** **

** **

**SECURITIESAND 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 29,  2008** |
| ** **                                              | ** **                                                                                          |
| **OR**                                                  |
| ** **                                              | ** **                                                                                          |
| **o**                                                   | **TRANSITION REPORT PURSUANT TO SECTION 13 or  15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For thetransition periodfrom            to          **

** **

**CommissionFile No. 0-22384**

** **

**MICRO COMPONENT TECHNOLOGY, INC.**

(Exactname of registrant as specified in its charter)

 

| **Minnesota**                                                   | ** ** | **41-0985960**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other jurisdiction of

incorporation or organization) |       | (I.R.S. Employer

Identification No.) |

 

**2340West County Road C, St. Paul, MN 55113-2528**

(Addressof principal executive offices)

 

**(651)697-4000**

(Registrant’stelephone number)

 

Indicate by check mark whether the Registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe 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 | Smaller  Reporting Company o |
|----------------------------|----------------------|--------------------------|------------------------------|

 

 

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

 

The number of shares outstanding of theRegistrant’s Common Stock, as of May 13, 2008 was 37,876,889.

 

 

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**MICRO COMPONENT TECHNOLOGY, INC**.

 

FORM 10-Q

 

TABLE OF CONTENTS

 

**PART I - FINANCIALINFORMATION**

** **
| ** **                          | **ITEM 1.**      | **FINANCIAL STATEMENTS**                                                                        | ** ** |
|-------------------------------------|------------------|-------------------------------------------------------------------------------------------------|------------|
| ** **                          | ** **       | ** **                                                                                      | ** ** |
| ** **                          | ** **       | **CONSOLIDATED  BALANCE SHEETS**                                                                | **3**      |
| ** **                          | ** **       | ** **                                                                                      | ** ** |
| ** **                          | ** **       | **CONSOLIDATED STATEMENTS OF OPERATIONS**                                                       | **4**      |
| ** **                          | ** **       | ** **                                                                                      | ** ** |
| ** **                          | ** **       | **CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                       | **5**      |
| ** **                          | ** **       | ** **                                                                                      | ** ** |
| ** **                          | ** **       | **NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL  STATEMENTS**                             | **6**      |
| ** **                          | ** **       | ** **                                                                                      | ** ** |
| ** **                          | **ITEM 2.**      | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION** | **11**     |
| ** **                          | ** **       | ** **                                                                                      | ** ** |
| ** **                          | **ITEM 3.**      | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                 | **15**     |
| ** **                          | ** **       | ** **                                                                                      | ** ** |
| ** **                          | **ITEM 4.**      | **CONTROLS AND  PROCEDURES**                                                                    | **15**     |
| ** **                          | ** **       | ** **                                                                                      | ** ** |
| **PART II. OTHER INFORMATION** | ** **       |
| ** **                          | ** **       | ** **                                                                                      | ** ** |
|                                | ITEM 1A.         | RISK FACTORS                                                                                    | 17         |
|                                |             |                                                                                            |       |
|                                | ITEM 6. EXHIBITS | 22                                                                                              |
|                                |             |                                                                                            |       |
| ** **                          | **SIGNATURES**   | **23**                                                                                          |

 

2

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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, exceptshare and per share data)

(Unaudited)
| ** **                                                                                             | ** ** | **March 29,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
|                                                                                                   |       | **2008**           | ** ** | **2007**              |       |
| **Assets**                                                                                             |       |               |       |                  |       |
| Current assets                                                                                         |       |               |       |                  |       |
| Cash and cash  equivalents                                                                             |       | $                  | 387        |                  | $          | 373 |   |
| Accounts  receivable, less allowance for doubtful accounts of $121 and $121,  respectively             |       | 2,456              |       | 3,044                 |       |
| Inventories                                                                                            |       | 1,811              |       | 1,671                 |       |
| Other                                                                                                  |       | 138                |       | 108                   |       |
| Total current  assets                                                                                  |       | 4,792              |       | 5,196                 |       |
|                                                                                                   |       |               |       |                  |       |
| Property, plant and equipment, net                                                                     |       | 111                |       | 114                   |       |
|                                                                                                   |       |               |       |                  |       |
| Debt issuance  costs, net of accumulated amortization of $1,541 and $1,518, respectively               |       | 144                |       | 167                   |       |
| Other assets                                                                                           |       | 32                 |       | 32                    |       |
|                                                                                                   |       |               |       |                  |       |
| Total assets                                                                                           |       | $                  | 5,079      |                  | $          | 5,509 |   |
| ** **                                                                                             |       |               |       |                  |       |
| **Liabilities and Stockholders’ Deficit**                                                         |       |               |       |                  |       |
| Current liabilities:                                                                                   |       |               |       |                  |       |
| Current portion  of long-term debt                                                                     |       | $                  | 132        |                  | $          | — |   |
| Accounts payable                                                                                       |       | 801                |       | 698                   |       |
| Accrued  compensation                                                                                  |       | 480                |       | 481                   |       |
| Accrued interest                                                                                       |       | 151                |       | 158                   |       |
| Accrued warranty                                                                                       |       | 99                 |       | 114                   |       |
| Customer  prepayments and unearned service revenue                                                     |       | 221                |       | 229                   |       |
| Other accrued  liabilities                                                                             |       | 195                |       | 158                   |       |
| Total current  liabilities                                                                             |       | 2,079              |       | 1,838                 |       |
|                                                                                                   |       |               |       |                  |       |
| Long-term debt, net of discounts of $1,546 and  $1,804, respectively                                   |       | 9,603              |       | 9,320                 |       |
| Total liabilities                                                                                      |       | 11,682             |       | 11,158                |       |
|                                                                                                   |       |               |       |                  |       |
| Stockholders’ deficit:                                                                            |       |               |       |                  |       |
| Preferred stock,  $.01 par value, 1,000,000 authorized, none issued and outstanding                    |       | —             |       | —                |       |
| Common stock,  $.01 par value, 100,000,000 authorized, 37,876,889 and 37,876,889 issued,  respectively |       | 379                |       | 379                   |       |
| Additional  paid-in capital                                                                            |       | 104,369            |       | 104,207               |       |
| Accumulated  deficit                                                                                   |       | (111,351           | )          | (110,235              | )          |
| Total  stockholders’ deficit                                                                      |       | (6,603             | )          | (5,649                | )          |
| Total liabilities and stockholders’ deficit                                                       |       | $                  | 5,079      |                  | $          | 5,509 |   |

