Attached files
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
| For the quarterly period ended January 31, 2013 | Commission file number 0-16416 |
MICRO IMAGING TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
| California | 33-0056212 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification No.) |
970 Calle Amanecer, Suite F, San Clemente, California 92673
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (949) 388-4547
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of Class)
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 [ ].
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | [ ] | Accelerated filer | [ ] | Non-accelerated filer | [ ] | Smaller reporting company | [X] |
| (Do not check if a smaller reporting company) | |||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X].
At March 8, 2013, there were 4,874,225 shares of the Registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
TABLE OF CONTENTS
| 2 |
Micro Imaging Technology, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Balance Sheet
January 31, 2013 and October 31, 2012
(Unaudited)
| ’ | January 31, 2013 | October 31, 2012 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 2,962 | $ | 90,132 | ||||
| Related party receivables | 12,015 | 15,269 | ||||||
| Inventory | 67,487 | 25,600 | ||||||
| Prepaid expenses | 16,141 | 31,120 | ||||||
| Total current assets | 98,605 | 162,121 | ||||||
| Fixed assets, net | 113,777 | 123,041 | ||||||
| Total assets | $ | 212,382 | $ | 285,162 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Liabilities: | ||||||||
| Current liabilities: | ||||||||
| Notes payable to stockholder, net of unamortized discount of $4,263 and $5,536 in 2013 and 2012, respectively | $ | 137,737 | $ | 136,464 | ||||
| Convertible notes payable, net of unamortized discount of $0 and $3,202 in 2013 and 2012, respectively | 77,368 | 74,166 | ||||||
| Accounts payable - trade | 216,743 | 171,578 | ||||||
| Accounts payable to officers and directors | 62,218 | 45,583 | ||||||
| Accrued payroll | 157,362 | 139,040 | ||||||
| Anti-dilution liability | 65,401 | 65,401 | ||||||
| Other accrued expenses | 61,167 | 58,555 | ||||||
| Total current liabilities | 777,996 | 690,787 | ||||||
| Long term liabilities: | ||||||||
| Note payable to stockholder, net of unamortized discount of $262 and $844 in 2013 and 2012, respectively | 24,188 | 46,106 | ||||||
| Redeemable convertible preferred stock, $0.01 par value; 5,200 shares authorized, issued and outstanding at January 31, 2013 and October 31, 2012 | 26,000 | 26,000 | ||||||
| Total long term liabilities | 50,188 | 72,106 | ||||||
| Total liabilities | 828,184 | 762,893 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock, $0.01 par value; 25,000,000 shares authorized; 4,725,048 and 4,473,715 shares issued and outstanding at January 31, 2013 and October 31, 2012, respectively | 47,250 | 44,737 | ||||||
| Additional paid-in capital | 45,043,499 | 44,889,013 | ||||||
| Accumulated deficit from previous operating activities | (27,809,201 | ) | (27,809,201 | ) | ||||
| Deficit accumulated during the development stage | (17,897,350 | ) | (17,602,280 | ) | ||||
| Total stockholders’ deficit | (615,802 | ) | (477,731 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 212,382 | $ | 285,162 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 3 |
Micro Imaging Technology, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Operations
Three months Ended January 31, 2013 and January 31, 2012
And the Cumulative Period November 1, 2005 to January 31, 2013
(Unaudited)
| Cumulative period | ||||||||||||
| from | ||||||||||||
| Three months ended | November 1, 2005 | |||||||||||
| January 31, | through | |||||||||||
| 2013 | 2012 | January 31, 2013 | ||||||||||
| Sales | $ | - | $ | - | $ | 58,000 | ||||||
| Cost of Sales | - | - | 29,886 | |||||||||
| Gross profit | - | - | 28,114 | |||||||||
| Operating costs and expenses: | ||||||||||||
| Research and development | 143,310 | 102,564 | 5,574,638 | |||||||||
| Sales, general and administrative | 142,236 | 137,385 | 8,053,316 | |||||||||
| Total operating expenses | 285,546 | 239,949 | 13,627,954 | |||||||||
| Loss from operations | (285,546 | ) | (239,949 | ) | (13,599,840 | ) | ||||||
| Other income (expense): | ||||||||||||
| Interest income | 11 | - | 11,462 | |||||||||
| Interest expense | (7,935 | ) | (110,644 | ) | (4,918,525 | ) | ||||||
| Gain on derivative instruments | - | 28,574 | 149,304 | |||||||||
| Other income, net | - | 762 | 473,049 | |||||||||
| Total other income (expense), net | (7,924 | ) | (81,308 | ) | (4,284,710 | ) | ||||||
| Loss from operations: | ||||||||||||
| Before provision for income tax | (293,470 | ) | (321,257 | ) | (17,884,550 | ) | ||||||
| Provision for income tax | (1,600 | ) | (1,600 | ) | (12,800 | ) | ||||||
| Net loss | (295,070 | ) | (322,857 | ) | (17,897,350 | ) | ||||||
| Net loss attributable to: | ||||||||||||
| Non-controlling interest | (39,955 | ) | (30,818 | ) | (1,289,717 | ) | ||||||
| Micro Imaging Technology, Inc. stockholders | (255,115 | ) | (292,039 | ) | (16,607,633 | ) | ||||||
| Net loss | $ | (295,070 | ) | $ | (322,857 | ) | $ | (17,897,350 | ) | |||
| Net loss per share, basic and diluted | $ | (0.06 | ) | $ | (0.31 | ) | ||||||
| Shares used in computing net loss per share, basic and diluted | 4,623,019 | 1,030,017 | ||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 4 |
Micro Imaging Technology, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
Three months ended January 31, 2013 and January 31, 2013
And the Cumulative Period November 1, 2005 to January 31, 2013
(Unaudited)
| Cumulative period | ||||||||||||
| from | ||||||||||||
| Three months ended | November 1, 2005 | |||||||||||
| January 31, | to | |||||||||||
