**SECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

**FORM 10-Q**
| x          | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                  |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** ** | ** ** | **For the  quarterly period ended March 31, 2007**                                                                                                                                                                                                                                                                                                                                                            |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** ** | ** ** | **OR**                                                                                                                                                                                                                                                                                                                                                                                                        |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                    |
| **o**      | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                 |
|       | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** ** | ** ** | **For the  transition period from                              to                              ** |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** ** | ** ** | **Commission  File No. 0-22384**                                                                                                                                                                                                                                                                                                                                                                              |

 

**MICRO COMPONENT TECHNOLOGY, INC.**

(Exact name of registrant as specified in itscharter)

| **Minnesota**                                         | ** ** | **41-0985960**       |
|-------------------------------------------------------|------------|----------------------|
| (State or other  jurisdiction of                      |       | (I.R.S. Employer     |
| incorporation or  organization)                       |       | Identification  No.) |
|                                                  |
| **2340  West County Road C, St. Paul, MN 55113-2528** |
| (Address of  principal executive offices)             |
|                                                  |
| **(651)  697-4000**                                   |
| (Registrant’s  telephone number)                 |

 

Indicateby check mark whether the Registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days

Yes      x      No     o

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer o |   | Accelerated Filer o |   | Non-Accelerated Filer x |
|---------------------------|--------|---------------------|--------|-------------------------|

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

Thenumber of shares outstanding of the Registrant’s Common Stock, as of May 11, 2007was 36,665,322.

 

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**MICRO COMPONENT TECHNOLOGY, INC**.

FORM 10-Q

TABLE OF CONTENTS
| **PART I - FINANCIAL  INFORMATION** |
|-------------------------------------|
| ** **                          |
| ITEM 1.                             | FINANCIAL  STATEMENTS |
|                                | ** ** |
|                                | CONSOLIDATED BALANCE SHEETS |
|                                |   |
|                                | CONSOLIDATED STATEMENTS OF OPERATIONS |
|                                |   |
|                                | CONSOLIDATED STATEMENTS OF CASH FLOWS |
|                                |   |
|                                | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL  STATEMENTS |
|                                |   |
| ITEM 2.                             | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF |
|                                | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
|                                |   |
| ITEM 3.                             | QUANTITATIVE  AND QUALITATIVE DISCLOSURES |
|                                | ABOUT  MARKET RISK |
|                                |   |
| ITEM 4.                             | CONTROLS AND  PROCEDURES |
|                                |
| **PART  II. OTHER INFORMATION**     |
| ** **                          |
| ITEM 2.                             | UREGISTERED  SALES OF EQUITY SECURITIES |
|                                | AND USE OF PROCEEDS |
|                                |   |
| ITEM 6.                             | EXHIBITS |
|                                |   |
| SIGNATURES                          |

 

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**MICROCOMPONENT TECHNOLOGY, INC. AND SUBSIDIARIES**

FORM 10-Q

# PART I.  FINANCIAL INFORMATION

## ITEM 1.  FINANCIAL STATEMENTS

## CONSOLIDATED BALANCE SHEETS

(In thousands,except share and per share data)

(Unaudited)
| ** **                                                                                            | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                            | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| **Assets**                                                                                            |       |               |       |                  |       |
| Current assets                                                                                        |       |               |       |                  |       |
| Cash and cash  equivalents                                                                            |       | $                  | 354        |                  | $          | 200 |   |
| Accounts  receivable, less allowance for doubtful accounts of $126 and $126,  respectively            |       | 2,648              |       | 2,816                 |       |
| Inventories                                                                                           |       | 2,464              |       | 2,016                 |       |
| Other                                                                                                 |       | 159                |       | 169                   |       |
| Total current  assets                                                                                 |       | 5,625              |       | 5,201                 |       |
|                                                                                                  |       |               |       |                  |       |
| Property, plant and  equipment, net                                                                   |       | 104                |       | 91                    |       |
|                                                                                                  |       |               |       |                  |       |
| Debt  issuance costs, net of accumulated amortization of $1,412 and $1,383,  respectively             |       | 267                |       | 246                   |       |
| Other assets                                                                                          |       | 19                 |       | 18                    |       |
|                                                                                                  |       |               |       |                  |       |
| Total assets                                                                                          |       | $                  | 6,015      |                  | $          | 5,556 |   |
|                                                                                                  |       |               |       |                  |       |
| **Liabilities and Stockholders’  Deficit**                                                       |       |               |       |                  |       |
| Current liabilities:                                                                                  |       |               |       |                  |       |
| Current portion  of long-term debt                                                                    |       | $                  | 1,467      |                  | $          | 228 |   |
| Bank line of  credit, net of discounts of $0 and $0, respectively                                     |       | 3,873              |       | 3,906                 |       |
| Accounts payable                                                                                      |       | 945                |       | 440                   |       |
| Accrued  compensation                                                                                 |       | 412                |       | 413                   |       |
| Accrued interest                                                                                      |       | 156                |       | 144                   |       |
| Accrued warranty                                                                                      |       | 103                |       | 101                   |       |
| Customer  prepayments and unearned service revenue                                                    |       | 560                |       | 382                   |       |
| Other accrued  liabilities                                                                            |       | 135                |       | 251                   |       |
| Total current  liabilities                                                                            |       | 7,651              |       | 5,865                 |       |
|                                                                                                  |       |               |       |                  |       |
| Long-term debt, net of  discounts of $1,956 and $836, respectively                                    |       | 3,206              |       | 5,506                 |       |
| Total liabilities                                                                                     |       | 10,857             |       | 11,371                |       |
|                                                                                                  |       |               |       |                  |       |
| Stockholders’ deficit:                                                                           |       |               |       |                  |       |
| Preferred stock,  $.01 par value, 1,000,000 authorized, none issued and outstanding                   |       | —             |       | —                |       |
| Common stock,  $.01 par value, 55,000,000 authorized, 36,665,322 and 36,665,322 issued,  respectively |       | 367                |       | 367                   |       |
| Additional  paid-in capital                                                                           |       | 103,591            |       | 102,459               |       |
| Accumulated  deficit                                                                                  |       | (108,800           | )          | (108,641              | )          |
| Total  stockholders’ deficit                                                                     |       | (4,842             | )          | (5,815                | )          |
| Total liabilities and stockholders’ deficit                                                      |       | $                  | 6,015      |                  | $          | 5,556 |   |

