MICRO COMPONENT TECHNOLOGY INC, 10-Q, 2000-07-20

MICRO COMPONENT TECHNOLOGY INC
10-Q, 2000-07-20
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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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 July 1, 2000

/ /	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 (State or other jurisdiction of incorporation or organization)		41-0985960 (I.R.S. Employer Identification No.)
2340 West County Road C, St. Paul, MN 55113-2528 (Address of principal executive offices)
(651) 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 July 17, 2000 was 11,098,117.

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	9
PART II—OTHER INFORMATION
ITEM 5.	OTHER INFORMATION	15
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	15
SIGNATURES		16
EXHIBITS AND REPORTS		17

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MICRO COMPONENT TECHNOLOGY, INC.

FORM 10-Q

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

(Unaudited)

				July 1, 2000			December 31, 1999
ASSETS
Current assets:
	Cash and cash equivalents			$	1,417		$	1,045
	Accounts receivable, less allowance for doubtful accounts of $282 and $136, respectively				14,407			4,087
	Inventories:
		Raw materials			7,776			1,545
		Work in process			3,449			980
		Finished goods			1,273			1,123
	Other				541			604

			Total current assets		28,863			9,384
Property, plant and equipment					5,097			4,089
	Less accumulated depreciation				(3,651	)		(3,224	)

	Property, plant and equipment, net				1,446			865
Goodwill and other intangible assets, net					17,597			32
Other assets					91			43

Total assets				$	47,997		$	10,324

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Line of credit			$	5,717		$	—
	Current portion of long-term debt				32			51
	Accounts payable				7,538			1,232
	Other accrued liabilities				4,508			1,715

			Total current liabilities		17,795			2,998
Long-term debt and financing obligations					54			70
Commitments and contingencies
Stockholders' equity:
	Common stock, $.01 par value, 20,000,000 authorized, 11,096,534 and 7,540,647 issued, respectively				111			75
	Additional paid-in-capital				68,300			44,217
	Cumulative translation adjustment				(69	)		(69	)
	Accumulated deficit				(38,194	)		(36,967	)

			Total stockholders' equity		30,148			7,256

Total liabilities and stockholders' equity				$	47,997		$	10,324

See notes to unaudited condensed consolidated financial statements

MICRO COMPONENT TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

		Three Months Ended						Six Months Ended
		Jul. 1, 2000			Jun. 26, 1999			Jul. 1, 2000			Jun. 26, 1999
Net sales		$	14,806		$	4,455		$	26,967		$	8,483
Cost of sales			7,873			2,001			14,122			4,033

Gross profit			6,933			2,454			12,845			4,450
Operating expenses:
	Selling, general and administrative		4,358			1,710			7,844			3,127
	Research and development		2,243			660			4,113			1,368
	Amortization of intangible assets		1,174			—			1,958			—

Total operating expenses			7,775			2,370			13,915			4,495

Profit (loss) from operations			(842	)		84			(1,070	)		(45	)
	Interest income		23			9			44			28
	Interest expense		(121	)		(3	)		(159	)		(4	)
	Other, net		(21	)		(36	)		(42	)		(50	)

Total interest and other			(119	)		(30	)		(157	)		(26	)

Net income (loss)		$	(961	)	$	54		$	(1,227	)	$	(71	)

Net income (loss) per share:
	Basic	$	(0.09	)	$	0.01		$	(0.12	)	$	(0.01	)

	Diluted	$	(0.09	)	$	0.01		$	(0.12	)	$	(0.01	)

Weighted average common and common equivalent shares outstanding:
	Basic		11,067			7,402			10,486			7,398

	Diluted		11,067			7,721			10,486			7,398

See notes to unaudited condensed consolidated financial statements

MICRO COMPONENT TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

				Six Months Ended
				July 1, 2000			June 26, 1999
Cash flows from operating activities:
	Net income (loss)			$	(1,227	)	$	(71	)
	Adjustments to reconcile net income (loss) to net cash used in operating activities:
		Depreciation and amortization			2,394			214
		Changes in assets and liabilities:
			Accounts receivable		(5,997	)		(1,023	)
			Inventories		(2,944	)		(352	)
			Other and other current assets		155			13
			Accounts payable		3,329			749
			Other accrued liabilities		399			215

Net cash used in operating activities					(3,891	)		(255	)
Cash flows from investing activities:
	Additions to property, plant and equipment				(161	)		(72	)
	Payment for acquisitions, net of cash acquired				(383	)		—