| 2013 | 2012 | January 31, 2013 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | $ | (295,070 | ) | $ | (322,857 | ) | $ | (17,897,350 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | 12,764 | 7,145 | 189,137 | |||||||||
| Gain on extinguishment of debt | - | - | (288,192 | ) | ||||||||
| Amortization of costs and fees related to convertible debentures | 5,057 | 85,486 | 1,165,291 | |||||||||
| Common stock issued for services | - | - | 2,144,790 | |||||||||
| Common stock issued to officers, directors and consultants for services | - | 906 | 3,211,491 | |||||||||
| Common stock issued for shares of subsidiary stock | - | - | 254,000 | |||||||||
| Common stock of subsidiary issued to employees and consultants | - | - | 2,815 | |||||||||
| Common stock issued as a commission | - | - | 3,000 | |||||||||
| Common stock issued for accounts payable | - | - | 296,583 | |||||||||
| Common stock issued to former licensee | - | - | 41,319 | |||||||||
| Common stock issued/recovered on cancelled agreements | - | - | 20,478 | |||||||||
| Non-cash compensation for stock options and warrants | - | - | 631,923 | |||||||||
| Costs and fees related to issuance of convertible debt | - | - | 542,540 | |||||||||
| Interest expense related to beneficial conversion feature | - | - | 1,944,800 | |||||||||
| Interest paid with common stock | - | 2,700 | 118,487 | |||||||||
| Interest on notes receivable for common stock | - | - | (1,373 | ) | ||||||||
| (Increase) decrease in assets: | ||||||||||||
| Related party receivables | 3,254 | - | (12,015 | ) | ||||||||
| Prepaid expenses | 14,979 | - | 9,450 | |||||||||
| Inventory | (41,887 | ) | - | (143,275 | ) | |||||||
| Increase (decrease) in liabilities: | ||||||||||||
| Derivate liability | - | (27,028 | ) | - | ||||||||
| Trade accounts payable | 57,165 | 57,905 | 542,059 | |||||||||
| Accounts payable to officers and directors | 16,635 | 62,549 | 769,258 | |||||||||
| Accrued payroll and other expenses | 20,933 | 30,845 | 454,582 | |||||||||
| Net cash used in operating activities | (206,170 | ) | (102,349 | ) | (6,000,202 | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of fixed assets | (3,500 | ) | - | (220,643 | ) | |||||||
| Net cash used in investing activities | (3,500 | ) | - | (220,643 | ) | |||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 5 |
Micro Imaging Technology, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows (Continued)
Three months ended January 31, 2013 and January 31, 2013
And the Cumulative Period November 1, 2005 to January 31, 2013
(Unaudited)
| Cumulative period | ||||||||||||
| from | ||||||||||||
| Three months ended | November 1, 2005 | |||||||||||
| January 31, | to | |||||||||||
| 2013 | 2012 | January 31, 2013 | ||||||||||
| Cash flows from financing activities: | ||||||||||||
| Principal payments on notes payable to stockholder | (22,500 | ) | - | (1,296,000 | ) | |||||||
| Proceeds from common stock subscription | - | (1,250 | ) | - | ||||||||
| Proceeds from issuance of notes payable to a related party | - | - | 1,119,800 | |||||||||
| Proceeds from issuance of notes and convertible notes payable | - | 32,500 | 1,604,234 | |||||||||
| Proceeds from issuance of common stock | 145,000 | 70,181 | 3,600,475 | |||||||||
| Net cash provided by financing activities | 122,500 | 101,431 | 5,028,509 | |||||||||
| Net change in cash | (87,170 | ) | (918 | ) | (1,192,336 | ) | ||||||
| Cash at beginning of period | 90,132 | 5,206 | 1,195,298 | |||||||||
| Cash at end of period | $ | 2,962 | $ | 4,288 | $ | 2,962 | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||||||
| Interest paid | $ | - | $ | 664 | $ | 10,985 | ||||||
| Income taxes paid | $ | 1,600 | $ | 1,600 | $ | 21,840 | ||||||
| Supplemental Schedule of Non-Cash Investing and Financing Activities | ||||||||||||
| Conversion of convertible notes payable to shares of common stock | $ | - | $ | 80,500 | ||||||||
| Common stock issued in consideration for accounts payable | $ | 12,000 | $ | - | ||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 6 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 1. | Nature of our Business, Development Stage Company and Continuance of Operations |
These unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern which contemplated the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Since inception, the Company has incurred substantial losses and there is substantial doubt that the Company will generate sufficient revenues in the foreseeable future to meet its operating cash requirements. Accordingly, the Company’s ability to continue operations depends on its success in obtaining additional capital in an amount sufficient to meet its cash needs. This raises substantial doubt about its ability to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty.
Our independent registered public accounting firm has included an explanatory paragraph in its report on the financial statements for the year ended October 31, 2012 which raises substantial doubt about our ability to continue as a going concern.
Micro Imaging Technology, Inc. (the “Company”), a California corporation, is a holding company whose operations are conducted through its Nevada subsidiary, Micro Imaging Technology (“MIT”). As of January 31, 2013, the Company owned eighty point seven percent (80.7%) of the issued and outstanding stock of MIT.
The losses incurred to date which are applicable to the minority stockholders of the Company’s consolidated subsidiary, MIT, exceed the value of the equity held by the minority stockholders. Such losses have been allocated to the Company as the majority stockholder and are included in the net loss and accumulated deficit in the condensed consolidated financial statements for the three months ended January 31, 2013. Any future profits reported by our subsidiary will be allocated to the Company until the minority’s share of losses previously absorbed by the Company have been recovered.
