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UNITED STATES
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 JUNE 30, 1998
-------------
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
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
9577 CHESAPEAKE DRIVE, SAN DIEGO, CALIFORNIA 92123
- -------------------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (619) 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 11, 1998, THERE WERE OUTSTANDING 10,836,890 SHARES OF THE
--------------- ----------
REGISTRANT'S COMMON STOCK, NO PAR VALUE PER SHARE.
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Index Page No.
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PART I FINANCIAL INFORMATION
Item 1. 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........... 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings......................................... 29
Item 2. Changes in Securities and Use of Proceeds................. 29
Item 3. Defaults upon Senior Securities........................... 29
Item 4. Submission of Matters to a Vote of Security Holders....... 29
Item 5. Other Information......................................... 30
Item 6. Exhibits and Reports on Form 8-K.......................... 30
SIGNATURES........................................................... 31
EXHIBIT INDEX........................................................ 32
2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
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(unaudited)
ASSETS
Current assets:
Cash $ 778,000 $ 1,296,000
Accounts receivable, net 1,981,000 2,504,000
Inventories 4,780,000 4,230,000
Other current assets 279,000 387,000
- -------------------------------------------------------------------------------
Total current assets 7,818,000 8,417,000
Property, plant and equipment, net 2,005,000 1,212,000
Other non-current assets 225,000 282,000
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$ 10,048,000 $ 9,911,000
===============================================================================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 33,000 $ 22,000
Accounts payable 6,814,000 7,450,000
Accrued liabilities 1,381,000 1,711,000
Deferred revenue 178,000 265,000
Debt and accrued interest of discontinued
operations in default, due on demand 30,343,000 27,151,000
Current liabilities of discontinued operations,
net -- 13,475,000
- -------------------------------------------------------------------------------
Total current liabilities 38,749,000 50,074,000
Long-term debt, less current portion 59,000 69,000
Commitments and Contingencies
Shareholders' Deficit
Common stock, no par value 40,079,000 40,016,000
Accumulated deficit (68,839,000) (80,248,000)
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Total shareholders' deficit (28,760,000) (40,232,000)
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$ 10,048,000 $ 9,911,000
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3
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended June 30, Six months ended June 30,
--------------------------- ---------------------------
1998 1997 1998 1997
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Net sales $5,825,000 $ 8,878,000 $13,159,000 $ 16,552,000
Cost of goods sold 4,559,000 8,292,000 9,940,000 15,083,000
- --------------------------------------------------------------------------------------------------------------
Gross profit 1,266,000 586,000 3,219,000 1,469,000
Selling, general and administrative 934,000 1,315,000 1,710,000 2,579,000
Engineering and product development 320,000 88,000 592,000 196,000
- --------------------------------------------------------------------------------------------------------------
Income (loss) from operations 12,000 (817,000) 917,000 (1,306,000)
Other income (expense):
Interest (expense), net (3,000) (5,000) (6,000) (25,000)
Other income, net 220,000 106,000 290,000 275,000
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Income (loss) from continuing operations
before provision for income taxes 229,000 (716,000) 1,201,000 (1,056,000)
Provision for income taxes - - (18,000) -
- --------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 229,000 (716,000) 1,183,000 (1,056,000)
Discontinued Operations:
Loss from discontinued operations - (3,644,000) - (4,524,000)
Estimated loss on disposal - (7,351,000) - (7,351,000)
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Net income (loss) $229,000 $(11,711,000) $ 1,183,000 $(12,931,000)
==============================================================================================================
Earnings (loss) per common share:
Continuing operations $ 0.02 $ (0.07) $ 0.11 $ (0.10)
Discontinued operations - (1.02) - (1.20)
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Net income (loss) per common share $ 0.02 $ (1.09) $ 0.11 $ (1.30)
==============================================================================================================
Earnings (loss) per common share - assuming dilution:
Continuing operations $ 0.02 $ (0.07) $ 0.10 $ (0.10)
Discontinued operations - (1.02) - (1.20)
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Net income (loss) per common share $ 0.02 $ (1.09) $ 0.10 $ (1.30)
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4
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended June 30,
--------------------------
1998 1997
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Net cash provided by operating activities of:
Continuing operations 517,000 689,000
Discontinued operations - 1,955,000
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Net cash provided by operating activities 517,000 2,644,000
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Cash flows from investing activities:
Acquisition of fixed assets (1,024,000) (331,000)
Continuing operations 10,000 24,000
Discontinued operations - 236,000
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Net cash provided (used) by investing activities (1,014,000) (71,000)
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Decrease in short-term notes payable
Continuing operations (21,000) -
Discontinued operations - (3,612,000)
Borrowings under long-term debt and promissory notes
Continuing operations - 76,000
Principal payments on long-term debt and promissory
notes
Continuing operations - (291,000)
Discontinued operations - (508,000)
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Net cash provided (used) by financing activities (21,000) (4,335,000)
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Net increase (decrease) in cash (518,000) (1,762,000)
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Cash at end of period $ 778,000 $ 1,192,000
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5
MICROELECTRONIC PACKAGING, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' DEFICIT
(unaudited)
Common Stock Accumulated
--------------------------
Shares Amount Deficit Total
---------- ----------- ------------ ------------
Balance at January 1, 1998 10,793,279 $40,016,000 ($80,248,000) ($40,232,000)
Non-employee stock-based
compensation - 63,000 - 63,000
De-Consolidation of
Discontinued Subsidiaries - - 10,226,000 10,226,000
Net income - - 1,183,000 1,183,000
---------- ----------- ------------ ------------
Balance at June 30, 1998 10,793,279 $40,079,000 ($68,839,000) ($28,760,000)
========== =========== ============ ============
6
Microelectronic Packaging, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Quarterly Financial Statements
The accompanying condensed consolidated financial statements and related
notes as of June 30, 1998 and for the three and six month periods ended June
30, 1998 and 1997 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,
1998 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, 1997 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. Inventories
Inventories consist of the following:
June 30, 1998 December 31, 1997
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(Unaudited)
Raw materials.................... $2,846,000 $2,445,000
Work-in-progress................. 1,804,000 1,654,000
Finished goods................... 130,000 131,000
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$4,780,000 $4,230,000
========== ==========
3. Effects of Income Taxes
The Company believes that it has sufficient losses to offset any taxable
income that will be generated in the current year. However, the Company's
use of these losses may result in alternative minimum taxes for Federal
income tax purposes. As a result, the Company has recorded a provision for
income taxes for the six month period ended June 30, 1998 (for anticipated
alternative minimum taxes).
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.
7
Notes to Condensed Consolidated Financial Statements (unaudited)
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4. Net Income (Loss) Per Share
For the three months ended June 30, 1998
----------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
============= ============= ==========
Income from continuing operations $229,000
Basic EPS
Income available to common shareholders 229,000 10,793,279 $0.02
=====
Effect of dilutive securities:
Stock options -- 1,408,323
Warrants -- --
-------- ---------- -----
Diluted EPS
Income available to common
shareholders + assumed conversions $229,000 12,201,602 $0.02
======== ========== =====
Options to purchase 55,800 shares and warrants to purchase 1,227,693 shares of
common stock at prices ranging from $1.00 to $6.50 were outstanding during the
second quarter of 1998 but were not included in the computation of diluted EPS
because the options' and warrants' exercise prices were greater than the average
market price of the common shares for the quarter then ended. The options and
warrants, which expire between August 1998 and June 2008 were still outstanding
as of June 30, 1998.
For the three months ended June 30, 1997
----------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
============ ============ ==========
Loss from continuing operations $ (716,000) 10,793,279 $(0.07)
Loss from discontinued operations (10,995,000) (1.02)
------------ ---------- -------
Basic EPS
Income (loss) available to common
shareholders (11,711,000) 10,793,279 $(1.09)
Effect of dilutive securities: =======
Stock options
Warrants -- --
Diluted EPS -- --
Income (loss) available to common ============ ==========
shareholders + assumed conversions
$(11,711,000) 10,793,279 $(1.09)
============ ==========
Options and warrants to purchase 2,289,927 shares of common stock which were
outstanding during the second quarter of 1997 were not included in the
computation of diluted EPS because the options' and warrants' effect on EPS
would be anti-dilutive.