 

See notes to unauditedcondensed consolidated financial statements

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**MICROCOMPONENT TECHNOLOGY, INC. AND SUBSIDIARIES**

## CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands,except per share data)

(Unaudited)
| ** **                                                  | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                  | ** ** | **March 31,**               | ** ** | **April 1,** | ** ** |
| ** **                                                  | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| Net sales                                                   |       | $                                | 3,377      |   | $ | 2,375 |   |
| Cost of sales                                               |       | 1,604                            |       | 1,181 |   |
| Gross profit                                                |       | 1,773                            |       | 1,194 |   |
|                                                        |       |                             |       |   |   |
| Operating  expenses:                                        |       |                             |       |   |   |
| Selling, general and administrative                         |       | 1,105                            |       | 945 |   |
| Research and development                                    |       | 500                              |       | 518 |   |
|                                                        |       |                             |       |   |   |
| Total operating  expenses                                   |       | 1,605                            |       | 1,463 |   |
|                                                        |       |                             |       |   |   |
| Income (loss)  from operations                              |       | 168                              |       | (269 | ) |
|                                                        |       |                             |       |   |   |
| Interest income                                             |       | 3                                |       | — |   |
| Interest expense and other                                  |       | (330                             | )          | (814 | ) |
|                                                        |       |                             |       |   |   |
| Total interest  and other                                   |       | (327                             | )          | (814 | ) |
|                                                        |       |                             |       |   |   |
| Net loss                                                    |       | $                                | (159       | ) | $ | (1,083 | ) |
|                                                        |       |                             |       |   |   |
| Net loss per  share:                                        |       |                             |       |   |   |
|                                                        |       |                             |       |   |   |
| Basic                                                       |       | $                                | (0.00      | ) | $ | (0.04 | ) |
| Diluted                                                     |       | $                                | (0.00      | ) | $ | (0.04 | ) |
|                                                        |       |                             |       |   |   |
| Weighted average  common and equivalent shares outstanding: |       |                             |       |   |   |
|                                                        |       |                             |       |   |   |
| Basic                                                       |       | 36,665                           |       | 27,225 |   |
| Diluted                                                     |       | 36,665                           |       | 27,225 |   |

 

