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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
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Commission file number 0-23562
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MICROELECTRONIC PACKAGING, INC.
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(Exact name of registrant as specified in its charter)
California 94-3142624
- -------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9577 Chesapeake Drive, San Diego, California 92123
- ------------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (858) 292-7000
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Indicate by check 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 [ ]
At August 10, 1999, there were outstanding 10,856,890 shares of the
Registrant's Common Stock, no par value per share.
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<TABLE>
<CAPTION>
Index Page No.
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets.......................... 3
Condensed Consolidated Statements of Operations................ 4
Condensed Consolidated Statements of Cash Flows................ 5
Condensed Consolidated Statement of
Changes in Shareholders' Deficit.............................. 6
Notes to Condensed Consolidated Financial Statements........... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 21
PART II OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 21
Item 2. Changes in Securities and Use of Proceeds...................... 21
Item 3. Defaults upon Senior Securities................................ 21
Item 4. Submission of Matters to a Vote of Security Holders............ 21
Item 5. Other Information.............................................. 21
Item 6. Exhibits and Reports on Form 8-K............................... 21
SIGNATURES....................................................................... 23
EXHIBIT INDEX.................................................................... 24
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
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ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash $ 140,000 $ 469,000
Accounts receivable, net 1,489,000 1,306,000
Inventories 2,065,000 3,073,000
Other current assets 164,000 60,000
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Total current assets 3,858,000 4,908,000
Property, plant and equipment, net 2,051,000 1,806,000
Other non-current assets 117,000 171,000
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$ 6,026,000 $ 6,885,000
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 473,000 $ 20,000
Accounts payable 3,883,000 4,045,000
Accrued liabilities 662,000 908,000
Debt and accrued interest of discontinued
operations, in default, due on demand 28,059,000 27,055,000
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Total current liabilities 33,077,000 32,028,000
Long-term debt, less current portion 40,000 49,000
Commitments and Contingencies
Shareholders' Deficit
Common stock, no par value 40,170,000 40,143,000
Accumulated deficit (67,261,000) (65,335,000)
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Total shareholders' deficit (27,091,000) (25,192,000)
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$ 6,026,000 $ 6,885,000
==================================================================================================
</TABLE>
3
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MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
----------------------------- ------------------------------
1999 1998 1999 1998
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(Restated) (Restated)
<S> <C> <C> <C> <C>
Net sales $2,182,000 $ 5,825,000 $ 3,924,000 $ 13,159,000
Cost of goods sold 1,928,000 4,559,000 3,511,000 9,940,000
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Gross profit 254,000 1,266,000 413,000 3,219,000
Selling, general and administrative 501,000 934,000 1,047,000 1,710,000
Engineering and product development 178,000 320,000 370,000 592,000
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Income (loss) from operations (425,000) 12,000 (1,004,000) 917,000
Other income (expense):
Interest (expense), net (507,000) (579,000) (1,013,000) (1,158,000)
Other income, net 90,000 1,000 91,000 49,000
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Income (loss) from continuing operations
before provision for income taxes (842,000) (566,000) (1,926,000) (192,000)
Provision for income taxes - - - (18,000)
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Income (loss) from continuing operations
operations (842,000) (566,000) (1,926,000) (210,000)
Discontinued Operations:
Estimated gain on disposal - 10,445,000 - 10,468,000
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Net income (loss) $ (842,000) $ 9,879,000 $ (1,926,000) $ 10,258,000
===================================================================================================================================
Earnings (loss) per common share - basic:
Continuing operations $ (0.08) $ (0.05) $ (0.18) $ (0.02)
Discontinued operations - 0.97 - 0.97
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Net income (loss) per common share $ (0.08) $ 0.92 $ (0.18) $ 0.95
===================================================================================================================================
Earnings (loss) per common share - assuming dilution:
Continuing operations $ (0.08) $ (0.05) $ (0.18) $ (0.02)
Discontinued operations - 0.97 - 0.97
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Net income (loss) per common share $ (0.08) $ 0.92 $ (0.18) $ 0.95
===================================================================================================================================
</TABLE>
4
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MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
----------------------------------
1999 1998
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<S> <C> <C>
Net cash provided (used) by operating activities: $(212,000) $ 517,000
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Cash flows from investing activities:
Acquisition of fixed assets (11,000) (1,024,000)
Proceeds from the sale of fixed assets -- 10,000
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Net cash used by investing activities (11,000) (1,014,000)
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Cash flows from financing activities:
Principal payments on long-term debt
and promissory notes (106,000) (21,000)
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Net cash provided (used) by financing activities (106,000) (21,000)
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Net decrease in cash (329,000) (518,000)
Cash at beginning of period 469,000 1,296,000
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Cash at end of period $ 140,000 $ 778,000
==================================================================================================
</TABLE>
5
<PAGE>
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' DEFICIT
(unaudited)
<TABLE>
<CAPTION>
Common Stock Accumulated
--------------------------------------
Shares Amount Deficit Total
----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1999 10,856,890 $40,143,000 $(65,335,000) $(25,192,000)
Non-employee stock-based
Compensation -- 27,000 -- 27,000
Net (loss) -- -- (1,926,000) (1,926,000)
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Balance at June 30, 1999 10,856,890 $40,170,000 $(67,261,000) $(27,091,000)
===============================================================================================================
</TABLE>
6
<PAGE>
Notes to Condensed Consolidated Financial Statements (unaudited)
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1. Quarterly Financial Statements
The accompanying condensed consolidated financial statements and related
notes as of June 30, 1999 and for the three and six month periods ended
June 30, 1999 and 1998 are unaudited but include all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of financial position and
results of operations of the Company for the interim periods. Certain prior
year amounts have been reclassified to conform to the current year
presentation. The results of operations for the three and six month periods
ended June 30, 1999 are not necessarily indicative of the operating results
to be expected for the full fiscal year. The information included in this
report should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto and the other
information, including risk factors, set forth for the year ended December
31, 1998 in the Company's Annual Report on Form 10-K. Readers of this
Quarterly Report on Form 10-Q are strongly encouraged to review the
Company's Annual Report on Form 10-K. Copies are available from the Chief
Financial Officer of the Company at 9577 Chesapeake Drive, San Diego,
California 92123.
