10QSB 1 mtii10qsb033106.htm MEDICAL TECHNOLOGY & INNOVATIONS, INC. FORM 10-QSB MARCH 31, 2006 Medical Technology & Innovations, Inc. Form 10-QSB March 31, 2006

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-QSB

(Mark One)

[ X ]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

[    ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ___________________ to ___________________

Commission File Number: 33-27610-A

MEDICAL TECHNOLOGY & INNOVATIONS, INC.
(Exact name of small business issuer as specified in its charter)

Florida
65-2954561
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
1800 Fruitville Pike Suite 200, Lancaster PA
17601
(Address of principal executive offices)
(Zip Code)
 
(717) 390-3777
(Issuer’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 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 [   ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
YES [   ]            NO [X]
 
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:
January 8, 2007
Common Voting Stock: 6,837,904

Transitional Small Business Disclosure Format (Check One):    YES [   ]            NO [X]
 

1

MEDICAL TECHNOLOGY & INNOVATIONS, INC.

TABLE OF CONTENTS

PART I.
FINANCIAL INFORMATION
  
       
 
Item 1.
Financial Statements
  
       
   
Consolidated Balance Sheets March 31, 2006 (Unaudited) and June 30, 2005
3
       
   
Consolidated Statements of Operations (Unaudited) For the Three and Nine Months Ended March 31, 2006 and 2005
4
       
   
Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended March 31, 2006 and 2005
5
       
   
Notes to Consolidated Financial Statements (Unaudited)
6
       
 
Item 2.
Management's Discussion and Analysis or Plan of Operation
7
       
PART II.
OTHER INFORMATION
  
       
 
Item 6.
Exhibits
8
       
SIGNATURES
8











 

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Medical Technology & Innovations, Inc.
Consolidated Balance Sheets
March 31, 2006 and June 30, 2005

   
(Unaudited)
      
   
March 31,
  
June 30,
  
   
2006
  
2005
  
Assets
  
           
Current Assets:
          
Cash
  
$
150,956
  
$
-
  
Restricted cash
    
3,000,000
    
-
  
Award receivable
    
-
    
15,626,623
  
Total Assets
  
$
3,150,956
  
$
15,626,623
  
               
               
Liabilities and Stockholders' Equity
 
Current Liabilities:
              
Accounts Payable
  
$
40,000
  
$
-
  
Accrued liabilities
    
241,250
    
226,625
  
Accrued legal expenses
    
-
    
5,526,041
  
Other liabilities
    
704,033
    
1,562,947
  
Accrued consulting services
    
84,672
    
4,460,000
  
Current Maturities of Long-Term Debt
    
1,052,548
    
1,385,000
  
Total current liabilities
    
2,122,503
    
13,160,613
  
               
Long-Term Debt, Net of Current Maturities
    
-
    
-
  
Other Long-Term Liabilities
    
-
    
619,766
  
Total Liabilities
    
2,122,503
    
13,780,379
  
               
               
Stockholders' Equity
              
Common stock, no par value, authorized 28,000,000 shares, outstanding 6,837,904 shares
    
15,883,711
    
15,883,711
  
Preferred Stock, Authorized 100,000,000 Shares $1,000 par value, 12%, noncumulative,outstanding 22.5 shares.
    
22,500
    
22,500
  
Treasury Stock, at cost (78,941 shares)
    
(436,799
)
  
(436,799
)
Accumulated Deficit
    
(14,440,959
)
  
(13,623,168
)
Total Stockholders' Equity
    
1,028,453
    
1,846,244
  
Total Liabilities and Stockholders' Equity
  
$
3,150,956
  
$
15,626,623
  





The accompanying notes are an integral part of the financial statements.


