**SECURITIES AND EXCHANGECOMMISSION**

**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 endedJune 30, 2007**

**OR**
| **o** | **TRANSITION  REPORT PURSUANT TO SECTION 13 or 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|------------------------------------------------------------------------------------------------|

 

**For the transition periodfrom                            to              **

**Commission File No. 0-22384**

**MICROCOMPONENT 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    AcceleratedFiler o    Non-Accelerated Filerx

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 August 14,2007 was 37,236,889.

 

----

**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 1A.RISK FACTORS |   |
|                                |                 |   |   |
|                                | ITEM  4.             | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS |   |
|                                |                 |   |   |
|                                | ITEM 6.              | EXHIBITS |   |
|                                |                 |   |   |
|                                | SIGNATURES           |   |

 

2

----

**MICROCOMPONENT TECHNOLOGY, INC. AND SUBSIDIARIES**

FORM 10-Q

# PART I.  FINANCIAL INFORMATION

## ITEM 1.  FINANCIAL STATEMENTS

## CONSOLIDATEDBALANCE SHEETS

(In thousands,except share and per share data)

(Unaudited)
| ** **                                                                                             | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                             | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| **Assets**                                                                                             |       |              |       |                  |       |
| Current assets                                                                                         |       |              |       |                  |       |
| Cash and cash  equivalents                                                                             |       | $                 | 435        |                  | $          | 200 |   |
| Accounts  receivable, less allowance for doubtful accounts of $122 and $126,  respectively             |       | 2,755             |       | 2,816                 |       |
| Inventories                                                                                            |       | 3,138             |       | 2,016                 |       |
| Other                                                                                                  |       | 158               |       | 169                   |       |
| Total current  assets                                                                                  |       | 6,486             |       | 5,201                 |       |
|                                                                                                   |       |              |       |                  |       |
| Property, plant and equipment,  net                                                                    |       | 95                |       | 91                    |       |
|                                                                                                   |       |              |       |                  |       |
| Debt issuance costs,  net of accumulated amortization of $1,449 and $1,383, respectively               |       | 236               |       | 246                   |       |
| Other assets                                                                                           |       | 36                |       | 18                    |       |
|                                                                                                   |       |              |       |                  |       |
| Total assets                                                                                           |       | $                 | 6,853      |                  | $          | 5,556 |   |
|                                                                                                   |       |              |       |                  |       |
| **Liabilities and Stockholders’  Deficit**                                                        |       |              |       |                  |       |
| Current liabilities:                                                                                   |       |              |       |                  |       |
| Current portion  of long-term debt                                                                     |       | $                 | 2,069      |                  | $          | 228 |   |
| Bank line of  credit                                                                                   |       | 3,930             |       | 3,906                 |       |
| Accounts payable                                                                                       |       | 1,312             |       | 440                   |       |
| Accrued  compensation                                                                                  |       | 487               |       | 413                   |       |
| Accrued interest                                                                                       |       | 162               |       | 144                   |       |
| Accrued warranty                                                                                       |       | 122               |       | 101                   |       |
| Customer  prepayments and unearned service revenue                                                     |       | 251               |       | 382                   |       |
| Other accrued  liabilities                                                                             |       | 351               |       | 251                   |       |
| Total current  liabilities                                                                             |       | 8,684             |       | 5,865                 |       |
|                                                                                                   |       |              |       |                  |       |
| Long-term debt, net of  discounts of $1,605 and $836, respectively                                     |       | 3,295             |       | 5,506                 |       |
| Total liabilities                                                                                      |       | 11,979            |       | 11,371                |       |
|                                                                                                   |       |              |       |                  |       |
| Stockholders’ Deficit:                                                                            |       |              |       |                  |       |
| Preferred stock,  $.01 par value, 1,000,000 authorized, none issued and outstanding                    |       | —            |       | —                |       |
| Common stock,  $.01 par value, 100,000,000 authorized, 36,665,322 and 36,665,322 issued,  respectively |       | 367               |       | 367                   |       |
| Additional  paid-in capital                                                                            |       | 103,587           |       | 102,459               |       |
| Accumulated  deficit                                                                                   |       | (109,080          | )          | (108,641              | )          |
| Total  stockholders’ deficit                                                                      |       | (5,126            | )          | (5,815                | )          |
| Total liabilities and stockholders’ deficit                                                       |       | $                 | 6,853      |                  | $          | 5,556 |   |

 

