SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) | |||
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For the quarterly period ended June 28, 2008 | |||||
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OR | |||||
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| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) | |||
For the transition period from to
Commission File No. 0-22384
MICRO COMPONENT TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Minnesota |
| 41-0985960 |
(State or other jurisdiction of |
| (I.R.S. Employer |
2340 West County Road C, St. Paul, MN 55113-2528
(Address of principal executive offices)
(651) 697-4000
(Registrant’s telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o |
| Accelerated Filer o |
| Non-Accelerated Filer x |
| Smaller Reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares outstanding of the Registrant’s Common Stock, as of August 12, 2008 was 37,876,889.
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
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| NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 6 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION | 12 | |
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MICRO COMPONENT TECHNOLOGY, INC. AND SUBSIDIARIES
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
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| June 28, |
| December 31, |
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| 2008 |
| 2007 |
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Assets |
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Current assets |
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Cash and cash equivalents |
| $ | 392 |
| $ | 373 |
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Accounts receivable, less allowance for doubtful accounts of $121 and $121, respectively |
| 2,418 |
| 3,044 |
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Inventories |
| 1,538 |
| 1.671 |
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Other |
| 165 |
| 108 |
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Total current assets |
| 4,513 |
| 5,196 |
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Property, plant and equipment, net |
| 96 |
| 114 |
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Debt issuance costs, net of accumulated amortization of $1,566 and $1,518, respectively |
| 120 |
| 167 |
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Other assets |
| 32 |
| 32 |
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Total assets |
| $ | 4,761 |
| $ | 5,509 |
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Liabilities and Stockholders’ Deficit |
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Current liabilities: |
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Current portion of long-term debt |
| $ | 233 |
| $ | — |
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Accounts payable |
| 974 |
| 698 |
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Accrued compensation |
| 517 |
| 481 |
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Accrued interest |
| 150 |
| 158 |
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Accrued warranty |
| 94 |
| 114 |
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Customer prepayments and unearned service revenue |
| 218 |
| 229 |
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Other accrued liabilities |
| 225 |
| 158 |
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Total current liabilities |
| 2,411 |
| 1,838 |
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Long-term debt, net of discounts of $1,258 and $1,804, respectively |
| 9,629 |
| 9,320 |
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Total liabilities |
| 12,040 |
| 11,158 |
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Stockholders’ Deficit: |
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Preferred stock, $.01 par value, 1,000,000 authorized, none issued and outstanding |
| — |
| — |
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Common stock, $.01 par value, 100,000,000 authorized, 37,876,889 and 37,876,889 issued, respectively |
| 379 |
| 379 |
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Additional paid-in capital |
| 104,378 |
| 104,207 |
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Accumulated deficit |
| (112,036 | ) | (110,235 | ) | ||
Total stockholders’ deficit |
| (7,279 | ) | (5,649 | ) | ||
Total liabilities and stockholders’ deficit |
| $ | 4,761 |
| $ | 5,509 |
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See notes to unaudited condensed consolidated financial statements
3
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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| Three Months Ended |
| Six Months Ended |
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| June 28, |
| June 30, |
| June 28, |
| June 30, |
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| 2007 |
| 2008 |
| 2007 |
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Net sales |
| $ | 2,963 |
| $ | 3,960 |
| $ | 5,161 |
| $ | 7,337 |
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Cost of sales |
| 1,531 |
| 1,875 |
| 2,664 |
| 3,479 |
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Gross profit |
| 1,432 |
| 2,085 |
| 2,497 |
| 3,858 |
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Operating expenses: |
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Selling, general and administrative |
| 1,054 |
| 1,121 |
| 2,216 |
| 2,226 |
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Research and development |
| 432 |
| 484 |
| 896 |
| 984 |
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Restructuring charge |
| 78 |
| 137 |
| 78 |
| 137 |
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Total operating expenses |
| 1,564 |
| 1,742 |
| 3,190 |
| 3,347 |
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Income (loss) from operations |
| (132 | ) | 343 |
| (693 | ) | 511 |
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Interest income |
| 4 |
| 2 |
| 6 |
| 5 |
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Interest expense |
| (275 | ) | (289 | ) | (526 | ) | (563 | ) | ||||
Interest expense – amortization of warrant discounts and debt issue costs |
| (282 | ) | (306 | ) | (563 | ) | (451 | ) | ||||
Other income (expense) |
| — |
| (30 | ) | (25 | ) | 59 |
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Total interest and other |
| (553 | ) | (623 | ) | (1,108 | ) | (950 | ) | ||||
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Net income |
| $ | (685 | ) | $ | (280 | ) | $ | (1,801 | ) | $ | (439 | ) |
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Net income per share: |
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Basic |
| $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.05 | ) | $ | (0.01 | ) |
Diluted |
| $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.05 | ) | $ | (0.01 | ) |
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Weighted average common and equivalent shares outstanding: |
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Basic |
| 37,877 |
| 36,665 |
| 37,877 |
| 36,665 |
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Diluted |
| 37,877 |
| 36,665 |
| 37,877 |
| 36,665 |
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See notes to unaudited condensed consolidated financial statements
4
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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| Six Months Ended |
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| June 28, |
| June 30, |
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| 2008 |
| 2007 |
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Cash flows from operating activities: |
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Net loss |
| $ | (1,801 | ) | $ | (439 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
| 31 |
| 46 |
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Amortization |
| 562 |
| 451 |
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Share-base compensation expense |
| 171 |
| 10 |
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Changes in assets and liabilities: |
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Accounts receivable |
| 626 |
| 61 |
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Inventories |
| 133 |
| (1,122 | ) | ||
Other assets |
| (57 | ) | (7 | ) | ||
Accounts payable |
| 276 |
| 872 |
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Other accrued liabilities |
| 64 |
| 83 |
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Net cash provided (used) in operating activities |
| 5 |
| (45 | ) | ||
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Cash flows from investing activities: |
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Purchases of property, plant, and equipment |
| (13 | ) | (50 | ) | ||
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Net cash used in investing activities |
| (13 | ) | (50 | ) | ||
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Cash flows from financing activities: |
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Proceeds (payments) on line of credit |
| (280 | ) | 47 |
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Proceeds on long term note, net of discounts |
| 307 |
| 297 |
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Stock Registration Fees |
| — |
| (14 | ) | ||
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Net cash provided by financing activities |
| 27 |
| 330 |
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Net increase in cash and cash equivalents |
| 19 |
| 235 |
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Cash and cash equivalents at beginning of period |
| 373 |
| 200 |
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Cash and cash equivalents at end of period |
| $ | 392 |
| $ | 435 |
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Supplemental cash flow information: |
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Cash paid for interest |
| $ | 534 |
| $ | 545 |
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See notes to unaudited condensed consolidated financial statements
5
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
Basis of Presentation
The consolidated financial statements include the accounts of the parent company and our subsidiaries after elimination of all significant intercompany balances and transactions. All significant subsidiaries are 100% owned.
The unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (generally accepted accounting principles) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management all adjustments, including normal recurring adjustments, necessary for a fair presentation of the interim periods presented have been included. The interim results are not necessarily indicative of the operating results expected for the full fiscal year ending on December 31, 2008.
Our consolidated financial statements have been prepared on the assumption that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Report of the Independent Registered Public Accounting Firm on the financial statements of the Company as of and for the fiscal year ended December 31, 2007 included in Form 10-K contained an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
As of June 28, 2008, the Company had an accumulated deficit of $112.0 million and incurred a net loss of $1.8 million for the six-month period ended June 28, 2008. As of June 28, 2008, the Company had cash and cash equivalents of $392,000, working capital of $2.1 million, a current ratio of 1.87, total assets of $4.8 million and total liabilities of $12.0 million. Our ability to generate cash and operating income is dependent on increasing our customer base to expand the penetration of our product technology and the realization of our lower operating expense targets.
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Interim unaudited financial results should be read in conjunction with the audited financial statements included in the SEC Report on Form 10-K, for the period ended December 31, 2007.
2. EARNINGS PER SHARE
Basic earnings per share are computed using the weighted average number of common shares outstanding during each period. Diluted earnings per share include the dilutive effect of common shares potentially issuable upon the exercise of stock options, warrants and the convertible term note outstanding. The following table reconciles the denominators used in computing basic and diluted earnings per share:
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| Three Months Ended |
| Six Months Ended |
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| June 28, |
| June 30, |
| June 28, |
| June 30, |
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(in thousands) |
| 2008 (1) |
| 2007 (1) |
| 2008 (1) |
| 2007 (1) |
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Weighted average common shares outstanding |
| 37,877 |
| 36,665 |
| 37,877 |
| 36,665 |
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Effect of dilutive stock options and warrants |
| — |
| — |
| — |
| — |
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| 37,877 |
| 36,665 |
| 37,877 |
| 36,665 |
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(1) We reported a loss for the period indicated. No adjustments were made for the effect of stock options and warrants, which represented 22,116,796 and 11,935,398 shares at June 28, 2008 and June 30 2007, respectively, as the effect is antidilutive.
3. BALANCE SHEET INFORMATION
Major components of inventories were as follows (in thousands):
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| June 28, |
| December 31, |
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| 2008 |
| 2007 |
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Raw materials |
| $ | 942 |
| $ | 1,149 |
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Work-in-process |
| 590 |
| 280 |
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Finished goods |
| 6 |
| 242 |
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| $ | 1,538 |
| $ | 1,671 |
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In accordance with accounting principles generally accepted in the United States, we value our inventories at the lower of cost or market.
The following table provides the inventory reserves for the quarter ended June 28, 2008.
Inventory reserve balance at December 31, 2007 |
| $ | 4,328 |
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Additional inventory reserve |
| 37 |
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Release of inventory reserve on scrap of goods |
| (62 | ) | |
Inventory reserve balance at June 28, 2008 |
| $ | 4,303 |
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We provide a standard thirteen month warranty program for our equipment products. We record provisions for warranty claims for these products based upon historical claim
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performance. The following table provides the expense recorded and charges against our reserves for the quarter ended June 28, 2008.
Accrued warranty balance at December 31, 2007 |
| $ | 114 |
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Provision |
| 4 |
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Warranty claims |
| (24 | ) | |
Accrued warranty balance at June 28, 2008 |
| $ | 94 |
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4. FINANCING TRANSACTIONS
On March 9, 2004, we completed a $5.0 million secured financing transaction with an institutional lender, Laurus Master Fund, Ltd. (referred to herein, together with its affiliates, as “Laurus”). Under the terms of the three-year agreement, we put in place a $3.0 million secured working capital line of credit and a $2.0 long-term convertible note. In connection with the execution of this credit facility, we issued to the lender a seven-year warrant to purchase 400,000 shares of our common stock at exercise prices ranging from $2.30 to $2.88. Our existing secured lending relationship was terminated as a result of this transaction. This credit facility is secured by all the assets of the Company.
On January 28, 2005, we completed an amendment to the financing agreement with Laurus to defer payments on the long-term convertible note. As part of this amendment, the conversion prices on both notes were reduced. We also issued Laurus at that time a seven-year warrant to purchase 150,000 shares of common stock at $.67 per share.
On April 29, 2005, we completed another financing transaction with Laurus in which we borrowed an additional $2.5 million, and which was convertible into shares of common stock. We also issued Laurus at that time an option to purchase 2,556,651 shares of common stock at an exercise price of $.01 per share. We received net proceeds of approximately $2.4 million at the closing.
On February 17, 2006, we restructured the financing with Laurus, and increased the total maximum secured indebtedness with Laurus to $9.25 million. The Company also issued Laurus a 10-year option to purchase 2,500,000 shares at an exercise price of $.01 per share.