Net cash used in investing activities					(544	)		(72	)
Cash flows from financing activities:
	Payments of long-term debt				(35	)		(24	)
	Increase in working line of credit				3,923			—
	Proceeds from issuance of stock				919			23

Net cash provided by (used in) financing activities					4,807			(1	)

Effect of exchange rate changes					—			(5	)

Net increase (decrease) in cash and cash equivalents					372			(333	)
Cash and cash equivalents at beginning of period					1,045			2,260

Cash and cash equivalents at end of period				$	1,417		$	1,927

Supplemental disclosure:
	Noncash investing and financing activities:
		Stock issued for acquisition of Aseco Corporation		$	23,200		$	—

See notes to unaudited condensed consolidated financial statements

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 and six month periods ended July 1, 2000 and June 26, 1999 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 our opinion, 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 Transition Report on Form 10-K, for the transition period ended December 31, 1999.

The results of operations for the three month and six month periods ended July 1, 2000 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. The following table reconciles the denominators used in computing basic and diluted earnings per share:

	Three months ended		Six months ended
(in thousands)	July 1, 2000(1)	June 26, 1999	July 1, 2000(1)	June 26, 1999(1)
Weighted average common shares outstanding	11,067	7,402	10,486	7,398
Effect of dilutive stock options and warrants	—	319	—	—

	11,067	7,721	10,486	7,398

(1): We reported a loss for the periods indicated. No adjustment was made for the effect of stock options or warrants, which totaled 1,942,838 shares at July 1, 2000 and 1,590,807 shares at June 26, 1999, as the effect was anti-dilutive.

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 three and six month periods ended

July 1, 2000 and June 26, 1999 total comprehensive income (loss) equaled net income (loss) as reported on the Consolidated Statements of Operations.

4. ACQUISITION

On January 31, 2000, we completed the acquisition of Aseco Corporation, a Massachusetts-based manufacturer of singulated handling equipment for the back-end of the semiconductor manufacturing process. The acquisition was structured as a stock-for-stock purchase and Aseco is now a wholly-owned subsidiary of MCT. The purchase price totaled $24.0 million, consisting of 2.9 million shares of our common stock valued at $22.5 million issued to former Aseco shareholders and $1.5 million of acquisition-related costs.

The acquisition was accounted for using the purchase method of accounting. The results of operations of Aseco are included in our consolidated financial statements beginning January 31, 2000. The purchase price has been allocated based on the estimated fair values of net assets acquired at the date of acquisition. The excess of purchase price over net assets acquired, amounting to $9.6 million, has been preliminarily allocated to goodwill, and is being amortized using a straight line method over the estimated useful life of five years. Other intangible assets, including established workforce, customer list, and core and developed technology, totaling $9.9 million are being amortized using the straight-line method over the estimated useful lives of two to five years. In accordance with generally accepted accounting principles, this initial allocation may be adjusted in future quarters as valuations of certain accounts, including inventory and accrued liabilities are finalized.

The following unaudited pro forma information presents a summary of combined results of operations of MCT and Aseco as if the acquisition had occurred at the beginning of the periods presented, along with certain pro forma adjustments to give effect to amortization of goodwill and other intangible assets. The pro forma information also does not attempt to show how we would actually have performed on a combined basis had the companies been combined throughout these periods. The following pro forma information, therefore, although helpful in illustrating the financial characteristics of our combined company under one set of assumptions, does not attempt to predict or suggest future results.

		Actual			Pro forma			Pro forma
		Three months ended						Six months ended
(in thousands, except per share data)		July 1, 2000			June 26, 1999			July 1, 2000			June 26, 1999
Net revenues		$	14,806		$	9,172		$	27,322		$	17,105
Net income (loss)			(960	)		(887	)		(3,332	)		(8,821	)
Net income (loss) per share:
	Basic and diluted		(0.09	)		(0.09	)		(0.30	)		(0.85	)

5. RECENT ACCOUNTING PRONOUNCEMENTS

derivative gains or losses be either reported in the statement of operations or as a deferred item depending on the type of hedge relationship that exists with respect to such derivative. We have not yet completed an assessment of the impact of adopting the provisions of SFAS No. 133 on our financial statements. The standard is effective for us in 2001.

