political changes in markets the Company
serves, including the uncertain economic situation currently facing Southeast
Asia; (7) the possible adverse impact on the Company's operations or material
costs which may be incurred by the Company due to undetected errors or defects
in preparing its internal operating systems for the year 2000; (8) the possible
adverse impact on the Company's operations or material costs which may be
incurred by the Company arising from year 2000 related repair costs or
litigation due to undetected errors or defects in its products which use
software; and, (9) other factors detailed from time to time in the Company's SEC
reports, including but not limited to the discussion in the Management's
Discussion & Analysis included in the Annual Report on Form 10-K for the year
ended June 27, 1998. All forecasts and projections in this report are
"forward-looking statements," and are based on management's current expectations
of the Company's near-term results, based on current information available
pertaining to the Company, including risk factors discussed above. Actual
results could differ materially.
10
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Securities and Exchange Commission is conducting an investigation with
respect to certain financial reporting discrepancies announced by the Company in
April 1994 dating back to fiscal 1993 and the first two quarters of fiscal 1994.
The Company has submitted documents to the Commission pursuant to requests from
the Commission, and certain former officers and certain current and former
employees of the Company have been interviewed by the Commission as part of the
investigation. In September 1998, the Company reached a preliminary resolution
of this matter with the staff, which is subject to approval by the Securities
and Exchange Commission. The terms of the preliminary resolution do not have a
significant financial impact on the Company.
ITEM 5. OTHER INFORMATION
On November 9, 1998 the Company's Board of Directors approved a stock repurchase
program for the purchase of up to 500,000 shares of the Company's common stock.
The repurchase program will be effective for a period of 90 days, unless earlier
terminated by the Board of Directors.
On September 4, 1998, the Company was notified by The Nasdaq Stock Market that
its Common stock did not comply with Nasdaq's $1.00 minimum bid price
requirement and that the Company had ninety (90) days to demonstrate compliance
with such requirement. Accordingly, unless the closing bid price of the
Company's Common stock is equal to or greater than $1.00 for ten (10)
consecutive trading days ending on or prior to December 3, 1998, the Company's
Common stock will be delisted at the opening of business on December 7, 1998.
The bid price of the Company's Common stock has been equal to or greater than $1
beginning November 2, 1998.
On October 5, 1998, the Company was notified by The Nasdaq Stock Market that its
Common stock did not comply with Nasdaq's $5 million minimum market float
requirement and that the Company had ninety (90) days to demonstrate compliance
with such requirement. Accordingly, unless the market float of the Company's
Common stock is equal to or greater than $5 million for ten (10) consecutive
trading days ending on or prior to January 4, 1999, the Company's Common stock
will be delisted at the opening of business on January 6, 1999. The market float
of the Company's Common stock has been equal to or greater than $5 million
beginning October 29, 1998.
In the event that the Company is not in compliance with either of these listing
requirements by the designated date, it may request a hearing to extend the
compliance period or request a waiver. The Company is currently reviewing
alternatives available for maintaining listing eligibility with Nasdaq.
11
<PAGE>
6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 10.O First Amendment to Credit and Security Agreement,
dated October 22, 1998 between Norwest Business
Credit, Inc. and Micro Component - Technology, Inc.
10.P First Amendment to Credit and Security Agreement,
dated October 22, 1998 between Norwest Bank
Minnesota, N.A. and Micro Component - Technology,
Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
12
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Micro Component Technology, Inc.
Registrant
Dated: November 10, 1998 By: /s/ Roger E. Gower
----------------------------------
Roger E. Gower
President and Chief Executive Officer
And
Dated: November 10, 1998 By: /s/ Jeffrey S. Mathiesen
----------------------------------
Jeffrey S. Mathiesen
Chief Financial Officer
Chief Accounting Officer
13
EXHIBIT 10.O
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of ______________, 1998, is made by and
between MICRO COMPONENT TECHNOLOGY, INC., a Minnesota corporation (the
"Borrower"), and NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the
"Lender").
