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MMTC > SEC Filings for MMTC > Form 10-Q on 13-Sep-2013All Recent SEC Filings

Show all filings for MICRO IMAGING TECHNOLOGY, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for MICRO IMAGING TECHNOLOGY, INC.


13-Sep-2013

Quarterly Report


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 nine month period ended July 31, 2013 and 2012, respectively.

The Company had no sales revenue during the nine months ended July 31, 2013 or 2012.

Research and development expenses for the nine month period ended July 31, 2013 increased by $27,445 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, depreciation expense and marketing related expenses. There were also modest increases in overall operating costs, i.e., utilities, supplies and software related to the development program for the Company's technology. These increases were partially offset by a decrease in consulting expenses in the current period as well as the amount expended on R&D materials and supplies. Research and development expense for the three months ended July 31, 2013 decreased by $38,959 in fiscal 2013 primarily in the areas of stockholder relations, travel, entertainment and consulting expenses. These decreases were partially offset by an increase in salaries and related expenses as the Company hired laboratory technicians during the current fiscal year.

Sales, general and administrative expenses decreased by $56,272 and $107,225 for the three and nine months ended July 31, 2013, respectively, compared to the prior year period. The decrease reflects a significant reduction in consulting costs as well as expenses associated with stockholder relations and tax accounting. This decrease was partially offset, however, by an increase in salaries and a substantial increase in legal fees related to the defense of the Texas-based lawsuit brought against the Company by Alpine MIT Partners.

The Company realized negligible interest income during the nine months ended July 31, 2013 as all available capital was utilized to sustain operations. Interest expense for the three and nine month periods ended July 31, 2013 decreased by $38,797 and $334,417, respectively, compared to the prior period reflecting the conversion of outstanding debt to equity in the past year.

The Company recognized $2,311 in non-cash gain for the three months ended July 31, 2012, related to the derivative nature of the beneficial conversion feature of the Series 1 convertible notes issued by the Company during July 2013.

Components of other income and expense reflected a gain (income) of $254,779 and $271,098 for the three and nine month periods ended July 31, 2012 on writing off old debt. No such gains were recorded during fiscal 2013.

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 July 31, 2013, the Company had working capital deficit of $990,065. This represents a working capital decrease of $461,399 compared to that reported at October 31, 2012. The decrease primarily reflects overall increases in current liabilities, i.e., accounts payable, accrued payroll, notes payable and derivative liabilities, while utilizing available cash for operating activities.

Our only source of cash during the nine months ended July 31, 2013 has been from the sale of common stock totaling $360,000, including $40,000 received upon the exercise of warrants, and $60,400 in short term loans. Management estimates that it utilized $47,000 per month in working capital on operations for the nine months ended July 31, 2013, compared to the approximate $72,100 per month expended during the nine month period ended July 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 has participated in several food safety conferences during 2012 and 2013 and brought significant attention to its MIT 1000 which has led to follow-up contacts from several high profile independent laboratories, multinational food and food safety industry leaders, as well as from prominent academic research institutes. The Company continues to develop promotional materials and enhance its website with a view toward generating sales in the near future.

The Company is developing its marketing and sales strategies with distributors in Japan and the ASEAN countries (Malaysia, Singapore, Thailand, Brunei, Indonesia, Philippines, Vietnam, Cambodia, Laos and Myanmar) which the Company believes will assist in generating sales revenues in the near future. The Company expects to establish additional distributing partners as its marketing plans develop.

In June 2009, the Company received Performance Test Method (PTM) Certification from the Association of Advanced Communities Research Institute (AOAC RI) for its IdentifierTMfor the Listeria bacteria species, a rare but lethal food-borne infection. In 2012, the Company's protocols for testing the pathogens E. Coli and Salmonella were accepted by the AOAC so that, once it has completed internal testing procedures (expected in early 2014), the Company will also apply for AOAC PTM Certification for those additional pathogens. When certified 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. Concurrently, the Company is developing an IdentifierTMfor Staphylococcus aureus, the potentially life-threatening, contagious bacterium that can cause widespread infections, particularly in hospitals and medical clinics.

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 September 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.

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.

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