Staff Accounting Bulletin No. 101—Revenue Recognition in Financial Statements (SAB 101)—In December 1999, the Securities and Exchange Commission staff issued SAB 101, which, among other things, establishes the SEC's interpretation that if uncertainty exists about customer acceptance of a product, revenue should not be recognized until acceptance occurs. Customer acceptance provisions may be included in a contract to enforce a customer's right to (1) test the delivered product, (2) require the seller to perform additional services subsequent to delivery of an initial product or performance of an initial service, such as a seller is required to install or activate delivered equipment, or (3) identify other work necessary to be done before accepting the product. The SEC presumes that such contractual customer acceptance provisions are substantive, bargained-for terms of an arrangement. Accordingly, when such contractual customer acceptance provisions exist, the SEC generally believes that the seller should not recognize revenue until customer acceptance occurs or the acceptance provisions lapse.

A seller should substantially complete or fulfill the terms specified in the arrangement in order for delivery or performance to have occurred. When applying the substantially complete notion, the SEC believes that only inconsequential or perfunctory actions may remain incomplete such that the failure to complete the actions would not result in the customer receiving a refund or rejecting the delivered products or services performed to date. In addition, the seller should have a demonstrated history of completing the remaining tasks in a timely manner and reliably estimating the remaining costs. If revenue is recognized upon substantial completion of the arrangement, all remaining costs of performance or delivery should be accrued.

Consistent with industry standards, we have historically recognized revenue at product shipment, unless acceptance criteria were significant. The SEC's interpretation, as explained above, will create a deferral of revenue recognition until product acceptance occurs.

On March 24, 2000, the SEC deferred implementation of SAB 101 until the second calendar quarter of 2000, and on June 26, 2000 implementation was further deferred until the fourth quarter of calendar 2000.

We are continuing to evaluate the potential impact of SAB 101 on our revenue recognition policy. We believe that the SEC is continuing to study the impact of SAB 101 on revenue recognition. We have not completed our evaluation of the impact of SAB 101; however, we expect it to have a material impact on our financial statements in its current form.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q

The following discussion of our results of operations and financial condition should be read together with the other financial information and consolidated financial statements included in this document. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a variety of factors, including those discussed in "Risk Factors" and elsewhere in this document.

Overview

We supply automation solutions for the global semiconductor test and assembly manufacturing market. Our solutions include automated test handlers, factory automation software and our new integrated Smart Solutions product line. We believe that our products can significantly improve the productivity, yield and throughput of the back-end, or to the post-wafer manufacturing process, including assembling, packaging, testing and singulating semiconductor devices.

The demand for our products and services is dependent upon growth in the semiconductor industry and the increasing automation needs of semiconductor manufacturers and independent test and assembly facilities. The semiconductor capital equipment market was in a significant downturn in 1999, that was accompanied by the economic crisis in Asia, where approximately 65% of our products were sold during the six-month transition period ended December 1999. These industry and economic conditions adversely affected our net sales and operating results in 1999. Beginning mid-year calendar 1999, the industry began to stabilize and show signs of a gradual recovery, which we believe will facilitate improved sales and operating results for our fiscal year ending December 31, 2000. No assurance can be made, however, that such improvement will occur.

Beginning in 1999, we broadened our strategy from that of a test handler manufacturer to becoming a provider of comprehensive automation solutions for the back-end of the semiconductor manufacturing process. First, we developed and introduced in February 1999 our Tapestry strip handler. Tapestry combines strip handling capability with robotics, machine vision technology and critical software, enabling the testing and tracking of semiconductor devices in strip form and the generation of critical process data throughout the test process. Second, in June 1999 we acquired the Infinity Systems division of Fico BV. Infinity Systems has been involved in the development of factory automation software for the semiconductor manufacturing industry. Infinity System's software expertise was integral to the development of our integrated Smart Solutions product line, introduced in May 2000. Together with a third party tester, our Smart Solutions products including our Tapestry handler enable complete automation of the test, laser mark, mark inspect, singulation, sort and packaging for shipment processes.

Acquisition of Aseco Corporation. On January 31, 2000, we completed the acquisition of Aseco Corporation, a Massachusetts-based manufacturer of singulated handling equipment for the back-end of the semiconductor manufacturing process. The acquisition was structured as a stock-for-stock purchase and Aseco is now a wholly-owned subsidiary of MCT. The purchase price totaled $24.0 million, consisting of 2.9 million shares of our common stock valued at $22.5 million issued to former Aseco shareholders and $1.5 million of acquisition-related costs.

date of acquisition. The excess of purchase price over net assets acquired, amounting to $9.6 million, has been preliminarily allocated to goodwill, and is being amortized using a straight line method over the estimated useful life of five years. Other intangible assets, including established workforce, customer list, and core and developed technology, totaling $9.9 million, are being amortized using the straight-line method over the estimated useful lives of two to five years. In accordance with generally accepted accounting principles, this initial allocation may be adjusted in future quarters as valuations of certain accounts, including inventory and accrued liabilities, are finalized.