Recitals
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of February 17, 1998 (the "Credit Agreement"). Capitalized
terms used in these recitals have the meanings given to them in the Credit
Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the
Credit Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
"'Cash' means currency and coins, marketable securities, cash equivalents,
negotiable checks and balances in bank accounts."
"'Closing Date' means February 17, 1998."
"'Quick Ratio' means the ratio of the Borrower's (i) Cash plus Accounts to
(ii) the Borrower's current liabilities (including the outstanding
principal balance of the Revolving Note) as determined in accordance with
GAAP."
2. Unused Line Fee. The table in Section 2.8(c) of the Credit
Agreement is hereby amended in its entirety and replaced with the following:
Average Daily Credit Exposure Monthly Unused Line Fee
----------------------------- -----------------------
$-0- $4,000
greater than $-0- but less than $4,000 less the average daily
$1,000,000 Credit Exposure multiplied by
0.03, and divided by 12
$1,000,000 or more $0
<PAGE>
3. Covenant Default Fee. Section 2.8 of the Credit Agreement is
hereby amended by adding the following new subsection 2.8(f):
"(f) COVENANT DEFAULT FEE. If at any time the Borrower is in
default of Section 6.12 or Section 6.13, the Borrower agrees to pay
to the Lender, upon written demand, a fully earned and
non-refundable covenant default fee of $20,000."
4. Termination Fees. Section 2.12(a) of the Credit Agreement is
hereby amended to read as follows:
"(a) TERMINATION FEES. If the Credit Facility is terminated
for any reason as of a date other than the Maturity Date the
Borrower shall pay the Lender a fee in an amount equal to a
percentage of the Maximum Line as follows: (i) two percent (2%) if
the termination occurs on or before the first anniversary of the
Closing Date; (ii) one percent (1%) if the termination or reduction
occurs after the first anniversary of the Closing Date but before
the Maturity Date."
5. Conditions Precedent. Section 4.1(n) of the Credit Agreement is
hereby amended to read as follows:
"(n) Satisfactory completion of a collateral audit showing
that on the date of the initial Revolving Advance or issuance of the
initial Letter of Credit, the Borrower has a minimum of $300,000 of
excess Availability after paying out trade payables older than 60
days from invoice date and any book or bank overdrafts."
6. Minimum Tangible Net Worth. Section 6.12 of the Credit Agreement
is hereby amended to read as follows:
"Section 6.12 Minimum Tangible Net Worth. The Borrower will maintain
its Tangible Net Worth determined as at the end of each fiscal quarter, at
an amount not less than the amount set forth opposite such fiscal quarter:
-2-
<PAGE>
Fiscal Quarter Ending Minimum Tangible
--------------------- Net Worth
---------
September 30, 1998 $7,000,000
December 31, 1998 $7,000,000
March 31, 1999 $7,000,000
June 30, 1999 $7,200,000
September 30, 1999 $7,400,000
December 31, 1999 and thereafter $7,600,000"
7. Maximum Net Loss. Section 6.13 of the Credit Agreement is hereby
amended to read as follows:
"Section 6.13 Maximum Net Loss. Borrower will achieve Net Loss,
determined as at the end of each month, of not more than the amount set
forth opposite the applicable period below:
Period Maximum Net Loss
------ ----------------
July 1, 1998 to March 31, 1999 $2,000,000
April 1, 1999 to June 30, 1999 $1,700,000
July 1, 1999 and thereafter $1,000,000"
8. Minimum Quick Ratio. The Credit Agreement is hereby amended by
adding the following new Section 6.15:
"Section 6.15 Minimum Quick Ratio. The Borrower will maintain its
Quick Ratio determined as at the end of each fiscal quarter, at not less
than 1.50 to 1.00."
9. No Other Changes. Except as explicitly amended by this Amendment,
all of the terms and conditions of the Credit Agreement shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.
