UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 333-52721
MICRO INTERCONNECT TECHNOLOGY, INC.
(Name of Small Business Issuer as specified in its charter)
70 Horizon Drive, Bedford, New Hampshire 03110
(Address of principal executive offices)
603-666-0206
(Registrants telephone no., including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of the issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The aggregate market value of the of the voting and non-voting common stock
held by non-affiliates computed by the price ($3.50 per share) at which the
common stock was sold as of March 21, 1999 - $536,550
The issuer's revenues for the most recent fiscal year amounted to $13,991
Common Stock outstanding at March 21, 2000 - 1,182,550 shares of $.001 par
value Common Stock.
Transitional Small Business Disclosure Format (Check one): Yes No X
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
Table of Contents
PART I
Item 1 Description of Business 3
Item 2 Description of Property 5
Item 3 Legal Proceedings 5
Item 4 Submission of Matters to a Vote of
Security Holders 5
PART II
Item 5 Market for Common Equity and
Related Stockholder Matters 5
Item 6 Management's Plan of Operations 7
Item 7 Financial Statements 9
Item 8 Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure 24
PART III
Item 9 Directors, Executive Officers, Promoters
and Control Persons 24
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners
and Management 24
Item 12 Certain Relationships and Related Transactions 24
Item 13 Exhibits and Reports on Form 8-K
Signature Page 26
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PART I
Item 1 Description of Business.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-KSB ARE FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING THE TIMELY DEVELOPMENT,
INTRODUCTION AND ACCEPTANCE OF NEW PRODUCTS, DEPENDENCE ON OTHERS, THE IMPACT
OF COMPETITIVE PRODUCTS, PATENT ISSUES, CHANGING MARKET CONDITIONS AND THE
OTHER RISKS DETAILED THROUGHOUT THIS FORM 10-K. ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE PROJECTED. THESE FORWARD-LOOKING STATEMENTS REPRESENT
THE COMPANY'S JUDGMENT AS OF THE DATE OF THE FILING OF THIS FORM 10-KSB. THE
COMPANY DISCLAIMS, HOWEVER, ANY INTENT OR OBLIGATION TO UPDATE THESE FORWARD-
LOOKING STATEMENTS
Micro Interconnect Technology, Inc. (the "Company") was incorporated
under the laws of the State of Nevada on February 11, 1998. The Company is
considered a development stage company and has begun active product
development operations. The Company owns exclusive licenses to use innovative
technology intended to improve the process and reduce the cost of producing
printed circuit boards by eliminating several steps in the production process
and by reducing both required materials and the use of costly hazardous
chemicals. The Company believes that its technology will permit production of
higher resolution interconnects which could be used to make electronics less
expensive, smaller and faster. The Company intends to use the licensed
technology as well as other proprietary technology to develop direct
electronic imaging, drilling, plating and etching workstations for high
density interconnects and a prototype production facility to manufacture
printed circuit boards. The prototype production facility will be used both
to refine the products the Company is developing and to demonstrate the
Company's technology while manufacturing printed circuit boards for third
parties to generate profits which can be used to finance additional product
research and development. If the Company can successfully develop its
technology into commercial viable processes and products, it will license its
technology and sell its products to other manufacturers in the printed circuit
board industry.
The Company's prototype production facility is scheduled to be completed
by Summer 2000. By the end of the second quarter of 2000, the Company expects
to begin soliciting work for its production facility.
The Company has made substantial progress in development of its direct
electronic imaging workstation, but has not yet determined when the direct
electronic workstation or any of the other workstations will be ready for
commercial release. There can be no assurance that the Company will be
successful in developing workstations or processes superior to those presently
available from the Company's present competitors. The risk of failure is high,
because the Company may find it more difficult than anticipated to reduce the
basic concepts of the proprietary technology to industrial production.
The Company is competing in an industry with annual sales estimated to
exceed $30 billion annually. Many of the Company's current and potential
competitors have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than the Company. The market for which the Company's products are
being developed is intensely competitive and subject to rapid technological
change. Competitors may develop superior products or products of similar
quality for sale at lower prices. Moreover, there can be no assurance that
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the Company's processes will not be rendered obsolete by changing technology
or new industry standards, or that competitive pressures faced by the Company
will not materially adversely affect its business, operating results and
financial condition. Many of the Company's competitors have the financial
resources necessary to enable them to withstand substantial price and product
competition, which is expected to increase. They can be expected to implement
extensive advertising and promotional programs, both generally and in response
to efforts by other competitors, to enter into existing markets or introduce
new products. The industry is also characterized by frequent introductions of
new products. The Company's ability to compete successfully will be largely
dependent on its ability to anticipate and respond to various competitive
factors affecting the industry. These include new products which may be
introduced, changes in customer preferences, demographic trends, pricing
strategies by competitors and consolidation in the industry where smaller
companies with leading edge technologies may be acquired by larger companies.
This, together with the limited capital available to the Company's marketing
effort, creates a significant competitive disadvantage to the Company. If the
Company is not able to compete successfully, regardless of the development of
its products, it will not succeed.