In each of the three quarters immediately prior to the acquisition, Aseco reported net sales comparable to ours, ranging from $4.7 million to $5.7 million. Their gross margins ranged from approximately 40% to 43%, compared to approximately 45% to 49% for us. Selling, general and administrative expenses for Aseco ranged from approximately 29% to 34% of net sales, compared to approximately 37% to 39% for us, and research and development expenses ranged from approximately 15% to 18% of net sales, compared to approximately 12% to 15% for us.

In Aseco's most recent fiscal year ended March 28, 1999, Aseco reported net sales of $19.2 million and a net loss of $13.7 million. The net loss included $2.2 million in charges related to the closing of its operations based in England and the discontinuation of several mature product models, a $5.0 million write-down of excess inventory and approximately $1.2 million of various restructuring related charges.

Prior to inclusion of other considerations discussed below, we expect that as we combine our operations with Aseco, our revenue base should approximately double. We believe that we will be able to sustain existing customers of Aseco and will have opportunities for incremental sales through introduction of our products to Aseco customers and vice versa. The termination of Aseco's relationship as a distributor for a foreign manufacturer is expected to allow improvement in gross margins in the latter part of 2000 as compared to our first six months of 2000. Our selling, general and administrative expenses are expected to decrease as a percentage of net sales, as we blend the businesses and eliminate redundant costs. Research and development expense is expected to initially increase as a percentage of net sales, as we complete development efforts underway at Aseco at the time of the acquisition, and accelerate some of our development projects. We will also continue to evaluate opportunities for reduction in operating and manufacturing expense through consolidation of duplicate processes of the two companies. Aseco is headquartered in a 61,000 square foot facility in Marlborough, Massachusetts, with approximately 100 employees.

Results of Operations for the Three Months Ended July 1, 2000 and June 26, 1999

Net sales for the three months ended July 1, 2000, increased $10.4 million or 232.3% to $14.8 million compared to $4.5 million for the three months ended June 26, 1999. Sales of Aseco products accounted for approximately $7.7 million of the net sales increase. Sales of our newer handler products, the MCT 5100 and MCT 7632, Smart Solutions products and automation software combined to contribute approximately $2.7 million of the increase in net sales over the comparable period in the prior year. Due to the inclusion of Aseco sales in the current year period, sales of our newer products, the MCT 5100, MCT 7632, Smart Solutions products and automation software, decreased to approximately 36% of total net sales in the current period compared to approximately 58% in the prior year period.

Gross profit for the second quarter of 2000 increased by $4.5 million to $6.9 million, or 46.8% of net sales, from $2.5 million, or 55.1% of net sales, for the comparable period in the prior year. The decrease in gross margin in the current year period primarily resulted from the inclusion of the lower margin Aseco products.

Selling, general and administrative expense in the second quarter of 2000 was $4.4 million, or 29.4% of net sales, compared to $1.7 million, or 38.4% of net sales for the comparable period in 1999. The addition of the Aseco operations accounted for approximately $1.6 million of the increase, with

increased direct selling costs related to increased sales revenues contributing $0.3 million of the increase. The remainder primarily related to increased personnel and travel expenses to support the sales growth. The decrease in selling, general and administrative expense as a percentage of net sales in the current year is primarily attributed to the increased sales in the current year period.

Research and development expense for the three months ended July 1, 2000 was $2.2 million, or 15.1% of net sales, compared to $0.7 million, or 14.8% of net sales in the comparable period of the prior year. The acquisition of Aseco accounted for approximately $1.1 million of the increase in the current year. The remainder of the increase, of which $0.3 million was increased personnel and contract labor costs, resulted from increased spending requirements for research and development projects initiated during the current year's quarter. These initiatives resulted in the introduction of several new products in 2000.

Amortization expense totaled $1.2 million, or 7.9% of sales, during the three months ended July 1, 2000, versus $0 in the prior year, and is attributed to the intangible assets and goodwill generated by our acquisitions.

Interest income for the second quarter of 2000 was $23,000 compared to $9,000 in the previous year's quarter. Interest expense totaled $121,000 in the current years quarter, compared to $3,000 for the comparable period in the prior year. The increase in interest expense is attributed to increased borrowings under the lines of credit during the current year.