 

See notes to unauditedcondensed consolidated financial statements

 

3

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**MICRO COMPONENT TECHNOLOGY, INC.AND SUBSIDIARIES**

## CONSOLIDATED STATEMENTSOF OPERATIONS

(In thousands, except pershare data)

(Unaudited)

 
| ** **                                                                      | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                      | ** ** | **March 29,**     | ** ** | **March 31,** | ** ** |
| ** **                                                                      | ** ** | **2008**               | ** ** | **2007** | ** ** |
| Net sales                                                                       |       | $                      | 2,198      |   | $ | 3,377 |   |
| Cost of sales                                                                   |       | 1,133                  |       | 1,604 |   |
| Gross profit                                                                    |       | 1,065                  |       | 1,773 |   |
|                                                                            |       |                   |       |   |   |
| Operating expenses:                                                             |       |                   |       |   |   |
| Selling, general  and administrative                                            |       | 1,162                  |       | 1,105 |   |
| Research and  development                                                       |       | 464                    |       | 500 |   |
|                                                                            |       |                   |       |   |   |
| Total operating expenses                                                        |       | 1,626                  |       | 1,605 |   |
|                                                                            |       |                   |       |   |   |
| Income (loss) from operations                                                   |       | (561                   | )          | 168 |   |
|                                                                            |       |                   |       |   |   |
| Interest income                                                                 |       | 2                      |       | 3 |   |
| Interest expense                                                                |       | (251                   | )          | (273 | ) |
| Interest expense  — amortization of warrant discounts and debt issue costs |       | (281                   | )          | (145 | ) |
| Other income  (expense)                                                         |       | (25                    | )          | 88 |   |
| Total interest and other                                                        |       | (555                   | )          | (327 | ) |
|                                                                            |       |                   |       |   |   |
| Net loss                                                                        |       | $                      | (1,116     | ) | $ | (159 | ) |
|                                                                            |       |                   |       |   |   |
| Net loss per share:                                                             |       |                   |       |   |   |
|                                                                            |       |                   |       |   |   |
| Basic                                                                           |       | $                      | (0.03      | ) | $ | (0.00 | ) |
| Diluted                                                                         |       | $                      | (0.03      | ) | $ | (0.00 | ) |
|                                                                            |       |                   |       |   |   |
| Weighted average common and equivalent shares  outstanding:                     |       |                   |       |   |   |
|                                                                            |       |                   |       |   |   |
| Basic                                                                           |       | 37,877                 |       | 36,665 |   |
| Diluted                                                                         |       | 37,877                 |       | 36,665 |   |

 

See notes tounaudited condensed consolidated financial statements

 

4

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**MICRO COMPONENT TECHNOLOGY, INC.AND SUBSIDIARIES**

## CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
| ** **                                                       | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                       | ** ** | **March 29,**     | ** ** | **March 31,** | ** ** |
| ** **                                                       | ** ** | **2008**               | ** ** | **2007** | ** ** |
| Cash flows from operating activities:                            |       |                   |       |   |   |
| Net loss                                                         |       | $                      | (1,116     | ) | $ | (159 | ) |
| Adjustments to  reconcile net loss to net cash used in operating |       |                   |       |   |   |
| Activities:                                                      |       |                   |       |   |   |
| Depreciation                                                     |       | 16                     |       | 25 |   |
| Amortization                                                     |       | 281                    |       | 145 |   |
| Share-based  compensation expense                                |       | 162                    |       | — |   |
| Changes in  assets and liabilities:                              |       |                   |       |   |   |
| Accounts  receivable                                             |       | 588                    |       | 168 |   |
| Inventories                                                      |       | (140                   | )          | (448 | ) |
| Other assets                                                     |       | (30                    | )          | 9 |   |
| Accounts payable                                                 |       | 103                    |       | 505 |   |
| Other accrued  liabilities                                       |       | 6                      |       | 75 |   |
|                                                             |       |                   |       |   |   |
| Net cash provided (used) in operating activities                 |       | (130                   | )          | 320 |   |
|                                                             |       |                   |       |   |   |
| Cash flow from investing activities:                             |       |                   |       |   |   |
| Purchases of  property, plant and equipment                      |       | (13                    | )          | (38 | ) |
|                                                             |       |                   |       |   |   |
| Net cash used in investing activities                            |       | (13                    | )          | (38 | ) |
|                                                             |       |                   |       |   |   |
| Cash flows from financing activities:                            |       |                   |       |   |   |
| Payment on line  of credit                                       |       | (150                   | )          | — |   |
| Proceeds on long  term note, net of discounts                    |       | 307                    |       | (128 | ) |
|                                                             |       |                   |       |   |   |
| Net cash  provided (used) by financing activities                |       | 157                    |       | (128 | ) |
|                                                             |       |                   |       |   |   |
| Net increase in cash and cash equivalents                        |       | 14                     |       | 154 |   |
|                                                             |       |                   |       |   |   |
| Cash and cash equivalents at beginning of period                 |       | 373                    |       | 200 |   |
|                                                             |       |                   |       |   |   |
| Cash and cash equivalents at end of period                       |       | $                      | 387        |   | $ | 354 |   |
|                                                             |       |                   |       |   |   |
| Supplemental cash flow information:                              |       |                   |       |   |   |
| Non-cash  financing activities:                                  |       |                   |       |   |   |
| Cash paid for  interest                                          |       | 258                    |       | 261 |   |