There are multiple available sources of the materials the Company is
incorporating into its products and the prototype production facilities. The
Company does not believe that it will be dependent upon a few suppliers.
There are also many potential customers for the Company's intended products.
Until the Company has completed development of commercial products, it is not
possible to predict whether the company will become dependent upon one or a
few major customers. The Company intends to establish a broad customer base,
however.
Certain of the Company's technology for developing its workstations and
processes for the production of high resolution electronic interconnects will
be protected by patents exclusively licensed by the Company. The Company
intends to enforce its licensed patents aggressively and will continue to seek
patent protection for innovations for which the Company's management, after
consultation with patent counsel, believes patent protection is available and
advisable. However, there can be no assurance that such protection will be
available or advisable in any particular instance, and there can be no
guarantee that future products will be patent protected or that a competitor
will not find a means of circumventing any patents that are awarded. There is
no guarantee that the Company will have the financial resources necessary to
protect its rights adequately. The unavailability of such protection or the
inability to adequately enforce such rights could materially adversely affect
the Company's business and operating results. In addition, the Company
operates in a competitive environment in which it would not be unlikely for a
third party to claim that certain of the Company's future products may
infringe the patents or rights of such third parties. If any such
infringements exist or arise in the future, the Company may be exposed to
liability for damages and may be required to obtain licenses relating to
technology incorporated into the Company's products. The Company's inability
to obtain such licenses on acceptable terms or the occurrence of related
litigation could materially adversely affect the Company's operation.
The Company's products are subject to numerous governmental regulations
designed to protect the health and safety of operators of manufacturing
equipment and the environment. In addition, numerous domestic semiconductor
manufacturers, including certain of the Company's potential customers, have
subscribed to voluntary health and safety standards and decline to purchase
equipment not meeting such standards. The Company believes that its products
will comply with all applicable material governmental health and safety
regulations and standards and with the voluntary industry standards currently
in effect. Because the future scope of these and other regulations and
standards cannot be predicted, there can be no assurance that the Company will
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be able to comply with any future regulation or industry standard. Non-
compliance could result in governmental restrictions on sales and/or
reductions in customer acceptance of the Company's products. Compliance may
also require significant product modifications, potentially resulting in
increased costs and impaired product performance. Because the Company's
products are being designed to reduce the use of expensive and hazardous
chemicals in the production of high resolution interconnects and printed
circuit boards, the Company believes that government environmental and work
regulations will eventually work to the Company's competitive advantage.
Since completion of the Company's initial public offering in May 1999,
the Company has incurred research and development expenditures in the amount
of $ 87,295. Since the Company's products are still under development and the
Company presently has no customers, the research and development costs are
borne directly by the Company.
The total number of employees working for the Company is 5, of which 2
are full time employees.
Item 2 Description of Property.
The Company conducts its business at a facility located at the end of
Tirrell Hill Road in Goffstown, N.H. which it has leased from Ruth Berg,
spouse of N. Edward Berg, President and Chairman of the Board. The Company
does not own any real property and has no present plans to acquire any real
property. The Company believes that the existing leased facilities are
adequate for its needs in the foreseeable future.
Item 3 Legal Proceedings.
The Company is not a party to any pending legal proceeding.
Item 4 Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, by proxy or otherwise.
PART II
Item 5 Market for Common Equity and Related Stockholder Matters.
Currently the Company's $.001 par value Common Stock (the "Company's
stock") is traded over the counter on the Bulletin Board under the trading
symbol MITR. During 1999 there was no established public trading market for
the Company's stock. Management is unaware of any reported public trades of
the Company's stock after completion of the Company's initial public offering
during the second quarter of 1999 and prior to March 20, 2000. Since March
20, 2000, the high and low bid prices for the Company's stock have been $4.00
and $3.50, respectively. Such quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.
No dividends have been paid on the Company's stock. The Company
currently intends to retain earnings for use in operation and expansion of its
business and does not anticipate paying any dividends in the foreseeable
future.
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The last reported sales price of the Company's common stock was $3.50 as
of March 21, 2000. As of March 21, 2000, there were approximately 47 holders
of record of the Company's stock.
On March 2, 1999, the United States Securities and Exchange Commission
entered an order under SEC File No. 333-52721 declaring the Company's Form SB-
2 Registration Statement effective, and the Company immediately commenced a
public offering of 150,000 units of the Company's securities at a price of
$2.00 per unit for an aggregate price of $300,000. Each unit consisted of one
share of the Company's $.001 par value Common Stock and two redeemable common
stock purchase warrants. Each warrant was exercisable to purchase one share
of the Company's $.001 par value Common Stock for $2.50 per share and was
exercisable for a period of one year from the date of the offering. The
offering was terminated in May 1999 after the Company successfully sold all
150,000 units of securities registered. The gross proceeds of the offering
amounted to $300,000. Stock offering costs of $35,935, including legal fees,
filing fees, and printing costs, were offset against the proceeds of the
offering, for net proceeds to the Company in the amount of $264,065. No
underwriter was involved in the offering, and no underwriting discounts,
commissions, finder's fees or other underwriter's expenses were paid. There
were no direct or indirect payments to directors or officers of the Company.
