U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________________ to _______________________
Commission file number 0-23710
Micro-Integration Corp.
(Exact name of small business issuer as specified in its charter)
Delaware 06-1204847
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Science Park
Frostburg, MD 21532
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 301-689-0800
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 issuer's classes of common stock as
of June 30, 1998:
Common Stock, $.01 Par Value --- 2,867,811 shares
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
<PAGE>
Micro-Integration Corp. and Subsidiaries
Form 10-QSB
Index
Part I Financial Information Page
----
Item 1. Consolidated Balance Sheets 2
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Unaudited Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 8
Part II Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
Part I Financial Information
Item 1. Financial Statements
Micro-Integration Corp. and Subsidiaries
Consolidated Balance Sheets
June 30 March 31
1998 1998
----------- -----------
(unaudited)
ASSETS
Current Assets
Cash $ 149,028 $ 176,964
Marketable securities, available-for-sale 100,000 100,000
Receivables
Trade, net of allowance for doubtful
accounts $177,456 and $153,377 1,954,765 1,650,884
Note 14,891 74,880
Inventory 681,549 551,565
Prepaid expense 146,059 101,571
----------- -----------
Total Current Assets 3,046,292 2,655,864
----------- -----------
Property, Plant, and Equipment
Land 92,962 92,962
Buildings 1,461,357 1,461,357
Equipment 1,657,157 1,418,918
Automobiles 74,037 54,955
Property held for sale, net 100,571 76,848
----------- -----------
3,386,084 3,105,040
Less accumulated depreciation (1,498,497) (1,209,082)
----------- -----------
1,887,587 1,895,958
Cash Surrender Value of Life Insurance
and Other Noncurrent Assets, Net 309,646 254,704
Intangible Assets, Net 932,981 468,932
----------- -----------
$ 6,176,506 $ 5,275,458
=========== ===========
2
<PAGE>
Micro-Integration Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 March 31
1998 1998
----------- -----------
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 844,523 $ 818,121
Accrued expenses 254,898 176,199
Demand notes payable 604,627 372,542
Current portion of long-term debt and
capital lease obligations 184,235 130,423
----------- -----------
Total Current Liabilities 1,888,283 1,497,285
----------- -----------
Long-Term Debt, Less Current Portion 1,251,002 1,162,987
Commitment and Contingencies -- --
Shareholders' Equity
Preferred stock - $.01 par value: authorized
4,000,000 shares; none issued and outstanding -- --
Common stock - $.01 par value; authorized
12,000,000 shares; issued 3,017,349 and
2,667,349 as of June 30, 1998
and March 31, 1998, respectively; outstanding
2,867,811 and 2,517,811 as of June 30, 1998
and March 31, 1998, respectively 30,173 26,673
Additional capital 6,292,039 5,683,039
Accumulated deficit (2,904,097) (2,713,632)
----------- -----------
3,418,115 2,996,080
Less 149,538 shares held in treasury 380,894 380,894
----------- -----------
3,037,221 2,615,186
----------- -----------
$ 6,176,506 $ 5,275,458
=========== ===========
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
<PAGE>
Micro-Integration Corp. and Subsidiaries
Consolidated Statements of Operations
Three months ended June 30
1998 1997
----------- -----------
(unaudited)
Revenues $ 3,205,535 $ 3,358,881
Cost of goods sold 2,033,144 2,243,637
----------- -----------
Gross Profit 1,172,391 1,115,244
Operating Expenses
Selling, general, and
administrative 1,267,285 1,009,450
Depreciation and
amortization expense 77,387 80,301
----------- -----------
1,344,672 1,089,751
Operating Income (Loss) (172,281) 25,493
Other Income (Expense)
Interest expense (37,492) (35,785)
Other income 21,184 19,154
----------- -----------
(16,308) (16,631)
----------- -----------
Income (Loss) before
Income Taxes (188,589) 8,862
Income tax expense 1,876 5,228
----------- -----------
Net Income (Loss) $ (190,465) $ 3,634
=========== ===========
Basic and Diluted Earnings
(Loss) per Common Share $ (0.07) $ --
=========== ===========
See Notes to Unaudited Condensed Consolidated Financial Statements.