 

See notes to unauditedcondensed consolidated financial statements

 

5

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**MICROCOMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIALSTATEMENTS

(Unaudited)

 

**1.****                         ****INTERIM FINANCIAL STATEMENTS**

 

*Basis ofPresentation*

 

The consolidatedfinancial statements include the accounts of the parent company and oursubsidiaries after elimination of all significant intercompany balances andtransactions.  All significantsubsidiaries are 100% owned.

 

The unauditedconsolidated financial statements included herein have been prepared inaccordance with accounting principles generally accepted in the United States(generally accepted accounting principles) for interim financial informationand with the instructions for Form 10-Q and Article 10 of RegulationS-X.  Certain information and footnotedisclosures normally included in financial statements prepared in accordancewith generally accepted accounting principles have been condensed or omittedpursuant to such rules and regulations. In the opinion of management all adjustments, including normal recurringadjustments, necessary for a fair presentation of the interim periods presentedhave been included.  The interim resultsare not necessarily indicative of the operating results expected for the fullfiscal year ending on December 31, 2008.

 

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 Report of theIndependent Registered Public Accounting Firm on the financial statements ofthe Company as of and for the fiscal year ended December 31, 2007 includedin Form 10-K contained an explanatory paragraph that expresses substantialdoubt about our ability to continue as a going concern.   The financial statements do not include anyadjustments to reflect the possible future effects on therecoverability and classification of assets or the amounts and classificationof liabilities that may result from the outcome of this uncertainty.

 

As of March 29,2008, the Company had an accumulated deficit of $111.4 million and incurred anet loss of $1.1 million for the three-month period ended March 29,2008.  As of March 29, 2008, theCompany had cash and cash equivalents of $387,000, working capital of $2.7million, a current ratio of 2.30, total assets of $5.1 million and totalliabilities of $11.7 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.

 

Interim unauditedfinancial results should be read in conjunction with the audited financialstatements included in the SEC Report on Form 10-K, for the period ended December 31,2007.

 

6

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**2.****                         ****EARNINGS PER SHARE**

 

Basic earnings per shareare computed using the weighted average number of common shares outstandingduring each period.  Diluted earnings pershare include the dilutive effect of common shares potentially issuable uponthe exercise of stock options, warrants and the convertible term noteoutstanding.  The following tablereconciles the denominators used in computing basic and diluted earnings per share:

 

| (in thousands)                                       | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|
| ** **                                           | ** ** | **March 29,**     | ** ** | **March 31,** | ** ** |
| ** **                                           | ** ** | **2008 (1)**           | ** ** | **2007 (1)** | ** ** |
| Weighted average common shares outstanding           |       | 37,877                 |       | 36,665 |   |
| Effect of dilutive stock options, warrants and notes |       | —                 |       | — |   |
|                                                 |       |                   |       |   |   |
|                                                 |       | 37,877                 |       | 36,665 |   |

 

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|   | (1) | We reported a loss for  the period indicated. No adjustments were made for the effect of stock  options and warrants, which represented 14,784,319 and 11,905,398 shares at  March 29, 2008 and March 31, 2007, respectively, as the effect is  antidilutive. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

**3.****                         ****BALANCE SHEET INFORMATION**

 

Major componentsof inventories were as follows (in thousands):

 
| ** **      | ** ** | **March 29,** | ** ** | **December 31,** | ** ** |
|-----------------|------------|--------------------|------------|-----------------------|------------|
| ** **      | ** ** | **2008**           | ** ** | **2007**              | ** ** |
|            |       |               |       |                  |       |
| Raw materials   |       | $                  | 1,076      |                  | $          | 1,149 |   |
| Work-in-process |       | 484                |       | 280                   |       |
| Finished goods  |       | 251                |       | 242                   |       |
|            |       | $                  | 1,811      |                  | $          | 1,671 |   |

 

In accordance withaccounting principles generally accepted in the United States of America, wevalue our inventories at the lower of cost or market.

 

The following tableprovides the inventory reserves for the quarter ended March 29, 2007.

 
| Inventory reserve balance at December 31, 2007 |   | $  | 4,328  |   |
|-----------------------------------------------------|--------|----|--------|--------|
| Additional inventory reserve                        |   | 37 |   |
| Inventory reserve balance at March 29, 2008    |   | $  | 4,365  |   |

 

7

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We provide a standard thirteen-month warranty program for ourequipment products. We record provisions for warranty claims for these productsbased upon historical claim performance. The following table provides the expense recorded and charges againstour reserves for the quarter ended March 29, 2008.

 
| Accrued warranty balance at December 31, 2007 |   | $   | 114    |   |
|----------------------------------------------------|--------|-----|--------|--------|
| Provision                                          |   | 4   |   |
| Warranty claims                                    |   | (19 | )      |
| Accrued warranty balance at March 29, 2008    |   | $   | 99     |   |

 

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

 

On March 9, 2004, wecompleted a $5.0 million secured financing transaction with an institutionallender, Laurus Master Fund Ltd.  Underthe terms of the three-year agreement, we put in place a $3.0 million securedworking capital line of credit and a $2.0 long-term convertible note.  In connection with the execution of thiscredit facility, we issued to the lender a seven-year warrant to purchase400,000 shares of our common stock at exercise prices ranging from $2.30 to$2.88.  Our existing secured lendingrelationship was terminated as a result of this transaction.  This credit facility is secured by all theassets of the Company.