In 1997, the Company began marketing a small, point-of-use water treatment product aimed at the high purity segment of commercial and industrial water treatment markets. In February 2000, the Company formed Electropure EDI, Inc. (EDI), a wholly-owned Nevada subsidiary, through which all manufacturing and sales of its proprietary water treatment products were then conducted. In October 2005, the Company sold the assets of the EDI subsidiary and discontinued operations.
The Company acquired, in October 1997, an exclusive license to the patent and intellectual property rights involving laser light scattering techniques to be utilized in the detection and monitoring of toxicants in drinking water. In February 2000, the Company formed Micro Imaging Technology (MIT), a majority-owned Nevada subsidiary, to conduct research and development based upon advancements developed and patented from the licensed technology. The technology being developed is a non-biologically based system utilizing both proprietary hardware and software to rapidly (near real time) determine the specific specie of an unknown microbe present in a fluid with a high degree of statistical probability (“MIT system”). It will analyze a sample presented to it and compare its characteristics to a library of known microbe characteristics on file. At present, it is the Company’s only operation.
Effective with the sale of its EDI operation in October 2005, the Company’s planned principal operation, the further development and marketing of its remaining technology, has not produced any significant revenue and, as such, the Company, beginning with the fiscal year starting November 1, 2005, is considered a development stage enterprise.
| 2. | Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting solely of normal recurring adjustments which management believes are necessary for a fair presentation of the Company’s financial position at January 31, 2013 and results of operations for the periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.
| 7 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with our audited financial statements and footnotes as of and for the year ended October 31, 2012, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on January 29, 2013.
Changes in Capitalization and Reverse Stock Split
On February 8, 2013, the Company effectively amended its Articles of Incorporation and decreased the authorized number of shares of Common Stock from 2.5 billion to 25 million shares. At the same time, the Company underwent a one-for-five hundred (1:500) reverse stock split of its Common Stock and Redeemable Convertible Preferred Stock. For purposes of this Quarterly Report, all issuances of common stock and options or warrants to purchase common stock, if any, are reflected retroactively in post-reverse split amounts. As of January 31, 2013, the reverse split effected by the Company resulted in a reduction in capital stock and an increase in additional paid-in capital in the amount of $23,577,990. See also Item 12 – “Subsequent Events.”
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. This change in classification does not materially affect previously reported cash flows in the Consolidated Statement of Cash Flows, and had no effect on the previously reported Consolidated Statement of Operations for any period.
Going Concern
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has not generated revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has obtained funds from several shareholders and believes this funding will continue. Management believes the existing shareholders will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core business.
| 3. | Concentration of Credit Risk and Other Risks and Uncertainties | |
| Accounts Payable – Trade |
As of January 31, 2013, the amount due to a former consultant to the Company, $112,000, represented 52% of the total amount due for accounts payable to non-affiliates.
Litigation and Claims
On May 16, 2012, Alpine MIT Partners, LLC (Plaintiffs) filed a civil action against the Company and its Chairman and Chief Executive Officer, Jeffrey G. Nunez, (collectively, the Company), in the Texas District Court, Travis County. Plaintiffs alleged breach of contract and civil conspiracy, as well as tortious interference with contractual relations and prospective business relations. The lawsuit alleges that the Company breached certain provisions of a March 7, 2012 Securities Purchase Agreement the Company executed with the Plaintiff to sell up to $2.0 million of 7% Senior Secured five-year Convertible Debentures convertible into shares of common stock at a conversion rate of $.003 per share. The purchase and sale of the first $1.0 million Debenture was scheduled to close on or before April 6, 2012 and was subject to, among other things, Alpine closing the necessary equity funding to consummate the transactions. No money was ever received by the Company from Alpine.
| 8 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The lawsuit also suggests that the Company’s Chairman and Chief Executive Officer, Jeffrey G. Nunez, has a history of regulatory and securities law violations. The Company’s Board of Directors has researched the matter and understands that in January 2004, Mr. Nunez was requested by the NASD to appear and provide testimony pursuant to NASD Rule 8210. Mr. Nunez did not appear, but agreed not to associate in any capacity, in the future, with NASD member firms. The Company’s Board of Directors believes this to be of no consequence with respect to Mr. Nunez’ qualifications to serve as a board member and chief executive officer of the Company.
The Company argued that the lawsuit was improperly filed in Texas and that the Texas court had no jurisdiction over the Company in this matter. At a hearing on March 7, 2013, the court upheld the Company’s position and dismissed the case against the Company.
On January 10, 2013, the Company learned that Plaintiffs had filed a lien against the Company’s patents on May 8, 2012 with the California Secretary of State under the Uniform Commercial Code. On or about January 29, 2013, the Company filed suit against Alpine MIT Partners, LLC in the Orange County, California Superior Court alleging, among other claims, that the UCC filing is unauthorized. The lawsuit also names the managing director and managing member of Alpine as Defendants and alleges that they made false promises, intentional misrepresentations and breached the contract which is the subject of the Texas suit. The Company is seeking damages of $1.6 million.
In accordance with accounting standards regarding loss contingencies, the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for its financial statements not to be misleading. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.
Because litigation outcomes are inherently unpredictable, the Company’s evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of its financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then the Company discloses the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. Since the lawsuit filed against the Company in Texas has been dismissed, no loss contingency has been accrued.
Antidilution Liability
The Company has recorded a $65,401 liability to allow for the possible dilutive impact of equity issuances that alter or effect conversion or exchange rates existing on the various dates of conversion or exercise of securities having adjustable conversion rates.
Accrued Payroll, Payroll Taxes and Benefits
From April 2010 through March 2012, payments made to two employees were recorded as reductions in accrued and unpaid payroll. In April 2012, the Company reclassified such payments as net payroll payments; calculated and recorded the employer and employee taxes that should have been withheld on such payment. Federal and state payroll tax returns have been filed for the last three quarters of 2010, all of 2011 and the first quarter of 2012. Estimated penalties and interest on the late filings and payments, in the sum of $27,029, have been accrued as of January 31, 2013. On September 20, 2012, the Internal Revenue Service filed a Notice of Federal Tax Lien against the Company assessing $58,857.60 for unpaid taxes, penalties and interest. A Notice of Tax Lien was also filed by the State of California on November 9, 2012 in the amount of $8,206, including penalty and interest, The Company has been in contact with the respective tax authorities in an effort to negotiate a payment arrangement for the taxes due.