On December 27, 2006, Laurus acquired a 10% convertible note from another note holder with a principal amount of $1.2 million. The Note has a conversion price of $.50 per share, and is due and payable in full on September 30, 2009.
On March 29, 2007, we restructured the financing with Laurus, and increased the total secured indebtedness to $10.25 million. The restructured financing includes a $5.25 million term note. Interest is charged on the term note at the prime rate plus 2.5%. The note is non-convertible and payable in full on September 30, 2009. In addition to the $5.25 million note, there is a $4.0 million working capital line of credit, which is payable in full on September 30, 2009. Interest is charged on the line at the prime rate plus 2.5%. As of June 28, 2008, there was a $443,000 over-advance in excess of the borrowing base on the
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working capital line of credit. The restructured financing also includes an additional $1.0 million term note. The proceeds from the $1.0 million term note, net of fees and expenses from the 2007 refinancing, are required to be held in a restricted account at a bank, and will only be released by the bank to the Company, upon approval of Laurus in its discretion, for the manufacture of demo equipment. As of June 28, 2008 the outstanding balance on this note was $964,000. Interest is charged on this note at the prime rate plus 2.0% and the principal is payable in full on September 30, 2009. As part of the 2007 restructuring, the Company issued Laurus a 10-year option to purchase 5,000,000 shares at an exercise price of $0.01 per share.
On December 6, 2007, the Company entered into an agreement with Laurus to extend the maturity dates for all of the notes issued by the Company to Laurus, from dates starting in February 2008 to September 30, 2009. These notes had an aggregate principal amount of $11,151,000 as of June 28, 2008. The agreement also extends to January 1, 2009 the commencement date for principal payments under the $5,250,000 term-note, and reduces the monthly principal payments prior to the maturity date from $87,500 per month to $44,000 per month. In consideration for the extension by Laurus of the note maturity dates, the Company granted Laurus a ten-year warrant to purchase 3,500,000 shares of common stock with an exercise price of $.01 per share. Laurus has agreed in the transaction documents that it will not sell any shares acquired by it under the 3,500,000 share warrant, or under the 5,000,000 share warrant granted to it as part of the March 2007 refinancing, prior to January 1, 2009. Laurus has also agreed that sales by it of Company common stock underlying the 2007 warrants on any trading day after January 1, 2009 will not exceed 20% of the aggregate number of shares of Company common stock sold on that day.
On July 31, 2008, the Company entered into another loan transaction with Laurus. The Company borrowed an additional $3,500,000 pursuant to a secured note. The note bears interest at the rate of twelve (12%) percent per annum, and is secured by all of the assets of the Company and its subsidiaries. As part of this transaction, the Company granted to Laurus a ten-year warrant to purchase 31,000,000 shares of the Company’s common stock at $0.01 per share. The new loan matures on November 30, 2008. Also as part of this transaction, the allowed over-advance on the Company’s revolving line of credit with Laurus was increased to $1,000,000 until November 30, 2008. The maturity date of this new loan, and of all of the Company’s debt with Laurus (including the over- advance), will be extended to July 31, 2010 if, no later than November 30, 2008, the Company holds a shareholders’ meeting to increase its number of authorized shares, and grants to Laurus an additional ten-year warrant to purchase 146,143,792 shares of the Company’s common stock at $0.01 per share.
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The table below details the warrants and options issued to Laurus in connection with prior financing transactions, excluding the July 31, 2008 transaction:
Grant Date |
| December |
| March |
| February |
| April |
| January |
| March |
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Number of shares |
| 3,500,000 |
| 5,000,000 |
| 2,500,000 |
| 2,556,651 |
| 150,000 |
| 400,000 |
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Exercise Price |
| $ | 0.01 |
| $ | 0.01 |
| $ | 0.01 |
| $ | 0.01 |
| $ | 0.67 |
| $2.30 - $2.88 |
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Dividend yield |
| 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Expected volatility |
| 98.61 | % | 88.63 | % | 122.09 | % | 95.33 | % | 93.13 | % | 98.51 | % | ||||||
Risk-free interest rate |
| 3.53 | % | 4.54 | % | 4.62 | % | 3.90 | % | 3.71 | % | 2.98 | % | ||||||
Expected life of options |
| 10.0 years |
| 10.0 years |
| 10.0 years |
| 7.0 years |
| 3.5 years |
| 3.0 years |
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Discount on long-term debt |
| $ | 620,000 |
| $ | 1,131,000 |
| $ | 821,000 |
| $ | 473,000 |
| $ | 51,000 |
| $ | 391,000 |
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Debt Issue Costs |
| $ | 0 |
| $ | 56,000 |
| $ | 347,000 |
| $ | 104,000 |
| $ | 0 |
| $ | 343,000 |
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Unexercised as of June 28, 2008 |
| 3,500,000 |
| 5,000,000 |
| 1,860,000 |
| 785,084 |
| 150,000 |
| 400,000 |
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5. STOCK BASED COMPENSATION
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R “Share-Based Payment”, on January 1, 2006. This statement requires us to recognize the cost of employee and director services received in exchange for the stock options it has awarded. Under SFAS 123R, we are required to recognize compensation expense over an award’s vesting period based on the award’s fair value at the date of grant. We have elected to adopt SFAS 123R on a modified prospective basis; accordingly the financial statements for periods prior to January 1, 2006 do not include stock-based compensation costs calculated under the fair value method.
The fair value of options granted under the stock options for the three months and six months ended June 28, 2008 and June 30, 2007, was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions.