 

OnJanuary 28, 2005, we completed an amendment to the financing agreementwith Laurus to defer payments on the long-term convertible note.  As partof this amendment, the conversion prices on both notes were reduced.  Wealso issued Laurus at that time a seven-year warrant to purchase 150,000 sharesof common stock at $.67 per share.

 

OnApril 29, 2005, we completed another financing transaction with Laurus inwhich we borrowed an additional $2.5 million, and which was convertible intoshares of common stock.  We also issued Laurus at that time an option topurchase 2,556,651 shares of common stock at an exercise price of $.01 pershare.  We received net proceeds of approximately $2.4 million at theclosing.

 

OnFebruary 17, 2006, we restructured the financing with Laurus, and increasedthe total maximum secured indebtedness with Laurus to $9.25 million. TheCompany also issued Laurus a 10-year option to purchase 2,500,000 shares at anexercise price of $.01 per share.

 

On December 27,2006, Laurus acquired a 10% convertible note from another note holder with aprincipal amount of  $1.2 million. TheNote has a conversion price of $.50 per share, and is due and payable in fullon September 30, 2009.

 

On March 29, 2007,we restructured 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 and payable in full on September 30, 2009.  In addition to the $5.25 million note, thereis a $4.0 million working capital line of credit, which is payable in full on September 30,2009.  Interest is payable monthly on the line at the prime rate plus2.5%.  As of March 29, 2008, there was a $302,000 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 

 

8

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May 1, 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.  As of March 29,2008 the outstanding balance on this note was $964,000.  Interest is payable monthly at the prime rateplus 2.0% and the principal is payable in full on September 30, 2009.  As part of the 2007 restructuring, theCompany issued Laurus a 10-year option to purchase 5,000,000 shares at anexercise price of $0.01 per share.

 

On December 6,2007, the Company entered into an agreement with Laurus to extend the maturitydates for all of the notes issued by the Company to Laurus, from dates startingin February 2008 to September 30, 2009.  These notes had an aggregate principal amountof $11,281,000 as of March 29, 2008. The agreement also extends to January 1, 2009 the commencement datefor principal payments under the $5,250,000 term-note, and reduces the monthlyprincipal payments prior to the maturity date from $87,500 per month to $44,000per month.  In consideration for the extension by Laurus of the notematurity dates, the Company granted Laurus a ten-year warrant to purchase3,500,000 shares of common stock with an exercise price of $.01 pershare.  Laurus has agreed in the transaction documents that it will notsell any shares acquired by it under the 3,500,000 share warrant, or under the5,000,000 share warrant granted to it as part of the March 2007refinancing, prior to January 1, 2009.  Laurus has also agreed thatsales by it of Company common stock underlying the 2007 warrants on any tradingday after January 1, 2009 will not exceed 20% of the aggregate number ofshares of Company common stock sold on that day.  The table below details thewarrants and options issued to Laurus in connection with prior financings:

 
| Grant Date                                      | ** ** | **December  2007** | ** ** | **March  2007** | ** ** | **February  2006** | ** ** | **April  2005** | ** ** | **January  2005** | ** ** | **March  2004** | ** ** |
|-------------------------------------------------|------------|--------------------|------------|-----------------|------------|--------------------|------------|-----------------|------------|-------------------|------------|-----------------|------------|
| Number of shares                                |       | 3,500,000          |       | 5,000,000       |       | 2,500,000          |       | 2,556,651       |       | 150,000           |       | 400,000         |       |
| Exercise Price                                  |       | $                  | 0.01       |            | $          | 0.01               |       | $               | 0.01       |              | $          | 0.01            |       | $ | 0.67 |   | $2.30 - $2.88 |   |
| Dividend yield                                  |       | 0.00               | %          | 0.00            | %          | 0.00               | %          | 0.00            | %          | 0.00              | %          | 0.00            | %          |
| Expected volatility                             |       | 98.61              | %          | 88.63           | %          | 122.09             | %          | 95.33           | %          | 93.13             | %          | 98.51           | %          |
| Risk-free interest rate                         |       | 3.53               | %          | 4.54            | %          | 4.62               | %          | 3.90            | %          | 3.71              | %          | 2.98            | %          |
| Expected life of options                        |       | 10.0 years         |       | 10.0 years      |       | 10.0 years         |       | 7.0 years       |       | 3.5 years         |       | 3.0 years       |       |
| Discount on long-term debt                      |       | $                  | 620,000    |            | $          | 1,131,000          |       | $               | 821,000    |              | $          | 473,000         |       | $ | 51,000 |   | $ | 391,000 |   |
| Unexercised  warrants as of March 29, 2008 |       | 3,500,000          |       | 5,000,000       |       | 1,860,000          |       | 785,084         |       | 150,000           |       | 400,000         |       |
|                                                 |            |                    |            |                 |            |                    |            |                 |            |                   |            |                 |            |  |  |  |  |  |  |

 

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

 

The Companyadopted Statement of Financial Accounting Standards (SFAS) No. 123R “Share-BasedPayment”, on January 1, 2006.  Thisstatement requires us to recognize the cost of employee and director servicesreceived in exchange for the stock options it has awarded.  Under SFAS 123R, we are required to recognizecompensation expense over an award’s vesting period based on the award’s fairvalue at the date of grant.  We haveelected to adopt SFAS 123R on a 

 

9

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modifiedprospective basis; accordingly the financial statements for periods prior to January 1,2006 do not include stock-based compensation costs calculated under the fairvalue method.