See notes to unauditedcondensed consolidated financial statements

3

----

**MICROCOMPONENT TECHNOLOGY, INC.**

## CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands,except per share data)

(Unaudited)
| ** **                                                  | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **June 30,**                | ** ** | **July 1,**               | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| ** **                                                  | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net sales                                                   |       | $                                | 3,960      |                           | $          | 3,676 |   | $ | 7,337 |   | $ | 6,051 |   |
| Cost of sales                                               |       | 1,875                            |       | 1,619                          |       | 3,479 |   | 2,799 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Gross profit                                                |       | 2,085                            |       | 2,057                          |       | 3,858 |   | 3,252 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Operating expenses:                                         |       |                             |       |                           |       |   |   |   |   |
| Selling, general  and administrative                        |       | 1,121                            |       | 1,038                          |       | 2,226 |   | 1,985 |   |
| Research and  development                                   |       | 484                              |       | 525                            |       | 984 |   | 1,043 |   |
| Restructuring  charge                                       |       | 137                              |       | —                         |       | 137 |   | — |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Total operating  expenses                                   |       | 1,742                            |       | 1,563                          |       | 3,347 |   | 3,028 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Income from operations                                      |       | 343                              |       | 494                            |       | 511 |   | 224 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Interest income                                             |       | 2                                |       | 3                              |       | 5 |   | 5 |   |
| Interest expense                                            |       | (289                             | )          | (320                           | )          | (563 | ) | (598 | ) |
| Amortization of Warrant  Discounts and other, net           |       | (319                             | )          | (156                           | )          | (375 | ) | (693 | ) |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Total interest and  other                                   |       | (606                             | )          | (473                           | )          | (933 | ) | (1,286 | ) |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Net income (loss)  before income tax                        |       | (263                             | )          | 21                             |       | (422 | ) | (1,062 | ) |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Income tax expense                                          |       | (17                              | )          | (14                            | )          | (17 | ) | (14 | ) |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Net income (loss)                                           |       | $                                | (280       | )                              | $          | 7 |   | $ | (439 | ) | $ | (1,076 | ) |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Net income (loss) per  share:                               |       |                             |       |                           |       |   |   |   |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Basic                                                       |       | $                                | (0.01      | )                              | $          | 0.00 |   | $ | (0.01 | ) | $ | (0.04 | ) |
| Diluted                                                     |       | $                                | (0.01      | )                              | $          | 0.00 |   | $ | (0.01 | ) | $ | (0.04 | ) |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Weighted average common  and equivalent shares outstanding: |       |                             |       |                           |       |   |   |   |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Basic                                                       |       | 36,665                           |       | 27,490                         |       | 36,665 |   | 27,357 |   |
| Diluted                                                     |       | 36,665                           |       | 27,490                         |       | 36,665 |   | 27,357 |   |

 

See notes tounaudited condensed consolidated financial statements

4

----

**MICROCOMPONENT TECHNOLOGY, INC.**

## CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)
| ** **                                                                   | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                   | ** ** | **June 30,**              | ** ** | **July 1,** | ** ** |
| ** **                                                                   | ** ** | **2007**                       | ** ** | **2006** | ** ** |
| Cash flows from  operating activities:                                       |       |                           |       |   |   |
| Net loss                                                                     |       | $                              | (439       | ) | $ | (1,076 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                           |       |   |   |
| Depreciation and  amortization                                               |       | 497                            |       | 719 |   |
| Changes in  assets and liabilities:                                          |       |                           |       |   |   |
| Accounts  receivable                                                         |       | 61                             |       | (654 | ) |
| Inventories                                                                  |       | (1,122                         | )          | (414 | ) |
| Other assets                                                                 |       | (7                             | )          | (42 | ) |
| Accounts payable                                                             |       | 872                            |       | 404 |   |
| Other accrued  liabilities                                                   |       | 83                             |       | 598 |   |
| Net cash used in  operating activities                                       |       | (55                            | )          | (465 | ) |
|                                                                         |       |                           |       |   |   |
| Cash flows from  investing activities:                                       |       |                           |       |   |   |
| Purchases of  property, plant, and equipment                                 |       | (50                            | )          | (11 | ) |
|                                                                         |       |                           |       |   |   |
| Net cash used in  investing activities                                       |       | (50                            | )          | (11 | ) |
|                                                                         |       |                           |       |   |   |
| Cash flows from financing  activities:                                       |       |                           |       |   |   |
| Repayment of  long term note                                                 |       | —                         |       | (4,000 | ) |
| Proceeds on long  term note, net of discounts                                |       | 297                            |       | 4,924 |   |
| Proceeds on  institutional line of credit, net of discounts                  |       | 47                             |       | 850 |   |
|                                                                         |       |                           |       |   |   |
| Proceeds from  issuance of stock, net of issuance costs                      |       | (4                             | )          | 50 |   |
|                                                                         |       |                           |       |   |   |
| Net cash provided by  financing activities                                   |       | 340                            |       | 1,824 |   |
|                                                                         |       |                           |       |   |   |
| Net increase in cash  and cash equivalents                                   |       | 235                            |       | 1,348 |   |
|                                                                         |       |                           |       |   |   |
| Cash and cash  equivalents at beginning of period                            |       | 200                            |       | 77 |   |
|                                                                         |       |                           |       |   |   |
| Cash and cash  equivalents at end of period                                  |       | $                              | 435        |   | $ | 1,425 |   |
|                                                                         |       |                           |       |   |   |
| Supplemental cash flow  information:                                         |       |                           |       |   |   |
|                                                                         |       |                           |       |   |   |
| Non-cash  financing activities:                                              |       |                           |       |   |   |
| Stock issued in  lieu of interest                                            |       | $                              | —     |   | $ | 149 |   |
| Stock issued in  conversion of 10% senior subordinated convertible debt      |       | —                         |       | 100 |   |
| Cash paid for interest                                                       |       | $                              | 545        |   | $ | 492 |   |

 

See notes to unauditedcondensed consolidated financial statements

5

----

**MICROCOMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## NOTES TOUNAUDITED 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 and regulations.  In the opinion of management all adjustments,including normal recurring adjustments, necessary for a fair presentation ofthe interim periods presented have been included.  The interim results are not necessarilyindicative of the operating results expected for the full fiscal year ending onDecember 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.   Thefinancial statements 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 ofJune 30, 2007, the Company had an accumulated deficit of $109.1 million andincurred a net loss of $439,000 for the six-month period ended June 30,2007.  As of June 30, 2007, the Companyhad cash and cash equivalents of $435,000, working capital of negative $2.2million, a current ratio of 0.75, total assets of $6.9 million and totalliabilities of $12.0 million.  Ourability to generate cash and operating income is dependent on increasing ourcustomer base to expand the penetration of our product technology and therealization of our lower operating expense targets.