See notes tounaudited condensed consolidated financial statements

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**MICROCOMPONENT TECHNOLOGY, INC. AND SUBSIDIARIES**

## CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)
| ** **                                                                   | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                   | ** ** | **March 31,**               | ** ** | **April 1,** | ** ** |
| ** **                                                                   | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                                                         |       |                             |       |   |   |
| Cash flows from  operating activities:                                       |       |                             |       |   |   |
| Net loss                                                                     |       | $                                | (159       | ) | $ | (1,083 | ) |
| Adjustments to reconcile net loss to net cash used  in operating Activities: |       |                             |       |   |   |
| Depreciation and amortization                                                |       | 170                              |       | 554 |   |
| Changes in assets and liabilities:                                           |       |                             |       |   |   |
| Accounts receivable                                                          |       | 168                              |       | (355 | ) |
| Inventories                                                                  |       | (448                             | )          | (229 | ) |
| Other assets                                                                 |       | 9                                |       | 28 |   |
| Accounts payable                                                             |       | 505                              |       | 358 |   |
| Other accrued liabilities                                                    |       | 75                               |       | 87 |   |
|                                                                         |       |                             |       |   |   |
| Net cash  provided (used) in operating activities                            |       | 320                              |       | (640 | ) |
|                                                                         |       |                             |       |   |   |
| Cash flow from  investing activities:                                        |       |                             |       |   |   |
| Purchases of property, plant and equipment                                   |       | (38                              | )          | (3 | ) |
|                                                                         |       |                             |       |   |   |
| Net cash used in  investing activities                                       |       | (38                              | )          | (3 | ) |
|                                                                         |       |                             |       |   |   |
| Cash flows from  financing activities:                                       |       |                             |       |   |   |
| Payments of long-term debt                                                   |       | —                           |       | (96 | ) |
| Repayment of long term note                                                  |       | —                           |       | (4,000 | ) |
| Proceeds on long term note, net of discounts                                 |       | (128                             | )          | 4,907 |   |
| Proceeds from issuance of stock                                              |       | —                           |       | 54 |   |
|                                                                         |       |                             |       |   |   |
| Net cash  provided (used) by financing activities                            |       | (128                             | )          | 865 |   |
|                                                                         |       |                             |       |   |   |
| Net increase in  cash and cash equivalents                                   |       | 154                              |       | 222 |   |
|                                                                         |       |                             |       |   |   |
| Cash and cash  equivalents at beginning of period                            |       | 200                              |       | 77 |   |
|                                                                         |       |                             |       |   |   |
| Cash and cash  equivalents at end of period                                  |       | $                                | 354        |   | $ | 299 |   |
|                                                                         |       |                             |       |   |   |
| Supplemental  cash flow information:                                         |       |                             |       |   |   |
| Non-cash financing activities:                                               |       |                             |       |   |   |
| Stock issued in lieu of interest                                             |       | $                                | —     |   | $ | 146 |   |
| Cash paid for  interest                                                      |       | 261                              |       | 205 |   |

 

See notes to unauditedcondensed consolidated financial statements

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**MICROCOMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

**1.****                          INTERIMFINANCIAL STATEMENTS**

*Basis of Presentation*

The consolidated financial statements include theaccounts of the parent company and our subsidiaries after elimination of allsignificant intercompany balances and transactions.  All significant subsidiaries are 100% owned.

The unaudited consolidated financial statementsincluded herein have been prepared in accordance with accounting principlesgenerally accepted in the United States (generally accepted accountingprinciples) for interim financial information and with the instructions forForm 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted pursuant to such rules andregulations.  In the opinion ofmanagement all adjustments, including normal recurring adjustments, necessaryfor a fair presentation of the interim periods presented have beenincluded.  The interim results are notnecessarily indicative of the operating results expected for the full fiscalyear ending on December 31, 2007.

Our consolidated financial statements have beenprepared on the assumption that we will continue as a going concern, whichcontemplates the realization of assets and liquidation of liabilities in thenormal course of business. The Report of the Independent Registered PublicAccounting Firm on the financial statements of the Company as of and for thefiscal year ended December 31, 2006 included in Form 10-K contained anexplanatory paragraph that expresses substantial doubt about our ability tocontinue as a going concern.   The financialstatements do not include any adjustments to reflect the possible future effectson the recoverability and classification of assets or the amounts and classificationof liabilities that may result from the outcome of this uncertainty.

As of March 31, 2007, the Company had an accumulated deficitof $108.8 million and incurred a net loss of $159,000 for the three-monthperiod ended March 31, 2007.  As of March31, 2007, the Company had cash and cash equivalents of $354,000, workingcapital of negative $2.0 million, a current ratio of negative 0.74, totalassets of $6.0 million and total liabilities of $10.9 million.  Our ability to generate cash and operatingincome is dependent on increasing our customer base to expand the penetrationof our product technology and the realization of our lower operating expensetargets.

As discussed in Note 4, On March 29, 2007, we againrestructured the financing with Laurus Master Fund, Ltd. (“Laurus”), andincreased the total secured indebtedness to $10.25 million.  The restructured financing includes a $5.25million term note.  Interest is payable monthly on the

6

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term note at the prime rate plus 2.5%.  The note isnon-convertible.  Beginning March 1,2008, we are required to make monthly payments equal to 1/60th of the principalamount until February 17, 2009, at which time the entire remaining principaland accrued interest is due and payable in full.  In addition to the $5.25million note, there is a $4.0 million working capital line of credit, which ispayable in full on March 8, 2008.  Interest is payable monthly on the lineat the prime rate plus 2.5%.  As of March 30, 2007, there was an $800,000over-advance in excess of the borrowing base on the working capital line ofcredit.  Principal on the over-advance isrepayable in $100,000 monthly payments beginning on February 28, 2008. The restructured financing also includes an additional $1.0 million termnote.  The proceeds from the $1 millionterm note, net of fees and expenses from the 2007 refinancing, are required tobe held in a restricted account at a bank, and will only be released by thebank to the Company, upon approval of Laurus in its discretion, for themanufacture of demo equipment.  Interestis payable monthly at the prime rate plus 2.0% and the principal is payable infull on March 31, 2008.  As part of the2007 restructuring, the Company also issued Laurus a 10-year option to purchase5,000,000 shares at an exercise price of $0.01 per share.  The shares issuable upon exercise of theoption have standard registration rights.