 

The fair value ofoptions granted under the stock options for the quarters ended March 29,2008 and March 31, 2007, was estimated on the date of grant using theBlack-Scholes option pricing model with the following weighted averageassumptions.

 
| ** **                              | ** ** | **Quarters ended** | ** ** |
|-----------------------------------------|------------|--------------------|------------|
| ** **                              | ** ** | **March 29,** | ** ** | **March 31,** | ** ** |
| ** **                              | ** ** | **2008**           | ** ** | **2007** | ** ** |
| Dividend yield                          |       | —             |       | 0.00 | % |
| Expected volatility                     |       | —             |       | 88.63 | % |
| Risk-free interest rate                 |       | —             |       | 4.54 | % |
| Expected life of options                |       | —             |       | 10 years |   |
| Fair value per share of options granted |       | —             |       | $ | 0.23 |   |
|                                         |            |                    |            |  |  |  |

 

 

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

 

In September 2006,the FASB issued SFAS No. 157, “*Fair Value Measurements*”(“SFAS No. 157”), which is effective for interim and annual reportingperiods beginning after November 15, 2007. This statement provides a definition of fair value, establishes aframework for measuring fair value, and expands disclosures about fair valuemeasurements for future transactions. This statement is effective for us on January 1, 2008, the firstday of our 2008 fiscal year.  Theadoption of this pronouncement does not have a material impact on our financialposition or results of operations.

 

In February 2007,the FASB issued 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 adoption of this pronouncement does nothave a material impact on our financial position or results of operations.

 

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**MICROCOMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

## RESULTS OF OPERATIONS AND FINANCIAL CONDITION

##  

*This Report on Form 10-Q contains forward-looking statements thathave been made pursuant to the provisions of the Private Securities LitigationReform Act of 1995.  Theseforward-looking statements are not historical facts, but rather are based onour current expectations, estimates and projections about the semiconductorcapital equipment industry, and our beliefs and assumptions.   We intend words such as “anticipates,” “expects,”“intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions toidentify forward-looking statements. These statements are not guarantees of future performance and aresubject to certain risks, uncertainties and other factors, some of which arebeyond 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, 2007.  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 ofunanticipated events.*

 

*Overview*

 

We supply equipmentautomation solutions for the global semiconductor test and assembly manufacturingmarket.  Our solutions include automatedtest handlers, factory automation software and our new integrated SmartSolutions equipment product line.  Webelieve that our products can significantly improve the productivity, yield andthroughput of the back-end, or to the post-wafer manufacturing process,including assembling, packaging, testing and singulating semiconductor devices.

 

Beginningin 1999 and continuing into 2000, we broadened our strategy from that of a testhandler manufacturer to becoming a provider of comprehensive equipmentautomation solutions for the back-end of the semiconductor manufacturingprocess.  First, we developed andintroduced 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 theInfinity Systems division of Fico. Infinity Systems has been involved in the development of factoryautomation software for the semiconductor manufacturing industry.  Infinity Systems’ software expertise wasintegral to the development of our integrated Smart Solutions equipment productline, introduced in May 2000. Together with a third party tester, our Smart Solutions equipmentproducts including our Tapestry handler enable complete automation of the test,laser mark, mark inspect and other processes of the back end.

 

The demand forour products and services is dependent upon growth in the semiconductorindustry and the increasing automation needs of semiconductor manufacturers andindependent test and assembly facilities. In the fourth quarter of 2000, the semiconductor industry went into a 

 

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sharp downturn,which continued 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.  Therefore, we will continueto monitor the market and if required, examine opportunities to further reduceour costs through further consolidation of operations, limiting capitalexpenditures, 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**

 

*RevenueRecognition*

 

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 performancespecifications or from sales where all or a portion of customer payment isbased upon acceptance 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 March 29, 2008, revenue recordedapproximated shipments.

 

*Allowance for Doubtful Accounts*

 

Werecord a provision for doubtful accounts based on specific identification ofour accounts receivable. This involves a degree of judgment based on discussionwith our internal sales and marketing groups, our customer base and theexamination 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 29, 2008.

 

*Valuation ofInventories*

 

Our inventories arestated at the lower of cost or market. Cost is determined by the first-in, first-out (“FIFO”) method.  We maintain a standard costing system for ourinventories.  Assumptions with respect todirect labor utilization, standard direct and indirect cost rates, vendor pricingand utilization of factory capacities are formulated in the development of ourstandard costing system.  Sudden orcontinuing changes in the semiconductor capital equipment market affecting ourshipments can result in significant production variances from our standardrates. These variances directly impact our gross profit performance and maycause variability in gross profits results from reporting period-to-reportingperiod.  Our labor and overhead rates areset for 

 

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production rates thatmatch typical market conditions. Production variances are charged to cost of sales each quarter asincurred. Material standards are based upon normal purchase volumes.  Purchase price variances are charged to costsof sales each quarter as incurred.

 

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.  We increasedour inventory reserves by $37,000 for the quarter ended March 29, 2008.

 

*Accrued Warranty*

 

Weprovide a standard thirteen-month warranty program for our equipment products.We record provisions for warranty claims for these products based uponhistorical claim performance.  Thisapproach has been applied since the inception of the warranty program andinvolves a degree of subjectivity in that historical performance is used toestimate future warranty claims. There can be no assurance that our estimateswill match the actual amount of future warranty claims.