2. Restatement of Activities of Discontinued Operations
In August 1999, it was determined that the $10,227,000 benefit arising from
the 1998 deconsolidation of the Company's discontinued Singapore
subsidiaries should be accounted for as a gain rather than as an
improvement/decrease of the Company's accumulated deficit. Additionally, it
was determined that the 1997 provision for interest of $3,500,000 on the
Company's discontinued Singapore subsidiaries' debt, guaranteed by MPI,
should be accrued over the period of the debt as interest expense. Such
interest is now reflected as a component of income (loss) from continuing
operations. It was also determined that the recording of certain items as
other income at interim periods in 1998 should be accounted for as gain
(loss) on disposal of discontinued operations.
Accordingly, the accompanying condensed consolidated statements of
operations for the three and six months ended June 30, 1998 have been
restated to reflect the benefit from deconsolidation as a gain on disposal
of discontinued operations ($10,226,000 for both periods ended June 30,
1998); to reflect interest on the Company's discontinued Singapore
subsidiaries' debt, guaranteed by MPI, as interest expense ($576,000 and
$1,152,000 for the three and six months ended June 30, 1998, respectively);
to reflect amortization of deferred revenue as gain on disposal of
discontinued operations ($22,000 and $44,000 for the three and six months
ended June 30, 1998, respectively); and to reflect collection of an
insurance recovery as gain on disposal of discontinued operations ($197,000
for both periods ended June 30, 1998). The effect of these changes was to
decrease income from continuing operations by $795,000 and $1,393,000 for
the three and six months ended June 30, 1998, respectively. Net income
(loss), which includes discontinued operations, increased by $9,650,000 and
$9,075,000 for the three and six months ended June 30, 1998, respectively.
The restatement had no impact on the reported net income (loss) from
operations.
7
<PAGE>
Notes to Condensed Consolidated Financial Statements (unaudited)
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3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
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(Unaudited)
<S> <C> <C>
Raw materials................. $ 1,722,000 $ 2,203,000
Work-in-progress.............. 1,003,000 1,531,000
Finished goods................ 7,000 38,000
Obsolescence reserve.......... (667,000) (699,000)
----------- -----------
$ 2,065,000 $ 3,073,000
=========== ===========
</TABLE>
A substantial portion of the Company's June 30, 1999 inventory,
approximately $1.7 million, was purchased for the Company's primary
customer. Under the terms of an agreement dated January 5, 1998 between the
Company and the customer, the Company has been and continues to be required
to maintain certain inventory levels as defined by the agreement. The
agreement stipulates that the cost of such inventory will be paid to the
Company should the customer terminate the business relationship. Terms of
the agreement have been used in determining the carrying value of the
Company's June 30, 1999 inventory. The customer can terminate the agreement
with 120 days notice, the agreement is not enforceable should the company
file bankruptcy, and notice expires in October 2000.
4. Effects of Income Taxes
The Company has not recorded provisions for any income taxes for the three
and six months ended June 30, 1999, since the Company's operations have
generated operating losses for both financial reporting and income tax
purposes. A 100% valuation allowance has been provided on the total
deferred income tax assets as they are not more likely than not to be
realized.
The Company believes that it has incurred an ownership change pursuant to
Section 382 of the Internal Revenue Code and, as a result, the Company
believes that its ability to utilize its current net operating loss and
credit carryforwards in subsequent periods will be subject to annual
limitations.
8
<PAGE>
Notes to Condensed Consolidated Financial Statements (unaudited)
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5. Net Income (Loss) Per Share
<TABLE>
<CAPTION>
For the three months ended June 30, 1999
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Income Shares Per-Share
(Numerator) (Denominator) Amount
------------- --------------- -----------
<S> <C> <C> <C>
Loss from continuing operations $ (842,000) --
Basic EPS
Loss available to common shareholders $ (842,000) 10,856,890 $ (0.08)
========== ========== ========
</TABLE>
The computation of diluted loss per share excludes the effect of
incremental common shares attributable to the exercise of outstanding
common stock options and warrants because their effect was antidilutive due
to losses incurred by the Company.
<TABLE>
<CAPTION>
For the three months ended June 30, 1998
----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------- --------------- -----------
<S> <C> <C> <C>
Loss from continuing operations $ (566,000) --
Basic EPS
Loss available to common shareholders $ (566,000) 10,793,279 $ (0.05)
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30, 1999
----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------- --------------- -----------
<S> <C> <C> <C>
Loss from continuing operations $ (1,926,000) --
Basic EPS
Loss available to common shareholders $ (1,926,000) 10,856,890 $ (0.18)
============= ========== ========
</TABLE>
The computation of diluted loss per share excludes the effect of
incremental common shares attributable to the exercise of outstanding
common stock options and warrants because their effect was antidilutive due
to losses by the Company.