4
<PAGE>
Micro-Integration Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended June 30
1998 1997
--------- ---------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss) income $(190,465) $ 3,634
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Depreciation and amortization 77,387 80,301
Loss on sale of fixed assets 2,151 --
Increase in cash surrender value of life insurance -- (9,521)
Other (6,262) --
Change in operating assets and liabilities:
Accounts receivable 103,329 219,583
Note receivable 59,989 41,944
Inventory 26,172 11,857
Prepaid expense (5,540) 25,020
Accounts payable (136,944) 5,286
Accrued expenses (102,822) (162,671)
Income taxes payable (352) 4,908
--------- ---------
Net cash (used in) provided by operating activities (173,357) 220,341
Cash Flows from Investing Activities
Acquisition of property, plant, and equipment (7,335) (7,383)
Increase in other noncurrent assets (15,940) (41,603)
Cash received in acquisition of subsidiaries 4,574 --
Proceeds from sale of fixed assets 18,263 --
--------- ---------
Net cash used in investing activities (438) (48,986)
Cash Flows from Financing Activities:
Issuance of notes payable and long-term debt 220,858 --
Repayments of notes payable, long-term debt, and
capital lease obligations (74,999) (69,407)
--------- ---------
Net cash provided by (used in) financing activities 145,859 (69,407)
Currency Adjustments:
(Decrease) increase in cash (27,936) 101,948
Cash at beginning of period 176,964 370,598
--------- ---------
Cash at end of period $ 149,028 $ 472,546
========= =========
Due to the acquisition of CompSource during the quarter ending June 30, 1998,
the Company had the following noncash investing and financing activities:
Assets acquired, excluding cash $(659,068)
Liabilities assumed 573,272
Goodwill recorded (522,130)
Common stock issued 612,500
---------
Cash acquired in acquisition $ 4,574
=========
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
5
<PAGE>
Micro-Integration Corp. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of
Micro-Integration Corp. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation have been included. The
results for the three months ended June 30, 1998, and 1997, are not necessarily
indicative of financial information for the full year. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in the
Company's annual report and Form 10-KSB for the year ended March 31, 1998.
For purposes of comparability, certain prior year amounts in the consolidated
financial statements have been reclassified to conform to the presentation used
for current period reporting.
2. Marketable Securities
Available-for-sale securities are stated at fair value, with the unrealized
gains and losses, net of tax, reported as a separate component of shareholders'
equity. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in investment
income. The cost of securities sold is based on the specific identification
method. Interest on securities classified as available-for-sale is included in
investment income. Available-for-sale securities include obligations of state
municipalities and are stated at fair market value of $100,000 at June 30, 1998,
and March 31, 1998. These securities mature in August 2026. There were no
unrealized gains/losses with respect to these securities during the period ended
June 30, 1998 nor 1997.
3. Inventory
Inventory consisted of the following:
June 30 March 31
1998 1998
-------- --------
Parts $ 87,646 $156,412
Finished goods 593,903 395,153
-------- --------
$681,549 $551,565
======== ========
Inventory is stated at the lower of cost or market. Cost is determined using the
first-in, first-out method.
6
<PAGE>
Micro-Integration Corp. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
4. Earnings per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
Three months ended June 30
1998 1997
--------- ----------
(unaudited)
Numerator used in basic and
diluted loss per share:
Net (loss) income $(190,465) $ 3,634
========= ==========
Denominator:
Weighted average number of
shares of common stock
outstanding during the period 2,867,811 2,491,939
========= ==========
Basic and diluted (loss)
earnings per share $ (0.07) $ 0.00
========= ==========
7
<PAGE>
Part I Financial Information
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition for the Three Months Ended June 30, 1998, and 1997
This quarterly report on Form 10-QSB contains forward-looking statements as that
term is defined in the Private Securities Litigation Reform Act of 1996. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Statements
regarding the intent, belief or current expectations of the Company are intended
to be forward-looking statements which may involve risk and uncertainty. There
are a number of factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements, including,
but not limited to, those discussed in "Part I - Item 1 - Description of
Business - Risk Factors" and "Part II - Item 6 - Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
Company's 1997-1998 Form 10-KSB, as filed with the Securities and Exchange
Commission on June 29, 1998. In addition, set forth below under the headings
"Results of Operations" and "Factors Affecting Operating Results" is a further
discussion of certain of those risks as they relate to the period covered by
this report, the Company's near term outlook with respect thereto, and the
forward-looking statements set forth herein; however, the absence in this
quarterly report of a complete recitation of or update to all risk factors
identified in the Company's 1997-1998 Form 10-KSB should not be interpreted as
modifying or superseding any such risk factors, except to the extent set forth
below. Investors should review this quarterly report in combination with the
Company's 1997-1998 Form 10-KSB in order to have a more complete understanding
of the principal risks associated with an investment in the Company's stock.
Overview
Micro-Integration Corp. ("MI" or the "Company") is primarily an Information
Technology ("IT") Services company which provides both IT services and products.