 

###### **Resultsof Operations for the Three Months Ended March 29, 2008 and March 31,2007**

###### ** **

Netsales for the three months ended March 29, 2008 decreased by $1.2 millionor 35% to $2.2 million compared to $3.4 million for the three months ended March 31,2007.

 

Grossprofit for the three months ended March 29, 2008 decreased by $708,000 to$1.1 million or 48.5% of net sales from $1.8 million or 52.5% of net sales forthe comparable period in the prior year. The decrease in gross margin in the current year period is attributableto the decrease in sales resulting in fixed costs being spread over a smallersales volume.

 

Total operating expense between the two quarters were substantially the same; an increase in 2008 of $21,000 or 1.3% from $1.605 million to $1.626 million.  Selling, general and administrative expenses increased slightly for the three months ended March 29, 2008 and were $1.2 million or 52.9% of net sales compared to $1.1 million or 32.7% of net sales for the three months ended March 31, 2007.  The increase in the percent of net sales is attributed to the reduction in net sales for the first quarter of 2008.  Included in 2008 selling, general and administrative expenses was $162,000 of stock-based compensation recognized under Statement of Financial Accounting Standards (SFAS) No. 123R.  Research and development expenses for the first quarter of 2008 decreased slightly and were $464,000 or 21.1% of net sales compared to $500,000 or 14.8% of net sales in the first quarter of 2007.  The increase in the percent of net sales is attributed to the reduction in net sales for the first quarter of 2008.

 

Thenet loss for the three months ended March 29, 2008 was $1.1 million or$0.03 per basic and fully-diluted share compared to net loss for the threemonths ended March 31, 2007 of $159,000 or $0.00 per basic andfully-diluted share.  Included in thecurrent year’s net loss were interest expense — amortization of warrantdiscounts and debt issue costs of $281,000 compared to 

 

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$145,000for the three months ended March 31, 2007. Other income (expense) was ($25,000) for the three months ended March 29,2008 and $88,000 for the three months ended March 31, 2007.  In 2007 there was $111,000 of other incomerecognized due to the recovery of funds related to a prior acquisition.

 

**Liquidityand Capital Resources**

 

Cashused in operations was $130,000 in the first quarter of 2008 as compared tocash generated of $320,000 in the first quarter of 2007.  Accountsreceivables decreased from 2007 year-end to $2.5 million from $3.0 million.  Inventory finished at $1.8 million, whichconsists of $6.2 million of gross inventories and $4.4 million ofreserves.  Capital expenditures were$13,000 for the first quarter of 2008 compared to $38,000 in the first quarterof 2007.

 

Weended the quarter with $387,000 in cash and cash equivalents up from $373,000at the end of 2007.  We had cashavailability from our credit line and term note of $199,000.  Working capital finished at a positive $2.7million compared to a positive $3.4 million at the end of 2007.  Working capital is positive as of March 29,2008 primary due to the classification of substantially all debt as long-term.

 

Beginning May 1,2008, principal on the $800,000 over-advance in excess of the borrowing base onthe working capital line of credit is repayable in $100,000 monthlypayments.  As of March 29, 2008,$302,000 of the over-advance was utilized. Starting in January 2009, monthly principal payments of $44,000become due and payable to Laurus.  On September 30,2009 all remaining principal and interest due from the Company to Laurus on theexisting financing agreements becomes due and payable.  In the event that we are unable to repay,extend or refinance our debt payments in 2008 and 2009, Laurus couldpotentially take a number of actions as secured creditor which would have amaterial negative impact on the Company and its shareholders, includingforeclosure, a forced sale of all or part of the Company, and/or liquidation.Further, if future financing requirements are satisfied through the issuance ofequity or debt instruments, shareholders may experience additional dilution interms of their percentage of ownership of our securities.

 

**IMPACT OFACCOUNTING STANDARDS**

 

In September 2006, the FASB issued SFAS No. 157, “*Fair Value Measurements*” (“SFAS No. 157”), whicheffective for 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.  We do not expect the adoption of thispronouncement to have a material impact on our financial position or results ofoperations.

 

In February 2007, the FASB issued Statement of Financial AccountingStandards 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 

 

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earnings caused by measuring related assets and liabilities differentlywithout having to apply complex hedge accounting provisions.  SFAS 159 will be effective for the firstfiscal year that begins after November 15, 2007. We do not expect theadoption of this pronouncement to have a material impact on our financialposition or results of operations.

 

 

 

**ITEM 3.****QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The vast majority of our transactions are denominated in U.S. dollars; assuch, fluctuations in foreign currency exchange rates have historically hadlittle impact on us.  Inflation has notbeen a significant factor in our operations in any of the periods presented,and it is not expected to affect operations in the future.  A 1% increase in interest rates wouldincrease our interest expense by $100,000 per year.  Our short term revolving line of credit andlong-term convertible debt carried interest at the prime rate plus 2.5%.  There is no material market risk relating toour long-term debt.

 

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

(a)                            Evaluation ofdisclosure controls and procedures.

 

The Company’s management carried out an evaluation,under the supervision and with the participation of the Company’s ChiefExecutive Officer and the Company’s Chief Financial Officer (principalfinancial officer), of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 29,2008, pursuant to Exchange Act Rule 13a-15.  Based upon that evaluation, the Company’s ChiefExecutive Officer and the Company’s Chief Financial Officer (principalfinancial officer) concluded that the Company’s disclosure controls andprocedures as of March 29, 2008 were effective to ensure that informationrequired to be disclosed by us in the reports that we file or submit under theExchange Act is recorded, processed, summarized and reported within the timeperiods specified in the rules and forms of the SEC, and are designed toensure that information required to be disclosed by us in these reports isaccumulated and communicated to our management, as appropriate to allow timelydecisions regarding disclosures.