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| Three Months Ended |
| Six Months Ended |
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| June 28, |
| June 30, |
| June 28, |
| June 30, |
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| 2008 |
| 2007 |
| 2008 |
| 2007 |
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Dividend yield |
| 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||
Expected volatility |
| 90.03 | % | 93.45 | % | 90.03 | % | 88.54 | % | ||||
Risk-free interest rate |
| 3.65 | % | 4.84 | % | 3.65 | % | 4.54 | % | ||||
Expected life of options |
| 3.5 years |
| 3.5 years |
| 3.5 years |
| 3.5 years |
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Fair value per share of options granted |
| $ | 0.07 |
| $ | 0.18 |
| $ | 0.07 |
| $ | 0.16 |
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6. RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which is effective for interim and annual reporting periods beginning after November 15, 2007. This statement provides a definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements for future transactions. This statement is effective for us on January 1, 2008, the first day of our 2008 fiscal year. The adoption of this pronouncement does not have a material impact on our financial position or results of operations.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). The Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 will be effective for the first fiscal year that begins after November 15, 2007. The adoption of this pronouncement does not have a material impact on our financial position or results of operations.
May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles,” which has been established by the FASB as a framework for entities to identify the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. SFAS No. 162 is not expected to result in a change in current practices. SFAS No. 162 is effective 60 days following the Securities and Exchange Commission’s (“SEC”) approval of the Public Company Accounting Oversight Board’s (“PCAOB”) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” Accordingly, the Company will adopt SFAS No. 162 within the required period.
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
This Report on Form 10-Q contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts, but rather are based on our current expectations, estimates and projections about the semiconductor capital equipment industry, and our beliefs and assumptions. We intend words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. These factors could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties are described elsewhere in this report on Form 10-Q and our report on Form 10-K for the year ended December 31, 2007. We caution you not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date of this Report on Form 10-Q. We are not obligated to update these statements or publicly release the result of any revisions to them to reflect events or circumstances after the date of this Report on Form 10-Q or to reflect the occurrence of unanticipated events.
Overview
We supply equipment automation solutions for the global semiconductor test and assembly manufacturing market. Our solutions include automated test handlers, factory automation software and our new integrated Smart Solutions equipment product line. We believe that our products can significantly improve the productivity, yield and throughput of the back-end, or to the post-wafer manufacturing process, including assembling, packaging, testing and singulating semiconductor devices.
Beginning in 1999 and continuing into 2000, we broadened our strategy from that of a test handler manufacturer to becoming a provider of comprehensive equipment automation solutions for the back-end of the semiconductor manufacturing process. First, we developed and introduced in February 1999 our Tapestry strip handler. Tapestry combines strip handling capability with robotics, machine vision technology and critical software, enabling the testing and tracking of semiconductor devices in strip form and the generation of critical process data throughout the test process. Second, in June 1999 we acquired the Infinity Systems division of Fico. Infinity Systems has been involved in the development of factory automation software for the semiconductor manufacturing industry. Infinity Systems’ software expertise was integral to the development of our integrated Smart Solutions equipment product line, introduced in May 2000. Together with a third party tester, our Smart Solutions equipment products including our Tapestry handler enable complete automation of the test, laser mark, mark inspect and other processes of the back end.
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Sales of our products and services are dependent upon demand by semiconductor manufacturers and independent test and assembly facilities, and their increasing automation needs. The semiconductor capital equipment market has been marked by recent periods of contraction and weakness which, if continued, could have the potential to have a material adverse effect on our financial condition, results of operations, and cash flows.
Critical Accounting Policies
Revenue Recognition
Under SAB 104, we recognize revenue upon shipment, as our terms are FOB shipping point, for established equipment products that have previously satisfied existing customer performance specifications and that provide for full payment tied to shipment. Revenue for products that have not previously satisfied customer performance specifications or from sales where all or a portion of customer payment is based upon acceptance are only recognized upon customer acceptance. As such, in periods of increasing shipments, revenues will be deferred if the shipments are for new customers or new products, or the payment terms are tied to acceptance criteria. If these conditions exist, we may report revenue levels that are not reflective of actual shipment growth rates. Conversely, in periods of decreasing shipments, we potentially could recognize revenues related to shipments made in prior periods. Consequently, if these conditions exist, we may report revenue levels that are greater than actual shipments. During the quarter ended June 28, 2008, $22,000 of revenue was deferred under SAB 104.
Allowance for Doubtful Accounts
We record a provision for doubtful accounts based on specific identification of our accounts receivable. This involves a degree of judgment based on discussion with our internal sales and marketing groups, our customer base and the examination of the financial stability of our customers. There can be no assurance that our estimates will match actual amounts ultimately written off. During periods of downturn in the market for semiconductor capital equipment or economic recession, a greater degree of risk exists concerning the ultimate collectability of our accounts receivable due to the impact that these conditions might have on our customer base. No provisions were recorded for the quarter ended June 28, 2008.
Valuation of Inventories
Our inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (“FIFO”) method. We maintain a standard costing system for our inventories. Assumptions with respect to direct labor utilization, standard direct and indirect cost rates,
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vendor pricing and utilization of factory capacities are formulated in the development of our standard costing system. Sudden or continuing changes in the semiconductor capital equipment market affecting our shipments can result in significant production variances from our standard rates. These variances directly impact our gross profit performance and may cause variability in gross profits results from reporting period-to-reporting period. Our labor and overhead rates are set for production rates that match typical market conditions. Production variances are charged to cost of sales each quarter as incurred. Material standards are based upon normal purchase volumes. Purchase price variances are charged to costs of sales each quarter as incurred.
Provisions to reduce inventories to the lower of cost or market are made based on a review of excess and obsolete inventories through an examination of historical component consumption, current market demands and shifting product technology. Significant assumptions with respect to market trends and customer product acceptance are utilized to formulate our provision methods. Sudden or continuing downward changes in the semiconductor capital equipment market may cause us to record additional inventory revaluation charges in future periods. No write-down of our inventories occurred for the quarter ended June 28, 2008.