8
Notes to Condensed Consolidated Financial Statements (unaudited)
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For the six months ended June 30, 1998
--------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Income from continuing operations $1,183,000
Basic EPS
Income available to common shareholders 1,183,000 10,793,279 $0.11
=====
Effect of dilutive securities:
Stock options -- 1,404,777
Warrants -- --
Diluted EPS ========== ==========
Income available to common
shareholders + assumed conversions $1,183,000 12,198,056 $0.10
========== ========== =====
Options to purchase 55,800 shares and warrants to purchase 1,227,693 shares of
common stock at prices ranging from $1.00 to $6.50 were outstanding during the
first six months of 1998 but were not included in the computation of diluted EPS
because the options' and warrants' exercise prices were greater than the average
market price of the common shares for the six months then ended. The options and
warrants, which expire between August 1998 and June 2008 were still outstanding
as of June 30, 1998.
For the six months ended June 30, 1997
--------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Loss from continuing operations $ (1,056,000) 9,921,235 $(0.10)
Loss from discontinued operations (11,875,000) (1.20)
------------ --------- ------
Basic EPS
Income (loss) available to common
shareholders (12,931,000) 9,921,235 $(1.30)
Effect of dilutive securities: ======
Stock options -- --
Warrants -- --
Diluted EPS ============ =========
Income (loss) available to common
shareholders + assumed conversions $(12,931,000) 9,921,235 $(1.30)
============ ========= ======
Options and warrants to purchase 2,289,927 shares of common stock which were
outstanding during the first six months of 1997 were not included in the
computation of diluted EPS because the options' and warrants' effect on EPS
would be anti-dilutive.
5. Commitments and Contingencies
The Company is involved in various claims and litigation arising in and
outside of the ordinary course of business. In addition, given the current
state of the Company and its subsidiaries, numerous creditors and parties to
contracts have threatened or initiated litigation to recoup their loans and
investments. If these claims are not favorably resolved, they will have a
material adverse effect on the Company's financial condition, results of
operations and ability to continue as a going-concern.
9
Notes to Condensed Consolidated Financial Statements (unaudited)
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The Company entered into a lease for new manufacturing facilities and
corporate offices. This lease commenced September 1, 1997, and extends 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.
6. Customer Supplied Inventory
The Company's CTM Electronics, Inc. subsidiary has purchased certain chips
("die") used in the assembly of multichip modules ("MCM's") sold to one of
the Company's significant customers from that same customer. Effective July
25, 1997, this customer notified the Company that it will no longer sell die
to the Company and instead is providing the die on consignment. The pro
forma presentation below gives effect to this change in operations on
selected line items from the Company's Condensed Consolidated Statements of
Operations for the three and six month periods ended June 30, 1997, as if
this change had been put into effect on January 1, 1997.
================================================================================================
Historical Pro Forma
Three Months Ended Pro Forma Three Months Ended
June 30, 1997 Adjustments June 30, 1997
===========================================================================
Net sales $ 8,878,000 $(5,005,000)/(1)/ $ 3,873,000
Cost of goods sold 8,292,000 (5,164,000)/(2)/ 3,128,000
Gross profit 586,000 159,000 745,000
Net loss $(11,711,000) 159,000 $(11,562,000)
Net loss per =====================================================================
common share $ (1.09) $ 0.01 $ (1.08)
================================================================================================
================================================================================================
Historical Pro Forma
Six Months Ended Pro Forma Six Months Ended
June 30, 1997 Adjustments June 30, 1997
================================================================================================
Net sales $ 16,552,000 $(9,661,000)/(1)/ $ 6,891,000
Cost of goods sold 15,083,000 (9,948,000)/(2)/ 5,135,000
Gross profit 1,469,000 287,000 1,756,000
Net loss $(12,931,000) 287,000 $(12,644,000)
Net loss per =====================================================================
common share $ (1.30) $ 0.02 $ (1.28)
================================================================================================
/(1)/ The cost of the die to be provided on consignment will be removed from
the selling price of the MCM's. The amount of the 2% prompt payment
discount offered to the customer, which is included in revenues, will
be reduced by the lower selling prices for these MCM's.
/(2)/ The cost of the die to be provided on consignment will be removed from
the cost of goods sold, corresponding to the reduction in selling
prices of the MCM's.
7. Discontinued Operations
On July 10, 1997, The Development Bank of Singapore Limited, one of the
Company's Singapore subsidiaries largest creditors ("DBS"), appointed a
Receiver and Manager to liquidate the assets of
10
Notes to Condensed Consolidated Financial Statements (unaudited)
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Microelectronic Packaging (S) Pte. Ltd. ("MPS"), which is a wholly owned
subsidiary of the Company which manufactured primarily pressed ceramics
products. DBS exercised its option to appoint a Receiver and Manager under
the terms of Deed of Debenture dated November 27, 1984 (as amended) between
DBS and MPS. The Company anticipates that the Receiver and Manager will
complete the liquidation of MPS in 1998. The Company has Guaranteed all of
MPS's obligations to DBS of which approximately $2.6 million was outstanding
as of June 30, 1998. These loans are included in the caption "Debt and
accrued interest of discontinued operations, in default, due on demand" in
the Consolidated Balance Sheet. See Note 9 to the Condensed Consolidated
Financial Statements. There can be no assurance that such debt will be fully
paid through the liquidation of the assets of MPS. If insufficient, DBS could
demand repayment of the shortfall from the Company through the guarantee. The
Company does not have adequate resources to repay such debt if the guarantee
is called.
The Company recorded the effect of the receivership as of June 30, 1997, and
the results of operations of MPS have been classified as "Loss from
discontinued operations" in the Consolidated Statement of Operations. As a
result of the appointment of a Receiver and Manager, MPS is no longer able to
manufacture its pressed ceramic products and has ceased generating revenue
since July 10, 1997.
During the last several months, the Company (as guarantor) reached written
agreements with five of MPS' creditors. For four of those creditors (see
separate discussion regarding the settlement of the DBS Bank loans below),
the Company agreed to make payments aggregating $2,341,540 as full
satisfaction of the total of all obligations to these creditors. The
payments to these creditors are due between November 15, 1998 and May 1,
1999. In addition, for the remaining creditor guaranteed by the Company, a
verbal agreement has been reached (subject to the completion of a definitive
agreement) for the payment of $1,137,044 as full satisfaction of the total of
all obligations to this creditor. In addition, it is anticipated that
warrants for the purchase of 200,000 shares of the Company's common stock at
an exercise price of $1.00 per share will be issued to this creditor.
On March 18, 1997, a Receiver was appointed to handle the liquidation of the
multilayer ceramics operations of MPM (S) Pte. Ltd. As of December 31, 1997,
essentially all of the assets of MPM had been sold. Final resolution of the
remaining liabilities will come only after the liquidation of MPS, since MPS
has guaranteed the DBS bank loan and the equipment leases entered into by
MPM. The portion of these liabilities remaining after any reduction
available from the sale of MPS and MPM assets will then be transferred to
MPI, as MPI also guaranteed these loans and leases, which balance was
approximately $2.4 million as of June 30, 1998. As of April 14, 1998, the
Company (as guarantor) reached an agreement with MPM's lessor for the payment
of $483,056 as full satisfaction of the balance remaining after the sale of
the leased equipment; this payment is due on May 1, 1999.
The holders of the debentures issued to Transpac and related parties still
retain $9.0 million of debt securities issued by MPM which are guaranteed by
the Company. The Company and MPM are in default thereunder. On April 22,
1998, the Company (as guarantor) reached an agreement with Transpac for the
payment of $3,112,463 as full satisfaction of the total of all obligations to
Transpac; this payment is due on May 1, 1999. In addition, warrants for the
purchase of 500,000 shares of the Company's common stock at an exercise price
of $1.00 per share were issued to Transpac, and the Company agreed to a
payment of 30% of any monetary proceeds from the settlement of a specific
claim, and the Company guaranteed a minimum proceeds of $1,000,000 on or
prior to December 31, 1999.
11
Notes to Condensed Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
As indicated previously, both MPS and MPM are indebted to DBS, and the
Company has guaranteed those obligations. As of July 20, 1998, the Company
(as guarantor) reached an agreement with DBS for the payment of $1,177,397 as
full satisfaction of all obligations to DBS; this payment is due on January
20, 1999. In addition, the Company agreed to a payment of 5% of any monetary
proceeds from the settlement of a specific claim, and there were further
considerations given to DBS that are not considered material by the Company.
