UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For quarterly period ended February 28, 2014

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____

 

Commission File Number: 333-146404

 

MICROCHANNEL TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada	98-0539775
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
10632 Little Patuxent Parkway, Suite 406
Columbia, Maryland	21044
(Address of principal executive offices)	(Zip Code)

 

(888) 522-6422

(Registrant's telephone number, including area code)

 

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

 

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.

 

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer (Do not check if a smaller reporting company)	¨		Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act.) Yes T No o

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 53,864,600 shares of common stock, par value $0.0001, were outstanding on April 14, 2014.

 

 

 

MICROCHANNEL TECHNOLOGIES CORPORATION

(A Development Stage Company)

 

FORM 10-Q

 

For the Period Ended February 28, 2014

 

Table of Contents

  

PART I    FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets	3
Statements of Operations	4
Statements of Stockholders’ Equity (Deficit)	5
Statements of Cash Flows	6
Notes to Financial Statements	7
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	9
Item 4.  Controls and Procedures	12
PART II OTHER INFORMATION
Item 1. Legal Proceedings	13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3. Defaults Upon Senior Securities	13
Item 4. Mine Safety Disclosures	13
Item 5. Other Information	13
Item 6. Exhibits	13
Signatures	14
Certifications

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

MICROCHANNEL TECHNOLOGIES CORPORATION

(A Development Stage Company)

 

BALANCE SHEETS

(Unaudited)

 

		February 28,				August 31,
		2014				2013
ASSETS
Current assets
Cash and cash equivalents		$	70,498			$	21,135
Prepaid expenses			-				241
Total current assets			70,498				21,376
Total assets		$	70,498			$	21,376
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable		$	6,115			$	816
Total current liabilities			6,115				816
Accrued interest			671				-
Note payable			70,000				-
Total liabilities			76,786				816
Stockholders' equity (deficit)
Common stock: $0.0001 par value; 300,000,000 shares authorized, 53,864,600 issued and outstanding at February 28, 2014 and August 31, 2013			5,386				5,386
Additional paid-in capital			556,711				556,711
Deficit accumulated during the development stage			(568,385	)			(541,537	)
Total stockholders' equity (deficit)			(6,288	)			20,560
Total liabilities and stockholders' equity (deficit)		$	70,498			$	21,376

 

(The accompanying notes are an integral part of these financial statements)

 

 

MICROCHANNEL TECHNOLOGIES CORPORATION

(A Development Stage Company)

 

STATEMENTS OF OPERATIONS

(Unaudited)

 

																		Cumulative
		Three Months Ended								Six Months Ended								February 28, 2005
		February 28,								February 28,								(inception) to
		2014				2013				2014				2013				February 28, 2014
Revenue		$	-			$	-			$	-			$	-			$	-
Operating expenses
Option fee			-				-				-				-				2,000
Research and development			-				-				-				-				175,839
Director and officer fees			2,250				2,250				4,500				4,500				103,300
Professional fees			8,011				7,899				20,202				20,532				263,958
Other operating expenses			560				870				1,475				1,718				31,557
Total operating expenses			10,821				11,019				26,177				26,750				576,654
Loss from operations			(10,821	)			(11,019	)			(26,177	)			(26,750	)			(576,654	)
Other income (expense)
Interest income			-				-				-				-				8,940
Interest expense			(671	)			-				(671	)			-				(671	)
Total other income (expense)			(671	)			-				(671	)			-				8,269
Net loss		$	(11,492	)		$	(11,019	)		$	(26,848	)		$	(26,750	)		$	(568,385	)
Net loss per common share: basic		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average number of common shares outstanding: basic			53,864,600				53,864,600				53,864,600				53,864,600

 

(The accompanying notes are an integral part of these financial statements)

 

 

MICROCHANNEL TECHNOLOGIES CORPORATION

(A Development Stage Company)

 

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(Unaudited)

 