The net offering proceeds to the Company were immediately added to the
Company's working capital and have been used since in furtherance of the
Company's business, including research and development and general and
administrative expenses. The Company's financial records reveal that for 1999
the actual amount used for research and development was $87,295 or
approximately 33.1% of the net offering proceeds. The actual amount used for
general and administrative expenses during this same period was $30,050 or
approximately 11.4% of the net offering proceeds. No other single category of
expenses or use of the net proceeds of the public offering required in excess
of five percent of the net proceeds. The unused net proceeds of the offering
are on deposit in interest bearing accounts at the Company's bank. Of the
amounts stated for research and development and for general and administrative
expenses, during 1999 $6,950 was paid to Ruth Berg, spouse of N. Edward Berg
for rent of the premises used by the Company, and $29,166.62 gross salary was
paid to N. Edward Berg. There were no other direct or indirect payments to
any director or officer of the Company, except for reimbursements of amounts
advanced for the Company.
The use of the net offering proceeds is somewhat different from what was
described in the prospectus prepared in connection with the Company's public
offering. Research and development expenditures to date have been less than
anticipated, and general and administrative expenditures have been higher than
anticipated. There are three principal reasons for the differences. First,
the Company has been able to progress with its research and development faster
and for less money than was originally expected, in part due to greater than
expected productivity of its employees and in part due to availability of less
expensive research and development personnel than the Company originally
contemplated. Secondly, because of the faster than anticipated progress in its
research and development efforts, the Company's management has decided to use
some of the technology it licensed or developed to concurrently produce a
prototype printed circuit board production facility, increasing both the space
the Company is required to rent and other general and administrative expenses.
Finally, with the benefit of hindsight, the Company believes now that it
originally underestimated the general and administrative expenses required to
conduct the Company's business efficiently.
No holders of the 300,000 warrants sold in the public offering, which
allows holders to purchase one share of the Company's common stock per warrant
for $2.50, exercised any of their warrants during 1999. On February 1, 2000,
the Company's board of directors extended the expiration date on the warrants
until June 10, 2000. Through March 27, 2000, warrant holders exercised 31,300
warrants to generate additional net proceeds to the Company in the amount of
$78,250. These proceeds have been added to the Company's working capital.
From the public offering there are still 268,700 unexercised and unexpired
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warrants to purchase one share of the Company's common stock per warrant for
$2.50 per share. The Company does not contemplate any other extensions of the
warrant expiration date.
On October 19, 1999, the Company authorized the private sale of 42,750
warrants to purchase one share of the Company's common stock per warrant for
$2.50 per share. These warrants were not registered under the Securities Act of
1933, and were offered and sold to only six persons, including four of the
directors of the Company, the Company's patent attorney and a technology
consultant to the Company. The transactions were exempt from registration
under Section 4(2) under the Securities Act because they did not involve any
public offering. No underwriter was involved in the transactions. The
warrants can be purchased for a period of 120 days from the date of approval.
The warrants expire five years from the date of issuance unless earlier
exercised. As of December 31, 1999, no warrants were purchased. The names of
the persons authorized to purchase the warrants, the relationship such person
has with the Company and the number of warrants authorized to be sold to each
person are listed below.
James R. Boyack Director 12,500
Peter Roth Director 12,500
David B. Ostler Director 1,250
Woodie Flowers Director 4,000
Brian Holland Consultant 10,000
Norman Soloway Patent Attorney 2,500
In February 2000 Mr. Ostler exercised his warrants to purchase 1,250
shares of stock for $2.50 per share to generate net proceeds to the Company in
the amount of $3,125.
Item 6 Management's Plan of Operations.
The Company is currently developing a direct electronic imaging
workstation that can produce in-situ masks that will have high resolution,
accurate alignment, and can be computer compensated for manufacturing defects.
Based on the current state of development of the direct electronic imaging
workstation, the Company believes that the imaging workstation will open the
way for a lower cost production process for high resolution interconnects.
The anticipated changes that can be made in the production process are
proprietary to the Company and may give the Company a competitive advantage in
profitably producing printed circuit boards. Therefore, the Company's
management has decided that during the next twelve months the Company's
primary research and development effort to develop a commercially viable
direct electronic imaging workstation should be expanded to encompass
concurrent development of a prototype facility for producing state-of-the-art
printed circuit boards. The Company anticipates that printed circuit board
sales may generate earnings to help finance the Company's ongoing
technological thrust and product development.