The Company's IT services include IT consulting, network integration and design
services, accounting and distribution information systems, process control
information systems, and Internet web site design, programming, and hosting. The
Company also sells computers, software and communications products purchased
from others. The Company provides Internet web hosting, training, desktop
management, help-desk, and maintenance services that complement its consulting
and computer and network software and equipment sales. In addition to IT
services and products, the Company designs, manufactures, and sells a line of
products that provides communications and connectivity between personal
computers ("PCs") and IBM mainframe and midrange AS/400 computers.
Results of Operations
On April 1, 1998, the Company completed the acquisition of all of the
outstanding stock of CompSource, Inc. in exchange for 350,000 shares of common
stock valued at $612,500. CompSource, Inc. is an eastern- and
central-Pennsylvania area business networking and software solutions provider.
The acquisition was accounted for using the purchase method of accounting.
Goodwill of $522,000 related to the acquisition is being amortized over its
estimated useful life of 15 years. In its last fiscal year, ended October 31,
1997, CompSource generated revenues of $3.3 million. CompSource contributed
$655,000 or 20% to Company revenues in the quarter ended June 30, 1998.
8
<PAGE>
The Company's total revenue was $3.2 million for the quarter ended June 30,
1998, a decrease of 5% or $153,000 from the quarter ended June 30, 1997. IT
Services revenue increased by $278,000 or 11% while PC Connectivity product and
royalty revenue decreased $431,000 or 51%. The Company's subsidiaries accounted
for 81% of the Company's total revenue for the quarter ended June 30, 1998
compared to 66% in the same quarter last year. The Company expects this trend to
continue as PC Connectivity product and royalty revenues continue to decline.
Gross profit increased to 36.6% for the quarter ended June 30, 1998, from 33.2%
in the same period in 1997. The major contributing factor to the improvement in
gross profit is the increase in the percentage of IT Services revenue derived
from high-margin IT services versus revenue from lower margin IT product sales.
For the quarter ended June 30, 1998, IT Services service revenue accounted for
$592,000 or 21% of the total IT Services revenue of $2.8 million compared to
$199,000 or 8% of total IT Services revenue of $2.5 million for the quarter
ended June 30, 1997.
Selling, general, and administrative (SG&A) expenses increased by $258,000 in
the quarter ended June 30, 1998, compared to the same period in 1997. As a
percentage of sales, SG&A expenses were 40% of total sales in the current
quarter compared with 30% of total sales in the same quarter last year. The
increase is primarily due to increases in salaries and benefits, consulting and
occupancy expenses offset by a reduction in legal expenses.
The Company's net other income was $21,000 for the three months ended June 30,
1998, an increase of $2,000 or 11%, compared to $19,000 of net other income in
the same quarter last year.
For the three months ended June 30, 1998, the Company recognized a corporate tax
expense of $2,000. At June 30, 1998, the Company had a net operating loss
carryforward of approximately $1.5 million available for offset against future
operating profits.
Liquidity and Capital Resources
The Company satisfies its cash requirements primarily through cash flow from
operations, bank borrowings, and lease financing. At June 30, 1998, the Company
had $100,000 invested in available-for-sale securities and an additional
$149,000 in cash. During the quarter ended June 30, 1998, cash provided by
financing activities of $146,000 was exceeded by cash used in operating and
investing activities of $174,000, resulting in a $28,000 decrease in cash.
The Company's working capital remained unchanged from March 31, 1998 to June 30,
1998 at 1.2 million.
At June 30, 1998, the Company had four working capital credit lines with U.S.
banks. One credit line, which is payable on demand, has a $100,000 limit and had
an outstanding balance of $100,000 as of June 30, 1998. A second line, which is
also payable on demand, has a $600,000 limit and had an outstanding balance of
$271,000 at June 30, 1998. The third line, also payable on demand, has a $50,000
limit and had an outstanding balance of $9,000 at June 30, 1998. The last line
is for $300,000, is renewable annually, and is limited to the lesser of $300,000
or 70% of acceptable domestic accounts receivable. This line is secured by
substantially all of the Company's assets and as of June 30, 1998, had an
outstanding balance of $226,000. The Company expects that cash generated from
operations and borrowings will satisfy its operating cash needs for the
foreseeable future.
9
<PAGE>
Factors Affecting Operating Results
Potential Fluctuations in Operating Results
The Company believes that future operating results will be subject to
fluctuations due to a variety of factors, many of which are beyond the Company's
control. Such factors may include, but are not limited to, demand for the
Company's services, availability of skilled sales and technical personnel,
introduction or enhancements of services by the Company or its competitors,
market acceptance of new service offerings, increased competition, litigation
costs, results of litigation, and general economic conditions.