9
<PAGE>
Notes to Condensed Consolidated Financial Statements (unaudited)
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<TABLE>
<CAPTION>
For the six months ended June 30, 1998
----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------- --------------- -----------
<S> <C> <C> <C>
Loss from continuing operations $ (210,000)
Basic EPS
Loss available to common shareholders $ (210,000) 10,793,279 $ (0.02)
========== ========== ========
</TABLE>
The computation of diluted loss per share excludes the effect of
incremental common shares attributable to the exercise of outstanding
common stock options and warrants because their effect was antidilutive due
to losses by the Company.
6. Commitments and Contingencies
The Company entered into an operating lease for manufacturing facilities
and corporate offices commencing September 1, 1997, and extending to
October 31, 2002. Minimum monthly rental payments of $16,000 began on
November 1, 1997, with scheduled annual increases of 6% to 7% per year
beginning November 1, 1998.
The Company also entered into an agreement in 1998 whereby the Company
obtained the use of a piece of test equipment and technical support for
such equipment from a supplier. The agreement calls for minimum annual
payments of $360,000 through 2007, plus the possible acceleration of
payments if the Company obtains new customers with projects that require
the use of the equipment and technical support of the equipment supplier.
In 1999, the Company financed the acquisition of certain machinery and
equipment for a total obligation of $549,000. The amounts are payable over
twelve monthly installments of $46,000 each, ending in April and June 2000.
7. Asian Creditor Loan Agreements Guaranteed by MPI
As further described below, and as of the date of this filing, the Company
has signed agreements with each of the eight creditors of the Singapore
subsidiaries which, subject to approval of the Company's shareholders,
proposes to convert and cancel the approximately $28.1 million in debt and
accrued interest owed to those eight creditors, for 9,362,777 shares of the
Series A Convertible Preferred Stock of the Company, which will initially
be convertible into 18,725,554 shares of the Company's Common Stock. A
further description of this conversion is set forth below.
With respect to the Company's subsidiaries in Singapore, all of which
ceased operations in 1997 ("Singapore Subsidiaries"), the Company
guaranteed certain debt obligations of the Singapore Subsidiaries
("Guaranty Obligations"). During 1998, the Company entered into settlement
agreements ("Settlement Agreements") with each of the eight creditors of
the Singapore Subsidiaries to whom the Company had a liability under the
Guaranty Obligations ("Singapore Subsidiary Creditors"), pursuant to which
the Company and the
10
<PAGE>
Notes to Condensed Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Singapore Subsidiary Creditors agreed that the Company would be released
from all of its liabilities under the Guaranty Obligations in exchange for
cash settlement payments in the aggregate amount of approximately $9.3
million ("Settlement Payments"). The Company was obligated to pay the
entire amount of the Settlement Payments on or about May 1, 1999
("Settlement Due Date").
After entering into the Settlement Agreements, the Company determined that
it would not have the ability to pay any portion of the Settlement Payments
by the Settlement Due Date. Therefore, the Company and the Singapore
Subsidiary Creditors negotiated new terms for the settlement of the
Guaranty Obligations, which new settlement terms are set forth in
definitive agreements entered into between the Company and each of the
eight Singapore Subsidiary Creditors during 1999 ("Definitive Agreements").
The Definitive Agreements provide that the entire amount of the Guaranty
Obligations would be converted into shares of the Company's Series A
Preferred Stock ("Debt to Equity Conversion") upon approval by a majority
of the Company's shareholders. Based upon extension agreements which were
signed by the Singapore Subsidiary Creditors during July 1999, these
creditors have agreed to an extension of the deadline for the Debt to
Equity Conversion to August 31, 1999. Each share of Series A Preferred
Stock would be convertible into two shares of the Company's Common Stock,
have a 3.5% per annum cumulative dividend, liquidation preferences,
registration rights, and certain other rights, preferences and privileges
senior to the Company's Common Stock. Upon the effective date of the Debt
to Equity Conversion, the entire amount that would be shown on the
Company's accompanying financial statements as "Debt and accrued interest
of discontinued operations, in default, due on demand ("Discontinued
Operations Debt"), the aggregate amount of which is $28,059,000 as of June
30, 1999, would be converted into shares of the Company's Series A
Preferred Stock or reflected as a gain on the Company's Statement of
Operations. Upon such conversion, the Discontinued Operations Debt would be
reduced to zero.
The Company currently has filed a Consent Solicitation Statement with the
Securities and Exchange Commission ("SEC"). Assuming approval by the SEC,
this Consent Solicitation Statement will be mailed to all shareholders of
the Company in an effort to obtain shareholder approval for the Debt to
Equity Conversion. If the proposal is not approved by the shareholders of
the Company by August 31, 1999, the Company will request an additional
extension of time beyond August 31, 1999 for a reasonable time to enable
the Company to receive shareholder approval. However, there is no assurance
that such request for extensions will be granted.
In connection with one of the Singapore Subsidiary Creditors, the Company
has entered into an agreement with this Singapore Subsidiary Creditor,
pursuant to which all of the rights of such creditor under the Guaranty
Obligations will be assigned to one or more third parties (some of whom are
employees of the Company). All of such third parties have agreed, upon such
assignment, to enter into Conversion Agreements and participate in the Debt
to Equity Conversion on the same terms and conditions as the other
Singapore Subsidiary Creditors ("Creditor Assignment"). The Creditor
Assignment will become effective upon the approval of the Debt to Equity
Conversion by the Company's
11
<PAGE>
Notes to Condensed Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
shareholders. In the event the Company is successful in obtaining
shareholder approval of the Debt to Equity Conversion, the Discontinued
Operations Debt will be eliminated in its entirety and the Company will no
longer have any liabilities under the Guaranty Obligations. In addition, if
the Company is successful in completing the Debt to Equity Conversion, the
equity interests of the Company's existing shareholders will be
substantially diluted and the Singapore Subsidiary Creditors, assuming
conversion of all their Series A Preferred Stock on the closing of the Debt
to Equity Conversion, would own a majority of the outstanding Common Stock
of the Company.