The Company believes that continued development of the direct electronic
imaging workstation and construction and debugging of the prototype facility
for producing printed circuit board can be accomplished during 2000 without
raising additional funds. Without future earnings from the sale of printed
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circuit boards produced in the Company's prototype factory, the Company
believes that its present cash resources (without exercise of outstanding
warrants) are sufficient to satisfy the Company's needs only for approximately
twelve months. If holders of some of the 268,700 unexercised warrants sold in
the initial public offering choose to exercise the warrants prior to
expiration on June 10, 2000, the Company will have substantial additional
resources available to finance its ongoing development efforts. Since the
last reported $3.50 per share sales price of the Company's stock currently
exceeds the $2.50 per share warrant exercise price by approximately forty
percent, the Company believes that it is probable that some warrant holders
will choose to exercise their warrants, generating additional working capital
for the Company. However, the Company's plan of operations for the next
twelve months does not anticipate additional funds from exercise of warrants.
If the Company is unsuccessful in developing and profitably marketing or
utilizing the direct electronic imaging workstation and the prototype printed
circuit board facility, it may be unable to continue operations beyond twelve
months without raising additional funds from other sources. Even the
successful development a prototype factory will not assure the Company's
ability to generate sufficient revenues from sales or the ability to obtain
any outside financing on favorable terms, if at all. There can be no
guarantees that the market will give financial support to the direct
electronic imaging workstation or products produced by the prototype printed
circuit board production facility, if it becomes fully functional. There is
no assurance that the Company will be able to raise additional funds from
other sources.
If the Company successfully completes development of its direct
electronic imaging workstation and the prototype factory and is able to market
its manufacturing services, the Company may hire an additional 4 full-time
employees and may purchase additional equipment costing approximately $40,000.
The Company will also continue developing the Company's proprietary technology
to develop additional workstations and to construct a complete high volume
flexible manufacturing cell (factory) for producing high density electronic
interconnects and printed circuit boards. However, the Company expects that
it could take up to three years to develop a high volume flexible
manufacturing cell. The Company does not believe that revenues generated from
future sales of printed circuit boards from the prototype facility will be
sufficient to provide all of the financial resources needed for planned future
product development. The Company anticipates that it will need additional
financing in approximately fifteen months to meet its current plan for the
development of additional workstations and a high volume flexible
manufacturing cell. If by then the Company is unable to obtain additional
financing, the Company will not be able to meet its plan for the development
of additional workstations and a high volume flexible manufacturing cell.
There are no guarantees that the Company will be successfully able to
fund its operations until it can develop a high volume flexible manufacturing
cell factory.
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Item 7 Financial Statements.
MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
DECEMBER 31, 1999
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
CONTENTS
PAGE
- Independent Auditors' Report 11
- Balance Sheet, December 31, 1999 12
- Statements of Operations, for the year ended
December 31, 1999 and from inception on
February 11, 1998 through December 31,
1998 and 1999 13
- Statement of Stockholders' Equity,
from inception on February 11, 1998
through December 31, 1999 14
- Statements of Cash Flows, for the year ended
December 31, 1999 and from inception on
February 11, 1998 through December 31,
1998 and 1999 15 - 16
- Notes to Financial Statements 17 - 23
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INDEPENDENT AUDITORS' REPORT
Board of Directors
MICRO INTERCONNECT TECHNOLOGY, INC.
Bedford, New Hampshire
We have audited the accompanying balance sheet of Micro Interconnect
Technology, Inc. [a development stage company] at December 31, 1999, and the
related statements of operations, stockholders' equity and cash flows for the
year ended December 31, 1999 and from inception on February 11, 1998 through
December 31, 1998 and 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Micro Interconnect Technology,
Inc. as of December 31, 1999, and the results of its operations and its cash
flows for the year ended December 31, 1999 and from inception through December
31, 1998 and 1999, in conformity with generally accepted accounting
principles.
/S/ Pritchett, Siler & Hardy, P.C.
January 27, 2000
Salt Lake City, Utah
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
BALANCE SHEET
ASSETS
December 31,
1999
___________
CURRENT ASSETS:
Cash in bank $ 167,272
Accounts receivable 510
Accrued interest receivable 675
___________
Total Current Assets 168,457
___________
PROPERTY AND EQUIPMENT, net 4,990
___________
OTHER ASSETS:
Refundable deposits 800
___________
Total Other Assets 800
___________
$ 174,247
___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,052
Accounts payable - related party 70
Other accrued liabilities 2,244
___________
Total Current Liabilities 9,366
___________
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
10,000,000 shares authorized,
no shares issued and outstanding -
Common stock, $.001 par value,
50,000,000 shares authorized,
1,150,000 shares issued and
outstanding 1,150
Capital in excess of par value 272,915
Deficit accumulated during the
development stage (109,184)
___________
Total Stockholders' Equity 164,881
___________
$ 174,247
___________
The accompanying notes are an integral part of this financial statement.