Since the Company recognizes services revenue only when personnel are engaged on
client projects, the relative utilization of such personnel directly affects the
Company's operating results. In addition, a majority of the Company's services
operating expenses, particularly personnel and related costs, are substantially
fixed in advance of any particular period. As a result, variations in
utilization of personnel may have material adverse effects on operating results.
Termination or completion of engagements in the Company's services business or
failure to obtain additional engagements in its services business could have a
material adverse effect on the Company's business, financial condition, and
results of operations.
Uncertainty of Future Acquisitions
The Company evaluates potential acquisitions on an ongoing basis. No assurance
can be given as to the Company's ability to compete successfully for available
acquisition candidates, to complete future acquisitions, or the financial effect
on the Company of any acquired businesses. Acquisitions by the Company may
involve significant cash expenditures and may result in decreased operating
income, either of which could have a material adverse effect on the Company's
business, financial condition, and results of operations. The inability of the
Company to successfully continue its acquisition strategy could have a material
adverse effect on the Company's business, financial condition, and results of
operations.
Management of Potential Growth
The Company's recent acquisitions have placed, and are expected to continue to
place, a significant strain on its managerial and operational resources. To
manage future potential growth, the Company must continue to implement and
improve its operational, management and financial systems and to train and
manage its employee base. The Company expects that its operational, management
and financial systems will face additional strains as a result of possible
acquisitions in the future.
Integration of Acquisitions
As part of its business strategy, the Company expects to continue to seek out
business combinations with other IT Services companies. Such business
combinations involve a number of risks, including, without limitation,
difficulty assimilating the operations and personnel, expenditure of management
time, expenses associated with the transactions, additional expenses associated
with amortization of acquired intangible assets, the implementation and
maintenance of standards, controls, procedures, and policies, the impairment of
relationships with employees and customers as a result of the integration of new
management personnel, and potential unknown liabilities associated with acquired
businesses. There can be no assurance that the Company will be successful in
addressing these risks or any other problems encountered in connection with such
business combinations.
10
<PAGE>
Dependence on Key Personnel
The Company's performance is substantially dependent on the performance of its
senior management and key sales and technical personnel. In particular, the
Company's success depends substantially on the continued efforts of its senior
management team. The Company does not carry key person life insurance on any of
its senior management personnel. The loss of the services of any of its
executive officers or other key employees could have a material adverse effect
on the business, operating results, and financial condition of the Company. The
Company's future success also depends on its continuing ability to attract and
retain highly-qualified sales, technical, and managerial personnel. Competition
for such personnel is intense and there can be no assurance that the Company
will be able to retain its key managerial, sales, and technical employees or
that it will be able to attract and retain additional highly-qualified sales,
technical, and managerial personnel in the future. The inability to attract and
retain the necessary sales, technical, and managerial personnel could have a
material adverse effect upon the Company's business, financial condition, and
results of operation.
Concentration of Stock Ownership
As of June 30, 1998, the present directors, executive officers, greater than 5%
stockholders, and their respective affiliates beneficially owned approximately
55% of the outstanding Common Stock of the Company. As of June 30, 1998, John A.
Parsons, the Company's Chairman and CEO, beneficially owned approximately 40% of
the outstanding Common Stock of the Company. As a result of their ownership, the
directors, executive officers, greater than 5% stockholders, and their
respective affiliates collectively are able to control all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may also
have the effect of delaying or preventing a change in control of the Company.
Volatility of Stock Price
The trading price of the Company's Common Stock has been and may continue to be
subject to wide fluctuations in response to a number of events and factors, such
as quarterly variations in operating results, changes in financial estimates and
recommendations by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable to the
Company, and news reports relating to trends in the Company's markets. In
addition, the stock market, in general, and the market prices for IT Services
companies, in particular, have experienced volatility that often has been
unrelated to the operating performance of such companies. These broad market and
industry fluctuations may adversely affect the trading price of the Company's
Common Stock, regardless of the Company's operating performance.
Year 2000
The Company is in the process of assessing the potential effects of the "Year
2000" millennium change on the Company's internal computer software applications
and systems, the Company's product and service offerings and the Company's
business in general. The Company believes that some of its internal mission
critical systems, including its internal and external telecommunications
systems, are not Year 2000 compliant, and has instituted measures to bring those
systems into compliance or replace them with compliant systems. The Company
believes that the remediation costs needed to make all of its internal
applications and systems Year 2000 compliant are not material and that they will
be implemented prior to the end of the first half of 1999. Delays in
implementing these remedial measures, failure of any new or upgraded system to
be Year 2000 compliant despite the vendors' assurances, or a failure to fully
identify or remediate all Year 2000 problems in the Company's systems which are
not being replaced or upgraded could have a material adverse effect on the
Company's business, financial condition or results of operations.
