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.
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.
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.
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.
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.”
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.
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. A
SU 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.”
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.”
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
|
|
$
|
—
|
|
|
$
|
—
|
|
MICRO
IMAGING TECHNOLOGY, INC. AND SUBSIDIARY
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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.
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.
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.