Interim unaudited financial results should be read in conjunction withthe audited financial statements included in the SEC Report on Form 10-K, forthe period ended December 31, 2006.

**2.****                          EARNINGSPER SHARE**

Basic earnings pershare are computed using the weighted average number of common sharesoutstanding during each period.  Dilutedearnings per share include the dilutive effect of common shares potentiallyissuable upon the exercise of stock options, warrants and the convertible termnote outstanding.  The following tablereconciles the denominators used in computing basic and diluted earnings pershare:
|                                                       | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                            | ** ** | **March 31,**               | ** ** | **April 1,** | ** ** |
| **(in thousands)**                               | ** ** | **2007 (1)**                     | ** ** | **2006 (1)** | ** ** |
| Weighted average  common shares outstanding           |       | 36,665                           |       | 27,225 |   |
| Effect of  dilutive stock options, warrants and notes |       | —                           |       | — |   |
|                                                  |       |                             |       |   |   |
|                                                  |       | 36,665                           |       | 27,225 |   |

 

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(1)                Wereported a loss for the period indicated. No adjustments were made for the effect of stock options and warrants,which represented 6,015,230 and 7,305,398 shares at March 31, 2007 and April 1,2006, respectively, as the effect is antidilutive.

**3.****                          BALANCESHEET INFORMATION**

Major componentsof inventories were as follows (in thousands):
|                 | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------|------------|--------------------|------------|-----------------------|------------|
| ** **      | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Raw materials   |       | $                  | 1,622      |                  | $          | 1,314 |   |
| Work-in-process |       | 639                |       | 377                   |       |
| Finished goods  |       | 203                |       | 325                   |       |
|            |       | $                  | 2,464      |                  | $          | 2,016 |   |

 

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In accordance with accounting principles generallyaccepted in the United States of America, we value our inventories at the lowerof cost or market.

The following table provides the inventory reserves for thequarter ended March 31, 2007.
| Inventory reserve balance at  December 31, 2006 |   | $      | 5,613  |   |
|-------------------------------------------------|--------|--------|--------|--------|
| Release of  inventory reserve on sale of goods  |   | — |   |
| Release of  inventory reserve on scrap of goods |   | (3     | )      |
| Additional/(reduction)  inventory reserve       |   | (100   | )      |
| Inventory reserve  balance at March 31, 2007    |   | $      | 5,510  |   |

 

Weprovide a standard thirteen month warranty program for our equipment products.We record provisions for warranty claims for these products based uponhistorical claim performance.  Thefollowing table provides the expense recorded and charges against our reservesfor the quarter ended March 31, 2007.
| Accrued warranty balance at  December 31, 2006 |   | $   | 101    |   |
|------------------------------------------------|--------|-----|--------|--------|
| Provision                                      |   | 16  |   |
| Warranty claims                                |   | (14 | )      |
| Accrued warranty  balance at March 31, 2007    |   | $   | 103    |   |

**4.**                          **FINANCING TRANSACTIONS**

OnMarch 9, 2004, we completed a $5.0 million financing transaction with an institutionallender, Laurus Master Fund, Ltd. (“Laurus”), secured by all of the assets ofthe Company.  The financing included a $3.0 million working capital lineof credit and a $2.0 million long-term note.  The notes were partiallyconvertible into shares of our common stock.  In connection with thetransaction, we issued to Laurus a seven-year warrant to purchase 400,000shares of common stock at exercise prices ranging from $2.30 to $2.88 pershare.  The secured loan in existence at that time with a prior lender wasterminated.

OnJanuary 28, 2005, we completed an amendment to the financing agreement withLaurus to defer payments on the long-term convertible note.  As part ofthis amendment, the conversion prices on both notes were reduced.  We alsoissued Laurus at that time a seven-year warrant to purchase 150,000 shares ofcommon stock at $.67 per share.

OnApril 29, 2005, we completed another financing transaction with Laurus in whichwe borrowed an additional $2.5 million, and which was convertible into sharesof common stock.  We also issued Laurus at that time an option to purchase2,556,651 shares of common stock at an exercise price of $.01 per share. We received net proceeds of approximately $2.4 million at the closing.

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On February 17, 2006, we restructured the financing withLaurus, and increased the total maximum secured indebtedness with Laurus to$9.25 million.  The Company also issued Laurus a 10-year option topurchase 2,500,000 shares at an exercise price of $.01 per share.  The sharesissuable upon exercise of the option have standard registration rights. As aresult of the new financing with Laurus, the conversion price for all of theNoteholders who accepted the prior restructuring agreements was reduced to$0.56 per share.