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 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 

6

----

addition to the $5.25 million note, there is a $4.0 millionworking capital line of credit, which is payable in full on March 8,2008.  Interest is payable monthly on the line at the prime rate plus2.5%.  As of March 30, 2007, there was an $800,000 over-advance in excessof 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.

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 shares outstanding during eachperiod.  Diluted earnings per shareinclude the dilutive effect of common shares potentially issuable upon theexercise of stock options, warrants and the convertible term noteoutstanding.  The following tablereconciles the denominators used in computing basic and diluted earnings pershare:
|                                                | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                     | ** ** | **June 30,**                | ** ** | **July 1,**               | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| **(in thousands)**                        | ** ** | **2007 (1)**                | ** ** | **2006 (1)**              | ** ** | **2007 (1)** | ** ** | **2006 (1)** | ** ** |
| Weighted average  common shares outstanding    |       | 36,665                           |       | 27,490                         |       | 36,665 |   | 27,357 |   |
| Effect of  dilutive stock options and warrants |       | —                           |       | —                         |       | — |   | — |   |
|                                           |       | 36,665                           |       | 27,490                         |       | 36,665 |   | 27,357 |   |

 

----

(1)       Wereported a loss for the period indicated. No adjustments were made for the effect of stock options and warrants,which represented 11,935,398 and 7,159,898 shares at June 30, 2007 and July 1,2006, respectively, as the effect is antidilutive.

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

Major components ofinventories were as follows (in thousands):
|                 | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-----------------|------------|-------------------|------------|-----------------------|------------|
| ** **      | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| Raw materials   |       | $                 | 1,802      |                  | $          | 1,314 |   |
| Work-in-process |       | 849               |       | 377                   |       |
| Finished goods  |       | 487               |       | 325                   |       |
|            |       | $                 | 3,138      |                  | $          | 2,016 |   |

 

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

7

----

The following table provides the inventory reservesfor the quarter ended June 30, 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 |   | (676   | )      |
| Additional/(Reduction)  in inventory reserve    |   | (290   | )      |
| Inventory reserve  balance at June 30, 2007     |   | $      | 4,647  |   |

 

Weprovide a standard thirteen month warranty program for our equipment products.We record provisions for warranty claims for these products based uponhistorical claim performance.  The followingtable provides the expense recorded and charges against our reserves for thequarter ended June 30, 2007.
| Accrued warranty balance at  December 31, 2006 |   | $   | 101    |   |
|------------------------------------------------|--------|-----|--------|--------|
| Provision                                      |   | 65  |   |
| Warranty claims                                |   | (44 | )      |
| Accrued warranty  balance at June 30, 2007     |   | $   | 122    |   |

 

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

OnMarch 9, 2004, we completed a $5.0 million financing transaction with aninstitutional lender, Laurus Master Fund, Ltd. (“Laurus”), secured by all ofthe assets of the Company.  The financing included a $3.0 million workingcapital line of credit and a $2.0 million long-termnote.  The notes were partially convertible into shares of our commonstock.  In connection with the transaction, we issued to Laurus aseven-year warrant to purchase 400,000 shares of common stock at exerciseprices ranging from $2.30 to $2.88 per share.  The secured loan inexistence at that time with a prior lender was terminated.

On January 28, 2005, wecompleted an amendment to the financing agreement with Laurus to defer paymentson the long-term convertible note.  As part of this amendment, theconversion prices on both notes were reduced.  We also issued Laurus atthat time a seven-year warrant to purchase 150,000 shares of common stock at$.67 per share.

On April 29, 2005, we completedanother financing transaction with Laurus in which we borrowed an additional$2.5 million, and which was convertible into shares of common stock.  Wealso issued Laurus at that time an option to purchase 2,556,651 shares ofcommon stock at an exercise price of $.01 per share.  We received netproceeds of approximately $2.4 million at the closing.

OnFebruary 17, 2006, we restructured the financing with Laurus, and increased thetotal maximum secured indebtedness with Laurus to $9.25 million.  The Companyalso issued Laurus a 10-year option to purchase 2,500,000 shares at an exerciseprice of $.01 per share.  The shares issuable upon exercise of the optionhave standard registration rights.

On March29, 2007, we again restructured the financing with Laurus, and increased thetotal secured indebtedness to $10.25 million. The restructured financing includes a $5.25 million term note. Interest is payable monthly on the term note at the prime rate plus 2.5%. The note is non-convertible.  