Accrued Warranty
We provide a standard thirteen month warranty program for our equipment products. We record provisions for warranty claims for these products based upon historical claim performance. This approach has been applied since the inception of the warranty program and involves a degree of subjectivity in that historical performance is used to estimate future warranty claims. There can be no assurance that our estimates will match the actual amount of future warranty claims.
Results of Operations for the Three Months Ended June 28, 2008 and June 30, 2007
Net sales for the three months ended June 28, 2008 decreased by $997,000 or 25% to $3.0 million compared to $4.0 million for the three months ended June 30, 2007. This decline was due in part to reduced purchases by semiconductor manufacturers and general economic conditions.
Gross margin for the three months ended June 28, 2008 was $1.4 million or 48% of net sales compared to $2.1 million or 53% of net sales for the comparable period in the prior year. The margin percent decrease is a result of changes in product and customer mix.
Total operating expense for the quarter decreased by $178,000 or 10% from $1.7 million to $1.6 million over the prior year. Selling, general and administrative expenses for the three months ended June 28, 2008 were $1.1 million or 36% of net sales compared to $1.1 million or 28% of net sales for the three months ended June 30, 2007. Selling, general and administrative expenses for the three months included $9,000 of share-based compensation expense. Research and development expenses for the second quarter of 2008 were $432,000
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or 15% of net sales compared to $484,000 or 12% of net sales in the second quarter of 2007. On June 18, 2008, we initiated an employee restructuring. A restructuring charge of $78,000 for the second quarter of 2008 was recorded for future cash expenditures for termination benefits and related costs. Cash payments are expected to be completed by third quarter 2008.
The net loss for the three months ended June 28, 2008 was $685,000 or $0.02 per basic and fully-diluted share compared to net loss for the three months ended June 30, 2007 of $280,000 or $0.01 per basic and fully-diluted share.
Results of Operations for the Six Months Ended June 28, 2008 and June 30, 2007
Net sales for the six months ended June 28, 2008 decreased $2.1 million or 29% to $5.2 million compared to $7.3 million for the six months ended June 30, 2007. This decline is due in part to reduced purchases by semiconductor manufacturers and general economic conditions.
Gross margins for the first six months of 2008 decreased by $1.4 million to $2.5 million, or 48% of net sales, from $3.9 million, or 53% of net sales, for the comparable period in the prior year. The margin percent decrease is a result of changes in product and customer mix.
Total operating expense for the first six months of 2008 decreased by $157,000 or 5% from $3.3 million to $3.2 million in the first six months of 2007. Selling, general and administrative expense for the first six months of 2008 was $2.2 million or 43% of net sales, compared to $2.2 million, or 30% of net sales for the first six months of 2007. Selling, general and administrative expenses for the six months included $171,000 of share-based compensation expense. Research and development expense for the first six months of 2008 was $896,000, or 17% of net sales compared to $984,000, or 13% of net sales for the first six months of 2007. On June 18, 2008, we initiated an employee restructuring. A restructuring charge of $78,000 for the second quarter of 2008 was recorded for future cash expenditures for termination benefits and related costs. Cash payments are expected to be completed by third quarter 2008.
Although there has been an increase in expenses as a percentage of sales resulting from the decrease in net sales, the dollar amount of operating expenses has been reduced by $270,000, excluding restructuring charges and share-based compensation expense.
The net loss for the first six months of 2008 was $1.8 million or $0.05 per share compared to net loss of $439,000 or $0.01 per share in the comparable prior year period. The net loss included $563,000 of amortization and $171,000 of share based compensation expenses.
Liquidity and Capital Resources
Cash provided by operations was $5,000 in the six months ended June 28, 2008 as compared to cash used in operations of $55,000 in the six months ended June 30, 2007. Accounts receivable decreased $626,000 from December 31, 2007 due to a higher level of collections.
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Accounts payable increased $276,000 from year-end primarily due to inventory purchases. Inventory finished at $1.5 million, which consists of $5.8 million of gross inventories and $4.3 million of reserves. Capital expenditures were $13,000 for the first six months of 2008 compared to $50,000 in the first six months of 2007. $307,000 was borrowed during the first six months of 2008, while borrowings against the line of credit were reduced by $280,000.
We ended the quarter with $392,000 in cash and cash equivalents up slightly from $373,000 at the end of 2007. Working capital finished at a $2.1 million compared to $3.4 million at the end of 2007. Working capital is positive as of June 28, 2008, primarily due to the classification of substantially all debt as long-term.
As of June 28, 2008, $443,000 of an over-advance in excess of the borrowing base on the working capital line of credit was utilized. As a result of a loan transaction with Laurus, on July 31, 2008 (described below), the over-advance was increased to $1.0 million until November 30, 2008.
On July 31, 2008, the Company entered into another loan transaction with Laurus. The Company borrowed an additional $3,500,000 pursuant to a secured note. The note bears interest at the rate of twelve (12%) percent per annum, and is secured by all of the assets of the Company and its subsidiaries. As part of this transaction, the Company granted to Laurus a ten-year warrant to purchase 31,000,000 shares of the Company’s common stock at $0.01 per share. The new loan matures on November 30, 2008. Also, as part of this transaction, the allowed over-advance on the Company’s revolving line of credit with Laurus was increased to $1,000,000 until November 30, 2008. The maturity date of this new loan, and of all of the Company’s debt with Laurus (including the over-advance), will be extended to July 31, 2010 if, no later than November 30, 2008, the Company holds a shareholders’ meeting to increase its number of authorized shares, and grants to Laurus an additional ten-year warrant to purchase 146,143,792 shares of the Company’s common stock at $0.01 per share. If the maturity date of the Company’s debt is not extended to July 31, 2010, starting in January 2009, monthly principal payments of $44,000 become due and payable to Laurus.