On March 29, 2007, we again restructured the financing withLaurus, and increased the total secured indebtedness to $10.25 million.  The restructured financing includes a $5.25million term note.  Interest is payable monthly on the term note at theprime rate plus 2.5%.  The note is non-convertible.  Beginning March 1, 2008, we are required tomake monthly payments equal to 1/60th of the principal amount until February17, 2009, at which time the entire remaining principal and accrued interest isdue and payable in full.  In addition to the $5.25 million note, there isa $4.0 million working capital line of credit, which is payable in full onMarch 8, 2008.  Interest is payable monthly on the line at the prime rateplus 2.5%.  As of March 30, 2007, there was an $800,000 over-advance inexcess of the borrowing base on the working capital line of credit.  Principal on the over-advance is repayable in$100,000 monthly payments beginning on February 28, 2008.  Therestructured financing also includes an additional $1.0 million term note.  The proceeds from the $1 million term note,net of fees and expenses from the 2007 refinancing, are required to be held ina restricted account at a bank, and will only be released by the bank to theCompany, upon approval of Laurus in its discretion, for the manufacture of demoequipment.  Interest is payable monthlyat the prime rate plus 2.0% and the principal is payable in full on March 31,2008.  As part of the 2007 restructuring,the Company also issued Laurus a 10-year option to purchase 5,000,000 shares atan exercise price of $0.01 per share. The shares issuable upon exercise of the option have standardregistration rights.

**5.**                          **STOCK BASED COMPENSATION**

The Company adopted Statement of Financial AccountingStandards (SFAS) No. 123R “Share-Based Payment”, on January 1, 2006.  This statement requires us to recognize thecost of employee and director services received in exchange for the stockoptions it has awarded.  Under SFAS 123R,we are required to recognize compensation expense over an award’s vestingperiod based on the award’s fair value at the date of grant.  We have elected to adopt SFAS 123R on amodified prospective basis; accordingly the financial statements for periodsprior to January 1, 2006 do not include stock-based compensation costscalculated under the fair value method.

The fair value of options granted under the stockoptions for the quarters ended March 31, 2007 and April 1, 2006 was estimatedon the date of grant using the Black-Scholes option pricing model with the followingweighted average assumptions for the three months ended March 31, 2007 andApril 1, 2006.
|                                          | ** ** | **Quarters ended** | ** ** |
|------------------------------------------|------------|-------------------------|------------|
| ** **                               | ** ** | **March 31,**      | ** ** | **April 1,** | ** ** |
| ** **                               | ** ** | **2007**                | ** ** | **2006** | ** ** |
| Dividend yield                           |       | 0.00                    | %          | 0.00 | % |
| Expected volatility                      |       | 88.63                   | %          | 122.09 | % |
| Risk-free  interest rate                 |       | 4.54                    | %          | 4.62 | % |
| Expected life of  options                |       | 10 years                |       | 10 years |   |
| Fair value per share of  options granted |       | $                       | 0.23       |   | $ | 0.33 |   |
|                                          |            |                         |            |  |  |  |  |

 

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**6.**                          **RECENT ACCOUNTING PRONOUNCEMENTS**

In June 2006, the Financial Accounting Standards Board issuedFASB Interpretation No. 48, *Accounting for Uncertaintyin Income Taxes, an interpretation of FASB Statement No. 109,*or FIN48.  FIN 48 clarifies the accounting foruncertainty in income taxes recognized in an enterprise’s financial statementsin accordance with FASB Statement No. 109, *Accounting for IncomeTaxes*.  FIN 48 prescribes arecognition threshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return.  This pronouncement alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition.  FIN 48 is effective for fiscal yearsbeginning after December 15, 2006; therefore, the Company will adopt the newrequirements for fiscal 2007.  We do notexpect the adoption of this pronouncement to have a material impact on ourfinancial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “*Fair Value Measurements*” (“SFAS No. 157”), which effectivefor interim and annual reporting periods beginning after November 15,2007.  This statement provides adefinition of fair value, establishes a framework for measuring fair value, andexpands disclosures about fair value measurements for future transactions.  The Company has not yet assessed the impactof this Statement on the Company’s financial statements.

In February 2007, the FASB issued Statement of FinancialAccounting Standards No. 159, “*The Fair Value Option forFinancial Assets and Financial Liabilities*” (“SFAS 159”).  The Statement permits entities to choose tomeasure many financial instruments and certain other items at fair value thatare not currently required to be measured at fair value.  The objective is to improve financialreporting by providing entities with the opportunity to mitigate volatility inreported earnings caused by measuring related assets and liabilitiesdifferently without having to apply complex hedge accounting provisions.  SFAS 159 will be effective for the firstfiscal year that begins after November 15, 2007.  The company has not yet assessed the impactof this Statement on the Company’s financial statements.