8

----

BeginningMarch 1, 2008, we are required to make monthly payments equal to 1/60th of theprincipal amount until February 17, 2009, at which time the entire remainingprincipal and accrued interest is due and payable in full.  In addition tothe $5.25 million note, there is a $4.0 million working capital line of credit,which is payable in full on March 8, 2008.  Interest is payable monthly onthe line at the prime rate plus 2.5%.  As of March 30, 2007, there was an$800,000 over-advance in excess of the borrowing base on the working capitalline of credit.  Principal on theover-advance is repayable in $100,000 monthly payments beginning on February28, 2008.  The restructured financing also includes an additional $1.0million term note.  The proceeds from the$1 million term note, net of fees and expenses from the 2007 refinancing, arerequired to be held in a restricted account at a bank, and will only bereleased by the bank to the Company, upon approval of Laurus in its discretion,for the manufacture of demo equipment. Interest is payable monthly at the prime rate plus 2.0% and theprincipal is payable in full on March 31, 2008. As part of the 2007 restructuring, the Company also issued Laurus a10-year option to purchase 5,000,000 shares at an exercise price of $0.01 pershare.  The shares issuable upon exerciseof the option have standard registration rights.

There iscurrently $1.2 million in principal amount of the 10% Senior SubordinatedConvertible Notes outstanding, represented by one Note now held by Laurus.  The Note has a conversion price of $.50 pershare. Interest is payable monthly at the rate of 10% and the principal ispayable in full on March 31, 2008.

**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. As a result of the adoption of SFAS 123R, we incurred a compensationexpense of $4,000 for the three months and six months ended July 1, 2006.  Compensation expense for the three months andsix months ended June 30, 2007 was $10,000.

The fair value of options granted under the stockoptions for the three months and six months ended June 30, 2007 and July 1,2006 was estimated on the date of grant using the Black-Scholes option pricingmodel with the following weighted average assumptions.
|                                         | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                              | ** ** | **June 30,**                | ** ** | **July 1,**               | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| ** **                              | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Dividend yield                          |       | 0.00                             | %          | 0.00                           | %          | 0.00 | % | 0.00 | % |
| Expected volatility                     |       | 93.45                            | %          | 91.89                          | %          | 88.54 | % | 91.89 | % |
| Risk-free interest rate                 |       | 4.84                             | %          | 4.99                           | %          | 4.54 | % | 4.99 | % |
| Expected life of  options               |       | 3.5 years                        |       | 3.5 years                      |       | 3.5 years |   | 3.5 years |   |
| Fair value per share of options granted |       | $                                | 0.18       |                           | $          | 0.32 |   | $ | 0.16 |   | $ | 0.32 |   |
|                                         |            |                                  |            |                                |            |  |  |  |  |  |  |  |  |

 

9

----

**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 for uncertainty in income taxes recognized in an enterprise’sfinancial statements in accordance with FASB Statement No. 109, *Accounting for Income Taxes*. FIN 48 prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. This pronouncement also provides guidance on derecognition,classification, interest and penalties, accounting in interim periods,disclosure and transition.  FIN 48 iseffective for fiscal years beginning after December 15, 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.

InSeptember 2006, the FASB issued SFAS No. 157, “*Fair ValueMeasurements*” (“SFAS No. 157”), which is effective for interim andannual reporting periods beginning after November 15, 2007.  This statement provides a definition of fairvalue, establishes a framework for measuring fair value, and expandsdisclosures about fair value measurements for future transactions.  The Company has not yet assessed the impactof this Statement on the Company’s financial statements.

InFebruary 2007, the FASB issued Statement of Financial Accounting Standards No.159, “*The Fair Value Option for Financial Assets andFinancial Liabilities*” (“SFAS 159”). The Statement permits entities to choose to measure many financialinstruments and certain other items at fair value that are not currentlyrequired to be measured at fair value. The objective is to improve financial reporting by providing entitieswith the opportunity to mitigate volatility in reported earnings caused bymeasuring related assets and liabilities differently without having to applycomplex hedge accounting provisions. SFAS 159 will be effective for the first fiscal year that begins afterNovember 15, 2007.  The company has notyet assessed the impact of this Statement on the Company’s financialstatements.

10

----

**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## ITEM 2.  MANAGEMENT’S DISCUSSIONAND ANALYSIS OFRESULTS 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 statementsare not historical facts, but rather are based on our current expectations,estimates and projections about the semiconductor capital equipment industry,and our beliefs and assumptions.   We intendwords 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 and uncertaintiesare described elsewhere in this report on Form 10-Q and our report on Form 10-Kfor the year ended December 31, 2006.  Wecaution you not to place undue reliance on these forward-looking statements,which reflect our management’s view only as of the date of this Report on Form10-Q.  We are not obligated to updatethese statements or publicly release the result of any revisions to them toreflect events or circumstances after the date of this Report on Form 10-Q orto reflect the occurrence of unanticipated events.*

*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, we developedand 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 beuncertain.  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.We will continue to monitor the 

11

----

market and if required,examine opportunities to further reduce our costs through further consolidationof operations, limiting capital expenditures, monitoring inventory purchasesand additional strategic restructuring initiatives.  Certain of these types of actions have thepotential for further charges in future periods.

**Critical Accounting Policies**

*Revenue Recognition*

Under SAB 104, we recognize revenue upon shipment, as our terms are FOBshipping point, for established equipment products that have previouslysatisfied existing customer performance specifications and that provide forfull payment tied to shipment.  Revenuefor products that have not previously satisfied customer performance specificationsor from sales where all or a portion of customer payment is based uponacceptance are only recognized upon customer acceptance.  As such, in periods of increasing shipments,revenues will be deferred if the shipments are for new customers, new productsor the payment terms are tied to acceptance criteria.  Consequently, if these conditions exist, wemay report revenue levels that are not reflective of actual shipment growthrates.  Conversely, in periods ofdecreasing shipments, we potentially could recognize revenues related toshipments made in prior periods. Consequently, if these conditions exist, we may report revenue levelsthat are greater than actual shipments. During the quarter ended June 30, 2007, we had $201,000 of deferredrevenue in excess of costs under the SAB 104 revenue recognition rule.