The Company's MPC subsidiary was informed in April 1997 that Carborundum
Corporation ("Carborundum"), its sole customer, was immediately canceling the
manufacturing and related agreements with MPC as a result of Carborundum's
sale of its assets to a third party.
On April 5, 1997, a fire at the Company's MPC facility caused damage to the
building and certain equipment. The Company is insured against the fire, and
believes that it will incur no losses from the fire. The Company has closed
the MPC operation and has terminated all of its MPC employees. The Company
expects that there will be minimal impact from the disposition of the assets
of MPC. Most costs of closure of the MPC operations will be borne by the
former customer or the Company's business interruption insurance. The
Company has recorded the effect of the closure of this business as of June
30, 1997, and the results of operations of MPC have been classified as "Loss
from discontinued operations" in the Consolidated Statement of Operations.
Discontinued operations include management's best estimates of the amounts
expected to be realized on the sale of its assets associated with these
discontinued operations and the expenses to be incurred through the disposal
date. The amounts the Company will ultimately realize and incur could differ
materially in the near term from the amounts assumed in arriving at the loss
on disposal of the discontinued operation. Management anticipates that the
foreign operations will be fully dissolved in 1998. However, Management
cannot predict how long it may take the High Court of the Republic of
Singapore to complete the Winding Up of these companies.
Consistent with the presentation in Form 10-K for the year ended December 31,
1997, all debt obligations originating in Singapore have been reclassified to
the caption "Debt and accrued interest of discontinued operations, in
default, due on demand."
8. Going Concern
The accompanying financial statements have been prepared assuming the Company
(MPI 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 Company's high level of
existing indebtedness, the need to restructure debt which is currently in
default, various claims and lawsuits, and the Company's Singapore operations
in receivership and liquidation raise substantial doubts about the Company's
ability to continue as a going concern. As of June 30, 1998, the Company has
an accumulated deficiency of $68.8 million and a working capital deficiency
of $30.9 million, which includes $30.3 million of debt of discontinued
operations due on demand and accrued interest from discontinued operations
debt net of the remaining assets from those discontinued operations. The
Company does not possess sufficient cash resources to repay these
obligations, and thus is in default on all of these obligations. The Company
would be unable to repay these loans in the event that such demand was made
by the Company's creditors. See Note 7 for further information regarding the
Company's efforts to restructure this debt and accrued interest from
discontinued operations.
The Company is currently renegotiating the terms of the debt obligations of
its discontinued Singapore operations. Certain obligations with principal
balances totaling approximately $25.2
12
Notes to Condensed Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
million have been guaranteed by MPI. Creditors holding over 85% of such debt
have signed definitive, binding agreements, including the Company's largest
creditor, and one remaining creditor holding the remainder of such debt has
verbally agreed to a settlement of the obligations owed to them. The
agreements reached with creditors principally involve MPI paying 30% to 40%
of the principal and accrued but unpaid interest owed to each creditor as of
December 31, 1997, within six months of formal documents being agreed between
the parties. The remaining 60% to 70% would be forgiven by the creditors at
the time of the payment of the 30% to 40% portion. There are also other non-
cash considerations being provided to certain creditors. The Company has not
yet recorded the benefit of such debt forgiveness. The Company intends to
attempt to obtain financing for the 30% to 40% portion to be paid by the
Company. There can be no assurance that the Company will be successful in its
effort to reduce the non-binding agreements reached with the one remaining
creditor to a binding written agreement. There can also be no assurance that
the Company will be successful in its efforts to obtain the financing needed,
on acceptable terms, or at all, in order to fulfill its obligations under the
agreements reached with creditors. This failure would materially adversely
affect the Company's financial condition and ability to continue as a going
concern, and could, as is the case with other debt defaults and failure to
repay, require that the Company seek bankruptcy protection under Chapter 11
or Chapter 7 of Title 11 of the United States Code for MPI and its U.S.
subsidiaries.
9. Restatement of Current Liabilities of Discontinued Operations, Net to
Shareholders' Deficit
During the quarter ended June 30, 1998, the High Court of the Republic of
Singapore ordered the Winding up of MPM Singapore Pte. Ltd. ("MPM"), a wholly
owned subsidiary of the Company. As a result of this decision, MPM cannot
continue an operating business, and it cannot be allowed to dispose of its
assets or incur further liabilities. In addition, the Company does not have
any control over the management of MPM. This function is undertaken by the
Receiver and Manager appointed by DBS Bank.
In September 1997, the High Court of the Republic of Singapore ordered the
Winding Up of Microelectronic Packaging (S) Pte. Ltd. ("MPS"), also a wholly
owned subsidiary of the Company. As with MPM, MPS cannot continue as an
operating business, and the Company does not have any control over the
management of MPS. This function is undertaken by the Receiver and Manager
appointed by DBS Bank.
The Company has been informed by DBS and the Receiver and Manager for MPM and
MPS that there will not be any funds remaining (after the liquidation of
assets) to satisfy any claims of unsecured creditors for MPM and MPS.
Due to the circumstances as described above, management, effective with the
quarter ended June 30, 1998, will not consolidate the assets and the
liabilities not guaranteed of MPM and MPS, into the consolidated financial
statements for MPI and subsidiaries. For MPM, the decision was based upon
the Singapore High Court's decision to Wind Up this company. For MPS, the
Singapore High Court had already ordered the Winding Up in September 1997,
however, due to the material amount of assets remaining to be liquidated and
also due to requests made by the MPS' Receiver and Manager for the Company to
assist them in the realization and disposal of MPS' remaining assets,
Management elected to consolidate until there was a clearer determination of
the control of the subsidiary and realization of its assets. In July 1998,
Management was informed of the sale of the two buildings owned by MPS. In
addition, it became more evident during the current quarter that any
remaining realization of Accounts Receivable on the books of MPS was highly
questionable. Accordingly the decision was made to not consolidate the
assets and the liabilities not guaranteed by the Company.
13
Notes to Condensed Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
The effect of this decision was to reduce the Current Liabilities of
Discontinued Operations, net and improve the Shareholders' Deficit by $10.2
million as of June 30, 1998.
10. 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.
14
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, 1998, net sales were $5,825,000 as compared
to $8,788,000 for second quarter of 1997. The Company's CTM Electronics, Inc.
subsidiary has purchased certain chips ("die") used in the assembly of multichip
modules ("MCMs") sold to one of the Company's significant customers from that
same customer (see Note 6 of Notes to Condensed Consolidated Financial
Statements). Effective July 25, 1997, this customer notified the Company that
it will no longer sell die to the Company and instead is providing the die on
consignment. This change ("consigned die") has resulted in a reduction in
selling prices for products sold to this customer. Had the consignment policy
been in effect as of January 1, 1997, net sales in the second quarter of 1997
would have been $3,873,000 ("proforma net sales"). Thus, net sales actually
increased $1,952,000 or 50%. The increase in net sales is primarily due to a
144% increase in MCM units shipped, partially offset by a decrease in average
selling prices (after removing die cost as discussed above). The primary reason
for the decrease in average selling prices resulted from a re-negotiated pricing
structure by CTM's largest customer as well as a change in product mix.
For the six months ended June 30, 1998, net sales were $13,159,000, representing
a decrease of $3,393,000 or 20% over net sales of $16,552,000 for the
corresponding period of 1997. Had the consignment policy described above been
in effect as of January 1, 1997, net sales for the six months ended June 30,
1997 would have been $6,891,000 ("proforma net sales"). Thus, net sales
actually increased by $6,268,000 or 90%. The increase is due to a 185% increase
in units shipped, partially offset by a decrease in average selling prices
described above.
Net sales for the three and six months ended June 30, 1997 includes $90,000 of
revenues derived under an agreement with a government factory in Yixing, China.
Such revenues have been included in "Other Sales" in the Condensed Consolidated
Statement of Operations. The contract was completed in the second quarter of
1997 and the final revenues under the contract were recorded at that time.