10. Waiver of Defaults. The Borrower is in default of the following
provisions of the Credit Agreement (collectively, the "Defaults"):
<TABLE>
<CAPTION>
SECTION/COVENANT PERIOD REQUIRED ACTUAL
---------------- ------ -------- ------
<S> <C> <C> <C>
6.12 Minimum Tangible Net Worth 6/30/98 not less than $10,500,000 $8,400,000
6.13 Maximum Net Loss 6/30/98 not more than $3,000,000 $3,879,000
</TABLE>
-3-
<PAGE>
Upon the terms and subject to the conditions set forth in this Amendment, the
Lender hereby waives the Defaults. This waiver shall be effective only in this
specific instance and for the specific purpose for which it is given, and this
waiver shall not entitle the Borrower to any other or further waiver in any
similar or other circumstances.
11. Amendment Fee. The Borrower shall pay the Lender as of the date
hereof a fully earned, non-refundable fee in the amount of $10,000 in
consideration of the Lender's execution of this Amendment.
12. Conditions Precedent. This Amendment, and the waiver set forth
in Paragraph 10 hereof, shall be effective when the Lender shall have received
an executed original hereof, together with each of the following, each in
substance and form acceptable to the Lender in its sole discretion:
(a) Payment of the fee described in Paragraph 11.
(b) Such other matters as the Lender may require.
13. Representations and Warranties. The Borrower hereby represents
and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute
this Amendment and to perform all of its obligations hereunder, and this
Amendment has been duly executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate action and
do not (i) require any authorization, consent or approval by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower, or the articles
of incorporation or by-laws of the Borrower, or (iii) result in a breach
of or constitute a default under any indenture or loan or credit agreement
or any other agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected.
(c) All of the representations and warranties contained in Article V
of the Credit Agreement are correct on and as of the date hereof as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
14. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any
-4-
<PAGE>
and all references in the Security Documents to the Credit Agreement shall be
deemed to refer to the Credit Agreement as amended hereby.
15. No Other Waiver. Except as set forth in Paragraph 10 hereof, the
execution of this Amendment and acceptance of any documents related hereto shall
not be deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or
other document held by the Lender, whether or not known to the Lender and
whether or not existing on the date of this Amendment.
16. Release. The Borrower hereby absolutely and unconditionally
releases and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
17. Costs and Expenses. The Borrower hereby reaffirms its agreement
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses and the fee
required under paragraph 11 hereof.
18. Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
NORWEST BUSINESS CREDIT, INC. MICRO COMPONENT TECHNOLOGY,
INC.
By __________________________________
By _____________________________________ Its ______________________________
Kate F. Wahlberg
Its Officer
-6-
EXHIBIT 10.P
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT
(Eximbank Guaranteed Loan No. AP073233XX)
This Amendment, dated as of ______________, 1998, is made by and
between MICRO COMPONENT TECHNOLOGY, INC., a Minnesota corporation (the
"Borrower"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association (the "Lender").
Recitals
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of February 17, 1998 (the "Credit Agreement"). Capitalized
terms used in these recitals have the meanings given to them in the Credit
Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the
Credit Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
"'Closing Date' means February 17, 1998.
2. Unused Line Fee. The table in Section 2.8(c) of the Credit
Agreement is hereby amended in its entirety and replaced with the following:
Average Daily Credit Exposure Monthly Unused Line Fee
----------------------------- -----------------------
$-0- $4,000
greater than $-0- but less than $4,000 less the average daily
$1,000,000 Credit Exposure multiplied by
0.03, and divided by 12
$1,000,000 or more $0
3. Termination Fees. Section 2.12(a) of the Credit Agreement is
hereby amended to read as follows:
"(a) TERMINATION FEES. If the Credit Facility is terminated
for any reason as of a date other than the Maturity Date the
Borrower shall pay the
<PAGE>
Lender a fee in an amount equal to a percentage of the Maximum Line
as follows: (i) two percent (2%) if the termination occurs on or
before the first anniversary of the Closing Date; (ii) one percent
(1%) if the termination or reduction occurs after the first
anniversary of the Closing Date but before the Maturity Date."