As of August 12, 2008, $12.2 million of principal is owed to Laurus. Monthly interest payments are added to the Company’s working capital line of credit. On September 30, 2009, all remaining principal and interest due from the Company to Laurus on the existing financing agreements becomes due and payable. In the event that we are unable to repay, extend or refinance our debt payments in 2008 and 2009, Laurus could potentially take a number of actions as secured creditor which would have a material negative impact on the Company and its shareholders, including foreclosure, a forced sale of all or part of the Company, and/or liquidation. Further, if future financing requirements are satisfied through the issuance of equity or debt instruments, shareholders may experience additional dilution in terms of their percentage of ownership of our securities.
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IMPACT OF ACCOUNTING STANDARDS
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which effective for interim and annual reporting periods beginning after November 15, 2007. This statement provides a definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements for future transactions. We do not expect the adoption of this pronouncement to have a material impact on our financial position or results of operations.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). The Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 will be effective for the first fiscal year that begins after November 15, 2007. We do not expect the adoption of this pronouncement to have a material impact on our financial position or results of operations.
May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles,” which has been established by the FASB as a framework for entities to identify the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. SFAS No. 162 is not expected to result in a change in current practices. SFAS No. 162 is effective 60 days following the Securities and Exchange Commission’s (“SEC”) approval of the Public Company Accounting Oversight Board’s (“PCAOB”) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” Accordingly, the Company will adopt SFAS No. 162 within the required period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The vast majority of our transactions are denominated in U.S. dollars; as such, fluctuations in foreign currency exchange rates have historically had little impact on us. Inflation has not been a significant factor in our operations in any of the periods presented, and it is not expected to affect operations in the future. A 1% increase in interest rates would increase our interest expense by approximately $100,000 per year. Our short term revolving line of credit and long-term convertible debt carried interest at the prime rate plus 2.5%. There is no material market risk relating to our long-term debt.
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ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 28, 2008, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer (principal financial officer) concluded that the Company’s disclosure controls and procedures as of June 28, 2008 were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and are designed to ensure that information required to be disclosed by us in these reports is accumulated and communicated to our management, as appropriate to allow timely decisions regarding disclosures.
We will consider further actions and continue to evaluate the effectiveness of our disclosure controls and internal controls and procedures on an ongoing basis, taking corrective action as appropriate. Management does not expect that disclosure controls and procedures or internal controls can prevent all errors and all fraud. A control system, not matter how well conceived and operated, can provide only reasonable and not absolute assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. While management believes that its disclosure controls and procedures provide reasonable assurance that fraud can be detected and prevented, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
(b) Changes in internal controls over financial reporting.
No changes in the Company’s internal control over financial reporting occurred during the second quarter of 2008 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART II. OTHER INFORMATION
Item 1A. Risk Factors
Set forth below is a discussion of the significant risk factors applicable to the Company. Additional risk factors may develop in the future.
Our ability to continue as a “going concern” is uncertain.
Our consolidated financial statements have been prepared on the assumption that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses from operations and has a stockholders’ deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern
As of June 28, 2008, we had cash and cash equivalents of $392,000, assets totaling $4.8 million, liabilities totaling $12.0 million, and incurred losses from continuing operations of $685,000 for the quarter then ended. We expect to continue to expend cash and incur operating losses in 2008. Certain operating expenses are expected to decline from 2007 levels, however, our ability to generate cash and operating income is dependent on increasing our customer base to expand the penetration of our product technology and the realization of our lower operating expense targets.
As of June 28, 2008, $443,000 of an over-advance in excess of the borrowing base on the working capital line of credit was utilized. As a result of a loan transaction with Laurus, on July 31, 2008 (described below), the over-advance was increased to $1.0 million until November 30, 2008.
On July 31, 2008, the Company entered into another loan transaction with Laurus. The Company borrowed an additional $3,500,000 pursuant to a secured note. The note bears interest at the rate of twelve (12%) percent per annum, and is secured by all of the assets of the Company and its subsidiaries. As part of this transaction, the Company granted to Laurus a ten-year warrant to purchase 31,000,000 shares of the Company’s common stock at $0.01 per share. The new loan matures on November 30, 2008. Also as part of this transaction, the allowed over-advance on the Company’s revolving line of credit with Laurus was increased to $1,000,000 until November 30, 2008. The maturity date of this new loan, and of all of the Company’s debt with Laurus (including the over-advance), will be extended to July 31, 2010 if, no later than November 30, 2008, the Company holds a shareholders’ meeting to increase its number of authorized shares, and grants to Laurus an additional ten-year warrant to purchase 146,143,792 shares of the Company’s common stock at $0.01 per share. If the maturity date of the Company’s debt is not extended to July 31, 2010, starting in January 2009, monthly principal payments of $44,000 become due and payable to Laurus.
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As of August 12, 2008, $12.2 million of principal is owed to Laurus. Monthly interest payments are added to the Company’s working capital line of credit. On September 30, 2009, all remaining principal and interest due from the Company to Laurus on the existing financing agreements becomes due and payable. In the event that we are unable to repay, extend or refinance our debt payments in 2008 and 2009, Laurus could potentially take a number of actions as secured creditor which would have a material negative impact on the Company and its shareholders, including foreclosure, a forced sale of all or part of the Company, and/or liquidation. Further, if future financing requirements are satisfied through the issuance of equity or debt instruments, shareholders may experience additional dilution in terms of their percentage of ownership of our securities.
The success of our new products depends upon customer acceptance of both the testing of semiconductor devices in strip form and the automation of the back-end of the semiconductor manufacturing process.
Several of our new products, including our Tapestry strip handler and other Smart Solutions products, are used to test and process semiconductor devices in strip form. Assembly of semiconductor devices in strip form is the standard industry practice. However, we cannot assure you that testing of semiconductor devices in strip form will become widely accepted by the industry. Until recently, most semiconductor manufacturers believed it was necessary to test semiconductors after they were cut from the strips because they believed the act of cutting the strips containing the semiconductor devices, referred to as singulation, could result in damage or contamination to the semiconductor devices and, as a consequence, make the prior test results unreliable.