8. Going Concern
The Company's accompanying financial statements have been prepared assuming
the Company (along with its only operating subsidiary, CTM) will continue
as a going concern. A number of factors, including the Company's history of
significant losses, the debt service costs associated with the Guaranty
Obligations and the Company's other debt obligations, and the current
uncertainty regarding whether the Company will successfully complete the
Debt to Equity Conversion, raise substantial doubts about the Company's
ability to continue as a going concern. As of June 30, 1999, the Company
has an accumulated deficit of $67.3 million and a working capital
deficiency of $29.2 million, which includes $28.1 million of liabilities
under the Guaranty Obligations. In the event the Company is not successful
in completing the Debt to Equity Conversion, and any of the Singapore
Subsidiary Creditors demand that the Company pay any portion of the
Settlement Payments or any of the Company's liabilities under the Guaranty
Obligations, the Company would be unable to do so. If the Company fails to
complete the Debt to Equity Conversion, material adverse impacts will occur
with respect to the Company's financial condition and ability to continue
as a going concern. Furthermore, the Company believes such failure would be
likely to require the Company and its U.S. subsidiaries to initially seek
bankruptcy protection under Chapter 11 of Title 11 of the United States
Code and there can be no assurance any such bankruptcy proceeding would
remain as a Chapter 11 proceeding.
9. Forward Looking Statements
These Condensed Consolidated Financial Statements contain forward-looking
statements which involve substantial risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the
effects of debt restructuring.
10. Subsequent Events
In August and September of 1999, the Company obtained amendments to the
agreements with secured creditors which call for the conversion of all
amounts due under the Guaranty Obligations into shares of Series A
Preferred Stock. Such amendments now grant the Company until October 31,
1999 to fulfill all of its obligations under the agreements, including
obtaining approval by a majority of the Company's shareholders. Further,
the Investor which had agreed to purchase the creditor position from the
holder of one of the Guaranty Obligations completed the purchase of such
creditor position on August 31, 1999, thereby replacing STMicroelectronics
as one of the group of secured creditors of the company.
12
<PAGE>
Notes to Condensed Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
For one of MPS' secured creditors, the Company has granted a security
interest in all of the issued and outstanding capital stock of MPS, CTM and
MPA. While in default, the creditor may have the right to vote and give
consents with respect to all of the issued and outstanding capital of MPS,
CTM and MPA. As a result, during an event of default, the Company may be
unable to control at the shareholder level the direction of the subsidiary
(CTM) that generates substantially all of the Company's revenues and holds
substantially all of the Company's assets. The Company has not been
informed of any such intention by the secured creditor, nor has that
creditor ever taken any such action under its security interest.
Currently, under the terms of the conversion agreement and subsequent
extensions with this creditor, the Company is not in technical default of
the borrowing arrangement presently, and has until October 31, 1999 to
complete the debt to equity conversion. Therefore, this creditor cannot
exercise its rights it may have under its security agreement with the
Company, covering the capital stock of CTM, until after October 31, 1999.
Since this creditor does not presently have the right to control voting of
the capital stock of CTM, Company management continues to make all
operating decisions relative to MPS, CTM and MPA. However, if the Company
was not able to complete the debt to equity conversion by October 31, 1999
and if the creditor were to exercise its rights under its security
agreement and if the Company were to lose control at the shareholder level
of its operating subsidiary, then the Company could be forced to seek
protection under Chapter 7 or Chapter 11 of Title 11 of the United States
Code.
13
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which involve substantial risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth in this section and elsewhere in this
Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS
NET SALES
For the three months ended June 30, 1999, net sales were $2,182,000 as compared
to net sales of $5,825,000 for the second quarter of 1998, resulting in
decreased sales of $3,643,000 or 63%. The decrease in net sales is primarily
the result of decreased shipments to the Company's largest customer,
Schlumberger. Sales to this one customer comprised 90% and 91% of total net
sales for the second quarters of 1999 and 1998, respectively. Sales to this
customer declined from $5,039,000 for the second quarter of 1998 to $1,958,000
for the second quarter of 1999, a decrease of $3,081,000 or 61%. Units shipped
to this one customer declined by 47%, reflecting lower demand from the customer
in the second quarter of 1999 as compared to the second quarter of 1998.
Revenue in terms of dollars declined by more than revenue in terms of units
because of a significant shift in product mix in 1999. Approximately 40% of
sales to the Company's largest customer in 1999 were comprised of the repair and
upgrade of multi-chip modules (MCMs). This repair activity generates only
approximately one-fourth of the dollar revenue as compared to the dollar revenue
of newly-built MCMs, thereby causing a decline in revenue dollars greater than
the decline in revenue units. Such repair activities comprised only
approximately 10% of sales for the second quarter of 1998.
For the six months ended June 30, 1999, net sales were $3,924,000, representing
a decrease of $9,235,000 or 70% over net sales of $13,159,000 for the
corresponding period of 1998. The decrease in net sales is primarily the result
of decreased shipments to the Company's largest customer, Schlumberger. Sales
to this one customer comprised 88% and 93% of total net sales for the six month
periods ended June 30, 1999 and 1998, respectively. The dollar value of
shipments to the Company's largest customer declined by 66% for the six month
period ended June 30, 1999 as compared to the same period in 1998. Unit
shipments to that same customer declined by 41% over the same comparative
periods. Approximately 40% of sales to the Company's largest customer in the
six months ended June 30, 1999 were comprised of the repair and upgrade of MCMs,
as compared to less than 10% in the six months ended June 30, 1998. This repair
activity caused the decline in revenue dollars to be greater than the decline in
revenue units as described above.