 

We will consider furtheractions and continue to evaluate the effectiveness of our disclosure controlsand internal controls and procedures on an ongoing basis, taking correctiveaction as appropriate.  Management doesnot expect that disclosure controls and procedures or internal controls canprevent all errors and all fraud.  Acontrol system, not matter how well conceived and operated, can provide onlyreasonable and not absolute assurance that the objectives of the control systemare met.  Further, the design of acontrol system must reflect the fact that there are resource constraints, andthe benefits of controls must be considered relative to their costs.  While management believes that its disclosurecontrols and procedures provide reasonable assurance that fraud can be detectedand prevented, because of the inherent limitations in all control 

 

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systems, no evaluation ofcontrols can provide absolute assurance that all control issues and instancesof fraud, if any, have been detected.

 

 

(b)                   Changes ininternal controls over financial reporting.

 

Nochanges in the Company’s internal control over financial reporting haveoccurred during the first quarter of 2008 that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

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**MICROCOMPONENT TECHNOLOGY, INC.**

## FORM 10-Q

# PART II. OTHER INFORMATION

#  

### **Item1A. RISK FACTORS**

### ** **

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

 

**Our ability 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 sufferedrecurring losses from operations and has a stockholders’ deficit.  These factors raise substantial doubt aboutthe Company’s ability to continue as a going concern

 

As of March 29,2008, we had cash and cash equivalents of $387,000, assets totaling $5.1million, liabilities totaling $11.7 million, and incurred losses fromcontinuing operations of $1.1 million for the quarter then ended.  We expect to continue to expend cash andincur operating losses in 2008.  Certainoperating expenses are expected to decline from 2007 levels, however, 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.

 

Beginning May 1,2008, principal on the $800,000 over-advance in excess of the borrowing base onthe working capital line of credit is repayable in $100,000 monthlypayments.  As of March 29, 2008,$302,000 of the over-advance was utilized. Starting in January 2009, monthly principal payments of $44,000become due and payable to Laurus.  On September 30,2009 all remaining principal and interest due from the Company to Laurus on theexisting financing agreements becomes due and payable.  In the event that we are unable to repay,extend or refinance our debt payments in 2008 and 2009, Laurus couldpotentially take a number of actions as secured creditor which would have amaterial negative impact on the Company and its shareholders, includingforeclosure, a forced sale of all or part of the Company, and/or liquidation.Further, if future financing requirements are satisfied through the issuance ofequity or debt instruments, shareholders may experience additional dilution interms of their percentage of ownership of our securities.

 

**Thesuccess of our new products depends upon customer acceptance of both thetesting of semiconductor devices in strip form and the automation of theback-end of the semiconductor manufacturing 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 

 

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contamination to thesemiconductor devices and, as a consequence, make the prior test resultsunreliable.

 

We introduced ourTapestry handling system in February 1999. In May 2000, we introduced other Smart Solutions products, whichprovide additional process capability for handling and testing semiconductordevices in strip form.  In July of2003, we introduced our Tapestry SC, a second-generation system.  In September of 2004 we introduced ourTapestry SC SmartMark, a second-generation system, while in May 2006 weintroduced Tapestry SC Tri-Temp and in July 2007 we introduced theFilmframe. Our new products are attractive to customers only if the customerscan see the value of automating the test and assembly 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.

 

**Downturnsin semiconductor industry business cycles could have a negative impact on ouroperating results.**

 

Ourbusiness depends heavily upon capital expenditures by semiconductormanufacturers.  The semiconductorindustry is highly cyclical, with periods of capacity shortage and periods ofexcess capacity.  In periods of excesscapacity, 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 and 2007, there was a slight upturnin the market, but the depressed market over the prior six years has negativelyaffected our operations and financial condition.

 

**We haveoffered automation solutions and, unless we effectively market our company as aprovider of automation 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-making processby customers than for our traditional handler products.  We need to successfully market our automationproducts using different sales methods than we have previously used.

 

Our future success isdependent upon being able to successfully market our automation products.  If we are not successful in effectivelymarketing ourselves as an equipment automation solutions provider to thesemiconductor industry, our results of operations and financial condition willsuffer.

 

**Weare exposed to the risks of operating a global business.**

 

We are a globalcorporation with offices and subsidiaries in certain foreign locations tosupport our sales and services to the global semiconductor industry and, assuch, we face risks in doing 

 

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business abroad that wedo not face domestically.  Certainaspects inherent in transacting business internationally could negativelyimpact our operating results, including:

 

·                  costs and difficulties in staffing andmanaging international operations;

 

·                  unexpected changes in regulatoryrequirements;

 

·                  difficulties in enforcing contractual andintellectual property rights;

 

·                  longer payment cycles;

 

·                  local political and economic conditions;

 

·                  potentially adverse tax consequences,including restrictions on repatriating earnings and the threat if “doubletaxation”; and

 

·                  fluctuations in currency exchange rates,which can effect demand and increase costs.

 

Additionally, managinggeographically dispersed operations presents difficult challenges associatedwith organizational alignment and infrastructure, communications andinformation technology, inventory control, customer relationship management,terrorist threats and related security matters and cultural diversities.  If we are unsuccessful in managing suchoperations effectively, our business and results of operations will beadversely affected.