														Deficit accumulated
		Common Stock								Additional				during the				Total stockholders'
		Shares				Amount				paid-in capital				development stage				equity (deficit)
Common stock issued at $0.0001 per share at inception			53,864,600			$	5,386			$	(5,286	)		$	-			$	100
Net loss			-				-				-				(52,898	)			(52,898	)
Balance, August 31, 2005			53,864,600				5,386				(5,286	)			(52,898	)			(52,798	)
Net loss			-				-				-				(82,739	)			(82,739	)
Balance, August 31, 2006			53,864,600				5,386				(5,286	)			(135,637	)			(135,537	)
Conversion of debt to equity on August 31, 2007			-				-				561,997				-				561,997
Net loss			-				-				-				(27,405	)			(27,405	)
Balance, August 31, 2007			53,864,600				5,386				556,711				(163,042	)			399,055
Net loss			-				-				-				(84,635	)			(84,635	)
Balance, August 31, 2008			53,864,600				5,386				556,711				(247,677	)			314,420
Net loss			-				-				-				(77,593	)			(77,593	)
Balance, August 31, 2009			53,864,600				5,386				556,711				(325,270	)			236,827
Net loss			-				-				-				(70,129	)			(70,129	)
Balance, August 31, 2010			53,864,600				5,386				556,711				(395,399	)			166,698
Net loss			-				-				-				(48,917	)			(48,917	)
Balance, August 31, 2011			53,864,600				5,386				556,711				(444,316	)			117,781
Net loss			-				-				-				(53,780	)			(53,780	)
Balance, August 31, 2012			53,864,600				5,386				556,711				(498,096	)			64,001
Net loss			-				-				-				(43,441	)			(43,441	)
Balance, August 31, 2013			53,864,600				5,386				556,711				(541,537	)			20,560
Net loss			-				-				-				(26,848	)			(26,848	)
Balance, February 28, 2014			53,864,600			$	5,386			$	556,711			$	(568,385	)		$	(6,288	)

 

(The accompanying notes are an integral part of these financial statements)

 

 

MICROCHANNEL TECHNOLOGIES CORPORATION

(A Development Stage Company)

 

STATEMENTS OF CASH FLOWS

(Unaudited)

 

										Cumulative
		Six Months Ended								February 28, 2005
		February 28,								(inception) to
		2014				2013				February 28, 2014
Cash flows from operating activities
Net loss		$	(26,848	)		$	(26,750	)		$	(568,385	)
Adjustments to reconcile net loss to net cash used in operating activities:
Decrease in prepaid expenses			241				63				-
Increase in accounts payable			5,299				499				6,115
Increase in accrued interest			671				-				671
Net cash used in operating activities			(20,637	)			(26,188	)			(561,599	)
Cash flows from financing activities
Increase in payable - related party			-				-				561,997
Proceeds from the issuance of common stock			-				-				100
Proceeds from the issuance of note payable			70,000				-				70,000
Net cash provided by financing activities			70,000				-				632,097
Increase (decrease) in cash and cash equivalents			49,363				(26,188	)			70,498
Cash and cash equivalents at beginning of period			21,135				66,612				-
Cash and cash equivalents at end of period		$	70,498			$	40,424			$	70,498
Supplemental disclosure of cash flow information:
Income taxes paid in cash		$	-			$	-			$	-
Supplemental disclosure of non-cash transaction:
Conversion of debt to equity		$	-			$	-			$	561,997

 

(The accompanying notes are an integral part of these financial statements)

 

 

MICROCHANNEL TECHNOLOGIES CORPORATION

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

 

February 28, 2014

(Unaudited)

 

Note 1. Organization and Description of Business

 

MicroChannel Technologies Corporation (the “Company”) was formed as a wholly-owned subsidiary of New Energy Technologies, Inc. (“New Energy”). New Energy spun off its issued and outstanding shares to New Energy’s shareholders on December 18, 2007. The Company was incorporated under the name MultiChannel Technologies Corporation on February 28, 2005 in the State of Nevada, and changed to its existing name on April 4, 2005.

 

The Company is not currently engaged in any business operations. It is, however, in the process of attempting to identify, locate, and if warranted, acquire new commercial opportunities.

 

Note 2. Going Concern Uncertainties

 

The Company is a development stage company, has not generated any revenues, has an accumulated deficit of $568,385 as of February 28, 2014, and does not have positive cash flows from operating activities. The Company expects to incur additional losses as it continues to identify and develop new commercial opportunities. The Company will be subject to the risks, uncertainties, and difficulties frequently encountered by early-stage companies. The Company may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause the Company’s business, results of operations, and financial condition to suffer. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company’s ability to continue as a going concern is an issue due to its net losses and negative cash flows from operations, and its need for additional financing to fund future operations. Management plans to identify commercial opportunities and to obtain necessary funding from outside sources. There can be no assurance that such funds, if available, can be obtained on terms reasonable to the Company. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty. Based on the Company’s current level of expenditures, management believes that cash on hand is adequate to fund operations for at least the next twelve months.

 

Note 3. Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's latest Annual Report filed with the SEC on Form 10-K for the year ended August 31, 2013. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Form 10-K have been omitted. The Company did not record an income tax provision during the periods presented due to net taxable losses.

 

 

Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from the estimates as additional information becomes known.

 

Recently Issued Accounting Pronouncements

 

The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable to the Company, it has not identified any standards that it believes merit further discussion. The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows.

 

Note 4. Net Loss Per Share

 

During the three and six months ended February 28, 2014 and 2013, the Company recorded a net loss. The Company does not have any stock options or warrants outstanding that would be anti-dilutive. Therefore, basic and diluted net loss per share is the same for those periods.