COST OF GOODS SOLD
For the three months ended June 30, 1998, the cost of goods sold was $4,559,000
as compared to $8,292,000 for the second quarter of 1997. After eliminating the
die cost from cost of goods sold for the second quarter of 1997 (see "Net Sales"
above and Note 6 of Notes to Condensed Consolidated Financial Statements), cost
of goods sold would have been $3,128,000. This represents a permanent change to
the cost structure of CTM. Thus, cost of goods sold increased $1,431,000 or
46%. The increase in cost of goods sold is due to the 144% increase in MCM
units shipped. However, cost of goods sold for the second quarter of 1998
includes a $200,000 reversal of a previously-recorded inventory reserve.
Without
15
such reversal, cost of goods sold as percentage of sales would have been
approximately the same for both second quarters.
For the six months ended June 30, 1998, the cost of goods sold was $9,940,000,
representing a decrease of $4,943,000 or 34% over cost of goods sold of
$15,083,000 for the corresponding period of 1997. After eliminating die cost
from cost of goods sold for the six months ended June 30, 1997, cost of goods
sold would have been $5,135,000. Thus cost of goods sold increased by
$4,805,000 or 94%. The increase in cost of goods sold is due to the 185%
increase in MCM units shipped. Cost of goods sold as a percentage of revenue
(on a proforma basis) increased by 2% due to declines in average selling prices
of certain products sold to CTM's most significant customer being greater than
declines in cost of goods sold for those products, principally material costs.
Cost of goods sold for the three and six months ended June 30, 1997 includes
$43,000 of expenses incurred under an agreement with a government factory in
Yixing, China. Such expenses have been included in "Other Sales" under "Cost of
Goods Sold" in the Condensed Consolidated Statement of Operations. The contract
was completed in the second quarter of 1997 and the final expenses under the
contract were recorded at that time.
GROSS PROFIT
Gross profit was $1,266,000 (21.7% of net sales) for the second quarter of 1998
as compared to $586,000 for the second quarter of 1997. Gross profit increased
due to increased sales revenue described above. Gross margin for the second
quarter of 1997 on a proforma basis is 19.2% of proforma sales. If the effect
of a $200,000 reversal of a previously-recorded inventory reserve were excluded
from the calculation of the 1998 second quarter gross margin, gross profit as a
percentage of net sales would have been 18.3%. Thus, comparative gross margin
declined by less than 1% between quarters, primarily due to reduced selling
prices and a change in product mix.
For the six months ended June 30, 1998, gross profit was $3,219,000 (24.5% of
net sales) as compared to $1,469,000 for the second quarter of 1997. Gross
profit increased due to increased sales revenue described above. Gross margin
for the six months ended June 30, 1997 on a proforma basis is 25.4% of proforma
sales. The decline in gross margin from the 1997 period to the 1998 period is
again primarily due to reduced selling prices and a change in product mix.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $934,000 for the second
quarter and $1,710,000 for the six months ended June 30, 1998, representing
decreases of $381,000 or 41% and $869,000 or 34%, respectively, from the
comparative periods of 1997. These decreases are primarily the result of the
Company's reduction of the additional legal and consulting fees which had been
incurred in connection with the restructuring of the Company's U.S. operations
and the winding up of its Singapore operations. The Company anticipates that
selling, general and administrative expenses, in absolute dollars, will remain
the same or decline for the balance of 1998 at the level of the second quarter
of 1998.
16
ENGINEERING AND PRODUCT DEVELOPMENT
Engineering and product development expenses were $320,000 for the second
quarter and $592,000 for the six months ended June 30, 1998, representing
increases of $232,000 or 73% and $396,000 or 202%, respectively, from the
comparative periods of 1997. The increases result primarily from the increase
in the engineering staff employed by the Company, which is part of the Company's
commitment to improvement in quality and processes in its manufacturing
facility. The Company anticipates that engineering and product development
expenses, in absolute dollars, will remain the same or decline for the balance
of 1998 at the level of the second quarter of 1998.
INTEREST EXPENSE
Interest expense was $3,000 for the second quarter and $7,000 for the six months
ended June 30, 1998, representing decreases of $2,000 and $18,000, respectively,
from the comparative periods of 1997. Interest expense for 1997 included
interest on the $2.8 million of convertible debentures issued in October 1996.
These debentures were converted into common stock by the end of February 1997,
thus no such interest was incurred in 1998. Interest on customer loans that are
related to the discontinued operations in Singapore have been included in
"Discontinued operations: Income (loss) from operations" line of the Condensed
Consolidated Statements of Operations.
OTHER INCOME
Other income was $220,000 for the second quarter and $290,000 for the six months
ended June 30, 1998, representing increases of $114,000 and $15,000,
respectively, from the comparative periods of 1997. Other income for the second
quarter of 1998 includes $204,000 relating to the partial settlement of an
insurance claim for a fire at the Company's MPC facility in April 1997. Other
income for the first quarter of 1997 included $190,000 received in settlement of
a note receivable which had been previously written-off.
EFFECTS OF INCOME TAXES
The Company believes that it has sufficient losses to offset any taxable income
that will be generated in the current year. However, the Company's use of these
losses may result in alternative minimum taxes for Federal income tax purposes.
As a result, the Company has recorded a provision for income taxes for the six
month period ended June 30, 1998.
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 net operating results of the activities of MPM, MPS, MPC and Furnace Tech
("FT") for each of the three and six month periods ended June 30, 1997 have been
included as income or loss from discontinued operations on the Condensed
Consolidated Statement of Operations. Amounts recorded as estimated losses on
disposal of assets of the discontinued operations reflect management's best
17
estimates of the amounts expected to be realized on the sale of the assets
associated with these discontinued operations and the expenses to be incurred
through the disposal date. Such expenses include $3.5 million of interest
expense relating to the indebtedness of the discontinued operations through the
expected completion of the liquidation process for those debts guaranteed by
MPI.
In the second quarter of 1998, the Company has discontinued the consolidation of
the assets and liabilities of MPM, MPS, MPC and FT. Those liabilities and
accrued interest guaranteed by MPI have continued to be included in the
Consolidated Balance Sheets of the Company. The effect of the deconsolidation
of these entities was to reduce current liabilities and improve shareholders'
deficit by $10.2 million as of June 30, 1998.
During the quarter ended June 30, 1998, the High Court of the Republic of
Singapore ordered the Winding up of MPM Singapore Pte. Ltd. ("MPM"), a wholly
owned subsidiary of the Company. As a result of this decision, MPM cannot
continue an operating business, and it cannot be allowed to dispose of its
assets or incur further liabilities. In addition, the Company does not have any
control over the management of MPM. This function is undertaken by the Receiver
and Manager appointed by DBS Bank.
In September 1997, the High Court of the Republic of Singapore ordered the
Winding Up of "Microelectronic Packaging (S) Pte. Ltd. ("MPS"), also a wholly
owned subsidiary of the Company. As with MPM, MPS cannot continue as an
operating business, and the Company does not have any control over the
management of MPS. This function is undertaken by the Receiver and Manager
appointed by DBS Bank.
Due to the circumstances as described in the previous two paragraphs,
management, effective with the quarter ended June 30, 1998, will not consolidate
the assets and the liabilities not guaranteed of MPS and MPM, into the
consolidated financial statements for MPI and subsidiaries. For MPM, the
decision was based upon the Singapore High Court's decision to Wind Up this
company. For MPS, the Singapore High Court had already ordered the Winding Up
in September 1997, however, due to the material amount of assets remaining to be
liquidated and also due to requests made by the MPS' Receiver and Manager for
the Company to assist them in the realization and disposal of MPS' remaining
assets, Management elected to consolidate until there was a clearer
determination of the control of the subsidiary and realization of its assets.
In July 1998, Management was informed of the sale of the two buildings owned by
MPS. In addition, it became more evident during the current quarter that any
remaining realization of Accounts Receivable on the books of MPS was highly
questionable. Accordingly the decision was made to not consolidate the assets
and the liabilities not guaranteed by the Company.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1998, the Company financed its operations
from operating cash flow. During this period, operating activities of
continuing operations provided $517,000. Investing activities, consisting
principally of the acquisition of assets of continuing operations, used
$1,014,000. At June 30, 1998, the Company had a working capital deficiency of
$30,931,000 and an accumulated deficit of $68,839,000. At June 30, 1998, the
Company had outstanding approximately $25,211,000 of principal amount of debt
from its discontinued operations, which debt has been guaranteed by MPI, the
parent company.
The Company's sources of liquidity at June 30, 1998 consisted of inventories of
$4,780,000, trade accounts receivable of $1,981,000 and its U.S. cash balance of
$778,000. The Company has no borrowing arrangements available to it.