Net loss for the quarter ended July 1, 2000 was $1.0 million or $0.09 per share, as compared to a net income of $54,000, or $0.01 per share in the prior year period.

Results of Operations for the Six Months Ended July 1, 2000 and June 26, 1999

Net sales for the six months ended July 1, 2000, increased $18.5 million or 217.9% to $27.0 million compared to $8.5 million for the comparable period ended June 26, 1999. Sales of Aseco products accounted for approximately $13.9 million of the sales increase. Sales of our newer handler products, the MCT 5100 and MCT 7632, Smart Solutions products and automation software combined to contribute approximately $3.0 million of the increase in net sales over the comparable period in the prior year, with the balance of the increase in net sales derived from sales and refurbishments of our more mature products. Due to the inclusion of Aseco sales for the first time, sales of our newer products, the MCT 5100, MCT 7632, Smart Solutions products and automation software, decreased to approximately 30% of total net sales in the current period compared to approximately 62% in the prior year's period.

Gross profit for the first six months of 2000 increased by $8.4 million to $12.8 million, or 47.6% of net sales, from $4.5 million, or 52.5% of net sales, for the comparable period in the prior year. The decrease in gross margin in the current year period resulted from the inclusion of the lower margin Aseco products, partially offset by increased margins on MCT products due to changes in product mix.

Selling, general and administrative expense in the first six months of 2000 was $7.8 million, or 29.1% of sales, compared to $3.1 million, or 36.9% of sales for the comparable period in 1999. The addition of the Aseco operations accounted for approximately $2.7 million of the increase, with increased direct selling costs related to increased sales revenues contributing $0.6 million of the increase. The remainder primarily related to increased personnel and travel expenses to support the sales growth during. The decrease in selling, general and administrative expense as a percentage of net sales in the current year is primarily due to the increased sales in the current period.

Research and development expense for the first six months of 2000 was $4.1 million, or 15.3% of net sales, compared to $1.4 million, or 16.1% of net sales in the previous year. The acquisition of Aseco accounted for approximately $01.8 million of the increase in the current year. The remainder of the increase, of which $0.6 million was increased personnel and contract labor costs, resulted from

increased spending requirements for research and development projects initiated during the current year. These initiatives resulted in the introduction of several new products in 2000. The decrease as a percentage of net sales in the current year is primarily attributed to the higher sales level in the current period.

Amortization expense totaled $2.0 million, or 7.3% of net sales, during the six months ended July 1, 2000, versus $0 in the prior year, and is attributed to the intangible assets and goodwill generated by our acquisitions.

Interest income for the six months ended July 1, 2000 was $44,000 compared to $28,000 in the comparable period in the prior year. Interest expense totaled $159,000 in the current year's period, compared to $4,000 for the comparable period in the prior year. The increase in interest expense is attributed to increased borrowings under the lines of credit during the current year.

Net loss for the six months ended July 1, 2000 was $1.2 million or $0.12 per share, as compared to a net loss of $71,000, or $0.01 per share in the prior year period.

Liquidity and Capital Resources

At July 1, 2000, we had cash and cash equivalents of $1.4 million, compared to $1.0 million at December 31, 1999. The current ratio was 1.6 and working capital totaled $11.1 million at July 1, 2000, compared to 3.1 and $6.4 million, respectively, at December 31, 1999.

We used $3.9 million of cash in operations in the six months ended July 1, 2000, versus $0.3 million in the comparable period in 1999. Increases in accounts receivable and inventories to support the increased revenues were the primary uses of cash in both periods.

Capital expenditures totaled $161,000 during the six months ended July 1, 2000, and $72,000 in the six months ended June 26, 1999. Capital purchases in both periods have been primarily for computer equipment. Cash used in the acquisition of Aseco Corporation was $0.4 million in the six months ended July 1, 2000.

Cash provided by financing activities was $4.8 million for the six months ended July 1, 2000, primarily comprised of cash provided from advances on our line of credit and proceeds from the issuance of common stock upon exercise of stock options. Cash used in financing activities in the six months ended June 26, 1999 was $1,000.

At July 1, 2000, we maintained two separate secured lines of credit at two separate banks; one for $5.0 million and the other for $3.0 million. The amount available for borrowing on the $5.0 million line is calculated as a percentage of our eligible accounts receivable and inventory, excluding Aseco, and amounted to approximately $5.0 million at July 1, 2000. Borrowings on the $5.0 million line, which totaled $3.0 at July 1, 2000, accrue interest at 1.5% over the bank's prime rate, which was 9.5% at July 1, 2000, for a borrowing rate of 11.0%.