*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  oreconomic recession, a greater degree of risk exists concerning the ultimatecollectability of our accounts receivable due to the impact that theseconditions might have on our customer base. No provisions were recorded for the quarter ended June 30, 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.

12

----

Provisions toreduce inventories to the lower of cost or market are made based on a review ofexcess and obsolete inventories through an examination of historical componentconsumption, current market demands and shifting product technology.  Significant assumptions with respect tomarket trends and customer product acceptance are utilized to formulate ourprovision methods.  Sudden or continuingdownward changes in the semiconductor capital equipment market may cause us torecord additional inventory revaluation charges in future periods.  No write-down of our inventories occurred forthe quarter ended June 30, 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 of subjectivityin that historical performance is used to estimate future warranty claims.There can be no assurance that our estimates will match the actual amount offuture warranty claims.

###### **Resultsof Operations for the Three Months Ended June 30, 2007 and July 1, 2006**

Net sales for the three months ended June 30, 2007 increased by$284,000 or 8% to $4.0 million compared to $3.7 million for the three monthsended July 1, 2006.  The Strip Test andMark product line enjoyed the largest percentage increase.

Gross margin for the three months ended June 30, 2007 was $2.1 millionor 53% of net sales compared to $2.1 million or 56% of net sales for thecomparable period in the prior year

Total operating expenseincreased by $179,000 or 11% from $1.6 million to $1.7 million over the prioryear.  Selling, general andadministrative expenses for the three months ended June 30, 2007 were $1.1million or 28% of net sales compared to $1.0 million or 28% of net sales forthe three months ended July 1, 2006. Research and development expenses for the second quarter of 2007 were$484,000 or 12% of net sales compared to $525,000 or 14% of net sales in thesecond quarter of 2006.   In addition, onJune 29, 2007, we restructured our Penang, Malaysia manufacturing operation.The restructuring plan included the reduction of our lease facility from 54,000square feet to 10,000 square feet, a workforce reduction of approximately 28positions in our Malaysian manufacturing operation, and outsourcingmanufacturing of certain fabricated parts. We recorded a total restructuring charge of $137,000 for the secondquarter of 2007, primarily for future cash expenditures for terminationbenefits and related costs. Cash payments are expected to be completed by thirdquarter 2007.

The net loss for the three months ended June 30, 2007 was $280,000 or$0.01 per basic and fully-diluted share compared to net income for the threemonths ended July 1, 2006 of $7,000 or $0.0 per basic and fully-diluted share.

###### **Resultsof Operations for the Six Months Ended June 30, 2007 and July 1, 2006**

Net sales for thesix months ended June 30, 2007 increased $1.3 million or 21% to $7.3 million compared to $6.0 millionfor the six months ended July 1, 2006. This increase is a result of a modest improvement in the capitalequipment market.  Sales increases wereexperienced across all of our product lines.

13

----

Gross margins for the first six months of 2007 increased by $606,000 to$3.9 million, or 52.6% of net sales, from $3.3 million, or 53.7% of net sales,for the comparable period in the prior year.

Total operating expense for the first six months of 2007 increased by$319,000 or 10.6% from $3.0 million to $3.3 million.  Selling, general and administrative expensefor the first six months of 2007 was $2.2 million or 30.4% of net sales,compared to $2.0 million, or 32.8% of net sales for the first six months of2006.  Substantially all of theseincreases were planned, and included $108,000 of increased selling andmarketing expenses over the prior year’s period due primarily to additionalcommissions and travel expenses, and $133,000 of increased general andadministrative expenses over the prior year’s period due primarily toadditional consulting and legal fees for corporate development projects andrefinancing of the Laurus debt.  Researchand development expense for the first six months of 2007 was $1.0 million, or13.4% of net sales compared to $1.0 million, or 17.2% of net sales for thefirst six months of 2006.   The decreasein expense as a percentage of sales is a result of the increase in netsales.  In addition, on June 29, 2007, werestructured our Penang, Malaysia manufacturing operation. The restructuringplan included the reduction of our lease facility from 54,000 square feet to10,000 square feet, a workforce reduction of approximately 28 positions in ourMalaysian manufacturing operation, and outsourcing manufacturing of certainfabricated parts.  We recorded a totalrestructuring charge of $137,000 for the second quarter of 2007, primarily forfuture cash expenditures for termination benefits and related costs. Cashpayments are expected to be completed by third quarter 2007.

The net loss for the first six months of 2007 was $439,000 or $0.01 pershare compared to net loss of $1.1 million or $0.04 per share in the comparableprior year period.  Included in the prioryear’s net loss were write-offs of $414,000 that relate to prior year’s debtissuance cost and FAS 123 discounts from the Laurus financing.  Without this write-off, net loss for thesecond quarter 2006 year-to-date would have been $662,000 or $0.02 per basicand fully-diluted share.