18
On July 10, 1997, The Development Bank of Singapore Limited, one of the
Company's Singapore subsidiaries largest creditors ("DBS"), appointed a Receiver
and Manager to liquidate the assets of Microelectronic Packaging (S) Pte. Ltd.
("MPS"), which is a wholly owned subsidiary of the Company which manufactured
primarily pressed ceramics products. DBS exercised its option to appoint a
Receiver and Manager under the terms of a Deed of Debenture dated November 27,
1984 (as amended) between DBS and MPS. The Company anticipates that the
Receiver and Manager will complete the liquidation of MPS in 1998. The Company
has guaranteed all of MPS's obligations to DBS of which approximately $2.6
million was outstanding as of December 31, 1997. These loans are included in
the caption "Debt of discontinued operations, in default, due on demand" in the
Consolidated Balance Sheet. There can be no assurance that such debt will be
fully paid through the liquidation of the assets of MPS. If insufficient , DBS
could demand repayment of the shortfall from the Company through the guarantee.
The Company does not have adequate resources to repay such debt if the guarantee
is called.
The Company recorded the effect of the receivership as of June 30, 1997, and the
results of operations of MPS have been classified as "Loss from discontinued
operations" in the Consolidated Statement of Operations. As a result of the
appointment of a Receiver and Manager, MPS is no longer able to manufacture its
pressed ceramic products and has ceased generating revenue since July 10, 1997.
During the last several months, the Company (as guarantor) reached written
agreements with five of MPS' creditors. For four of those creditors (see
separate discussion regarding the settlement of the DBS Bank loans below), the
Company agreed to make payments aggregating $2,341,540 as full satisfaction of
the total of all obligations to these creditors. The payments to these
creditors are due between November 15, 1998 and May 1, 1999. In addition, for
the remaining creditor guaranteed by the Company, a verbal agreement has been
reached (subject to the completion of a definitive agreement) for the payment of
$1,137,044 as full satisfaction of the total of all obligations to this
creditor. In addition, it is anticipated that warrants for the purchase of
200,000 shares of the Company's common stock at an exercise price of $1.00 per
share will be issued to this creditor.
On March 18, 1997, a Receiver was appointed to handle the liquidation of the
multilayer ceramics operations of MPM (S) Pte. Ltd. As of December 31, 1997,
essentially all of the assets of MPM had been sold. Final resolution of the
remaining liabilities will come only after the liquidation of MPS, since MPS has
guaranteed the DBS bank loan and the equipment leases entered into by MPM. The
portion of these liabilities remaining after any reduction available from the
sale of MPS and MPM assets will then be transferred to MPI, as MPI also
guaranteed these loans and leases. As of April 14, 1998, the Company (as
guarantor) reached an agreement with MPM's lessor for the payment of $483,056 as
full satisfaction of the balance remaining after the sale of the leased
equipment; this payment is due on May 1, 1999.
The holders of the debentures issued to Transpac and related parties still
retain $9.0 million of debt securities issued by MPM which are guaranteed by the
Company. The Company and MPM are in default thereunder. On April 22, 1998, the
Company (as guarantor) reached an agreement with Transpac for the payment of
$3,112,463 as full satisfaction of the total of all obligations to Transpac;
this payment is due on May 1, 1999. In addition, warrants for the purchase of
500,000 shares of the Company's common stock at an exercise price of $1.00 per
share were issued to Transpac, and the Company agreed to a payment of 30% of any
monetary proceeds from the settlement of a specific claim, and the Company
guaranteed a minimum proceeds of $1,000,000 on or prior to December 31, 1999.
As indicated previously, both MPS and MPM are indebted to DBS, and the Company
has guaranteed those obligations. As of July 20, 1998, the Company (as
guarantor) reached an agreement with DBS for the payment of $1,177,397 as full
satisfaction of total of all obligations to DBS; this payment is due on January
20, 1999. In addition, the Company agreed to a payment of 5% of any monetary
proceeds from
19
the settlement of a specific claim, and there were further considerations with
DBS that are not considered material by the Company.
Management anticipates that the foreign operations will be fully dissolved in
1998. However, Management cannot predict how long it may take the High Court of
the Republic of Singapore to complete the Winding Up of these companies.
The Company also has various capitalized leases for equipment utilized in the US
operations, with a total balance of approximately $88,000 as June 30, 1998.
These lease obligations are being serviced currently by CTM.
The Company previously purchased raw materials from its principal customer. As
of July 25, 1997, the material was supplied by the customer on consignment. As
of June 30, 1998, the Company owes to that customer approximately $3.7 million
from purchases previously made before the change to consignment. The Company is
making regular payments to that customer under an informal repayment plan.
The Company has outstanding indebtedness at June 30, 1998 to DBS denominated in
Singapore dollars of approximately Singapore $3,400,000 (U.S. equivalent
$2,144,000). Further, the Company has two buildings, also located in Singapore,
which are mortgaged as security for the Singapore loans, and for which deposits
have been received from purchasers for the sale of such buildings. 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. The sales price of the buildings
located in Singapore is somewhat more than the amount of the Company's debt
which is denominated in Singapore dollars. Accordingly, the Company believes
its exposure to foreign currency rate movements is extremely limited since it
has matched the maturity and approximate amount of assets and liabilities
denominated in the Singapore dollar.
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 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 repayment
of debts, and assuming the Company is successful in restructuring its debt, 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 1998. Any significant increase in planned capital expenditures or
other costs or any decrease in or elimination of anticipated sources of revenue
or the inability of the Company to restructure its debt could cause the Company
to restrict its business and product development efforts. There can be no
assurance that the Company will be successful in restructuring its debt on
acceptable terms, or at all. 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
debt 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. The Company may need to be reorganized under Chapter 11 of
Title 11 of the United States Code or 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
20
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.
Future Capital Needs; Need for Additional Financing. The Company's future
capital requirements will depend upon many factors, including the extent and
timing of acceptance of the Company's products in the market, requirements to
restructure and retire its substantial debt, requirements to construct,
transition and maintain existing or new manufacturing facilities, commitments to
third parties to develop, manufacture, license and sell products, the progress
of the Company's research and development efforts, the Company's operating
results and the status of competitive products. If the Company is successful in
restructuring its debt obligations, absent debt or equity financing and
excluding significant expenditures required for the Company's major projects and
repayments of debts, the Company anticipates that cash on hand and anticipated
cash flow from operations may be adequate to fund its operations through 1998.
There can be no assurance, however, that the Company will not require additional
financing prior to such date to fund its operations. In addition, the Company
may require substantial additional financing to fund its operations in the
ordinary course, particularly if the Company is unable to restructure its debt
obligations. Furthermore, the Company may require additional financing to fund
the acquisition of selected assets needed in its production facilities. There
can be no assurance that the Company will be able to obtain such additional
financing on terms acceptable to the Company, or at all.
The Company is in breach of substantially all of its debt obligations and is in
default under each of such agreements. If the Company cannot consummate its
agreements with its creditors to repay its obligations, the Company will not be
able to continue as a going concern. The Company's high level of outstanding
indebtedness and the numerous restrictive covenants set forth in the agreements
covering this indebtedness and its default position prohibit the Company from
obtaining additional bank lines of credit and from raising funds through the
issuance of debt or other securities without the prior consent of DBS and
Transpac and other creditors. The Company is currently in default on its
guarantee and loan obligations to DBS as a result of the Company's decision to
cease its multilayer and pressed ceramics operations, and to liquidate the
assets of MPM and MPS. The liquidation of MPM and MPS have also resulted in the
Company's default under a number of other agreements. There can be no assurance
that other creditors of the Company will not choose to accelerate the Company's
debt obligations and the Company will not able to repay such accelerated
obligations as they become due and immediately payable. If either a sufficient
number of creditors or any of the substantial creditors choose to accelerate
payments or to place MPI or one or more of its subsidiaries under judicial
reorganization, the Company may be forced to seek protection under Chapter 11 of
Title 11 of the United States Code or similar bankruptcy laws of Singapore. If
the Company were to seek additional financing, such additional financing may not
be available to the Company on acceptable terms, or at all. If additional funds
are raised by issuing equity or convertible or debt securities, further dilution
to the existing shareholders will result. Since adequate funds are not
currently available, the Company has been required to delay, scale back or
eliminate programs which could continue to have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
In addition, the Company has been forced to delay, downsize or eliminate other
research and development, manufacturing, construction or transitioning programs
or alliances or obtain funds through arrangements with third parties pursuant to
which the Company has been forced to relinquish rights to certain of its
technologies or to other assets that the Company would not otherwise relinquish.