Accrued Payroll and Benefits consist of the above payroll taxes and salaries, wages, and vacation benefits earned by employees, but not disbursed as of January 31, 2013. Accrued Payroll also includes the above estimated penalties and interest due on such unpaid payroll taxes. Liability for vacation benefits is accrued when earned monthly and reduced when taken. At the end of each fiscal period, the balance in the accrued vacation benefits liability account is adjusted to reflect current pay rates. Annual leave earned but not taken is considered an unfunded liability since this leave will be funded from future appropriations when it is actually taken by employees.
| 9 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 4. | Related Party Receivables |
Receivables from related parties are non-interest bearing, uncollateralized obligations and consist of a $2,000 advance to one recently hired employee in October 2012 to assist with moving expenses. The balance of $10,015 represents the amount which the Company’s President, Jeffrey Nunez, has received in excess of fees and expenses due to him since becoming employed by the Company in April 2012. The preparation of financial statements requires our management to make estimates and assumptions relating to the collectivity of our accounts receivable. Management believes that the referenced receivables are collectible and as of October 31, 2012 and January 31, 2012, the Company has determined that no Allowance for Doubtful Accounts was required.
See also Note 11 – “Securities Transactions.”
| 5. | Inventory |
Inventory is stated at the lower of cost or market and comprised entirely of finished goods. Cost is determined on a first-in, first-out (FIFO) basis. The Company’s management monitors inventory for excess and obsolete items and makes necessary valuation corrections when such adjustments are required.
| 6. | Property and Equipment |
Property and equipment are recorded at cost and are depreciated using the straight-line method over an expected useful life of 3 or 5 years. Effective October 31, 2011, the Company reclassified and capitalized as machinery and equipment eight of its MIT 1000 Systems that it had carried as finished goods valued at $75,788. A revised model of the systems has been designed and the Company will utilize these eight first generation models as laboratory testing equipment. Commencing November 1, 2011, these systems are being depreciated over an expected useful life of 3 years.
The production tooling for the Company’s revised MIT 1000 has been capitalized and the $14,000 cost is being amortized over an estimated useful life of 3 years.
Expenditures for normal maintenance and repairs are charged to operations. The cost and related accumulated depreciation of assets are removed from the accounts upon retirement or other disposition, and the resulting profit or loss is reflected in the Statement of Operations. Renewals and betterments that materially extend the life of the assets are capitalized.
| 7. | Summary of Significant Accounting Policies |
The accounting policies followed are as set forth in Note 1 of the Notes to Financial Statements in the Company’s 2011 Annual Report on Form 10-K. The Company has not experienced any material change in its critical accounting policies since November 1, 2011. The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments regarding uncertainties that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, the Company evaluates its estimates, which are based upon historical experience and on other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The Company considers the following accounting policies to be most critical in their potential effect on its financial position or results of operations.
| 10 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
New Accounting Pronouncements
The following accounting standards updates were recently issued and have not yet been adopted by us. These standards are currently under review to determine their impact on our consolidated financial position, results of operations, or cash flows. There were various other updates recently issued which represented technical corrections to the accounting literature or application to specific industries. None of the other updates are expected to a have a material impact on our consolidated financial position, results of operations or cash flows.
January 31, 2013, the FASB issued Accounting Standards Update [ASU] 2013-01, entitled Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The guidance in ASU 2013-01 amends the requirements in the FASB Accounting Standards Codification [FASB ASC] Topic 210, entitled Balance Sheet. The ASU 2013-01 amendments to FASB ASC 210 clarify that ordinary trade receivables and receivables in general are not within the scope of ASU 2011-11, entitled Disclosure about Offsetting Assets and Liabilities, where that ASU amended the guidance in FASB ASC 210. As those disclosures now are modified with the ASU 2013-01 amendments, the FASB ASC 210 balance sheet offsetting disclosures now clearly are applicable only where reporting entities are involved with bifurcated embedded derivatives, repurchase agreements, reverse repurchase agreements, and securities borrowing and lending transactions that either are offset using the FASB ASC 210 or 815 requirements, or that are subject to enforceable master netting arrangements or similar agreements. ASU 2013-01 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of this ASU is not expected to have a material impact on our financial statements.
On February 7, 2013, the FASB issued Accounting Standards Update [ASU] 2013-03, entitled Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities. The guidance in ASU 2013-03 amends the requirements in the FASB Accounting Standards Codification [FASB ASC] Topic 825, entitled Financial Instruments. The objective associated with issuing this amended guidance is to clarify the scope and applicability of a particular disclosure for nonpublic entities [nonissuers] that resulted from the issuance of ASU 2011-04, entitled Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, where that amended guidance essentially served to rewrite the guidance in FASB ASC 820, entitled Fair Value Measurement. The ASU 2013-03 amendments to FASB ASC 825 became effective upon issuance of the guidance. Since the amendments were issued on February 7, 2013, that date serves as the effective date of the amended guidance. The adoption of ASU 2013-03 is not expected to have a material effect on the Company’s operating results or financial position.
Earnings Per Share
Basic earnings per share are based on the weighted average number of shares outstanding for a period. Diluted earnings per share are based upon the weighted average number of shares and potentially dilutive common shares outstanding. Potential common shares outstanding principally include convertible notes payable and stock options under our stock plan. Since the Company has incurred losses, the effect of any common stock equivalent would be anti-dilutive.
Stock Based Compensation
Stock-based compensation costs for stock options issued to employees is measured at the grant date, based on the fair value of the award using the Black Scholes Option Pricing Model, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).