3

Medical Technology & Innovations, Inc.
Consolidated Statements of Operations (Unaudited)
For the Three and Nine Months Ended March 31, 2006 and 2005


   
Three Months Ended
  
Nine Months Ended
  
   
March 31,
  
March 31,
  
   
2006
  
2005
  
2006
  
2005
  
                   
                   
Operating Expenses
                          
General and Administrative
  
$
108,878
  
$
24,223
  
$
763,576
  
$
103,154
  
Total Operating Expenses
    
108,878
    
24,223
    
763,576
    
103,154
  
                           
Loss from Operations
    
(108,878
)
  
(24,223
)
  
(763,576
)
  
(103,154
)
                           
Interest Expense, Net
    
19,227
    
17,934
    
54,215
    
53,803
  
                           
Net Loss
  
$
(128,105
)
$
(42,157
)
$
(817,791
)
$
(156,957
)
                           
Net Loss per common share (basic and diluted)
  
$
(0.019
)
$
(0.006
)
$
(0.120
)
$
(0.023
)
                           
Weighted Average Outstanding Shares
    
6,837,904
    
6,837,904
    
6,837,904
    
6,837,904
  
















The accompanying notes are an integral part of the financial statements.

4

Medical Technology & Innovations, Inc.
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended March 31, 2006 and 2005


   
2006
  
2005
  
           
Cash flows from operating activities
              
Net loss
  
$
(817,791
)
$
(156,957
)
Changes in assets and liabilities
              
               
Award Receivable
   
15,626,623
    
-
  
Restricted cash
    
(3,000,000
)
  
-
  
Accounts Payable
    
40,000
    
-
  
Accrued legal expenses
    
(5,526,041
)
  
-
  
Other long-term liabilities
    
(619,766
)
  
-
  
Accrued consulting services
    
(4,375,328
)
  
-
  
Accrued interest payable
    
52,548
    
-
  
Other liabilities
    
(858,914
)
  
53,625
  
Accrued liabilities
    
14,625
    
103,332
  
Net cash provided by operating activities
    
535,956
    
-
  
               
               
Cash flows from financing activities:
              
Principal payments on long-term debt
    
(385,000
)
  
-
  
Net cash used in financing activities
    
(385,000
)
  
-
  
Net increase in cash
    
150,956
    
-
  
Cash at beginning of year
    
-
    
-
  
Cash at end of year
  
$
150,956
  
$
-
  
               
               
Noncash investing and financing transactions:
              
               
Cash paid for interest
  
$
195,680
  
$
-
  











The accompanying notes are an integral part of the financial statements.



5

Medical Technology & Innovations, Inc.
Notes to Consolidated Financial Statements
For the Three and Nine Months Ended March 31, 2006 and 2005
(Unaudited)

 
1.
Financial Statements. The unaudited consolidated financial information contained in this report reflects all adjustments (consisting of normal recurring accruals) considered necessary, in the opinion of management, for a fair presentation of results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 2005 Annual Report on Form 10-KSB. The results of operations for periods ended March 31 are not necessarily indicative of operations for the full year.

 
2.
Net Loss Per Common Share. Basic and diluted net loss per common share was computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period. The impact of common stock equivalents has been excluded from the computation of weighted average common shares outstanding, as of the effect would be antidilutive.

 
3.
Stock Option Plans In April of 1996 the Company’s shareholders approved the 1996 Stock Option Plan, which allows the Board of Directors to grant up to 120,000 options. Under this plan, 68,000 options have been granted. No options have been granted since fiscal 2000. No options have vested since fiscal 2001. No options are outstanding at March 31, 2006.

4.
Preferred Stock. The $1,000 par value convertible preferred stock is convertible into 599 shares of the Company's common stock.

 
5.
Related Party Transactions. As part of the Agreement in Lieu of Foreclosure, the Company accrued expenses payable to the Chairman of the Board and Chief Executive Officer and his related companies. The Company accrued $130,648 and $103,154 for the nine months ended March 31, 2006 and 2005, respectively.
 
 
6.
Restricted Cash. Restricted cash is excluded from cash in the Consolidated Statements of Cash Flows until the cash is transferred from the restricted account to the Company’s operating account. The cash has been restricted by court order in anticipation of settling the litigation and has been placed in escrow.