We introduced our Tapestry handling system in February 1999. In May 2000, we introduced other Smart Solutions products, which provide additional process capability for handling and testing semiconductor devices in strip form. In July of 2003, we introduced our Tapestry SC, a second-generation system. In September of 2004 we introduced our Tapestry SC SmartMark, a second-generation system, while in May 2006 we introduced Tapestry SC Tri-Temp and in July 2007 we introduced the Filmframe. Our new products are attractive to customers only if the customers can see the value of automating the test and assembly portions of their semiconductor manufacturing operations. Although semiconductor manufacturers have automated the wafer fabrication portion of their operation, or the front-end of the semiconductor manufacturing process, very few semiconductor manufacturers have invested a significant amount of capital to automate the test and assembly portions of their operations. We are introducing new products for technologies, which may not be accepted on a wide-scale basis by the industry. If either the testing of semiconductor devices in strip form or wide-scale automation of the back-end is not accepted by the industry, our net sales likely will suffer.
Downturns in semiconductor industry business cycles could have a negative impact on our operating results.
Our business depends heavily upon capital expenditures by semiconductor manufacturers. The semiconductor industry is highly cyclical, with periods of capacity shortage and periods
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of excess capacity. In periods of excess capacity, the industry sharply cuts purchases of capital equipment, such as our products. Thus, a semiconductor industry downturn or slowdown substantially reduces our revenues and operating results and could hurt our financial condition. In the fourth quarter of 2000, the semiconductor capital equipment industry went into a severe downturn and continued through 2005. In 2006 and 2007, there was a slight upturn in the market, but the depressed market over the prior six years has negatively affected our operations and financial condition.
We have offered automation solutions and, unless we effectively market our company as a provider of automation solutions, our expected financial results will suffer.
We offer equipment automation solutions and software development services. These solutions and services require different marketing techniques and involve a more extensive decision-making process by customers than for our traditional handler products. We need to successfully market our automation products using different sales methods than we have previously used.
Our future success is dependent upon being able to successfully market our automation products. If we are not successful in effectively marketing ourselves as an equipment automation solutions provider to the semiconductor industry, our results of operations and financial condition will suffer.
We are exposed to the risks of operating a global business.
We are a global corporation with offices and subsidiaries in certain foreign locations to support our sales and services to the global semiconductor industry and, as such, we face risks in doing business abroad that we do not face domestically. Certain aspects inherent in transacting business internationally could negatively impact our operating results, including:
· costs and difficulties in staffing and managing international operations;
· unexpected changes in regulatory requirements;
· difficulties in enforcing contractual and intellectual property rights;
· longer payment cycles;
· local political and economic conditions;
· potentially adverse tax consequences, including restrictions on repatriating earnings and the threat of “double taxation”; and
· fluctuations in currency exchange rates, which can effect demand and increase costs.
Additionally, managing geographically dispersed operations presents difficult challenges associated with organizational alignment and infrastructure, communications and information technology, inventory control, customer relationship management, terrorist threats and related
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security matters and cultural diversities. If we are unsuccessful in managing such operations effectively, our business and results of operations will be adversely affected.
Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner could adversely impact our operations.
We use numerous vendors to supply parts, components and subassemblies for the manufacture of our products. It is not always possible to maintain multiple qualified suppliers for all of our parts, components and subassemblies. As a result, certain key parts may be available only from a single supplier or a limited number of suppliers. In addition, suppliers may cease manufacturing certain components that are difficult to replace without significant reengineering of our products. On occasion, we have experienced problems in obtaining adequate and reliable quantities of various parts and components from certain key suppliers. Our results of operations may be materially and adversely impacted if we do not receive sufficient parts to meet our requirements in a timely and cost effective manner.
We invest heavily in research and development efforts and our financial results depend upon the success of these efforts.
We have spent, and expect to continue to spend, a significant amount of time and resources developing new products and refining existing products and systems. In light of the long product development cycles inherent in our industry, these expenditures will be made well in advance of the prospect of deriving revenue from the sale of new systems.
Our ability to introduce and market new products successfully is subject to a wide variety of challenges during this development cycle, such as design defects or changing market requirements that could delay introduction of these systems. In addition, since our customers are not obligated by long-term contracts to purchase our products, our anticipated product orders may not materialize, or orders that do materialize may be canceled. As a result, if we do not achieve market acceptance of new products, we may not be able to realize sufficient sales needed to recoup our research and development expenditures.
The loss of key personnel could adversely impact our business.
Certain key personnel are critical to our business. Our future operating results depend substantially upon the continued service of our key personnel, many of whom are not bound by employment or non-competition agreements. Our future operating results also depend in significant part upon our ability to attract and retain qualified management, manufacturing, technical, engineering, marketing, sales and support personnel. Competition for qualified personnel, particularly those with technical skills, is intense, and we cannot ensure success in attracting or retaining qualified personnel. Our business, financial condition and results of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any key employee to perform in his or her current position, or by our inability to attract and retain skilled employees. Employee restructuring announced on June 18, 2008 has the risk of further diluting our key personnel.
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Recently enacted and future changes in securities laws and regulations have increased our costs.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations, are creating challenges for publicly-held companies. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. In particular, our efforts to maintain compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment has required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of significant resources. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified board members and executive officers, which could harm our business.
Our operating results often have large changes from period to period, which may result in a decrease in our stock price.
Our quarterly and annual operating results are affected by a wide variety of factors that could adversely affect sales or operating results or lead to significant variability in our operating results. A variety of factors could cause this variability, including the following:
· the cyclical nature of the semiconductor industry;
· delays in, or cancellation of, significant system purchases by customers;
· delays in the development, introduction and production of our products;
· changes in the mix of our products and their gross margins;
· new product introductions by competitors and competitive pricing pressures;
· the time required for us to adjust our operating expenses to respond to changes in sales and market conditions;
· the timing of any future acquisitions and their effect on our financial results;
· component shortages resulting in manufacturing delays; and
· pressure by customers to reduce prices, shorten delivery times and extend payment terms.