 

Note 5. Note Payable

 

On January 9, 2014, the Company issued a $70,000 note payable to a shareholder of the Company. The note payable bears interest at an annual rate of 7%. Principal and accrued interest on the note payable are due on January 9, 2016. The outstanding balance of principal and accrued interest may be prepaid without penalty. During both of the three and six month periods ended February 28, 2014, the Company recorded interest expense of $671 related to the note payable. Accrued interest at February 28, 2014 related to the note payable was $671. At February 28, 2014, the original principal balance of $70,000 on the note payable remained outstanding.

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Except for the historical information presented in this document, the matters discussed in this Form 10-Q for the quarter ended February 28, 2014, contain forward-looking statements which involve assumptions and our future plans, strategies, and expectations. These statements are generally identified by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project,” or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.

 

Such forward-looking statements include statements regarding, among other things, (a) our potential profitability and cash flows, (b) our growth strategies, (c) our future financing plans, and (d) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in this Form 10-Q generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

 

Except where the context otherwise requires and for purposes of this Form 10-Q only, “we,” “us,” “our,” “Company,” “our Company,” and “MicroChannel” refer to MicroChannel Technologies Corporation.

 

Overview

 

The following discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with our financial statements and the accompanying notes to the financial statements included in this Form 10-Q.

 

The MD&A is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

 

Background

 

We were formed as a wholly-owned subsidiary of New Energy Technologies, Inc. New Energy spun off its issued and outstanding shares to New Energy’s shareholders on December 18, 2007. We were incorporated under the name MultiChannel Technologies Corporation on February 28, 2005 in the State of Nevada, and changed to our existing name, MicroChannel Technologies Corporation, on April 4, 2005.

 

We are not currently engaged in any business operations. We are, however, in the process of attempting to identify, locate, and if warranted, acquire new commercial opportunities.

 

Results of Operation

 

Three and Six Months Ended February 28, 2014 and 2013

 

Director and Officer Fees

 

Director and officer fees for both of the three-month periods ended February 28, 2014 and 2013 were $2,250. Director and officer fees for both of the six-month periods ended February 28, 2014 and 2013 were $4,500.

 

Professional Fees

 

Professional fees for the three months ended February 28, 2014 and 2013, were $8,011 and $7,899, respectively. Professional fees for the six months ended February 28, 2014 and 2013, were $20,202 and $20,532, respectively. Professional fees during the periods presented are comparable due to the same level of operations during the periods.

 

Other Operating Expenses

 

Other operating expenses for the three months ended February 28, 2014 and 2013, were $560 and $870, respectively. Other operating expenses for the six months ended February 28, 2014 and 2013, were $1,475 and $1,718, respectively. Other operating expenses during the periods presented are comparable due to the same level of operations during the periods.

 

Interest Expense

 

Interest expense for the three months ended February 28, 2014 and 2013, was $671 and zero, respectively. Interest expense for the six months ended February 28, 2014 and 2013, was $671 and zero, respectively. On January 9, 2014, the Company issued a $70,000 note payable to a shareholder of the Company. The note payable bears interest at an annual rate of 7%. Principal and accrued interest on the note payable are due on January 9, 2016. During both of the three and six month periods ended February 28, 2014, the Company recorded interest expense of $671 related to the note payable.

 

Liquidity and Capital Resources

 

As of February 28, 2014, we had an accumulated deficit of $568,385. At February 28, 2014, we had cash and cash equivalents of $70,498 compared to $21,135 at August 31, 2013. In January 2014, we received funding by issuing a $70,000 note payable, which is still outstanding at February 28, 2014.

 

Net cash used in operating activities was $20,637 for the six months ended February 28, 2014, compared to net cash used in operating activities of $26,188 for the prior year. Based on our current level of expenditures, we believe that cash on hand is adequate to fund our operations for at least the next twelve months.

 

Other Contractual Obligations

 

As of February 28, 2014, we do not have any contractual obligations other than the $70,000 note payable and related accrued interest.

 

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Recently Issued Accounting Pronouncements

 

We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.

 

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of February 28, 2014, that our disclosure controls and procedures were effective such that the information required to be disclosed in our United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit No.		Description of Exhibit
3.1		Articles of Incorporation, as amended. (1)
3.2		By Laws. (2)
31.1		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13(a)-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 USC. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

 

 

*Filed herewith.

 

⁽¹⁾ Incorporated by reference to the exhibits filed as part of the report on Form 10-Q filed by MicroChannel Technologies Corporation on April 8, 2010.

 

⁽²⁾ Incorporated by reference to the exhibits filed as part of the report on Form SB-2 filed by MicroChannel Technologies Corporation on October 1, 2007.

 

 

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.

 

	MicroChannel Technologies Corporation
	(Registrant)
April 14, 2014	By:	/s/ David Gamache
	David Gamache
	President, Chief Executive Officer,
	Chief Financial Officer, and Director