COST OF GOODS SOLD
For the three months ended June 30, 1999, the cost of goods sold was $1,928,000
as compared to $4,559,000 for the second quarter of 1998, a decrease of
2,631,000 or 58%. The decrease in cost
14
<PAGE>
of goods sold is partially due to a 41% decline in total MCM units shipped from
1998 to 1999. The decrease in units shipped was exacerbated by a 33% decrease in
the average selling price of a unit shipped in 1999 as compared to the
corresponding quarter of 1998. The primary reason for the decrease in average
cost per unit sold results from the change in product mix due to the repair and
upgrade activities described above.
For the six months ended June 30, 1999, the cost of goods sold was $3,511,000,
representing a decrease of $6,429,000 or 65% over cost of goods sold of
$9,940,000 for the corresponding period of 1998. The decrease in cost of goods
sold is partially due to a 37% decline in MCM units shipped from 1998 to 1999.
The decrease in units shipped was exacerbated by an approximately 50% decrease
in the average selling price of a unit shipped in 1999 as compared to the
corresponding quarter of 1998. The primary reason for the decrease in average
cost per unit sold results from the change in product mix due to the repair and
upgrade activities described above.
GROSS PROFIT
Gross profit was $254,000 (12% of net sales) for the second quarter of 1999 as
compared to $1,266,000 (22% of net sales) for the second quarter of 1998. The
decrease in gross profit is attributable to the decrease in sales. The decrease
in gross profit as a percentage of net sales is the result of the change in
product mix, as discussed above, as well as the effect of the absorption of
fixed manufacturing costs over lower sales revenue for the 1999 period as
compared to the 1998 period.
Gross profit was $413,000 (11% of net sales) for the six months ended June 30,
1999 as compared to $3,219,000 (24% of net sales) for the six months ended June
30, 1998. The decrease in gross profit as a percentage of net sales is the
result of the change in product mix, as discussed above, as well as the effect
of the absorption of fixed manufacturing costs over lower sales revenue for the
1999 period as compared to the 1998 period.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $501,000 for the second
quarter of 1999, representing a decrease of $433,000 or 46% from the second
quarter of 1998. Selling, general and administrative expenses were $1,047,000
for the six months ended June 30, 1999, representing a decrease of $663,000 or
39% from the comparative period of 1998. The decreases are the result of a
reduction of consulting fees which had been incurred by the Company in 1998, as
well as reductions in staffing commensurate with the lower sales volume activity
in 1999.
ENGINEERING AND PRODUCT DEVELOPMENT
Engineering and product development expenses were $178,000 for the second
quarter of 1999 and $370,000 for the six months ended June 30, 1999,
representing decreases of $142,000 or 44% and $222,000 or 38% from the
corresponding periods of 1998, respectively. The decreases are primarily
comprised of decreased use of outside consultants in 1999 as compared to 1998.
15
<PAGE>
INTEREST EXPENSE
Interest expense was $507,000 for the second quarter of 1999, representing a
decrease of $72,000 from the corresponding quarter of 1998. Interest expense
was $1,013,000 for the six months ended June 30, 1999, representing a decrease
of $145,000 from the same period of 1998. The majority of the interest expense
recorded for all periods presented is interest accrued on the guaranteed debt of
the Company's discontinued operations ("Guaranty Obligations"). While the
Company has accrued the interest on the Guaranty Obligations, the Company does
not anticipate that it will pay such interest to the holders of these
obligations. See Note 6 to the accompanying Condensed Consolidated Financial
Statements for an explanation of how the Company intends to eliminate the
Guaranty Obligations and the associated interest expense. The amount of
interest recorded on the Guaranty Obligations declined from the 1998 periods to
the corresponding 1999 periods. One portion of the Guaranty Obligations, due to
Development Bank of Singapore (DBS), declined in 1998 due to the sale of
property held as security by DBS and the corresponding reduction in the amount
of debt due to DBS. This debt reduction resulted in a lesser amount of interest
accrued in 1999 as compared to 1998.
OTHER INCOME
Other income was $90,000 for the second quarter of 1999, as compared to $1,000
for the second quarter of 1998. Other income was $91,000 for the six months
ended June 30, 1999 as compared to $49,000 for the same period of 1998. Other
income for 1999 is primarily comprised of the recovery of an asset written off
in 1997.
EFFECTS OF INCOME TAXES
The Company has not recorded provisions for any income taxes for the three and
six months ended June 30, 1999, since the Company's operations have generated
operating losses for both financial reporting and income tax purposes. A 100%
valuation allowance has been provided on the total deferred income tax assets as
they are not more likely than not to be realized.
The Company believes that it has incurred an ownership change pursuant to
Section 382 of the Internal Revenue Code, and, as a result, the Company believes
that its ability to utilize its current net operating loss and credit
carryforwards in subsequent periods will be subject to annual limitations.
DISCONTINUED OPERATIONS
The three and six month periods ended June 30, 1998 included results from the
Company's discontinued Singapore operations, which activities did not occur in
1999. The 1998 results include the effect of the Company's decision to not
consolidate the assets and liabilities of the Company's discontinued operations
not guaranteed by the Company. The discontinued operations are MPM, MPS, MPC
and Furnace Tech. The effect of this decision was to record a gain of $10.2
million, reduce the Current Liabilities of Discontinued Operations, net and
improve/decrease the accumulated deficit by the same amount as of June 30, 1998.