No stock-based compensation was recognized during the three months ended January 31, 2013.
On February 14, 2012, the Board of Directors adopted the 2012 Employee Benefit Plan which is authorized to grant up to 120,000 shares of common stock or options to purchase common stock to eligible employees, directors, officers, consultants or advisors. Eligibility is determined by the Board of Directors. On January 16, 2013, the Company issued 8,000 shares of common stock under the Plan to legal counsel for services rendered. The value of the shares was $12,000, or $1.50 per share. See also Note 12 – “Subsequent Events.”
| 11 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes information about options granted under the Company’s equity compensation plans through January 31, 2013 and otherwise to employees, directors and consultants of the Company. Generally, options vest on an annual pro rata basis over various periods of time and are exercisable, upon proper notice, in whole or in part at any time upon vesting. Typically, in the case of an employee, vested options terminate when an employee leaves the Company. The options granted have contractual lives ranging from two to ten years.
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at October 31, 2012 | 5,600 | $ | 40.00 | 1.2 | $ | — | ||||||||||
| Granted | — | — | ||||||||||||||
| Exercised | — | — | ||||||||||||||
| Expired | (1,000 | ) | 145.00 | |||||||||||||
| Canceled | — | — | ||||||||||||||
| Outstanding at January 31, 2013 | 4,600 | $ | 19.29 | 1.2 | $ | — | ||||||||||
Summary information about the Company’s options outstanding at January 31, 2013 is set forth in the table below. Options outstanding at January 31, 2013 expire between August 2013 and January 2016.
| Range of Exercise Prices | Options Outstanding January 31, 2013 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Options Exercisable January 31, 2013 | Weighted Average Exercise Price | |||||||||||||||
| $ 1.00-$70.00 | 4,400 | 1.2 | $ | 13.50 | 4,400 | $ | 13.50 | |||||||||||||
| $150.00 | 200 | 0.5 | $ | 150.00 | 200 | $ | 150.00 | |||||||||||||
| TOTAL: | 4,600 | 4,600 | ||||||||||||||||||
As of January 31, 2013, all outstanding options had fully vested and there was no estimated unrecognized compensation from unvested stock options.
The following table summarizes the information relating to warrants granted to non-employees as of October 31, 2011 and changes during the three months ended January 31, 2013:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at October 31, 2012 | 146,667 | $ | 1.00 | 1.8 | $ | — | ||||||||||
| Granted | — | — | ||||||||||||||
| Exercised | (40,000 | ) | 1.00 | |||||||||||||
| Expired | — | — | ||||||||||||||
| Canceled | — | — | ||||||||||||||
| Outstanding at January 31, 2013 | 106,667 | $ | 1.31 | 1.2 | $ | — | ||||||||||
Summary information about the Company’s warrants outstanding at January 31, 2013 is set forth in the table below. Warrants outstanding at January 31, 2013 expire between September 2013 and April 2015. See also Note 12 – “Subsequent Events.”
| 12 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| Range of Exercise Prices | Warrants Outstanding January 31, 2013 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Warrants Exercisable January 31, 2013 | Weighted Average Exercise Price | |||||||||||||||||
| $ | 1.00 | 40,000 | 2.2 | $ | 1.00 | 40,000 | $ | 1.00 | ||||||||||||||
| $ | 1.50 | 66,667 | 0.6 | $ | 1.50 | 66,667 | $ | 1.50 | ||||||||||||||
| 106,667 | 106,667 | |||||||||||||||||||||
| 8. | Convertible Debentures |
On November 10, 2010, the Company entered into a convertible note for $64,868 with a stockholder. The Note matured on May 31, 2012 and bears interest at the rate of ten percent (10%) per annum. The Note is convertible into shares of common stock at a forty two percent (42%) discount to the average of the lowest three (3) closing bid prices of the common stock during the ten (10) trading days prior to the conversion date. The note holder may convert any or all of the unpaid principal note prior to the maturity date. The Company calculated the intrinsic value of the conversion feature to be $46,973 as of the date of issuance of the debentures using the same criteria as noted above, which amount has been fully amortized as of January 31, 2013. The Company has expensed $14,449 in accrued interest on the note as of January 31, 2013. If the note had been converted as of January 31, 2013, the Company would have issued a total of 117,728 shares of common stock the value of which would exceed, by $117,610 the principal balance due on the note. The Company is currently negotiating with the lender to settle or renegotiate the Note.
On November 27, 2009, the Company borrowed $25,000 from an unaffiliated lender. In September 2011, the lender converted $12,500 of the principal and $2,876 in accrued interest into 17,084 shares of common stock. The Company issued an Amended and Restated Convertible Note for the $12,500 principal balance of the loan. The amended note matured on December 31, 2012 and bears interest at 6% and is convertible into common shares at a 55% discount to the average of the lowest three (3) closing bid prices of the common stock during the ten (10) trading days prior to the conversion date. The Company calculated the intrinsic value of the conversion feature on the remaining balance to be $10,507 as of the date of issuance of the amended note which has been fully amortized as of January 31, 2013. As of January 31, 2013, the Company had expensed a total of $1,021 in accrued interest on the remaining principal balance of $12,500. If the $12,500 balance of the note had been converted as of January 31, 2013, the Company would have issued a total of 29,240 shares of common stock.