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
From Inception
on February 11,
For the 1998 Through
Year Ended December 31,
December 31, _________________________
1999 1998 1999
____________ ____________ ____________
SALES, net $ 6,995 $ - $ 6,995
COST OF SALES 4,635 - 4,635
____________ ____________ ____________
Gross Profit 2,360 - 2,360
____________ ____________ ____________
OPERATING EXPENSES:
General and administrative 30,050 1,268 31,318
Research and development 87,295 - 87,295
____________ ____________ ____________
Total Operating Expenses 117,345 1,268 118,613
____________ ____________ ____________
LOSS FROM OPERATIONS (114,985) (1,268) (116,253)
____________ ____________ ____________
OTHER INCOME (EXPENSE):
Interest income 6,996 112 7,108
Interest expense (39) - (39)
____________ ____________ ____________
Total Other Income (Expense) 6,957 112 7,069
____________ ____________ ____________
LOSS BEFORE INCOME TAXES (108,028) (1,156) (109,184)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
____________ ____________ ____________
NET LOSS $ (108,028) $ (1,156) $ (109,184)
____________ ____________ ____________
LOSS PER COMMON SHARE $ (.10) $ (.00) $ (.10)
____________ ____________ ____________
The accompanying notes are an integral part of these financial statements.
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON FEBRUARY 11, 1998
THROUGH DECEMBER 31, 1999
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
_________________ _________________ Excess of Development
Shares Amount Shares Amount Par Value Stage
_________ _______ _________ _______ ___________ ____________
BALANCE,
February 11, 1998 - $ - - $ - $ - $ -
Issuance of
1,000,000 shares
of common stock
for cash, February
1998 at $.01 per
share - - 1,000,000 1,000 9,000 -
Net loss for the
period ended
December 31, 1998 - - - - - (1,156)
_________ _______ _________ _______ ___________ ____________
BALANCE,
December 31, 1998 - - 1,000,000 1,000 9,000 (1,156)
Issuance of
150,000 shares
of common stock
for cash, May
1999 at $2.00
per share, net
of stock offering
costs of $35,935 - - 150,000 150 263,915 -
Net loss for the
year ended
December 31, 1999 - - - - - (108,028)
_________ _______ _________ _______ ___________ ____________
BALANCE,
December 31, 1999 - $ - 1,150,000 $ 1,150 $ 272,915 $ (109,184)
_________ _______ _________ _______ ___________ ____________
The accompanying notes are an integral part of this financial statement.
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
From Inception
on February 11,
For the 1998 Through
Year Ended December 31,
December 31, _________________________
1999 1998 1999
____________ ____________ ____________
Cash Flows from Operating Activities:
Net loss $ (108,028) $ (1,156) $ (109,184)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Amortization expense 405 81 486
Depreciation expense 602 - 602
Changes in assets and liabilities:
(Increase) in accounts receivable (510) - (510)
(Increase) in other receivables (675) - (675)
(Increase) in refundable assets (800) - (800)
Increase in accounts payable 5,877 1,175 7,052
Increase (decrease) in accounts
payable - related party (416) 486 70
Increase in other accrued
liabilities 2,244 - 2,244
____________ ____________ ____________
Net Cash Provided (Used) by
Operating Activities (101,301) 586 (100,715)
____________ ____________ ____________
Cash Flows from Investing Activities:
Payments for organization costs - (486) (486)
Purchase of property and equipment (5,592) - (5,592)
____________ ____________ ____________
Net Cash (Used) by Investing
Activities (5,592) (486) (6,078)
____________ ____________ ____________
Cash Flows from Financing Activities:
Proceeds from common stock issuance 300,000 10,000 310,000
Stock offering costs (32,035) (3,900) (35,935)
____________ ____________ ____________
Net Cash Provided by Financing
Activities 267,965 6,100 274,065
____________ ____________ ____________
Net Increase in Cash 161,072 6,200 167,272
Cash at Beginning of Period 6,200 - -
____________ ____________ ____________
Cash at End of Period $ 167,272 $ 6,200 $ 167,272
____________ ____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 39 $ - $ 39
Income taxes $ - $ - $ -
[Continued]
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
[Continued]
Supplemental Schedule of Noncash Investing and Financing Activities:
For the year ended December 31, 1999:
None.
For the year ended December 31, 1998:
The Company accrued $1,137 in accounts payable for deferred stock offering
costs.
The accompanying notes are an integral part of these financial statements.
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Micro Interconnect Technology, Inc. ("the Company") was
organized under the laws of the State of Nevada on February 11, 1998. The
Company is considered a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7. The Company engages in the
business of developing proprietary technology to reduce the size of electronic
devices that link electronic components together and to make those devices
operate at higher speeds. The Company has, at the present time, not paid any
dividends and any dividends that may be paid in the future will depend upon
the financial requirements of the Company and other relevant factors.
Cash and Cash Equivalents - For purposes of the financial statements, the
Company considers all highly liquid debt investments purchased with a maturity
of three months or less to be cash equivalents.
Accounts Receivable - Management believes the accounts receivable are fully
collectible and, accordingly, no allowance for doubtful accounts has been
accrued.
Organization Costs - The Company has amortized its organization costs, which
reflect amounts expended to organize the Company. Amortization expense for
the year ended December 31, 1999 totaled $405.
Revenue Recognition - The Company recognizes revenue upon delivery of the
product.
Property and Equipment - Property and equipment are stated at cost.
Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalzied upon being placed in service.
Expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation is computed for financial statement purposes on a straight-line
method over the estimated useful lives of the assets which range from five to
seven years.
Research and Development - Research and development costs are expensed as
incurred. [See Note 8]
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes". [See Note 10]
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the periods presented in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share" [See Note 11].
Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those estimated.
17
<PAGE>
MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards ("SFAS") No. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", SFAS No. 134, "Accounting for Mortgage-Backed
Securities." and SFAS No. 135, "Rescission of FASB Statement No. 75 and
Technical Corrections" were recently issued. SFAS No. 132, 133, 134 and 135
have no current applicability to the Company or their effect on the financial
statements would not have been significant.
Stock Based Compensation - The Company accounts for its stock based
compensation in accordance with Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation." This statement establishes
an accounting method based on the fair value of equity instruments awarded to
employees as compensation. However, companies are permitted to continue
applying previous accounting standards in the determination of net income with
disclosure in the notes to the financial statements of the differences between
previous accounting measurements and those formulated by the new accounting
standard. The Company has adopted the disclosure only provisions of SFAS No.
123. Accordingly, the Company has elected to determine net income using
previous accounting standards.
NOTE 2 - CASH CONCENTRATIONS
For the year ended December 31, 1999, the Company had cash balances of
approximately $67,000 in excess of federally insured amounts.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and Equipment consisted of the following at December 31, 1999:
Office equipment $5,592
Less accumulated depreciation (602)
________
$4,990
________
During the year ended December 31, 1999 depreciation expense amounted to $602.
NOTE 4 - LICENSE AGREEMENT
The Company entered into an exclusive licensing agreement with an officer and
shareholder of the Company for the exclusive rights for patents covering
electronic interconnection manufacturing technologies for the United States
and its territories and possessions. The agreement expires March 31, 2007.
The Company will pay a 1% royalty of gross sales and receipts for the right
beginning January 1999. As of December 31, 1999, royalty expense amounted to
$70. During the year ended December 31, 1999, the Company incurred costs of
$4,071 to register additional patents owned by the officer and shareholder.
According to the license agreement, incurring these costs extends the license
agreement seven years to expire in 2014. The Company expensed the costs
during 1999.
18
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MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - OPERATING LEASE
Beginning June 1, 1999, the Company entered into a one year lease for office
space. Monthly rent from June 1, 1999 to October 31, 1999 was $800. Monthly
rent from November 1, 1999 to December 31, 1999 was approximately $1,400.
Rent expense for the year ended December 31, 1999 totaled $6,950. A security
deposit of $800 was also paid during the year ended December 31, 1999.
NOTE 6 - CAPITAL STOCK, OPTIONS AND WARRANTS
Common Stock - During May 1999 the Company completed a public stock offering
and issued 150,000 units of its previously authorized, but unissued, common
stock. Each unit consists of one share of common stock and two redeemable
common stock purchase warrants. Each warrant allows the holder to purchase
one share of common stock for $2.50. The warrants are subject to adjustment
in certain events and are exercisable for a period of one year from the date
of the offering. The Company may redeem the warrants at a price of $.01 per
warrant, at any time beginning six months after the date of the offering upon
not less than 30 days prior written notice, if the closing bid price of the
Company's common stock on the NASDAQ Bulletin Board is at least $3.00 per
share for twenty consecutive trading days, ending not earlier than five days
before the warrants are called for redemption. Gross proceeds from the sale
of stock amounted to $300,000 (or $2 per share). Stock offering costs of
$35,935 were offset against the proceeds of the offering in capital in excess
of par value. The offering was registered with the United States Securities
and Exchange Commission on Form SB-2 under the Securities Act of 1933. An
offering price of $2 per unit was arbitrarily determined by the Company. The
offering was managed by the Company without any underwriter.
During February 1998, in connection with its organization, the Company issued
1,000,000 shares of its previously authorized, but unissued, common stock.
Total proceeds from the sale of stock amounted to $10,000 (or $.01 per share).
Preferred Stock - The Company has authorized 10,000,000 shares of preferred
stock, $.001 par value, with such rights, preferences and designations and to
be issued in such series as determined by the Board of Directors. No shares
are issued and outstanding at December 31, 1999.
Stock Warrants - During 1999, the Company approved the sale of warrants to
purchase 42,750 shares of common stock, to various directors, an employee, and
an attorney. They can purchase their warrants at $.01 per warrant. Each
warrant grants the holder the right to purchase one share of the Company's
common stock at a price of $2.50 per share. The warrants can be purchased for
a period of 120 days from the date of approval. The warrants are exercisable
for five years. As of December 31, 1999, no warrants were purchased.
19
<PAGE>
MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - CAPITAL STOCK, OPTIONS AND WARRANTS [Continued]
Stock Options - On June 15, 1999, the Company granted 30,000 stock options
under the 1998 Stock Option Plan (the Plan). The Company has adopted the
disclosure only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation." No compensation cost
has been recognized for the stock options under APB 25 since the market
value of the Company's common stock was equal to the exercise price of the
options on the date of grant. No compensation cost has been recognized for
the stock option plans under SFAS No. 123. Had compensation cost for the
Company's stock option plan been determined based on the fair value at the
grant date for awards in 1999 consistent with the provisions of SFAS No.