The
16
<PAGE>
Company also recorded in 1998, $197,000 relating to the partial settlement of an
insurance claim for a fire at the Company's MPC facility in April 1997. The 1998
amount also includes $44,000 relating to the amortization of deferred revenue
from the Company's MPS operation in Singapore.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1999, operating activities of continuing
operations used $212,000. The source of the Company's cash flow during this
period was principally the liquidation of inventory. Investing activities,
consisting principally of the acquisition of fixed assets of continuing
operations, used $11,000. At June 30, 1999, the Company had a working capital
deficiency of $29,219,000 and an accumulated deficit of $67,261,000. At June
30, 1999, the Company had outstanding approximately $28,059,000 of principal and
accrued interest under the Guaranty Obligations.
The Company's sources of available liquidity at June 30, 1999 consisted of
inventories of $2,065,000, trade accounts receivable of $1,489,000 and its cash
balance of $140,000. The Company has no borrowing arrangements available to it.
As indicated in Note 6 to the Condensed Consolidated Financial Statements, the
Company has renegotiated its settlement of the Guaranty Obligations, pursuant to
which settlement all liabilities and accrued interest under the Guaranty
Obligations would be converted into 9,362,777 shares of the Company's Series A
Preferred Stock. If the Conversion Agreements are not all finalized, or if the
Company's shareholders do not approve the Debt to Equity Conversion, the entire
liability of $28,059,000 under the Guaranty Obligations, which is currently in
default, will be immediately due and payable.
FUTURE OPERATING RESULTS
Status as a Going Concern. The Company's independent certified public
accountants have included an explanatory paragraph in their audit report with
respect to the Company's 1998, 1997, 1996 and 1995 consolidated financial
statements related to a substantial doubt with respect to the Company's ability
to continue as a going concern. Absent outside debt or equity financing, and
excluding significant expenditures required for the Company's major projects and
assuming the Company is successful in restructuring its liability under the
Guaranty Obligations, the Company currently anticipates that cash on hand and
anticipated cash flow from operations may be adequate to fund its operations in
the ordinary course throughout 1999 and 2000. In the event the Company is not
successful in completing the Debt to Equity Conversion, and any of the Singapore
Subsidiary Creditors demand that the Company pay any portion of the Settlement
Payments or any of the Company's liabilities under the Guaranty Obligations, the
Company would be unable to do so. If the Company fails to complete the Debt to
Equity Conversion, material adverse impacts will occur with respect to the
Company's financial condition and ability to continue as a going concern.
Furthermore, the Company believes such failure would be likely to require the
Company and its U.S. subsidiaries to initially seek bankruptcy protection under
Chapter 11 of Title 11 of the United States Code and there can be no assurance
any such bankruptcy proceeding would remain as a Chapter 11 proceeding.
17
<PAGE>
Further, any significant increase in planned capital expenditures or other costs
or any decrease in or elimination of anticipated sources of revenue could cause
the Company to restrict its business and product development efforts. If
adequate revenues are not available, the Company will be unable to execute its
business development efforts and may be unable to continue as a going concern.
There can be no assurance that the Company's future consolidated financial
statements will not include another going concern explanatory paragraph if the
Company is unable to restructure its liability under the Guaranty Obligations
and become profitable. The factors leading to and the existence of the
explanatory paragraph will have a material adverse effect on the Company's
ability to obtain additional financing.
Risk of Bankruptcy. If the Company is not able to restructure its liabilities
under the Guaranty Obligations, the Company believes it will initially file for
reorganization under Chapter 11 of Title 11 of the United States Code or, if a
Chapter 11 bankruptcy cannot be completed, the company may be liquidated under
Chapter 7 of Title 11 of the United States Code. There can be no assurance that
if the Company decides to reorganize under the applicable laws of the United
States that such reorganizational efforts would be successful or that
shareholders would receive any distribution on account of their ownership of
shares of the Company's stock. Similarly, there can be no assurances that if
the Company decides to liquidate under the applicable laws of the United States
that such liquidation would result in the shareholders receiving any
distribution on account of their ownership of shares of the Company's stock. In
fact, if the Company were to be reorganized or liquidated under the applicable
laws of the United States, the bankruptcy laws would require (with limited
exceptions) that the creditors of the Company be paid before any distribution is
made to the shareholders.
Certain Obligations of MPS. In connection with Microelectronic Packaging (S)
Pte. Ltd. ("MPS") borrowing from Citibank N.A., Motorola guaranteed (and
subsequently satisfied MPS' obligation) $2.2 million in borrowings from
Citibank N.A. Under the terms of the agreement relating to Motorola's guarantee,
MPI granted Motorola a security interest in all of the issued and outstanding
capital stock of MPS, CTM Electronics, Inc. ("CTM") and Microelectronic
Packaging America ("MPA"). While in default, Motorola may have the right to vote
and give consents with respect to all of the issued and outstanding capital of
MPS, CTM and MPA. As a result, during the continuation of any such event of
default, MPI may be unable to control at the shareholder level the direction of
the subsidiaries that generate substantially all of the Company's revenues and
hold substantially all of the Company's assets. However, the Company has not
been informed by Motorola of any intention to exercise its rights under the
security interest. Any such loss of control would have a material adverse
effect on the Company's business, prospects, financial condition, results of
operations and status as an ongoing concern and could force the Company to seek
protection under what it believes would initially be Chapter 11 of Title 11 of
the United States Code or similar bankruptcy laws of Singapore, however there
can be no assurance it would remain a Chapter 11. The other Asian debt
agreements contain numerous restrictions and events of default that have been
triggered by the aforementioned actions and would, if they became effective and
operative, materially adversely affect the Company's business, prospects,
results of operations, condition and status as an ongoing concern and could
force the Company to seek protection under what it believes would initially be
Chapter 11 of Title 11 of the United States Code or
18
<PAGE>
similar bankruptcy laws of Singapore, however there can be no assurance it would
remain a Chapter 11.