11
<PAGE>
In addition, the Company intends to contact its significant suppliers, service
providers, customers and other contracting parties to determine the extent to
which the Company is vulnerable to any such third party's failure to achieve
Year 2000 compliance for their own systems or products. At the present time, the
Company does not expect Year 2000 issues of such third parties to materially
effect the Company's services or products. However, the Company can give no
assurances that the systems or products of other companies on which the Company
relies will be Year 2000 compliant or that the failure of such third parties to
achieve Year 2000 compliance for such systems or products will not have a
material adverse effect on the Company.
12
<PAGE>
Part II Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
Micro-Integration Corp. has made the following unregistered sales of the
Company's Common Stock during the past three years and in the quarter ended June
30, 1998:
<TABLE>
<CAPTION>
Transaction Number of Shares Name of Underwriter Consideration Persons or Class of Persons to
Date of Common Stock or Placement Agent Received Whom the Securities Were Sold
- ---------------- ------------------------- ------------------------ ----------------- ------------------------------------
<S> <C> <C> <C> <C>
11/22/96 97,254 None (1) Thomas M. Eversole
12/01/97 22,456 None (2) J. Michael Lafferty
04/01/98 343,884 None (3) Russell A. Hinnershitz
4,484 Randy Engle
1,632 A. Scott Kauffman
</TABLE>
(1) Pursuant to the Purchase Agreement between Micro-Integration Corp. and
Computer One of Ohio, Inc. ("Computer One") dated November 22, 1996,
Micro-Integration Corp. acquired Computer One by purchasing all of Computer
One's assets for a common stock issuance of 97,254 shares of Micro-Integration
Corp.'s common stock and the assumption of Computer One's liabilities and
accounted for such acquisition using the purchase method of accounting.
(2) Pursuant to the Purchase Agreement by and among Micro-Integration Corp.,
SuiteOne Computer Services, Inc. ("SuiteOne"), and Michael Lafferty dated
December 1, 1997, Micro-Integration Corp. acquired all of the outstanding stock
of SuiteOne in exchange for 22,456 shares of Micro-Integration Corp.'s common
stock and accounted for such acquisition using the purchase method of
accounting.
(3) Pursuant to the Purchase Agreement by and among Micro-Integration Corp.,
Russell A. Hinnershitz, and A. Scott Kauffman dated April 1, 1998,
Micro-Integration Corp. acquired all of the outstanding stock of CompSource,
Inc. in exchange for 350,000 shares of Micro-Integration Corp.'s common stock
and accounted for such acquisition using the purchase method of accounting.
For each of the above transactions, the Company claims the exemption from
registration under Section 4(2) of the Securities Act of 1933 (the "1933 Act")
based upon the following facts: (1) no general solicitation or advertising
occurred, (2) there was a limited number of purchasers, (3) purchasers purchased
with a view toward investment, and (4) each purchaser had access to information
as would be provided by a registration statement under the 1933 Act.
13
<PAGE>
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
(a) Exhibits
27.1 Financial Data Schedule
(b) The Company filed a report on Form 8-K on April 15, 1998 for the
acquisition of CompSource, Inc.
14
<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 in the city of Frostburg, state of
Maryland, on the 14th day of August, 1998:
Micro-Integration Corp.
By: /s/ John A. Parsons
----------------------------------
John A. Parsons
President, Chairman of the Board,
Chief Executive Officer
By: /s/ Terry D. Frost
----------------------------------
Terry D. Frost
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 149,028
<SECURITIES> 100,000
<RECEIVABLES> 2,132,221
<ALLOWANCES> 177,456
<INVENTORY> 681,549
<CURRENT-ASSETS> 3,046,292
<PP&E> 3,386,084
<DEPRECIATION> 1,498,497
<TOTAL-ASSETS> 6,176,506
<CURRENT-LIABILITIES> 1,888,283
<BONDS> 0
0
0
<COMMON> 30,173
<OTHER-SE> 3,007,048
<TOTAL-LIABILITY-AND-EQUITY> 6,176,506
<SALES> 3,205,535
<TOTAL-REVENUES> 3,205,535
<CGS> 2,033,144
<TOTAL-COSTS> 2,033,144
<OTHER-EXPENSES> 1,344,672
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,492
<INCOME-PRETAX> (188,589)
<INCOME-TAX> 1,876
<INCOME-CONTINUING> (190,465)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190,465)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