123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:
1999
__________
Net Loss As reported $(108,028)
Proforma $(108,724)
(Loss) per share As reported $ (.10)
Proforma $ (.10)
Diluted (loss) per share As reported $ NA
Proforma $ NA
The fair value of each option granted is estimated on the date granted using
the Black-Scholes option pricing model, with the following weighted-average
assumptions used for grants during the year ended December 31, 1999: risk-
free interest rate of 5.65%, expected dividend yield of zero, expected lives
of 7 years and expected volatility of 20%.
Stock Option Plan - On February 17, 1998, the Board of Directors of the
Company adopted, and the stockholders at that time approved, the 1998 Stock
Option Plan (the Plan). The plan provides for the granting of awards of up to
1,000,000 shares of common stock to sales representatives, officers,
directors, consultants and employees. The awards can consist of stock
options, restricted stock awards, deferred stock awards, stock appreciation
rights and other stock-based awards as described in the plan. Awards under
the plan will be granted as determined by the Board of Directors. At December
31, 1999, total options available to be granted under the plan amounted to
970,000.
20
<PAGE>
MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - CAPITAL STOCK, OPTIONS AND WARRANTS [Continued]
A summary of the status of the options granted under the Company's stock
option plan at December 31, 1999 is presented below:
December 31, 1999
____________________________
Weighted Average
Shares Exercise Price
___________ ________________
Outstanding at beginning of year - $ -
Granted 30,000 $ 2.00
Exercised - $ -
Forfeited - $ -
Expired - $ -
___________ ________________
Outstanding at end of year 30,000 $ 2.00
___________ ________________
Weighted average fair value of
options granted during the year 30,000 $ 2.00
___________ ________________
A summary of the status of the options outstanding under the Company's stock
option plan at December 31, 1999 is presented below:
Options Outstanding Options Exercisable
__________________________________ _____________________
Weighted
Range of Average Weighted Weighted
Exercise Number Remaining Average Average
Prices Outstanding Contractual Exercise Number Exercise
Life Price Exercisable Price
________ ___________ ___________ __________ ___________ _________
$2.00 30,000 7.0 years $2.00 30,000 $2.00
________ ___________ ___________ __________ ___________ _________
NOTE 7 - RELATED PARTY TRANSACTIONS
Management Compensation - As of May 31, 1999, the Company had not paid any
compensation to its officers and directors. Starting June 1, 1999 the
president is being compensated by the Company. For the year ended December
31, 1999, the Company paid approximately $29,000 in salary to the president.
Payable to Related Party - During the year ended December 31, 1999, the
Company reimbursed an officer/shareholder $486 for organization costs advanced
by him in the previous fiscal year.
Stock Warrants - During the year ended December 31, 1999, the Company approved
the sale of warrants to purchase 42,750 shares of common stock to various
directors, an employee and an attorney. Of the warrants approved to sale,
30,250 were to directors.
Cost of Sales - During the year ended December 31, 1999, the Company purchased
raw materials and labor in the amount of $2,700 (approximately 58% of the
total cost of sales) from a relative of an officer/director of the Company.
21
<PAGE>
MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - RELATED PARTY TRANSACTIONS [Continued]
License Agreement - The Company entered into an exclusive licensing agreement
with an officer and shareholder of the Company for the exclusive rights to
patents covering electronic interconnection manufacturing technologies for the
United States and it's territories and possessions. The agreement expires
March 31, 2007. The Company will pay a 1% royalty of gross sales and receipts
for the rights beginning January 1999. As of December 31, 1999, royalties
payable to the officer/shareholder totaled $70. During the year ended
December 31, 1999, the Company incurred costs of $4,071 to register additional
patents owned by the officer and shareholder. According to the license
agreement, incurring these costs extends the license agreement seven years to
expire in 2014. The Company expensed the costs during 1999.
Rent Agreement - Beginning June 1, 1999, the Company entered into a one year
lease for office space with a related party. Monthly rent from June 1, 1999
to October 31, 1999 was $800. Monthly rent from November 1, 1999 to December
31, 1999 was approximately $1,400 [See Note 5]. Total rent paid during 1999
to the related party was $6,950.
NOTE 8 - RESEARCH AND DEVELOPMENT
The Company expenses the costs of research and development as the costs are
incurred. Research and development costs amounted to $87,295 for the year
ended December 31, 1999.
NOTE 9 - DEVELOPMENT STAGE COMPANY
The Company was formed with a very specific business plan. However, the
possibility exists that the Company could expend virtually all of its working
capital in a relatively short time period and may not be successful in
establishing on-going profitable operations.
NOTE 10 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". SFAS
No. 109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At December 31, 1999, the Company
has available unused operating loss carryforwards of approximately $109,000,
which may be applied against future taxable income and which expire in 2019.