The delay, scaling back or elimination of any such programs or the
relinquishment of any such rights could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
21
Future Operating Results. The Company's operating results have fluctuated
significantly in the past and will continue to fluctuate significantly in the
future depending upon a variety of factors, including foreign currency losses,
corporate and debt restructurings, creditor relationships, conversions of
significant amounts of debt into a significant amount of equity, downward
pressure in gross margins, losses due to low shipping volume, delayed market
acceptance, if any, of new and enhanced versions of the Company's products,
delays, cancellations or reschedulings of orders, delays in product development,
defects in products, integration of acquired businesses, political and economic
instability, natural disasters, outbreaks of hostilities, variations in
manufacturing yields, changes in manufacturing capacity and variations in the
utilization of such capacity, changes in the length of the design-to-production
cycle, relationships with and conditions of customers, subcontractors, and
suppliers, receipt of raw materials, including consigned materials, customer
concentration, price competition, cyclicality in the semiconductor industry and
conditions in the personal computer industries. In addition, operating results
will fluctuate significantly based upon several other factors, including the
Company's ability to attract new customers, changes in pricing by the Company,
its competitors, subcontractors, customers or suppliers, and fluctuations in
manufacturing yields. The absence of significant backlog for an extended period
of time will also limit the Company's ability to plan production and inventory
levels, which could lead to substantial fluctuations in operating results.
Accordingly, the failure to receive anticipated orders or delays in shipments
due, for example, to unanticipated shipment reschedulings or defects or to
cancellations by customers, or to unexpected manufacturing problems may cause
net sales in a particular quarter to fall significantly below the Company's
expectations, which would materially adversely affect the Company's operating
results for such quarter. The impact of these and other factors on the
Company's net sales and operating results in any future period cannot be
forecasted with certainty. In addition, the significant fixed overhead costs at
the Company's facilities, the need for continued expenditures for research and
development, capital equipment and other commitments of the Company, among other
factors, will make it difficult for the Company to reduce its expenses in a
particular period if the Company's sales goals for such period are not met. A
large portion of the Company's operating expenses are fixed and are difficult to
reduce or modify should revenues not meet the Company's expectations, thus
magnifying the material adverse impact of any such revenue shortfall.
Accordingly, there can be no assurance that the Company will not incur losses in
the future or that such losses will not have a material adverse effect on the
Company's business, financial condition and results of operations.
Repayment of Debt Obligations by MPM and MPS. As of June 30, 1998, MPM and MPS
had combined outstanding borrowings of approximately $25,211,000. Most of the
assets of MPM and MPS have been liquidated by receivers appointed by DBS. The
Company currently anticipates that the remaining proceeds from the liquidation
of assets will be insufficient to fully repay its outstanding debt. Since the
borrowings have been guaranteed by MPI, the Company has renegotiated terms for
the repayment of the remaining indebtedness. The failure of the Company to
consummate the renegotiated debt obligations would materially adversely affect
the Company's financial condition and the ability of the Company to continue as
a going concern.
Adverse Impact of MPM and MPS Liquidations on MPI. MPM and MPS are currently
being liquidated under the laws of Singapore. The liquidation of the assets of
MPM and MPS are expected to generate proceeds that total less than the
outstanding obligations of those entities guaranteed by MPI. If such shortfall
occurs, MPI may be forced to repay any outstanding debt because of its role as
guarantor of such debts. If MPI were unable to repay these debts, the Company
may be forced to seek bankruptcy protection under Chapter 11 or Chapter 7 of
Title 11 of the United States Code or similar bankruptcy laws of Singapore for
MPI and its subsidiaries.
Certain Obligations of MPS. At June 30, 1998, MPS had outstanding borrowings of
approximately $3,955,000 with DBS and had borrowed an aggregate of approximately
$11,354,000 from a consortium of customers to fund its purchase of certain
CERDIP manufacturing and alumina powder equipment
22
from Samsung Corning. All such amounts are in default. If any lender were to
accelerate the principal due as one of their remedies, such accelerations will
materially adversely affect the Company's ability to continue as an ongoing
concern and may force the Company to seek bankruptcy protection under Chapter 7
or Chapter 11 of Title 11 of the United States Code or similar bankruptcy laws
of Singapore. As a part of the Consortium, Motorola guaranteed MPS' repayment of
$2.0 million in borrowings from a certain bank lender. 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 and 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. 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 Chapter 7 or Chapter 11 of Title 11 of the United States Code
or similar bankruptcy laws of Singapore. The agreements covering the Transpac
Financing, including the convertible debenture and MPI's guarantee of such MPM
indebtedness, 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 Chapter 7 or Chapter 11 of Title 11
of the United States Code or similar bankruptcy laws of Singapore.
High Leverage. The Company is highly leveraged and has substantial debt service
requirements. The Company has $38,808,000 in liabilities as of June 30, 1998.
On June 30, 1998, the Company had a total shareholders' deficit of approximately
$28,760,000. The Company's ability to meet its debt service requirements will
be dependent upon the Company's future performance, which will be subject to
financial, business and other factors affecting the operation of the Company,
many of which are beyond its control and on the willingness of the Company's
creditors to participate in restructuring the Company's debt. There can be no
assurance that the Company will be able to meet the capital requirements
described above or, if the Company is able to meet such requirements, that the
terms available will be favorable to the Company. See "Liquidity and Capital
Resources".
Highly Competitive Industry; Significant Price Competition. The electronic
interconnection technology industry is intensely competitive. The Company
experiences intense competition worldwide from a number of manufacturers,
including Maxtek Components Corporation, VLSI Packaging, Raytheon Electronic
Systems, Hewlett-Packard Company, Advanced Packaging Technology of America and
MicroModule Systems, all of which have substantially greater financial resources
and production, marketing and other capabilities than the Company with which to
develop, manufacture, market and sell their products. The Company faces
competition from certain of its customers that have the internal capability to
produce products competitive with the Company's products and may face
competition from new market entrants in the future. In addition, corporations
with which the Company has agreements are conducting independent research and
development efforts in areas which are or may be competitive with the Company.
The Company expects its competitors to continue to improve the performance of
their current products and to introduce new products or new technologies that
provide improved performance characteristics. New product introductions by the
Company's competitors could cause a significant decline in sales or loss of
market acceptance of the Company's existing products which could materially
adversely affect the Company's business, financial condition and results of
operations. The Company is also experiencing significant price competition,
which may materially adversely affect the Company's business, financial
condition and results of operations. The Company believes that to remain
competitive in the future it will need to continue to develop new products and
to invest significant financial resources in new product development. There can
be no assurance that such new products will be developed or that
23
sales of such new products will be achieved. There can be no assurance that the
Company will be able to compete successfully in the future.
Reliance on Principal Customer. Sales to one principal customer, accounted for
85% of the Company's net sales in the second quarter of 1998 and is expected to
continue to account for most of the Company's net sales. Under the agreement
between the principal customer and the Company entered into in January 1998, the
Company is obligated to provide the principal customer 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 the
principal customer's requirements will materially adversely affect the Company's
ability to continue as an ongoing concern. In addition, under the terms of the
agreement, the principal customer is entitled to request repricing of the
Company's products. The principal customer has requested repricing for the
third quarter of 1998. Such repricing in the future may result in the Company
being unable to produce the products made for the principal customer 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 the principal
customer. 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.
Significant Customer Concentration. Historically, the Company has sold its
products to a very limited number of customers. Any reduction in orders by any
of these customers, including reductions due to market, economic or competitive
conditions in the semiconductor, personal computer or electronic industries or
in other industries that manufacture products utilizing semiconductors or MCMs,
could materially adversely affect the Company's business, financial condition
and results of operations. The supply agreements with certain of the Company's
customers do not obligate them to purchase products from the Company. The
Company's ability to increase its sales in the future will also depend in part
upon its ability to obtain orders from new customers. There can be no assurance
that the Company's sales will increase in the future or that the Company will be
able to retain existing customers or to attract new ones. Failure to develop
new customer relationships could materially adversely affect each such
subsidiary's results of operations and would materially adversely affect the
Company's business, financial condition and results of operations.