At January 31, 2013 and October 31, 2012, without taking into effect any unamortized discounts, convertible debentures consisted of the following:
| October 31, 2012 | ||||||||
| January 31, 2013 | (Audited) | |||||||
| Convertible note payable to stockholder; principal and interest at 10% due on May 31, 2012. | $ | 64,868 | 64,868 | |||||
| Convertible notes payable to various stockholders; principal and interest at 6% maturing on December 31, 2012. | $ | 12,500 | 12,500 | |||||
| 77,368 | 77,368 | |||||||
| Less current maturities | $ | 77,368 | 77,368 | |||||
| Long term portion of Convertible and Series 1 notes payable | $ | — | $ | — | ||||
| 13 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 9. | Notes Payable |
At January 31, 2013 and October 31, 2012, without taking into effect any unamortized discounts, notes payable to an officer and to stockholders consisted of the following:
| October 31, 2012 | ||||||||
| January 31, 2013 | (Audited) | |||||||
| Unsecured, interest-free convertible notes payable to former officer/director of the Company; principal due on payment schedule through May 2014. | $ | 114,450 | $ | 136,950 | ||||
| Unsecured convertible note payable to various stockholders; principal and interest at 6% due between December 9, 2010 and April 20, 2011. | 52,000 | 52,000 | ||||||
| 166,450 | 188,950 | |||||||
| Less current maturities | 142,000 | 142,000 | ||||||
| Long term portion of notes payable | $ | 24,450 | $ | 46,950 | ||||
Concurrent with his April 13, 2012 resignation as Chairman of the Board of Directors and Chief Executive Officer, the Company agreed to repay a total of $160,000 in principal loans, $24,339 in accrued interest and $13,120 in unpaid fees and expenses due Michael Brennan over a 25-month payment schedule commencing May 1, 2012. As of January 31, 2013, payments have been made to Mr. Brennan to reduce the principal balance to $114,450.
With the exception of the above $114,450 in notes payable to a former officer and director, all of the above notes payable were past due as of January 31, 2013. The Company is currently negotiating with holders of the remaining $52,000 in principal notes to either extend the maturity date or convert the notes into shares of common stock.
| 10. | Employee Retirement Plan |
Commencing on January 1, 2005, the Company sponsored a Simple IRA retirement plan which covers substantially all qualified full-time employees. Participation in the plan is voluntary and employer contributions are determined on an annual basis. Employer contributions would be made at the rate of three percent (3%) of the employees’ base annual wages. However, the Company made no contributions to the IRA plan during the three months ended January 31, 2013 and 2012.
| 11. | Securities Transactions |
Common Stock Issued in Private Placement Transactions
On May 8, 2012, Board member, Gregg J. Newhuis, entered into a Subscription Agreement, as amended on October 31, 2012, to purchase a total of 1,800,000 shares of the Company’s common stock at $0.50 per share over a six-month period. Mr. Newhuis also received a one-year option to purchase up to an additional 266,667 shares of common stock at $1.50 per share in September 2012. This option was cancelled in October 2012. The Company received the final $100,000 from Mr. Newhuis on November 29, 2012 pursuant to his May 2012 subscription arrangement. Giving effect to the February 8, 2013 reverse stock split, the Company issued a total of 200,000 shares of common stock at $0.50 per share for the November 29, 2012 purchase.
On April 20, 2012, the Company granted three-year warrants to purchase 80,000 shares of common stock to a major shareholder as part of a Subscription Agreement for the purchase of 80,000 shares of common stock at $0.75 per share. The warrants are exercisable at $1.00 per share within one year of the subscription; $2.50 per share within two years; and at $5.00 per share during the third year of the warrant. On January 11, 2013, the warrant holder exercised his right to purchase one half of the warrants granted and paid $40,000. Giving effect to the February 8, 2013 reverse stock split, the Company issued 40,000 shares of common stock at $1.00 per share on this transaction.
| 14 |
MICRO IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On January 11, 2013, Victor Hollander, a Director and the Company’s Chief Financial Officer, purchased 3,333 shares of common stock for proceeds of $5,000, at the fair market value of $1.50 per share.
Pursuant to an April 1, 2012 consulting arrangement, the Company agreed to pay Jeffrey Nunez a five percent (5%) transaction fee on all proceeds received by the Company during the one year term of such agreement. The fee is payable in shares of the Company’s common stock which are to be valued as the average closing price of the common stock for the five (5) trading days prior to the transaction which triggers the fee. Between April 20 and October 31, 2012, the Company issued Mr. Nunez a total 35,512 shares of common stock valued at $53,000 pursuant to the transaction fee arrangement. As of January 31, 2013, an additional $7,000 was due Mr. Nunez under this arrangement at which time the transaction fee arrangement was terminated by mutual agreement. See also Note 4 – “Related Party Receivables.”
Common Stock Issued in Cancellation of Debt
On January 16, 2013, the Company issued its legal counsel a total of 8,000 shares of common stock in payment for $12,000 in legal services rendered for $1.50 per share.
| 12. | Subsequent Events |
On February 6, 2013, the Company entered into a Subscription Agreement with a major stockholder, Anthony Frank, to purchase up to $180,000 in shares of common stock at a purchase price of $0.85 per share over a three month period. Mr. Frank purchased 70,588 shares of common stock on February 6, 2013 and paid $60,000. An additional 70,588 shares were purchased under this arrangement on February 28, 2013 for $60,000.
On May 21, 2012, the Company entered into a Subscription Agreement with a major stockholder to purchase a total of 400,000 shares of the Company’s common stock at $0.50 per share, for a total of $200,000 which the Company received during fiscal 2012. As additional consideration, the purchaser was granted a one-year option to purchase up to an additional 66,667 shares of common stock at $1.50 per share commencing on the date the final dollars are invested. On February 6, 2013, this stockholder surrendered his rights to the referenced warrants in full.