22
<PAGE>
MICRO INTERCONNECT TECHNOLOGY, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - INCOME TAXES [Continued]
The amount of and ultimate realization of the benefits from the operating loss
carryforwards for income tax purposes is dependent, in part, upon the tax laws
in effect, the future earnings of the Company, and other future events, the
effects of which cannot be determined. Because of the uncertainty surrounding
the realization of the loss carryforwards the Company has established a
valuation allowance equal to the tax effect of the loss carryforwards and,
therefore, no deferred tax asset has been recognized for the loss
carryforwards. The net deferred tax assets are approximately $37,000 and $400
as of December 31, 1999 and December 31, 1998, respectively, with an
offsetting valuation allowance at each period end of the same amount resulting
in a change in the valuation allowance of approximately $36,600 for the year
ended December 31, 1999.
NOTE 11 - LOSS PER SHARE
The following data show the amounts used in computing loss per share and the
effect on loss and the weighted average number of shares of dilutive potential
common stock for the year ended December 31, 1999 and from inception on
February 11, 1998 through December 31, 1998 and 1999:
From Inception
on February 11,
For the 1998 Through
Year Ended December 31,
December 31, _________________________
1999 1998 1999
____________ ____________ ____________
Loss from continuing operations
available to common shareholders
(numerator) $ (108,028) $ (1,156) $ (109,184)
____________ ____________ ____________
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 1,100,274 1,000,000 1,053,198
____________ ____________ ____________
Dilutive earnings per share was not presented, as the Company had no common
equivalent shares for all periods presented that would effect the computation
of diluted loss per share.
23
<PAGE>
Item 8 Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
There are no changes in or disagreements with accountants on accounting
and financial disclosure.
PART III
Item 9 Directors, Executive Officers, Promoters and Control Person; Compliance
with Section 16(a) of the Exchange Act.
The information required in this item is incorporated by reference to
the Section of the Proxy Statement for the Year 2000 Annual Meeting of
Shareholders entitled "Nominees," "Key Employees" and "Section 16(a)
Beneficial Ownership Reporting Compliance."
Item 10 Executive Compensation.
The information required in this item is incorporated by reference to the
Section of the Proxy Statement for the Year 2000 Annual Meeting of
Shareholders entitled "Executive Compensation."
Item 11 Security Ownership of Certain Beneficial Owners and Management.
The information required in this item is incorporated by reference to the
Section of the Proxy Statement for the Year 2000 Annual Meeting of
Shareholders entitled "Security Ownership of Certain Beneficial Owners and
Management."
Item 12 Certain Relationships and Related Transactions.
The information required in this item is incorporated by reference to the
Section of the Proxy Statement for the Year 2000 Annual Meeting of
Shareholders entitled "Certain Relationships and Related transactions."
Item 13 Exhibits and Reports on Form 8-K.
The following exhibits are incorporated by reference or filed herewith,
and this list is intended to constitute the exhibit index:
Exhibit No.
3.1 Articles of Incorporation - Incorporated by reference to Exhibit
3a to Amendment No. 3 of the Company's Registration Statement on Form
SB-2, as filed with the Securities and Exchange Commission on
February 1, 1999.
3.2 Bylaws - Incorporated by reference to Exhibit 3b to Amendment No.
3 of the Company's Registration Statement on Form SB-2, as filed with
the Securities and Exchange Commission on February 1, 1999.
10.1 Micro Interconnect Technology, Inc. 1998 Stock Option Plan -
Incorporated by reference to Exhibit 99a to Amendment No. 3 of the
Company's Registration Statement on Form SB-2, as filed with the
Securities and Exchange Commission on February 1, 1999.
10.2 Patent Licensing Agreement - Incorporated by reference to Exhibit
99c to Amendment No. 3 of the Company's Registration Statement on
Form SB-2, as filed with the Securities and Exchange Commission on
February 1, 1999.
24
<PAGE>
10.3 Agreement for Facilities - Incorporated by reference to Exhibit
99d to Amendment No. 3 of the Company's Registration Statement on
Form SB-2, as filed with the Securities and Exchange Commission on
February 1, 1999.
10.4 Employment Agreement with N. Edward Berg Dated June 1, 1999.
24.1 Power of Attorney of David B. Ostler
24.2 Power of Attorney of James R. Boyack
24.3 Power of Attorney of Woodie Flowers
24.4 Power of Attorney of Peter Roth
27 Financial Data Schedule
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 27, 2000
MICRO INTERCONNECT TECHNOLOGY, INC.
/S/ N. Edward Berg
By:
N. Edward Berg, President
Signature Title
/S/ N. Edward Berg
President (Principal Executive Officer)
N. Edward Berg and Chairman of the Board)
/S/ David B. Ostler
Secretary/Treasurer (Principal Financial
David B. Ostler and Accounting Officer)
/S/ James R. Boyack
Director
James R. Boyack
/S/ Woodie Flowers
Director
Woodie Flowers
/S/ Peter Roth
Director
Peter Roth