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**MICRO COMPONENT TECHNOLOGY, INC.**FORM 10-QITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSISOFRESULTS OF OPERATIONS AND FINANCIAL CONDITION

*ThisReport on Form 10-Q contains forward-looking statements that have been madepursuant to the provisions of the Private Securities Litigation Reform Act of1995.  These forward-looking statements arenot historical facts, but rather are based on our current expectations,estimates and projections about the semiconductor capital equipment industry,and our beliefs and assumptions.   Weintend words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,”“estimates” and similar expressions to identify forward-looking statements.  These statements are not guarantees of futureperformance and are subject to certain risks, uncertainties and other factors,some of which are beyond our control and are difficult to predict.  These factors could cause actual results todiffer materially from those expressed or forecasted in the forward-lookingstatements.  These risks anduncertainties are described elsewhere in this report on Form 10-Q and ourreport on Form 10-K for the year ended December 31, 2006.  We caution you not to place undue reliance onthese forward-looking statements, which reflect our management’s view only asof the date of this Report on Form 10-Q. We are not obligated to update these statements or publicly release theresult of any revisions to them to reflect events or circumstances after thedate of this Report on Form 10-Q or to reflect the occurrence of unanticipatedevents.*

*Overview*

We supply equipment automation solutions for the globalsemiconductor test and assembly manufacturing market.  Our solutions include automated test handlers,factory automation software and our new integrated Smart Solutions equipmentproduct line.  We believe that ourproducts can significantly improve the productivity, yield and throughput ofthe back-end, or to the post-wafer manufacturing process, including assembling,packaging, testing and singulating semiconductor devices.

Beginning in 1999 and continuing into 2000, we broadened our strategyfrom that of a test handler manufacturer to becoming a provider ofcomprehensive equipment automation solutions for the back-end of the semiconductormanufacturing process.  First, wedeveloped and introduced in February 1999 our Tapestry strip handler.  Tapestry combines strip handling capabilitywith robotics, machine vision technology and critical software, enabling thetesting and tracking of semiconductor devices in strip form and the generationof critical process data throughout the test process.  Second, in June 1999 we acquired the InfinitySystems division of Fico.  InfinitySystems has been involved in the development of factory automation software forthe semiconductor manufacturing industry. Infinity Systems’ software expertise was integral to the development ofour integrated Smart Solutions equipment product line, introduced in May2000.  Together with a third partytester, our Smart Solutions equipment products including our Tapestry handlerenable complete automation of the test, laser mark, mark inspect and other processesof the back end.

The demand for our products andservices is dependent upon growth in the semiconductor industry and theincreasing automation needs of semiconductor manufacturers and independent testand assembly facilities.  In the fourthquarter of 2000, the semiconductor industry went into a sharp downturn, whichcontinued through 2005, and began to improve in 2006.  However, the level of improvement and theability for the market to sustain an improvement continues to be uncertain.

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Therefore, we willcontinue to monitor the market and if required, examine opportunities tofurther reduce our costs through further consolidation of operations, limitingcapital expenditures, monitoring inventory purchases and additional strategicrestructuring initiatives.  Certain ofthese types of actions have the potential for further charges in futureperiods.  The impact of a renewedcontraction of the semiconductor capital equipment market has the potential tohave a material adverse effect on our financial condition, results ofoperations, and cash flows.

**Critical Accounting Policies**

*Revenue Recognition*

Under SAB 104, we recognize revenueupon shipment, as our terms are FOB shipping point, for established equipmentproducts that have previously satisfied existing customer performancespecifications and that provide for full payment tied to shipment.  Revenue for products that have not previouslysatisfied customer performance specifications or from sales where all or aportion of customer payment is based upon acceptance are only recognized uponcustomer acceptance.  As such, in periodsof increasing shipments, revenues will be deferred if the shipments are for newcustomers; new products or the payment terms are tied to acceptancecriteria.  Consequently, if theseconditions exist, we may report revenue levels that are not reflective ofactual shipment growth rates. Conversely, in periods of decreasing shipments, we potentially couldrecognize revenues related to shipments made in prior periods.  Consequently, if these conditions exist, wemay report revenue levels that are greater than actual shipments.  During the quarter ended March 31, 2007,revenue recorded approximated shipments.

*Allowance forDoubtful Accounts*

We record a provision for doubtful accounts based on specificidentification of our accounts receivable. This involves a degree of judgmentbased on discussion with our internal sales and marketing groups, our customerbase and the examination of the financial stability of our customers.  There can be no assurance that our estimateswill match actual amounts ultimately written off.  During periods of downturn in the market forsemiconductor capital equipment or economic recession, a greater degree of riskexists concerning the ultimate collectability of our accounts receivable due tothe impact that these conditions might have on our customer base.  No provisions were recorded for the quarterended March 31, 2007.

*Valuation of Inventories*

Our inventoriesare stated at the lower of cost or market. Cost is determined by the first-in, first-out (“FIFO”)method.  We maintain a standard costingsystem for our inventories.  Assumptionswith respect to direct labor utilization, standard direct and indirect costrates, vendor pricing and utilization of factory capacities are formulated inthe development of our standard costing system. Sudden or continuing changes in the semiconductor capital equipmentmarket affecting our shipments can result in significant production variancesfrom our standard rates. These variances directly impact our gross profitperformance and may cause variability in gross profits results from reportingperiod-to-reporting period.  Our laborand overhead rates are set for production rates that match typical marketconditions.  Production variances arecharged to cost of sales each quarter as incurred. Material standards are basedupon normal purchase volumes.  Purchaseprice variances are charged to costs of sales each quarter as incurred.