**Liquidityand Capital Resources**

Cash used in operations was $55,000 in the six months ended June 30,2007 as compared to $465,000 in the six months ended July 1, 2006.  Accountspayable increased $872,000 from year-end to $1.3 million from $440,000,primarily due to inventory purchases. Inventory finished at $3.1 million, which consists of $7.8 million ofgross inventories and $4.7 million of reserves. Capital expenditures were $50,000 for the first six months of 2007compared to $11,000 in the first six months of 2006.

We ended the quarter with $435,000 in cash and cash equivalents up from$200,000 at the end of 2006.  Workingcapital finished at a negative $2.2 million compared to negative $664,000 atthe end of 2006.  The negative workingcapital position is primarily due to the Laurus $5.25 million term note, the$1.0 million term note, and the convertible term note coming into classificationfrom long term to short term, as this debt is due within the upcoming 12months.

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 

14

----

plus 2.5%.  As ofMarch 30, 2007, there was an $800,000 over-advance in excess of the borrowingbase on the working capital line of credit. Principal on the over-advance is repayable in $100,000 monthly paymentsbeginning on February 28, 2008.  The restructured financing also includesan additional $1.0 million term note. The proceeds from the $1 million term note, net of fees and expensesfrom the 2007 refinancing, are required to be held in a restricted account at abank, and will only be released by the bank to the Company, upon approval ofLaurus in its discretion, for the manufacture of demo equipment.  Interest is payable monthly at the prime rateplus 2.0% and the principal is payable in full on March 31, 2008.  As part of the 2007 restructuring, theCompany also issued Laurus a 10-year option to purchase 5,000,000 shares at anexercise price of $0.01 per share.  Theshares issuable upon exercise of the option have standard registration rights.

There is currently $1.2 millionin principal amount of the 10% Senior Subordinated Convertible Notesoutstanding, represented by one Note now held by Laurus.  The Note has a conversion price of $.50 pershare. Interest is payable monthly at the rate of 10% and the principal ispayable in full on March 31, 2008.

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. Further, if future financing requirements are satisfied through the issuance of equity or debt instruments, shareholders may experience additional dilution in terms of their percentage of ownership of our securities.

**IMPACT OF ACCOUNTING STANDARDS**

In June 2006, the Financial AccountingStandards Board issued FASB Interpretation No. 48, *Accountingfor Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,*orFIN 48.  FIN 48 clarifies the accountingfor uncertainty in income taxes recognized in an enterprise’s financialstatements in accordance with FASB Statement No. 109, *Accountingfor Income Taxes*.  FIN 48prescribes a recognition threshold and measurement attribute for the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return.  Thispronouncement also provides guidance on derecognition, classification, interestand 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 FASBissued SFAS No. 157, “*Fair Value Measurements*”(“SFAS No. 157”), which is 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 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.  

15

----

SFAS 159 will beeffective for 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 toensure that the information required to be disclosed by us in our periodic SECfilings is recorded, processed, summarized, and reported within the timeperiods specified in the Securities and Exchange Commission’s rules and forms.

(b)   Changes in internal controls over financialreporting.

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

16

----

**MICROCOMPONENT TECHNOLOGY, INC.**

## FORM 10-Q

# PART II.  OTHER INFORMATION

### **Item1A. Risk Factors**

Set forth below isa discussion of the significant risk factors applicable to the Company.  Additional risk factors may develop in thefuture.

**Ourability to continue as a “going concern” is uncertain.**

Our consolidatedfinancial statements have been prepared on the assumption that we will continueas a going concern, which contemplates the realization of assets andliquidation of liabilities in the normal course of business.  The Company has suffered recurring losses from operations and has astockholders’ deficit.  These factorsraise substantial doubt about the Company’s ability to continue as a goingconcern. As of June 30, 2007, we had cash and cash equivalents of$435,000, assets totaling $6.9 million, liabilities totaling $12.0 million, andincurred losses from continuing operations of $439,000 for the first six monthsof 2007.  We expect to continue to expendcash and incur operating losses at the current net sales levels, but to alesser extent than the twelve months ended December 31, 2006 as certainoperating expenses are expected to decline from 2006 levels. Our ability togenerate cash and operating income is dependent on increasing our customer baseto expand the penetration of our product technology and the realization of ourlower operating expense targets.

A material portion of theprincipal and interest due from the Company to Laurus on the existing financingagreements becomes due and payable in March of 2008.  In the event that we are unable to repay orrefinance our debt in March of 2008, Laurus could potentially take a number ofactions as secured creditor which would have a material negative impact on theCompany and its shareholders, including foreclosure, a forced sale of all or partof the Company, and/or liquidation. Further, if future financing requirementsare satisfied through the issuance of equity or debt instruments, shareholdersmay experience additional dilution in terms of their percentage of ownership ofour securities.

**The success of our new productsdepends upon customer acceptance of both the testing of semiconductor devicesin strip form and the automation of the back-end of the semiconductormanufacturing process.**

Several of our newproducts, including our Tapestry strip handler and other Smart Solutionsproducts, are used to test and process semiconductor devices in stripform.  Assembly of semiconductor devicesin strip form is the standard industry practice.  However, we cannot assure you that testing ofsemiconductor devices in strip form will become widely accepted by theindustry.  Until recently, mostsemiconductor manufacturers believed it was necessary to test semiconductorsafter they were cut from the strips because they believed the act of cuttingthe strips containing the semiconductor devices, referred to as singulation,could result in damage or contamination to the semiconductor devices and, as aconsequence, make the prior test results unreliable.