In July 1999, the Company and Motorola signed a definitive agreement which calls
for the conversion of all the Company's liabilities to Motorola under the
Guaranty Obligations into shares of the Company's Series A Preferred Stock, as
explained in Note 7 to the accompanying Condensed Consolidated Financial
Statements. There can be no assurance that the Company will be successful in
its efforts to obtain Shareholder approval to complete this Debt to Equity
Conversion Agreement.
As of the date of filing this amended document, the Company is not in technical
default of the borrowing arrangement presently, and has until October 31, 1999
to complete the debt to equity conversion. Therefore, Motorola cannot exercise
its rights it may have under its security agreement with the Company, covering
the capital stock of CTM, until after October 31, 1999. Since Motorola does not
presently have the right to control voting of the capital stock of CTM, Company
management continues to make all operating decisions relative to CTM and MPA.
However, if the Company is not able to complete the debt to equity conversion by
October 31, 1999 and if Motorola were to exercise its rights under its security
agreement and if the Company were to lose control at the shareholder level of
its operating subsidiary, then, as previously indicated, the Company could be
forced to seek protection under Chapter 7 or Chapter 11 of Title 11 of the
United States Code.
Reliance on Schlumberger. Sales to one customer, Schlumberger, accounted for
90% of the Company's net sales in the second quarter of 1999 and is expected to
continue to account for most of the Company's net sales in 1999. Under the
agreement between Schlumberger and the Company entered into in January 1998, the
Company is obligated to provide Schlumberger with its requirements for MCM
product. Given the Company's anticipated continued reliance on its MCM business
as a large percentage of overall net sales, the failure to meet Schlumberger's
requirements will materially adversely affect the Company's ability to continue
as a going concern. In addition, under the terms of the agreement, Schlumberer
is entitled to request repricing of the Company's products. Schlumberger has
requested repricing on several occasions in the past. Such repricing in the
future may result in the Company being unable to produce the products made for
Schlumberger with an adequate operating profit, and the Company may be unable to
compete with the prices of other vendors who supply the same or similar products
to Schlumberger. The failure to satisfy the terms of the agreement, or the
failure of the Company to achieve an operating profit under the contract, would
have a material adverse impact on the Company's business, financial condition,
and results of operation.
Year 2000 Compliance. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field.
These date code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, in less than one year,
computer systems and/or software used by many companies may need to be upgraded
to comply with such "Year 2000" requirements. Significant uncertainty exists in
the software industry and in other industries concerning the potential effects
associated with such compliance. Although the Company currently offers products
that are designed to be Year 2000 compliant, there can be no assurance that the
Company's products
19
<PAGE>
and the software products used by the Company contain all necessary date code
changes. As of June 30, 1999, the Company has partially completed an analysis of
its readiness for compliance with the Year 2000 change. Its assessment of its
manufacturing systems and company products reveals that no known Year 2000
issues currently exist either in the products, their raw materials, or their
relationship as components to larger systems produced by its customers; its
financial systems software has been upgraded to a newer replacement system, and
which system is Year 2000 compliant; documentation systems that currently use
fixed dating are Year 2000 compliant, while those that require revision dating
are currently under review; and approximately 50% of the Company's computing
hardware systems have been upgraded to be Year 2000 compliant. The Company's
costs to become Year 2000 compliant as of June 30, 1999 have been $235,000 for
computer software and $48,000 for computer hardware.
The Company has not yet completed its analysis of its readiness for compliance
with the Year 2000 change. Based upon the partial analysis described above, the
Company believes its exposure to Year 2000 risks is limited because the majority
of the Company's recordkeeping systems are new and compliant and have been
installed within the last two years. The Company utilizes no custom-programmed
"legacy" software or hardware systems known to need Year 2000 upgrading or
conversion. The Company believes it should be fully compliant with its Year 2000
issues by the end of the third quarter of 1999 when it believes it will have
completed due diligence of its internal systems and supplier compliance
requirements, as well as completed the remaining 50% of its computing hardware
upgrades needed. However, there can be no assurance that conditions or events
may occur during the course of the completion of this analysis which will have
an adverse impact on the Company's readiness for compliance with the Year 2000
change. In addition, the Company cannot be certain that its suppliers, service
providers and customers will be Year 2000 compliant. The failure of these
companies to be fully compliant could create critical cash shortages to the
Company due to the inability of customers to send payments to the Company. In
addition, any product shortages from suppliers, or service shutdowns from the
Company's utility or communications providers could potentially shut down the
Company's manufacturing operations, thereby causing a material adverse impact on
the Company's operations and liquidity.
The Company believes that the purchasing patterns of customers and potential
customers and the performance of vendors may be affected by Year 2000 issues in
a variety of ways. Many companies are expending significant resources to correct
or patch their current software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase products such as
those offered by the Company or the inability to render services or provide
supplies to the Company. Year 2000 issues may cause other companies to
accelerate purchases, thereby causing an increase in short-term demand and a
consequent decrease in long-term demand for software products, and disruption of
supply patterns. Additionally, Year 2000 issues could cause a significant number
of companies, including current Company customers and vendors, to spend
significant resources upgrading their internal systems, and as a result consider
switching to other systems or suppliers. Any of the foregoing could result in a
material adverse effect on the Company's business, operating results and
financial condition.