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We cannot predict the impact of these and other factors on our sales or operating results in any future period. Results of operations in any period, therefore, should not be considered indicative of the results to be expected for any future period. Because of this difficulty in predicting future performance, our operating results may fall below expectations of security analysts or investors in some future periods. Our failure to meet these expectations would likely adversely affect the market price of our common stock.
Our stock price is volatile and it may drop unexpectedly.
Stock prices of companies in the semiconductor equipment industry, including ours, can swing dramatically with little relationship to operating performance. Factors, which could cause our stock price to change, include:
· changes in the market’s view of the semiconductor industry in general;
· changes in our quarterly operating results for the reasons set out in the previous risk factors for other reasons;
· changes in our reported financial results based on accounting pronouncements;
· changes in research analysts’ expectations for us or our industry or failure to meet research analysts’ estimates;
· changes in the general economic conditions or developments in the semiconductor industry which affect investors confidence;
· continuing dilution of shares outstanding as a result of obtaining required future financing;
· announcements by us or our competitors of technological innovations or new or enhanced products and;
Additional factors, which may impact our results, include:
· we depend upon a few customers for the majority of our revenues and a reduction in their orders could adversely affect us;
· our operating results would be harmed if one of our key suppliers fails to deliver components for our products;
· the loss of any of our key personnel could harm our business;
· our markets are very competitive and demand for our products may decrease if additional competitors enter our markets;
· our dependence upon international sales involves significant risk;
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· the possible adverse impact of economic or political changes in the market we serve;
· our inability to obtain financing to fund continuing or expanding operations;
Fluctuations or decreases in the trading price of our common stock may adversely affect the ability to trade our shares. In addition, these fluctuations could adversely affect our ability to raise capital through future equity financing.
Item 4. Submission Of Matters To A Vote Of Security Holders
On June 19, 2008, the Company held its annual meeting of shareholders. At the meeting, the following actions were taken:
Election of Directors
The following persons were elected directors of the Company to serve for a term of one year:
Roger E. Gower |
|
|
Donald R.VanLuvanee |
|
|
David M. Sugishita |
|
|
Richard E. Struthers |
|
|
The vote summaries are as follows:
Director Name |
| Affirmed |
| Withheld |
|
Roger E. Gower |
| 33,820,762 |
| 397,463 |
|
David M. Sugishita |
| 33,818,042 |
| 400,183 |
|
Donald R. VanLuvanee |
| 33,820,030 |
| 398,195 |
|
Richard E. Struthers |
| 33,820,262 |
| 397,963 |
|
Appointment of Olsen Thielen & Co. Ltd. as the independent registered public accounting firm
To appoint Olsen Thielen & Co. Ltd. as the independent registered public accounting firm for the current year.
For |
| 31,680,811 |
|
Against |
| 76,364 |
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Abstain |
| 2,461,050 |
|
25
Item 6. Exhibits
10.1 |
| Consulting Agreement between the Company and LMWH Management Partners, LLC, dated May 8, 2008 (filed herewith). |
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10.2 |
| Stock Option Agreement between the Company and LMWH Management Partners, LLC, dated May 8, 2008. (filed herewith). |
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10.3 |
| Consulting Agreement between the Company and IT Carrier, Inc., dated June 4, 2008 (filed herewith). |
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10.4 |
| Stock Option Agreement between the Company and IT Carrier, Inc., dated June 19, 2008 (filed herewith). |
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10.5 |
| Stock Pledge Agreement with LV Administrative Services, Inc., dated July 31, 2008 (filed herewith). |
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10.6 |
| Funds Escrow Agreement with Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd., and Loeb & Loeb LLP, dated July 31, 2008 (filed herewith). |
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10.7 |
| Master Security Agreement with LV Administrative Services, Inc., dated July 31, 2008 (filed herewith). |
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10.8 |
| Restricted Account Agreement with Capital One, N.A. and LV Administrative Services, Inc., dated July 31, 2008 (filed herewith). |
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10.9 |
| Restricted Account Side Letter with LV Administrative Services, Inc., dated July 31, 2008 (filed herewith). |
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10.10 |
| Secured Term Note with Valens Offshore SPV I, Ltd., dated July 31, 2008 (filed herewith). |
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10.11 |
| Secured Term Note with Valens U.S. SPV I, LLC., dated July 31, 2008 (filed herewith). |
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10.12 |
| Securities Purchase Agreement with LV Administrative Services, Inc., dated July 31, 2008 (filed herewith). |
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10.13 |
| Side letter regarding Extension of Maturity Dates with Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd., Valens U.S. SPV I, LLC., and Psource Structured Debt Ltd., dated July 31, 2008 (filed herewith). |
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10.14 |
| Subsidiary Guaranty with LV Administrative Services, Inc., dated July 31, 2008 (filed herewith). |
26
10.15 |
| Common Stock Purchase Warrant with Valens Offshore SPV I, Ltd., dated July 31, 2008 (filed herewith). |
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10.16 |
| Common Stock Purchase Warrant with Valens U.S. SPV I, LLC., dated July 31, 2008 (filed herewith). |
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10.17 |
| Fourth Amended and Restated Overadvance Letter with Laurus Master Fund, Ltd., dated July 31, 2008 (filed herewith). |
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31.1 |
| Certification of Chief Executive Officer (filed herewith). |
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31.2 |
| Certification of Chief Financial Officer (filed herewith). |
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32 |
| Section 1350 Certification (filed herewith). |
27
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Micro Component Technology, Inc. | |
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Dated August 12, 2008 | By: | /s/ Roger E. Gower |
| Roger E. Gower | |
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| And | |
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Dated August 12, 2008 | By: | /s/ Bruce Ficks |
| Bruce Ficks |
28