4. Minimum Tangible Net Worth. Section 6.8 of the Credit Agreement
is hereby amended to read as follows:
"Section 6.8 Minimum Tangible Net Worth. The Borrower will maintain
its Tangible Net Worth determined as at the end of each fiscal quarter, at
an amount not less than the amount set forth opposite such fiscal quarter:
Fiscal Quarter Ending Minimum Tangible
--------------------- Net Worth
---------
September 30, 1998 $7,000,000
December 31, 1998 $7,000,000
March 31, 1999 $7,000,000
June 30, 1999 $7,200,000
September 30, 1999 $7,400,000
December 31, 1999 and thereafter $7,600,000"
5. No Other Changes. Except as explicitly amended by this Amendment,
all of the terms and conditions of the Credit Agreement shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.
6. Waiver of Defaults. The Borrower is in default of the following
provision of the Credit Agreement (the "Default"):
<TABLE>
<CAPTION>
SECTION/COVENANT PERIOD REQUIRED ACTUAL
---------------- ------ -------- ------
<S> <C> <C> <C>
6.8 Minimum Tangible Net Worth 6/30/98 not less than $10,500,000 $8,400,000
</TABLE>
Upon the terms and subject to the conditions set forth in this Amendment, the
Lender hereby waives the Default. This waiver shall be effective only in this
specific instance and for the specific purpose for which it is given, and this
waiver shall not entitle the Borrower to any other or further waiver in any
similar or other circumstances.
7. Conditions Precedent. This Amendment, and the waiver set forth in
Paragraph 6 hereof, shall be effective when the Lender shall have received an
executed original hereof.
-2-
<PAGE>
8. Representations and Warranties. The Borrower hereby represents
and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute
this Amendment and to perform all of its obligations hereunder, and this
Amendment has been duly executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate action and
do not (i) require any authorization, consent or approval by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower, or the articles
of incorporation or by-laws of the Borrower, or (iii) result in a breach
of or constitute a default under any indenture or loan or credit agreement
or any other agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected.
(c) All of the representations and warranties contained in Article V
of the Credit Agreement are correct on and as of the date hereof as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
9. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any and all references in the Security Documents to the Credit Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.
10. No Other Waiver. Except as set forth in Paragraph 6 hereof, the
execution of this Amendment and acceptance of any documents related hereto shall
not be deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or
other document held by the Lender, whether or not known to the Lender and
whether or not existing on the date of this Amendment.
11. Release. The Borrower hereby absolutely and unconditionally
releases and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing
-3-
<PAGE>
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
12. Costs and Expenses. The Borrower hereby reaffirms its agreement
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses.
13. Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
NORWEST BANK MINNESOTA, MICRO COMPONENT TECHNOLOGY,
NATIONAL ASSOCIATION INC.
by By _________________________________
Its _____________________________
NORWEST BUSINESS CREDIT, INC.
as Servicer
By __________________________________
Kate F. Wahlberg
Its Officer
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-26-1999
<PERIOD-END> SEP-26-1998
<CASH> 2,683
<SECURITIES> 0
<RECEIVABLES> 2,227
<ALLOWANCES> (204)
<INVENTORY> 3,820
<CURRENT-ASSETS> 8,892
<PP&E> 3,945
<DEPRECIATION> (3,013)
<TOTAL-ASSETS> 9,872
<CURRENT-LIABILITIES> 2,220
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 7,581
<TOTAL-LIABILITY-AND-EQUITY> 9,872
<SALES> 3,668
<TOTAL-REVENUES> 3,668
<CGS> 1,935
<TOTAL-COSTS> 1,935
<OTHER-EXPENSES> 2,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (819)
<INCOME-TAX> 0
<INCOME-CONTINUING> (819)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (819)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