Dependence on Semiconductor and Personal Computer Industries. The financial
performance of the Company is dependent in large part upon the current and
anticipated market demand for semiconductors and products such as personal
computers that incorporate semiconductors. The semiconductor industry is highly
cyclical and historically has experienced recurring periods of oversupply The
Company believes that the markets for new generations of semiconductors will
also be subject to similar fluctuations. The semiconductor industry has
demonstrated a significant prolonged slowdown in demand. There can be no
assurance that growth will return and that the slowdown will not continue. A
reduced rate of growth in the demand for semiconductor component parts due, for
example, to competitive factors, technological change or otherwise, may
materially adversely affect the markets for the Company's products. From time
to time, the personal computer industry, like the semiconductor industry, has
experienced significant downturns, often in connection with, or in anticipation
of, declines in general economic conditions. Accordingly, any factor adversely
affecting the semiconductor or the personal computer industry or particular
segments within the semiconductor or personal computer industry may materially
adversely affect the Company's business, financial condition and results of
operations. There can be no assurance that the Company's net sales and results
of operations will not be materially adversely affected if downturns or
slowdowns in the semiconductor, personal computer industry or other industries
utilizing the Company's products continue or again occur in the future.
Technological Change; Importance of Timely Product Introduction; Uncertainty of
Market Acceptance and Emerging Markets. The markets for the Company's products
are subject to technological change and new product introductions and
enhancements. Customers in the Company's markets require products embodying
increasingly advanced electronics interconnection technology. Accordingly, the
Company must anticipate
24
changes in technology and define, develop and manufacture or acquire new
products that meet its customers' needs on a timely basis. The Company
anticipates that technological changes could cause the Company's net sales to
decline in the future. There can be no assurance that the Company will be able
to identify, develop, manufacture, market, support or acquire new products
successfully, that any such new products will gain market acceptance, or that
the Company will be able to respond effectively to technological changes. If the
Company is unable for technological or other reasons to develop products in a
timely manner in response to changes in technology, the Company's business,
financial condition and results of operations will be materially adversely
affected. There can be no assurance that the Company will not encounter
technical or other difficulties that could in the future delay the introduction
of new products or product enhancements. In addition, new product introductions
by the Company's competitors could cause a decline in sales or loss of market
acceptance of the Company's products, which could materially adversely affect
the Company's business, financial condition and results of operations. Even if
the Company develops and introduces new products, such products must gain market
acceptance and significant sales in order for the Company to achieve its growth
objectives. Furthermore, it is essential that the Company develop business
relationships with and supply products to customers whose end-user products
achieve and sustain market penetration. There can be no assurance that the
Company's products will achieve widespread market acceptance or that the Company
will successfully develop such customer relationships Failure by the Company to
develop products that gain widespread market acceptance and significant sales or
to develop relationships with customers whose end-user products achieve and
sustain market penetration will materially adversely affect the Company's
business, financial condition and results of operations. The Company's financial
performance will depend in significant part on the continued development of new
and emerging markets such as the market for MCMs. The Company is unable to
predict with any certainty any growth rate and potential size of emerging
markets. Accordingly, there can be no assurance that emerging markets targeted
by the Company, such as the market for MCMs, will develop or that the Company's
products will achieve market acceptance in such markets. The failure of emerging
markets targeted by the Company to develop or the failure by the Company's
products to achieve acceptance in such markets could materially adversely affect
the Company's business, financial condition and results of operations.
Sole or Limited Sources of Supply. Certain raw materials essential for the
manufacture of the Company's products are obtained from a sole supplier or a
limited group of suppliers. There are a limited number of qualified suppliers
of laminate substrates and die which are of critical importance to the
production of the Company's MCM products. In the manufacturing process, the
Company also utilizes consigned materials supplied by certain of its customers.
Such material supplied by customers has historically been in short supply, and
has impacted the Company's ability to produce its goods on a timely basis. The
Company's reliance on sole or a limited group of suppliers and certain customers
for consigned materials involves several risks, including a potential inability
to obtain an adequate supply of required materials and reduced control over the
price, timely delivery, and quality of raw materials. There can be no assurance
that problems with respect to yield and quality of such materials and timeliness
of deliveries will not continue to occur. Disruption or termination of these
sources could delay shipments of the Company's products and could have a
material adverse effect on the Company's business, financial condition and
operating results. Such delays could also damage relationships with current and
prospective customers, including customers that supply consigned materials.
Product Quality and Reliability; Need to Increase Production. The Company's
customers establish demanding and time-consuming specifications for quality and
reliability that must be met by the Company's products. From initial customer
contact to actual qualification for production, which may take as long as three
years, the Company typically expends significant resources. Although the
Company has generally met its customers' quality and reliability product
specifications, the Company has in the past experienced and is currently
experiencing difficulties in meeting some of these standards. Although the
Company has addressed past concerns and has resolved a number of quality and
reliability problems, there can be no assurance that such problems will not
continue or recur in the future. If such problems did continue or recur, the
Company could experience delays in shipments,
25
increased costs, delays in or cancellation of orders and product returns, any of
which would have a material adverse effect on the Company's business, financial
condition or results of operations. The manufacture of the Company's products is
complex and subject to a wide variety of factors, including the level of
contaminants in the manufacturing environment and the materials used and the
performance of personnel and equipment. The Company has in the past experienced
lower than anticipated production yields and written off defective inventory as
a result of such factors. The Company must also successfully increase production
to support anticipated sales volumes. There can be no assurance that the Company
will be able to do so or that it will not experience problems in increasing
production in the future. The Company's failure to adequately increase
production or to maintain high quality production standards would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Expansion of Operations. In order to be competitive, the Company must implement
a variety of systems, procedures and controls. The Company expects its
operating expenses to continue to increase. If orders received by the Company
do not result in sales or if the Company is unable to sustain net sales at
anticipated levels, the Company's operating results will be materially adversely
affected until operating expenses can be reduced. The Company's expansion will
also continue to cause a significant strain on the Company's management,
financial and other resources. If the Company is to grow, it must expand its
accounting and other internal management systems, and there can be no assurance
that the Company will be successful in effecting such expansion. Any failure to
expand these areas in an efficient manner at a pace consistent with the
Company's business could have a material adverse effect on the Company's results
of operations. Moreover, there can be no assurance that net sales will increase
or remain at or above recent levels or that the Company's systems, procedures
and controls will be adequate to support the Company's operations. The
Company's financial performance will depend in part on its ability to continue
to improve its systems, procedures and controls.
Intellectual Property Matters. Although the Company attempts to protect its
intellectual property rights through patents, trade secrets and other measures,
it believes that its financial performance will depend more upon the innovation,
technological expertise, manufacturing efficiency and marketing and sales
abilities of its employees. There can be no assurance that others will not
independently develop similar proprietary information and techniques or gain
access to the Company's intellectual property rights or disclose such technology
or that the Company can meaningfully protect its intellectual property rights.
There can be no assurance that any patent owned by the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications will be issued with the scope of the
claims sought by the Company, if at all. Furthermore, there can be no assurance
that others will not develop similar products, duplicate the Company's products
or design around the patents owned by the Company, or that third parties will
not assert intellectual property infringement claims against the Company. In
addition there can be no assurance that foreign intellectual property laws will
protect the Company's intellectual property rights.
Environmental Regulations. The Company is subject to a variety of local, state,
federal and foreign governmental regulations relating to the storage, discharge,
handling, emission, generation, manufacture and disposal of toxic or other
hazardous substances used to manufacture the Company's products. The Company
believes that it is currently in compliance in all material respects with such
regulations and that it has obtained all necessary environmental permits to
conduct its business. Nevertheless, the failure to comply with current or
future regulations could result in the imposition of substantial fines on the
Company, suspension of production, alteration of its manufacturing processes or
cessation of operations. Compliance with such regulations could require the
Company to acquire expensive remediation equipment or to incur substantial
expenses. Any failure by the Company to control the use, disposal, removal or
storage of, or to adequately restrict the discharge of, or assist in the cleanup
of, hazardous or toxic substances, could subject the Company to significant
liabilities,
26
including joint and several liability under certain statutes. The imposition of
such liabilities could materially adversely affect the Company's business,
financial condition or results of operations. The Company has been notified by
the United States Environmental Protection Agency that it considers the Company
to be a potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986.