On February 8, 2013, pursuant to a Written Consent of a Majority of Shareholders, the Company voted to amend its Articles of Incorporation to:
| ● | Decrease the authorized number of Common Stock of the Company from 2.5 billion to 25 million shares; and |
| ● | Effect a 500-to-1 reverse split of all classes of its issued and outstanding shares of stock such that the following classes of shares would be reconstituted as of February 8, 2013 as follows: |
| NUMBER OF SHARES ISSUED AND OUTSTANDING | ||||||||
| TITLE OF SECURITIES | PRE-REVERSE SPLIT | POST-REVERSE SPLIT | ||||||
| Common Stock | 2,397,818,199 | 4,795,636 | ||||||
| Class B Common Stock | None | None | ||||||
| Convertible Preferred Stock | 2,600,000 | 5,200 | ||||||
| Preferred Stock | None | None | ||||||
On February 22, 2013, the Company issued its legal counsel a total of 8,000 shares of common stock in payment for $8,000 in legal services rendered for $1.00 per share.
| 15 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Plan of Operation |
Forward-Looking Statements
This Quarterly Report, including the Notes to the Condensed Consolidated Financial Statements and the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements. The words “believe,” “expect,” “anticipate,” “intends,” “projects,” and similar expressions identify forward-looking statements. Such statements may include, but are not limited to, projections regarding demand for the Company’s products, the impact of the Company’s development and manufacturing process on its research and development costs, future research and development expenditures, and the Company’s ability to obtain new financing as well as assumptions related to the foregoing. Readers are cautioned not to place undue reliance on forward-looking statements. They reflect opinions, assumptions, and estimates only as of the date they were made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements in this Quarterly Report, whether as a result of new information, future events or circumstances, or otherwise.
Results of Operations
References to fiscal 2013 and fiscal 2012 are for the three month period ended January 31, 2013 and 2012, respectively.
The Company had no sales revenue during the three months ended January 31, 2013 or 2012.
Research and development expenses for the three month period ended January 31, 2013 increased by $40,746 compared to the prior year. These expenses arose from the program which the Company initiated in December 1997 to develop the micro imaging technology for detecting and identifying contaminants in fluids. The overall increase mainly reflects additional expenditures for salaries and related costs, consulting and marketing related expenses and modest increases in overall operating costs, i.e., utilities, supplies and software related to the development program for the Company’s technology.
Sales, general and administrative expenses increased by $4,851 for the three months ended January 31, 2013 compared to the prior year period. The increase, though minimal, reflects expanded operational activities resulting in higher costs for salaries and temporary labor, offices supplies, postage, utilities, etc. These increases were partially offset by reductions in consulting expenses, legal fees, shareholder relations expenses, as well as reduced expenditures for research and development supplies..
The Company realized negligible interest income during the three months ended January 31, 2013 as all available capital was utilized to sustain operations. Interest expense for the three month period ended January 31, 2013 decreased by $102,709 compared to the prior period reflecting the conversion of outstanding debt to equity in the past year.
The Company recognized $28,574 in non-cash gain for the three months ended January 31, 2012, related to certain convertible notes with beneficial conversion features (the Series 1 Notes) that were fully converted as of the fiscal year ended October 31, 2012.
Components of other income and expense reflect a gain of $762 in fiscal 2012 on writing off old debt.
The Company recorded the minimum state income tax provision in fiscal 2013 and 2012 as the Company had cumulative net operating losses in all tax jurisdictions.
Liquidity and Capital Resources
At January 31, 2013, the Company had working capital deficit of $679,391. This represents a working capital decrease of $150,725 compared to that reported at October 31, 2012. The decrease primarily reflects overall modest increases in current liabilities, i.e., accounts payable and accrued payroll, while utilizing available cash for operating activities.
| 16 |
Our only source of cash during the three months ended January 31, 2013 has been from the sale of common stock totaling $145,000, including $40,000 received upon the exercise of warrants. Management estimates that it utilized $64,600 per month in working capital on operations for the three months ended January 31, 2013, compared to the approximate $28,500 per month expended during the three month period ended January 31, 2012.
Plan of Operation
Our independent registered public accounting firm has included an explanatory paragraph in its report on the financial statements for the year ended October 31, 2012 which raises substantial doubt about our ability to continue as a going concern.
The Company is in the process of identifying commercial, technical and scientific partners that can aid in advancing the MIT expertise, provide external endorsements of the technology, and accelerate introduction to the market. This strategy is dependent upon our ability to identify and attract the right customers and partners over the next six month period and to secure sufficient additional working capital in a timely manner. There can be no assurances that our efforts will be successful or that the Company will be able to raise sufficient capital to implement our plans or to continue operations.
In April 2012, the Company commenced the production phase of its MIT 1000 Rapid Microbial Identification System with its Hawthorne, California-based manufacturing partner. The first of twenty Systems were received in July 2012, with three additional Systems received in November 2012. The Company participated in several food safety conferences during 2012 and brought significant attention to its MIT 1000 which has led to follow-up contacts from several high profile laboratories and research institutes. The Company continues to develop promotional materials and enhance its website with a view toward generating sales in the near future.
During the latter part of 2008, the Company appointed an exclusive distributor to sell our MIT products in Taiwan and China. The Company has entered into similar arrangements with five other companies granting distribution rights in Turkey, Bulgaria, the United Kingdom, Ireland, Puerto Rico and the Caribbean. In October 2009, the Company entered into a distribution agreement with a Biotek Sdn Bhd, a Malaysian distributor of research and scientific products for the Association of Southeast Asian Nations (ASEAN) (namely Malaysia, Singapore, Thailand, Brunei, Indonesia, Philippines, Vietnam, Cambodia, Laos and Myanmar). All of our distribution agreements remain in effect at this time.
The Company is in the process of developing and marketing and sales strategies with these and other future distributors which the Company believes will assist in generating sales revenues in the near future.
In April 2012, the Company submitted applications to the Association of Advanced Communities Research Institute (AOAC RI) for Performance Test Method Certification for the MIT 1000 System’s for accurate bacterial identifications of the pathogens E. coli and Salmonella. In June 2009, the Company received AOAC RI Certification for the identification of the Listeria bacteria species, a rare but lethal food-borne infection. When certified for certification for the two additional pathogenic bacteria identification processes, the Company’s System will have the proven capability of identifying over 90 percent of all bacteria-causing, food-related illnesses.