 

**Failure of critical suppliers to deliver sufficient quantities of partsin a timely and cost-effective manner could adversely impact our operations.**

** **

We use numerous vendors to supply parts, componentsand subassemblies for the manufacture of our products.  It is not always possible to maintainmultiple qualified suppliers for all of our parts, components and subassemblies.As a result, certain key parts may be available only from a single supplier ora limited number of suppliers.  Inaddition, suppliers may cease manufacturing certain components that aredifficult to replace without significant reengineering of our products.  On occasion, we have experienced problems inobtaining adequate and reliable quantities of various parts and components fromcertain key suppliers.  Our results ofoperations may be materially and adversely impacted if we do not receivesufficient parts to meet our requirements in a timely and cost effectivemanner.

 

**We investheavily in research and development efforts and our financial results dependupon the success of these efforts.**

 

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 purchase our products, our anticipated productorders may 

 

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not materialize, ororders that do materialize may be canceled. As a result, if we do not achieve market acceptance of new products, wemay not be able to realize sufficient sales needed to recoup our research anddevelopment expenditures.

 

**Theloss of key personnel could adversely impact our business.**

 

Certain key personnel arecritical to our business.  Our futureoperating results depend substantially upon the continued service of our keypersonnel, many of whom are not bound by employment or non-competitionagreements. Our future operating results also depend in significant part uponour ability to attract and retain qualified management, manufacturing,technical, engineering, marketing, sales and support personnel.  Competition for qualified personnel,particularly those with technical skills, is intense, and we cannot ensure successin attracting or retaining qualified personnel. Our business, financialcondition and results of operations could be materially adversely affected bythe loss of any of our key employees, by the failure of any key employee toperform in his or her current position, or by our inability to attract andretain skilled employees.

 

**Recentlyenacted and future changes in securities laws and regulations have increasedour costs.**

 

Changing laws,regulations and standards relating to corporate governance and publicdisclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations,are creating challenges for publicly-held companies. We are committed tomaintaining high standards of corporate governance and public disclosure. As aresult, our efforts to comply with evolving laws, regulations and standardshave resulted in, and are likely to continue to result in, increased generaland administrative expenses and a diversion of management time and attentionfrom revenue-generating activities to compliance activities. In particular, ourefforts to maintain compliance with Section 404 of the Sarbanes-Oxley Actof 2002 and the related regulations regarding our required assessment of ourinternal controls over financial reporting and our external auditors’ audit ofthat assessment has required the commitment of significant financial andmanagerial resources. We expect these efforts to require the continuedcommitment of significant resources. Further, our board members, chiefexecutive officer and chief financial officer could face an increased risk ofpersonal liability in connection with the performance of their duties. As aresult, we may have difficulty attracting and retaining qualified board membersand executive officers, which could harm our business.

 

**Ouroperating results often have large changes from period to period, which mayresult in a decrease in our stock price.**

 

Our quarterly and annual operating results are affected by awide variety of factors that could adversely affect sales or operating resultsor lead to significant variability in our operating results.  A variety of factors could cause thisvariability, including the following:

 

·                  the cyclical nature of the semiconductorindustry;

 

·                  delays in, or cancellation of,significant system purchases by customers;

 

·                  delays in the development, introductionand production of our products;

 

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·                  changes in the mix of our products andtheir gross margins;

 

·                  new product introductions by competitorsand competitive pricing pressures;

 

·                  the time required for us to adjust ouroperating expenses to respond to changes in sales and market conditions;

 

·                  the timing of any future acquisitions andtheir effect on our financial results;

 

·                  component shortages resulting inmanufacturing delays; and

 

·                  pressure by 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 stockprice is volatile and it 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:

 

·                  changes in the market’s view of the semiconductorindustry in general;

 

·                  changes in our quarterly operatingresults for the reasons set out in the previous risk factors for other reasons;

 

·                  changes in our reported financial results based onaccounting pronouncements;

 

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

 

·                  changes in the general economicconditions or developments in the semiconductor industry which affect investorsconfidence;

 

·                  announcements by us or our competitors oftechnological innovations or new or enhanced products and;

 

Additional factors, which may impact our results,include:

 

·                  we depend upon a few customers for themajority of our revenues and a reduction in their orders could adversely affectus;

 

·                  our operating results would be harmed ifone of our key suppliers fails to deliver components for our products;

 

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·                  the loss of any of our key personnel could harm ourbusiness;

 

·                  our markets are very competitive anddemand for our products may decrease if additional competitors enter ourmarkets;

 

·                  our dependence upon international sales involvessignificant risk;

 

·                  the possible adverse impact of economic or politicalchanges in the market we serve;

 

·                  our inability to obtain financing to fund continuingor expanding operations;

 

Fluctuations ordecreases in the trading price of our common stock may adversely affect theability to trade our shares.  Inaddition, these fluctuations could adversely affect our ability to raisecapital through future equity financing.

 

 

 

### **Item6.  EXHIBITS**

### ** **

31.1               Certification of Chief Executive Officer(filed herewith).

 

31.2               Certification of Chief Financial Officer(filed herewith).

 

32        Section 1350 Certification (filedherewith).

 

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**MICRO COMPONENT 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 13, 2008 | By:                                    | /s/ Roger E. Gower |
|                                 | Roger E. Gower                         |
|                                 | President and Chief  Executive Officer |
|                                 |                                   |
|                                 |                                   |
|                                 | And                                    |
|                                 |                                   |
|                                 |                                   |
| Dated:   May 13, 2008 | By:                                    | /s/  Bruce R. Ficks |
|                                 | Bruce R. Ficks                         |
|                                 | Chief Financial Officer                |

 

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