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Provisions to reduce inventories to the lower of cost ormarket are made based on a review of excess and obsolete inventories through anexamination of historical component consumption, current market demands andshifting product technology.  Significantassumptions with respect to market trends and customer product acceptance areutilized to formulate our provision methods. Sudden or continuing downward changes in the semiconductor capitalequipment market may cause us to record additional inventory revaluationcharges in future periods.  No write-downof our inventories occurred for the quarter ended March 31, 2007.

*Accrued Warranty*

We provide astandard thirteen month warranty program for our equipment products. We recordprovisions for warranty claims for these products based upon historical claimperformance.  This approach has beenapplied since the inception of the warranty program and involves a degree ofsubjectivity in that historical performance is used to estimate future warrantyclaims. There can be no assurance that our estimates will match the actualamount of future warranty claims.

###### **Resultsof Operations for the Three Months Ended March 31, 2007 and April 1, 2006**

Net sales for the three months ended March 31, 2007 increased by $1.0million or 42% to $3.4 million compared to $2.4 million for the three monthsended April 1, 2006.  The Strip Test andMark product line enjoyed the largest percentage increase.

Gross profit for the three months ended March 31, 2007 increased by$579,000 to $1.8 million or 52.5% of net sales from $1.2 million or 50.3% ofnet sales for the comparable period in the prior year.  The increase in gross margin in the currentyear period is directly attributable to the increase in sales resulting in fixedcosts being spread over a larger sales volume.

Total operating expense increased by $142,000 or 9.7% from $1.5 million to $1.6 million.  Selling, general and administrative expenses for the three months ended March 31, 2007 were $1.1 million or 32.7% of net sales compared to $0.9 million or 39.8% of net sales for the three months ended April 1, 2006.  Substantially all of these increases were planned, and included $70,000 of increased selling and marketing expenses over the prior year’s period due primarily to additional commissions and travel expenses, and $90,000 of increased general and administrative expenses over the prior year’s period due primarily to additional consulting and legal fees for corporate development projects and refinancing of the Laurus debt.  Research and development expenses for the first quarter of 2007 were $500,000 or 14.8% of net sales compared to $518,000 or 21.8% of net sales in the first quarter of 2006.

The net loss for the three months ended March 31, 2007 was $159,000 or$0.00 per basic and fully-diluted share compared to net loss for the threemonths ended April 1, 2006 of $1.1 million or $0.04 per basic and fully-dilutedshare.  Included in the prior year’s netloss were write-offs of $414,000 that relate to prior year’s debt issuance costand FAS 123 discounts from the Laurus financing.  Without this write-off, net loss for thefirst quarter of 2006 would be $669,000 or $0.02 per basic and fully-dilutedshare.

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**Liquidityand Capital Resources**

Cash was generated in operations of $320,000 in the first quarter of2007 as compared to cash usage of $640,000 in the first quarter of2006.  Accounts receivables decreased from 2006 year-end to $2.6 million from$2.8 million.  Inventory finished at $2.5million, which consists of $8.0 million of gross inventories and $5.5 millionof reserves.  Capital expenditures were$38,000 for the first quarter of 2007 compared to $3,000 in the first quarterof 2006.

We ended the quarter with $354,000 in cash and cash equivalents up from$200,000 at the end of 2006 and cash availability from our credit line and termnote of $1.1 million.  Working capitalfinished at a negative $2.0 million compared to a negative $664,000 at the endof 2006.  The majority of the negativeworking capital position is due to the Laurus $1.2 million term note cominginto classification from long term to short term, as this debt is due withinthe upcoming 12 months.

On March 29, 2007, we againrestructured the financing with Laurus, and increased the total securedindebtedness to $10.25 million.  Therestructured financing includes a $5.25 million term note.  Interest ispayable monthly on the term note at the prime rate plus 2.5%.  The note isnon-convertible.  Beginning March 1,2008, we are required to make monthly payments equal to 1/60th of the principalamount until February 17, 2009, at which time the entire remaining principaland accrued interest is due and payable in full.  In addition to the $5.25million note, there is a $4.0 million working capital line of credit, which ispayable in full on March 8, 2008.  Interest is payable monthly on the lineat the prime rate plus 2.5%.  As of March 30, 2007, there was an $800,000over-advance in excess of the borrowing base on the working capital line ofcredit.  Principal on the over-advance isrepayable in $100,000 monthly payments beginning on February 28, 2008. The restructured financing also includes an additional $1.0 million termnote.  The proceeds from the $1 millionterm note, net of fees and expenses from the 2007 refinancing, are required tobe held in a restricted account at a bank, and will only be released by thebank to the Company, upon approval of Laurus in its discretion, for themanufacture of demo equipment.  Interestis payable monthly at the prime rate plus 2.0% and the principal is payable infull on March 31, 2008.  As part of the2007 restructuring, the Company also issued Laurus a 10-year option to purchase5,000,000 shares at an exercise price of $0.01 per share.  The shares issuable upon exercise of theoption have standard registration rights.