In the opinion of management, available funds and funds anticipated from forthcoming loans and equity sales are expected to satisfy our working capital requirements through April 2013. However, no assurances can be given that the Company will secure additional financing or revenues in a timely manner, if at all, or that such funds would be sufficient to achieve our intended business objectives.
| 17 |
The Company will be required to raise substantial amounts of new financing in the form of additional equity investments, loan financings, or from strategic partnerships, to carry out our business objectives. There can be no assurance that the Company will be able to obtain additional financing on terms that are acceptable to us and at the time required by us, or at all. Further, any financing may cause dilution of the interests of our current stockholders. If the Company is unable to obtain additional equity or loan financing, our financial condition and results of operations will be materially adversely affected. Moreover, estimates of our cash requirements to carry out our current business objectives are based upon various assumptions, including assumptions as to our revenues, net income or loss and other factors, and there can be no assurance that these assumptions will prove to be accurate or that unbudgeted costs will not be incurred. Future events, including the problems, delays, expenses and difficulties frequently encountered by similarly situated companies, as well as changes in economic, regulatory or competitive conditions, may lead to cost increases that could have a material adverse effect on us and our plans. If the Company is not successful in obtaining financing for future developments, whether in the form of loans, licenses or equity transactions, it is unlikely that the Company will have sufficient cash to continue to conduct operations, particularly research and development programs, as currently planned. The Company believes that in order to raise needed capital, the Company may be required to issue debt at significantly higher interest rates or equity securities that are significantly lower than the current market price of our common stock.
No assurances can be given that currently available funds will satisfy our working capital needs for the period estimated, or that the Company can obtain additional working capital through the sale of common stock or other securities, the issuance of indebtedness or otherwise or on terms acceptable to us. Further, no assurances can be given that any such equity financing will not result in a further substantial dilution to the existing stockholders or will be on terms satisfactory to us.
| Item 3. | Controls and Procedures |
The Company’s management has carried out an evaluation, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, (1) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
In addition, based on that evaluation, there has been no change in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 1. | Legal Proceedings |
On May 16, 2012, Alpine MIT Partners, LLC (Plaintiffs) filed a civil action against the Company and its Chairman and Chief Executive Officer, Jeffrey G. Nunez, (collectively, the Company), in the Texas District Court, Travis County. Plaintiffs alleged breach of contract and civil conspiracy, as well as tortious interference with contractual relations and prospective business relations. The lawsuit alleges that the Company breached certain provisions of a March 7, 2012 Securities Purchase Agreement the Company executed with the Plaintiff to sell up to $2.0 million of 7% Senior Secured five-year Convertible Debentures convertible into shares of common stock at a conversion rate of $.003 per share. The purchase and sale of the first $1.0 million Debenture was scheduled to close on or before April 6, 2012 and was subject to, among other things, Alpine closing the necessary equity funding to consummate the transactions. No money was ever received by the Company from Alpine.
The lawsuit also suggests that the Company’s Chairman and Chief Executive Officer, Jeffrey G. Nunez, has a history of regulatory and securities law violations. The Company’s Board of Directors has researched the matter and understands that in January 2004, Mr. Nunez was requested by the NASD to appear and provide testimony pursuant to NASD Rule 8210. Mr. Nunez did not appear, but agreed not to associate in any capacity, in the future, with NASD member firms. The Company’s Board of Directors believes this to be of no consequence with respect to Mr. Nunez’ qualifications to serve as a board member and chief executive officer of the Company.
| 18 |
At a hearing on March 7, 2013, the court dismissed the lawsuit against the Company upholding its motion that the Texas court had no jurisdiction over the matter.
On January 10, 2013, the Company learned that Plaintiffs had filed a lien against the Company’s patents on May 8, 2012 with the California Secretary of State under the Uniform Commercial Code. On or about January 29, 2013, the Company filed suit against Alpine MIT Partners, LLC in the Orange County, California Superior Court alleging, among other claims, that the UCC filing is unauthorized. The lawsuit also names the managing director and managing member of Alpine as Defendants and alleges that they made false promises, intentional misrepresentations and breached the contract which is the subject of the Texas suit. The Company is seeking damages of $1.6 million.
| Item 2. | Changes in Securities |
On November 29, 2012, the Company issued 200,000 shares of common stock to Gregg Newhuis, a Director of the Company, for proceeds of $100,000, or $0.50 per share.
On January 11, 2013, a major stockholder of the Company exercised a warrant to purchase 40,000 shares of common stock at $1.00 per share and the Company received $40,000 pursuant to the exercise.
On January 11, 2013, the Company’s Chief Financial Officer, Victor Hollander, purchased 3,333 shares of Common Stock for proceeds of $5,000, or $1.50 per share.
On January 16, 2013, the Company issued 8,000 shares of common stock in payment for legal services rendered valued at $12,000.
| Items 3 through 5. | Omitted as not applicable. |
| Item 6. | Exhibits and Reports on Form 8-K |
(a) Exhibits:
| 31.1 | Certification of Chief Executive Officer * | |
| 31.2 | Certification of Chief Financial Officer * | |
| 32.1 | 906 Certification of Chief Executive Officer * | |
| 32.2 | 906 Certification of Chief Financial Officer * | |
| 101** | Interactive Data Files of Financial Statements and Notes formatted in Extensible Business Reporting Language (XBRL). |
_______________
* Filed herewith
** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Exchange Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
(b) Reports on Form 8-K.
| None. |
| 19 |
Pursuant to the requirements of the Securities Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: March 18, 2013 | MICRO IMAGING TECHNOLOGY, INC. | |
| By | /s/ Victor A. Hollander | |
| Victor A. Hollander | ||
| (Chief Financial Officer with responsibility to sign on behalf of Registrant as a duly authorized officer and principal financial officer) | ||
| 20 |