We introduced ourTapestry handling system in February 1999. In May 2000, we introduced other Smart Solutions products, which provideadditional process capability for handling and testing semiconductor devices instrip form.  In July of 2003, weintroduced our Tapestry SC, a second-generation system.  In July of 2004, we introduced our TapestrySC SmartMark, a second-generation system. Our new products are attractive tocustomers only if the customers can see the value of automating the test andassembly 

17

----

portions of theirsemiconductor manufacturing operations. Although semiconductor manufacturers have automated the waferfabrication portion of their operation, or the front-end of the semiconductormanufacturing process, very few semiconductor manufacturers have invested asignificant amount of capital to automate the test and assembly portions oftheir operations.  We are introducing newproducts for technologies, which may not be accepted on a wide-scale basis bythe industry.  If either the testing ofsemiconductor devices in strip form or wide-scale automation of the back-end isnot accepted by the industry, our net sales likely will suffer.

**Downturns in semiconductorindustry business cycles could have a negative impact on our operating results.**

Our business dependsheavily upon capital expenditures by semiconductor manufacturers.  The semiconductor industry is highlycyclical, with periods of capacity shortage and periods of excesscapacity.  In periods of excess capacity,the industry sharply cuts purchases of capital equipment, such as ourproducts.  Thus, a semiconductor industrydownturn or slowdown substantially reduces our revenues and operating resultsand could hurt our financial condition. In the fourth quarter of 2000, the semiconductor capital equipmentindustry went into a severe downturn and continued through 2005.  In 2006, there was a slight upturn in themarket, but the depressed market over the prior six years has negativelyaffected our operations and financial condition.

**We have offered automationsolutions and, unless we effectively market our company as a provider ofautomation solutions, our expected financial results will suffer.**

We offer equipmentautomation solutions and software development services.  These solutions and services requiredifferent marketing techniques and involve a more extensive decision-makingprocess by customers than for our traditional handler products.  We need to successfully market our automationproducts using different sales methods than we have previously used.

We acquired an automationsoftware business in June 1999 and introduced our first suite of products toprovide an automation solution for the testing portion of semiconductor manufacturingin May 2000.  The sales from theseoperations make up less than 1%, 1% and 3% of net sales for the years endedDecember 31, 2006, 2005 and 2004, respectively. Our future success is dependent upon being able to successfully marketour automation products.  If we are notsuccessful in effectively marketing ourselves as an equipment automationsolutions provider to the semiconductor industry, our results of operations andfinancial condition will suffer.

**We invest heavily in research anddevelopment efforts and our financial results depend upon the success of theseefforts.**

We have spent, and expectto continue to spend, a significant amount of time and resources developing newproducts and refining existing products and systems.  In light of the long product developmentcycles inherent in our industry, these expenditures will be made well inadvance of the prospect of deriving revenue from the sale of new systems.

Our ability to introduceand market new products successfully is subject to a wide variety of challengesduring this development cycle, such as design defects or changing marketrequirements that could delay introduction of these systems.  In addition, since our customers are notobligated by long-term contracts to 

18

----

purchase our products,our anticipated product orders may not materialize, or orders that domaterialize may be canceled.  As aresult, if we do not achieve market acceptance of new products, we may not beable to realize sufficient sales needed to recoup our research and developmentexpenditures.

**Our operating results often havelarge changes from period to period, which may result in a decrease in ourstock price.**

Our quarterly and annualoperating results are affected by a wide variety of factors that couldadversely affect sales or operating results or lead to significant variabilityin our operating results.  A variety offactors could cause this variability, including the following:

·              thecyclical nature of the semiconductor industry;

·              delaysin, or cancellation of, significant system purchases by customers;

·              delaysin the development, introduction and production of our products;

·              changesin the mix of our products and their gross margins;

·              newproduct introductions by competitors and competitive pricing pressures;

·              the time requiredfor us to adjust our operating expenses to respond to changes in sales andmarket conditions;

·              thetiming of any future acquisitions and their effect on our financial results;

·              componentshortages resulting in manufacturing delays; and

·              pressureby customers to reduce prices, shorten delivery times and extend payment terms.

We cannot predict theimpact of these and other factors on our sales or operating results in anyfuture period.  Results of operations inany period, therefore, should not be considered indicative of the results to beexpected for any future period.  Becauseof this difficulty in predicting future performance, our operating results mayfall below expectations of security analysts or investors in some futureperiods.  Our failure to meet theseexpectations would likely adversely affect the market price of our commonstock.

**Our stock price is volatile andit may drop unexpectedly.**

Stock prices of companiesin the semiconductor equipment industry, including ours, can swing dramaticallywith little relationship to operating performance.  Factors, which could cause our stock price tochange, include:

·              changesin the market’s view of the semiconductor industry in general;

·              changes in ourquarterly operating results for the reasons set out in the previous riskfactors for other reasons;

·              changesin our reported financial results based on accounting pronouncements;

·              changes in researchanalysts’ expectations for us or our industry or failure to meet researchanalysts’ estimates;

·              changes in thegeneral economic conditions or developments in the semiconductor industry whichaffect investors confidence;

·              announcementsby us or our competitors of technological innovations or new or enhancedproducts and;

Additional factors, which may impact our results,include:

19

----

·              we depend upon a fewcustomers for the majority of our revenues and a reduction in their orderscould adversely affect us;

·              our operatingresults would be harmed if one of our key suppliers fails to deliver componentsfor our products;

·              theloss of any of our key personnel could harm our business;

·              our markets are verycompetitive and demand for our products may decrease if additional competitorsenter our markets;

·              ourdependence upon international sales involves significant risk;

·              thepossible adverse impact of economic or political changes in the market weserve;

·              ourinability to obtain financing to fund continuing or expanding operations;

Fluctuations or decreases in the trading price of our common stock mayadversely affect the ability to trade our shares.  In addition, these fluctuations couldadversely affect our ability to raise capital through future equity financing.