A material portion of the principal and interest due from the Company to Laurus on the existing financing agreements becomes due and payable in March of 2008.  In the event that we are unable to repay or refinance our debt in March of 2008, Laurus could potentially take a number of actions as secured creditor which would have a material negative impact on the Company and its shareholders, including foreclosure, a forced sale of all or part of the Company, and/or liquidation.

**IMPACT OF ACCOUNTING STANDARDS**

In June 2006, the FinancialAccounting Standards Board issued FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes, an interpretation of FASBStatement No. 109,*or FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxesrecognized in an enterprise’s financial statements in accordance with FASBStatement No. 109, *Accounting for IncomeTaxes*.  FIN 48 prescribes arecognition threshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return.  This pronouncement alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition.  FIN 48 is effective for fiscal yearsbeginning after December 15,

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2006; therefore, theCompany will adopt the new requirements for fiscal 2007.  We do not expect the adoption of thispronouncement to have a material impact on our financial position or results ofoperations.

In September 2006, the FASBissued SFAS No. 157, “*Fair Value Measurements*”(“SFAS No. 157”), which effective for interim and annual reporting periodsbeginning after November 15, 2007.  Thisstatement provides a definition of fair value, establishes a framework formeasuring fair value, and expands disclosures about fair value measurements forfuture transactions.  The Company has notyet assessed the impact of this Statement on the Company’s financialstatements.

In February 2007, the FASBissued Statement of Financial Accounting Standards No. 159, “*The Fair Value Option for Financial Assets and Financial Liabilities*”(“SFAS 159”).  The Statement permitsentities to choose to measure many financial instruments and certain otheritems at fair value that are not currently required to be measured at fairvalue.  The objective is to improvefinancial reporting by providing entities with the opportunity to mitigatevolatility in reported earnings caused by measuring related assets andliabilities differently without having to apply complex hedge accountingprovisions.  SFAS 159 will be effectivefor the first fiscal year that begins after November 15, 2007.  The company has not yet assessed the impactof this Statement on the Company’s financial statements.

**ITEM 3.****QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

The vast majority of ourtransactions are denominated in U.S. dollars; as such, fluctuations in foreigncurrency exchange rates have historically had little impact on us.  Inflation has not been a significant factorin our operations in any of the periods presented, and it is not expected toaffect operations in the future.  A 1%increase in interest rates would increase our interest expense by $100,000 peryear.  Our short term revolving line ofcredit and long-term convertible debt carried interest at the prime rate plus2.5%.  There is no material market riskrelating to our long-term debt.

**ITEM4. CONTROLS AND PROCEDURES**

(a)                Evaluation of disclosure controls andprocedures.

Under the supervision and with the participation of our management,including the Company’s Chief Executive Officer and Chief Financial Officer, weevaluated the effectiveness of the design and operation of our disclosurecontrols and procedures (as defined in Rule 13a-15(e) under the Exchange Act)as of the end of the period covered by this report.  Based upon that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that, as of theevaluation date, our disclosure controls and procedures were effective to ensurethat the information required to be disclosed by us in our periodic SEC filingsis recorded, processed, summarized, and reported within the time periodsspecified in the Securities and Exchange Commission’s rules and forms.

(b)         Changes in internal controls over financial reporting.

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No changes in the Company’s internal control over financial reportingoccurred during the first quarter of 2007 that have materially affected, or arereasonably likely to affect, our internal control over financial reporting.

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**MICROCOMPONENT TECHNOLOGY, INC.**

## FORM 10-Q

# PART II.  OTHER INFORMATION

### **Item2.  Unregistered Sales Of EquitySecurities And Use Of Proceeds**

In connection with the refinancing of the Laurus financing thatoccurred on March 29, 2007, the Company issued Laurus a 10-year option topurchase 5,000,000 shares at an exercise price of $0.01 per share.  Theissuance was exempt from registration under Rules 505 and 506 under theSecurities Act of 1933, because Laurus is an accredited investor, the Companydisclosed all material information about the issuance to Laurus in advance,there was no general solicitation or advertisement, the securities are subjectto restrictions on transfer, and a Form D was filed with the Securities andExchange Commission.

### **Item6.  Exhibits**

31.1         Certification of ChiefExecutive Officer (filed herewith).

31.2         Certification of ChiefFinancial Officer (filed herewith).

32            Section 1350Certification (filed herewith).

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**MICROCOMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|        |         | Micro Component Technology, Inc.  Registrant          |
|--------|--------------|-------------------------------------------------------|
|   |         |                                                  |
|   |         |                                                  |
| Dated: | May 11, 2007 |                                                  | By: | /s/ Roger E. Gower |   |
|   |         | Roger E. Gower  President and Chief Executive Officer |
|   |         |                                                  |
|   |         |                                                  |
|   |         | And                                                   |
|   |         |                                                  |
|   |         |                                                  |
| Dated: | May 11, 2007 |                                                  | By: | /s/ BachThuy T. Vo |   |
|   |         | BachThuy T. Vo  Interim Chief Financial Officer       |
|        |              |                                                       |  |  |  |  |

 

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