20
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company has no derivative financial instruments.
The Company has outstanding indebtedness at June 30, 1999 to DBS denominated in
Singapore dollars of approximately Singapore $737,000 (U.S. equivalent
$445,000). All of the Company's other indebtedness is denominated in U.S.
dollars, and all other Singapore-based assets have been liquidated by the
receiver of MPM or MPS and used to retire outstanding indebtedness.
Accordingly, the Company believes its exposure to foreign currency rate
movements is limited.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K.
None.
The Exhibits filed as part of this report are listed below.
Exhibit No. Description
----------- -------------------------------------------------
10.81 First Amendment to Debt Conversion and Mutual
Settlement and Release Agreement between Transpac
Capital and the Company dated June 30, 1999.
21
<PAGE>
10.82 Debt Conversion and Mutual Settlement and Release Agreement
between Motorola, Inc. and the Company dated June 3, 1999.
10.83 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between Motorola, Inc. and the Company
dated June 30, 1999.
10.84 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between Texas Instruments Incorporated and
the Company dated June 30, 1999.
10.85 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between ORIX Leasing and the Company dated
June 30, 1999
10.86 Debt Conversion and Mutual Settlement and Release Agreement
between The Development Bank of Singapore Limited and the
Company dated April 30, 1999.
10.87 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between The Development Bank of Singapore
Limited and the Company dated June 30, 1999.
10.88 Nonbinding Letter Agreement between Samsung Corning Co.,
Ltd. and the Company.
10.89 Debt Conversion and Mutual Settlement and Release Agreement
between Samsung Corning Co., Ltd. and the Company dated May
3, 1999.
10.90 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between Samsung Corning Co., Ltd. and the
Company dated June 30, 1999.
10.91 Debt Conversion and Mutual Settlement and Release Agreement
between NS Electronics Bangkok (1993), Ltd. and the Company
and the Company dated May 3, 1999.
10.92 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between NS Electronics Bangkok (1993),
Ltd. and the Company dated June 30, 1999.
10.93 Debt Conversion and Mutual Settlement and Release Agreement
between FI Financial, LLC and the Company dated June 10,
1999.
10.94 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between FI Financial, LLC and the Company
dated June 30, 1999.
10.95 Nonbinding Letter Agreement between STMicroelectronics, Inc.
and the Company dated April 14, 1999.
27.1 Financial Data Schedule
22
<PAGE>
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.
MICROELECTRONIC PACKAGING, INC.
-------------------------------
(Registrant)
Date: September 17, 1999 By: /s/ Denis J. Trafecanty
---------------------- ----------------------------
Denis J. Trafecanty
Senior Vice President,
Chief Financial Officer
and Secretary
23
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
10.81 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between Transpac Capital and the Company dated
June 30, 1999.
10.82 Debt Conversion and Mutual Settlement and Release Agreement
between Motorola, Inc. and the Company dated June 3, 1999.
10.83 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between Motorola, Inc. and the Company dated
June 30, 1999.
10.84 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between Texas Instruments Incorporated and the
Company dated June 30, 1999.
10.85 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between ORIX Leasing and the Company dated June
30, 1999
10.86 Debt Conversion and Mutual Settlement and Release Agreement
between The Development Bank of Singapore Limited and the Company
dated April 30, 1999.
10.87 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between The Development Bank of Singapore
Limited and the Company dated June 30, 1999.
10.88 Nonbinding Letter Agreement between Samsung Corning Co., Ltd. and
the Company.
10.89 Debt Conversion and Mutual Settlement and Release Agreement
between Samsung Corning Co., Ltd. and the Company dated May 3,
1999.
10.90 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between Samsung Corning Co., Ltd. and the
Company dated June 30, 1999.
10.91 Debt Conversion and Mutual Settlement and Release Agreement
between NS Electronics Bangkok (1993), Ltd. and the Company dated
May 3, 1999.
10.92 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between NS Electronics Bangkok (1993), Ltd. and
the Company dated June 30, 1999.
10.93 Debt Conversion and Mutual Settlement and Release Agreement
between FI Financial, LLC and the Company dated June 10, 1999.
10.94 First Amendment to Debt Conversion and Mutual Settlement and
Release Agreement between FI Financial, LLC and the Company dated
June 30, 1999.
10.95 Nonbinding Letter Agreement between STMicroelectronics, Inc. and
the Company dated April 14, 1999.
27.1 Financial Data Schedule
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AS OF JUNE 30, 1999 AND THE STATEMENTS OF OPERATIONS, CASH FLOWS AND
SHAREHOLDERS EQUITY FOR THE PERIOD ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 140
<SECURITIES> 0
<RECEIVABLES> 1,489
<ALLOWANCES> 0
<INVENTORY> 2,065
<CURRENT-ASSETS> 3,858
<PP&E> 2,051
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,026
<CURRENT-LIABILITIES> 33,077
<BONDS> 40
0
0
<COMMON> 40,170
<OTHER-SE> (67,261)
<TOTAL-LIABILITY-AND-EQUITY> 6,026
<SALES> 2,182
<TOTAL-REVENUES> 2,182
<CGS> 1,928
<TOTAL-COSTS> 1,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 507
<INCOME-PRETAX> (842)
<INCOME-TAX> 0
<INCOME-CONTINUING> (842)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (842)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