On July 1, 2006, the court ordered the Company to settle this litigation for approximately $704,000. The Company’s escrow agent paid the settlement from the escrowed funds and returned the balance of the account to the Company. At that time, the restriction was terminated.


6

Item 2. Management's Discussion and Analysis or Plan of Operation

This analysis should be read in conjunction with the condensed consolidated financial statements, the notes thereto, and the financial statements and notes thereto included in the Company's June 30, 2005 Annual Report on Form 10-KSB.

All nonhistorical information contained in this Form 10-QSB is a forward-looking statement. The forward looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward looking statements. Factors that might cause such differences include, but are not limited to the following, a slower acceptance of the PhotoScreener in the marketplace, increased foreign competition putting pricing pressures on Steridyne products, changes in economic trends and other unforeseen situations or developments. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof.

Agreement in Lieu of Foreclosure

On August 30, 2002, the Company’s Board of Directors unanimously approved an Agreement in Lieu of Foreclosure (“Agreement”) between (a) the Company and its subsidiaries as Debtors and (b) Polycrest Holdings, Inc. as Creditor. The Board of Directors of each of the Company’s subsidiaries likewise approved the Agreement.

The Agreement transferred the assets of the Company and its subsidiaries to Polycrest Holdings, Inc., except for (a) certain technology that was retained by the Company, part of which it licensed to Polycrest Holdings, Inc. in return for royalties from the sale of IVD products, and (b) the Company’s contingent asset related to the anticipated settlement, award or judgment in the Company’s litigation against LensCrafters, Inc. and Luxottica Group S.p.A. This contingent asset is subject to payment of attorney’s fees and a fee for managing the case and advancing the costs and expenses incurred in the litigation.

The Agreement transferred the liabilities of the Company and its subsidiaries to Polycrest Holdings, Inc. The Company retained certain contingent liabilities, the Company’s lease of its headquarters building, its employment agreement with the Chairman and Chief Executive Officer and contingent liabilities associated with the various litigation matters.

The Agreement released the Company and its subsidiaries from all liabilities related to funds and services that had been advanced by the Chairman and Chief Executive Officer and parties related to him as well as the security agreements that covered those liabilities.

Because the Company’s inability to repay the advances, Polycrest Holdings, Inc. was entitled to foreclose on the assets of the Company and its subsidiaries but instead settled the potential foreclosure actions by entering into the Agreement. The date of the Agreement is September 6, 2002, to reflect the onset of the closing process, which was completed over the following thirty days.



7

Results of Operations

Comparison of Nine Month Periods Ended March 31, 2006 and 2005

Operating expenses for the nine months ended March 31, 2006, were $108,878 compared to $156,957 for the comparable period in fiscal 2005 for a decrease of $48,079 or 31%. Operating expenses consist of accrued rent, salaries, and expenses related to the LensCrafters litigation.

Interest expense was $54,215 for the nine months ended March 31, 2006, compared to $53,803 for the first nine months of fiscal 2005.

Liquidity and Capital Resources

The Company has financed and expects to continue to finance on a short-term basis all of its operations through the proceeds of the LensCrafters litigation received July 25, 2005. The Company may raise additional capital through private and/or public sales of securities in the future.

 
PART II. - OTHER INFORMATION

Item 6. Exhibits

 
(a)
Exhibits:

 
31.1
Rule 13a-14(a) Certification - CEO
 
31.2
Rule 13a-14(a) Certification - CFO
 
32
Rule 13a-14(b) Certification

Signatures
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MEDICAL TECHNOLOGY & INNOVATIONS, INC.

BY:
  
BY:
  
 
/s/ Jennifer A. Herman              
 
/s/ Jeremy P. Feakins                          
 
Jennifer A. Herman
  
Jeremy P. Feakins,
 
Vice President Finance
 
Chairman and Chief Executive Officer
 
(Chief Financial Officer)
    

Date: January 8, 2007
 
 
 
 
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