Borrowings on the $3.0 million line, which totaled $2.7 million at July 1, 2000, accrue interest at 1.5% over the bank's prime rate, which was of 9.5% at July 1, 2000, for a borrowing rate of 11.0%. The amount available for borrowing is calculated as a percentage of eligible accounts receivable and inventory of Aseco, and amounted to $3.0 million at July 1, 2000. As a result of purchase accounting adjustments related to the acquisition of Aseco, we were in default of certain financial covenants of the line of credit related to tangible net worth at July 1, 2000. The bank has waived noncompliance with these covenants until September 30, 2000. We intend to negotiate new financial covenants on the line of credit. However, we cannot assure you that we will be successful in negotiating such financial covenants.

Our anticipated capital needs for the next twelve months are expected to be less than $1.0 million and concentrated in development of additional products and upgrading our management information

systems. We believe that cash and cash equivalents on hand at July 1, 2000, and funds available through our bank lines of credit are sufficient to finance our continuing operations at the least the next twelve months, but that one or more additional business acquisitions or unforeseen changes in market conditions could cause us to seek additional financing sooner. We believe that we will be able to raise additional capital and/or negotiate an increase to one or both of our bank lines of credit at terms acceptable to us if required, but no assurance can be made that such financing will be available if needed. We may acquire other companies, product lines or technologies that are complementary to our business and our working capital needs may change as a result of such acquisitions.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The vast majority of our transactions are denominated in U.S. dollars; as such, fluctuations in foreign currency exchange rates have historically had little impact on us. Inflation has not been a significant factor in our operations in any of the periods presented, and it is not expected to affect operations in the future. Our bank line of credit carries a variable interest rate. At July 1, 2000, we had approximately $5.7 million outstanding on our lines of credit, at an interest rate of 11.0%. An increase in the interest rates could expose us to market risk in the event we are continue to borrow under the lines to finance our operations in the future. At July 1, 2000, all of our outstanding long-term debt carried interest at a fixed rate. There is no material market risk relating to our bank lines or long-term debt.

IMPACT OF ACCOUNTING STANDARDS

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"—Issued in June 1998, SFAS No. 133 which establishes a new model for accounting for derivatives and hedging activities and supersedes and amends a number of existing accounting standards. SFAS No. 133 requires that all derivatives be recognized in the balance sheet at their fair market value, and the corresponding derivative gains or losses be either reported in the statement of operations or as a deferred item depending on the type of hedge relationship that exists with respect to such derivative. We have not yet completed an assessment of the impact of adopting the provisions of SFAS No. 133 on our financial statements. The standard is effective for us in 2001.

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 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 we respond to successfully in order for its products to avoid becoming noncompetitive or obsolete; (3) customer acceptance of our new products, including the MCT 5100, MCT 7632, Tapestry handling systems, Smart Sort, Smart Mark and MCT 5115 products in which we have invested significant amounts of inventory; (4) possible loss of any of our key customers, who account for a substantial percentage of our business; (5) the possible adverse impact of competition in markets which are highly competitive; (6) the possible adverse impact of economic or political changes in markets we serve; (7) failure to realize the expected benefits of the MCT and Aseco merger; and, (8) other factors detailed from time to time in our SEC reports, including but not limited to the discussion in the Management's Discussion & Analysis included in the Transition Report on Form 10-K for the transition period ended December 31, 1999. All forecasts and projections in this report are "forward-looking statements," and are based on our current expectations of our near-term results, based on current information available pertaining to us, including risk factors discussed above. Actual results could differ materially.

PART II. OTHER INFORMATION

MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits: 27 Financial Data Schedule

(b)

Reports on Form 8-K

I.: On April 24, 2000, the Company filed a Current Report on Form 8-K under Item 8 regarding its change in fiscal year.

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: July 20, 2000	By: /s/ Roger E. Gower Roger E. Gower President and Chief Executive Officer
	And
Dated: July 20, 2000	By: /s/ Jeffrey S. Mathiesen Jeffrey S. Mathiesen Chief Financial Officer Chief Accounting Officer

MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
EXHIBIT INDEX

Exhibit Number				Page
27		Financial Data Schedule		20

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MICRO COMPONENT TECHNOLOGY, INC. FORM 10-Q EXHIBIT INDEX