Growth Strategy Through Acquisitions. As part of its growth strategy, the
Company has in the past sought and may in the future continue to seek to
increase sales and achieve growth through the acquisition of comparable or
complementary businesses or technologies. The implementation of this strategy
will depend on many factors, including the availability of acquisitions at
attractive prices and the ability of the Company to make acquisitions, the
integration of acquired businesses into existing operations, the expansion of
the Company's customer base and the availability of required capital.
Acquisitions by the Company may result in dilutive issuances of equity
securities, and in the incurrence of debt and the amortization of goodwill and
other intangible assets that could adversely affect the Company's profitability.
Any inability to control and manage growth effectively could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will successfully expand
or that growth and expansion will result in profitability or that the Company's
growth plans through acquisitions will not be inhibited by the Company's current
lack of resources.
Dependence on Key Personnel. The Company's financial performance depends in
part upon its ability to attract and retain qualified management, technical, and
sales and support personnel for its operations. Competition for such personnel
is intense, and there can be no assurance that the Company will be successful in
attracting or retaining such personnel. The loss of any key employee, the
failure of any key employee to perform in his current position or the Company's
inability to attract and retain skilled employees, as needed, could materially
adversely affect the Company's business, financial condition and results of
operations.
Volatility of Stock Price. The Company believes that factors such as
announcements of developments related to the Company's business, fluctuations in
the Company's financial results, general conditions or developments in the
semiconductor and personal computer industry and the general economy, sales of
the Company's Common Stock into the marketplace, the ability of the Company to
sell its stock on an exchange or over-the-counter, an outbreak of hostilities,
natural disasters, announcements of technological innovations or new products or
enhancements by the Company or its competitors, developments in the Company's
relationships with its customers and suppliers, or a shortfall or changes in
revenue, gross margins or earnings or other financial results from analysts'
expectations could cause the price of the Company's Common Stock to fluctuate,
perhaps substantially. In recent years the stock market in general, and the
market for shares of small capitalization stocks in particular, including the
Company, have experienced extreme price fluctuations, which have often been
unrelated to the operating performance of affected companies. There can be no
assurance that the market price of the Company's Common Stock will not continue
to experience significant fluctuations in the future, including fluctuations
that are unrelated to the Company's performance.
Recurring Net Operating Losses. The Company's decision to discontinue its
multilayer ceramic operations was the primary factor contributing to its 1996
net loss of $41,842,000. The decision by the principal secured creditors of the
Company's pressed ceramic operations to liquidate that operation's assets was
the primary factor contributing to the 1997 net loss of $11,496,000, as well as
additional loss provisions made in 1997 relating to the discontinuance of the
multilayer ceramic operations. At June 30, 1998, the Company had a working
capital deficiency of $30,931,000 and an accumulated deficit of $68,839,000.
The Company had outstanding at June 30, 1998 approximately $25,211,000 of
principal amount of debt from its discontinued operations, which debt has been
guaranteed by MPI, the parent company, and most of which debt is in default and
due on demand.
27
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 two
years, 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 and the software products used by the Company
contain all necessary date code changes. In addition, the Company has not
comprehensively tested all of its internal software systems, or the third-party
software it uses in its business, for Year 2000 problems. Year 2000 problems in
the Company's internal software, or in the software of third parties that the
Company uses in its business, could have a material adverse effect on the
Company's business, operating results and financial condition.
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.
28
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Due to the closure of the Company's Singapore operations, various
creditors have instituted legal actions against the Company and its
subsidiaries in order to recover amounts due. In addition, numerous
other creditors and parties to contracts have threatened or initiated
litigation to recoup their loans and/or investments. These claims will
not be fully satisfied through the liquidation of assets in Singapore.
If these claims are not favorably resolved, they will have a material
adverse effect on the Company's financial condition, results of
operations and ability to continue as a going concern because the
Company has guaranteed substantially all of these debts.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
As of June 30, 1998, the Company and its subsidiaries were in default
on most of their debt obligations, which total $30.3 million due to
non-payment of principal or interest payments due. The amount above
includes MPM's $9.0 million in debentures owing to Transpac, which are
in default under the terms of the debentures in part due to non-payment
of interest which was due on December 31, 1996. The repayment of the
debentures and other debt in default have been guaranteed by MPI.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on June 17,
1998. The following items were voted upon by the shareholders with all
items being approved.
Votes
Against or Votes
Votes For Withheld Abstained
(1) Election of the following persons, who were
the only nominees, as Directors to hold office
until the next Annual Meeting or until their
successors are elected and qualified:
Lewis Solomon 9,041,185 37,329
Frank L. Howland 9,042,199 36,315
Gary S. Stein 9,042,199 36,315
Anthony J. A. Bryan 9,042,199 36,315
Andrew K. Wrobel 9,042,199 36,315
(4) Ratification of BDO Seidman, LLP as the
Company's independent accountants for the
fiscal year ending December 31, 1998. 9,052,387 12,025 14,102
29
Item 5. Other Information
On July 1, 1998, Waldemar Heeb was appointed as a Director of the
Company.
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
----------- -----------
10.76 Restructuring, Settlement and Mutual Release Agreement
between ORIX Leasing Singapore Limited and the Company
dated April 14, 1998.
10.77 Restructuring, Settlement and Mutual Release Agreement
between Texas Instruments Singapore (Pte.) Ltd. and the
Company dated April 24, 1998.
10.78 Restructuring, Settlement and Mutual Release Agreement
between Samsung-Corning Co., Ltd. and the Company dated
May 19, 1998.
10.79 Restructuring, Settlement and Mutual Release Agreement
between Transpac Capital Pte. Ltd., Transpac Industrial
Holdings Ltd., Regional Investment Company, Ltd. and
Natsteel Equity III Pte. Ltd., and the Company dated
April 22, 1998.
10.80 Forbearance, Restructure and Mutual Release Agreement
between Motorola, Inc. and the Company dated July 1,
1998.
10.81 Restructuring, Settlement and Mutual Release Agreement
between NS Electronics Bangkok (1993) Ltd. and the
Company dated May 29, 1998.
10.82 Restructuring, Settlement and Mutual Release Agreement
between the Development Bank of Singapore Limited and
the Company dated July 10, 1998.
10.83 Form of Warrant to Purchase Common Stock dated April 24,
1998 issued to Transpac Capital Pte. Ltd., Transpac
Industrial Holdings Ltd., Regional Investment Company,
Ltd. and Natsteel Equity III Pte. Ltd.
27.1 Financial Data Schedule
30
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: August 11, 1998 By: /s/ DENIS J. TRAFECANTY
----------------- ---------------------------
Denis J. Trafecanty
Senior Vice President,
Chief Financial Officer and Secretary
31
EXHIBIT INDEX
Number Description
- ---------- -----------
10.76 Restructuring, Settlement and Mutual Release Agreement between
ORIX Leasing Singapore Limited and the Company dated April 14,
1998.
10.77 Restructuring, Settlement and Mutual Release Agreement between
Texas Instruments Singapore (Pte.) Ltd. and the Company dated
April 24, 1998.
10.78 Restructuring, Settlement and Mutual Release Agreement between
Samsung-Corning Co., Ltd. and the Company dated May 19, 1998.
10.79 Restructuring, Settlement and Mutual Release Agreement between
Transpac Capital Pte. Ltd., Transpac Industrial Holdings Ltd.,
Regional Investment Company, Ltd. and Natsteel Equity III Pte.
Ltd., and the Company dated April 22, 1998.
10.80 Forbearance, Restructure and Mutual Release Agreement between
Motorola, Inc. and the Company dated July 1, 1998.
10.81 Restructuring, Settlement and Mutual Release Agreement between NS
Electronics Bangkok (1993) Ltd. and the Company dated May 29,
1998.
10.82 Restructuring, Settlement and Mutual Release Agreement between the
Development Bank of Singapore Limited and the Company dated July
10, 1998.
10.83 Form of Warrant to Purchase Common Stock dated April 24, 1998
issued to Transpac Capital Pte. Ltd., Transpac Industrial Holdings
Ltd., Regional Investment Company, Ltd. and Natsteel Equity III
Pte. Ltd.
27.1 Financial Data Schedule
32