### **Item 4. Submission Of Matters To A Vote Of Security Holders**

On June 21, 2007, the Companyheld its annual meeting of shareholders. At the meeting, the following actions were taken:

Election of Directors

The following persons were elected directors ofthe Company to serve for a term of one year:
| Roger Gower         | David M. Sugishita |
|---------------------|--------------------|
| Donald R VanLuvanee | Patrick Verderico  |

 

The vote summaries are as follows:
| Director Name   | ** ** | **Affirmed** | ** ** | **Withheld** | ** ** |
|----------------------|------------|--------------|------------|--------------|------------|
| Roger E. Gower       |       | 34,203,708   |       | 665,685      |       |
| David M. Sugishita   |       | 34,203,458   |       | 665,935      |       |
| Donald R. VanLuvanee |       | 34,203,458   |       | 665,935      |       |
| Patrick  Verderico   |       | 34,201,497   |       | 667,896      |       |

 

Approval of Amendment to the Article of Incorporation

To amend the Article of Incorporation by increasing the number ofshares of Common Stock authorized for issuance by the Company from 55,000,000shares to 100,000,000 shares.
| For     |   | 32,855,876 |   |
|---------|--------|------------|--------|
| Against |   | 1,937,793  |   |
| Abstain |   | 75,724     |   |

 

20

----

Approval of Amendment to Stock Option Plan forOutside Directors

To amend the Stock Option Plan for Outside Directors by increasing thenumber of shares reserved for issuance under the Plan from 570,000 to 670,000shares.
| For             |   | 12,210,332 |   |
|-----------------|--------|------------|--------|
| Against         |   | 1,674,176  |   |
| Abstain         |   | 137,623    |   |
| Broker Non-Vote |   | 20,847,262 |   |

 

Approval of Amendment to 2004 Incentive Stock Plan

To amend the 2004 IncentiveStock Plan by increasing the number of shares reserved for issuance under thePlan from 880,000 to 1,880,000 shares.
| For             |   | 11,707,157 |   |
|-----------------|--------|------------|--------|
| Against         |   | 2,183,251  |   |
| Abstain         |   | 131,723    |   |
| Broker Non-Vote |   | 20,847,262 |   |

 

Appointment of Olsen Thielen & Co. Ltd. as the independentregistered public accounting firm 

To appoint Olsen Thielen& Co. Ltd. as the independent registered public accounting firm for thecurrent year.
| For     |   | 34,642,288 |   |
|---------|--------|------------|--------|
| Against |   | 85,727     |   |
| Abstain |   | 141,378    |   |

 

### **Item6.  Exhibits**

| 10.1   | Offer Letter to Bruce Ficks, Chief Financial Officer  of the Company (filed herewith).                  |
|--------|---------------------------------------------------------------------------------------------------------|
|   |                                                                                                    |
| 10.2   | Contract Manufacturing Agreement between Company and  Greatech Integration(M) Sdn Bhd (filed herewith). |
|   |                                                                                                    |
| 10.3   | Lease agreement between Company and AT Engineering  Sdn Bhd (filed herewith).                           |
|   |                                                                                                    |
| 31.1   | Certification of Chief Executive Officer (filed  herewith).                                             |
|   |                                                                                                    |
| 31.2   | Certification of Chief Financial Officer (filed  herewith).                                             |
|   |                                                                                                    |
| 32     | Section 1350 Certification (filed herewith).                                                            |

 

21

----

**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: | August 14, 2007 |                             | By:                                   | /s/ Roger E. Gower |
|   |            |                             | Roger E. Gower                        |
|   |            |                             | President and Chief Executive Officer |
|   |            |                             |                                  |
|   |            |                             |                                  |
|   |            |                             | And                                   |
|   |            |                             |                                  |
|   |            |                             |                                  |
| Dated: | August 14, 2007 |                             | By:                                   | /s/ Bruce Ficks |
|   |            |                             | Bruce Ficks                           |
|   |            |                             | Chief Financial Officer               |
|        |                 |                                  |                                       |  |  |

 

22

----

EXHIBIT INDEX
| 10.1   | Offer Letter to Bruce Ficks, Chief Financial Officer  of the Company (filed herewith).                  |
|--------|---------------------------------------------------------------------------------------------------------|
|   |                                                                                                    |
| 10.2   | Contract Manufacturing Agreement between Company and  Greatech Integration(M) Sdn Bhd (filed herewith). |
|   |                                                                                                    |
| 10.3   | Lease agreement between Company and AT Engineering  Sdn Bhd (filed herewith).                           |
|   |                                                                                                    |
| 31.1   | Certification of Chief Executive Officer (filed  herewith).                                             |
|   |                                                                                                    |
| 31.2   | Certification of Chief Financial Officer (filed  herewith).                                             |
|   |                                                                                                    |
| 32     | Section 1350 Certification (filed herewith).                                                            |

 

23

----