R
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
For the fiscal year ended December
31, 2006
|
||
or
|
||
£
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Delaware
|
56-1764501
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Page
|
||
PART
I
|
||
Item
1
|
Business
|
4
|
Item
1A
|
Risk
Factors
|
16
|
Item
1B
|
Unresolved
Staff Comments
|
20
|
Item
2
|
Properties
|
20
|
Item
3
|
Legal
Proceedings
|
21
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
21
|
PART
II
|
||
Item
5
|
Market
for Registrant’s Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities
|
21
|
Item
6
|
Selected
Financial Data
|
22
|
Item
7
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
23
|
Item
7A
|
Quantitative
and Qualitative Disclosures About Market Risk
|
28
|
Item
8
|
Financial
Statements and Supplementary Data
|
29
|
Item
9
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
53
|
Item
9A
|
Controls
and Procedures
|
53
|
Item
9B
|
Other
Information
|
53
|
PART
III
|
||
Item
10
|
Directors,
Executive Officers, and Corporate Governance
|
53
|
Item
11
|
Executive
Compensation
|
53
|
Item
12
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
53
|
Item
13
|
Certain
Relationships and Related Transactions
|
53
|
Item
14
|
Principal
Accounting Fees and Services
|
53
|
PART
IV
|
||
Item
15
|
Exhibits
and Financial Statement Schedules
|
54
|
Signatures
|
||
· |
the
user does not need to accurately position the head-wearable display
to the
eye;
|
· |
the
image will change minimally with eye movement and appear more natural;
and
|
· |
the
display can be placed further from the eye and not cut off part of
the
image.
|
· |
Entertainment
and gaming video headset systems, which permit individuals to view
television, including HDTV, video CDs, DVDs and video games on virtual
large screens or stereovision in private without disturbing others.
We
believe that these new headset game systems can provide a game or
telepresence experience not otherwise practical using conventional
direct
view display technology. The advent of video iPods and the rapidly
increasing amount of downloadable content have accelerated the movement
toward portable video technology. At the same time, the desire for
larger
screen sizes while retaining the iPod portability has been referenced
in
many publications. Virtual imaging uniquely provides a large, high
resolution view in a small portable package, and we believe that
our OLED
on silicon technology is a best fit to help open this market.
|
· |
Notebook
computers, which can use head-wearable devices to reduce power
requirements as well as expand the apparent screen size and increase
privacy. Current notebook computers do not use microdisplays. Our
products
can apply not only to new models of notebook computers, but also
as
aftermarket attachments to older notebooks still in use. The display
can
be easily used as a second monitor on notebook computers for ease
of
editing multiple documents to provide multiple screens or for data
privacy
while traveling. It can also be used to provide larger screen capability
for viewing spreadsheets or complex computer aided design (CAD) files.
We
expect to market our head-wearable displays to be used as plug-in
peripherals to be compatible with most notebook computers. We believe
that
the SVGA-3D microdisplay is well suited for most portable PC headsets.
Our
microdisplays can be operated using the USB power source of most
portable
computers. This eliminates added power supplies, batteries, and rechargers
and reduces system complexity and cost.
|
· |
Handheld
personal computers, whose small, direct view screens are often
limitations, but which are now capable of running software applications
that would benefit from a larger display. Microdisplays can be built
into
handheld computers to display more information content on virtual
screens
without forfeiting portability or adding the cost a larger direct
view
screen. Microdisplays are not currently used in this market. We believe
that GPS viewers and other novel products are likely to develop as
our
displays become more available.
|
· |
Leverage
our superior technology to establish a leading market position. As
the
first to exploit OLED-on-silicon microdisplays, we believe that we
enjoy a
significant advantage in bringing this technology to market.
|
· |
Optimize
manufacturing efficiencies by outsourcing while protecting proprietary
processes. We outsource certain portions of microdisplay production,
such
as chip fabrication, to minimize both our costs and time to market.
We
intend to retain the OLED application and OLED sealing processes
in-house.
We believe that these areas are where we have a core competency and
manufacturing expertise. We also believe that by keeping these processes
under tight control we can better protect our proprietary technology
and
process know-how. This strategy will also enhance our ability to
continue
to optimize and customize processes and devices to meet customer
needs. By
performing the processes in-house we can continue to directly make
improvements in the processes, which will improve device performance.
We
also retain the ability to customize certain aspects such as color
balance, which is known as chromaticity, as well as specialized boards
or
interfaces, and to adjust other parameters at the customer's request.
In
the area of lenses and head-wearable displays, we intend to focus
on
design and development, while working with third parties for the
manufacture and distribution of finished products. We intend to prototype
new optical systems, provide customization of optical systems, and
manufacture limited volumes, but we intend to outsource high volume
manufacturing operations. There are numerous companies that provide
these
outsource services.
|
· |
Build
and maintain strong internal design capabilities. As more circuitry
is
added to OLED-on-silicon devices, the cost of the end product using
the
display can be decreased; therefore integrated circuit design capability
will become increasingly important to us. To meet these requirements,
we
utilize in-house design capabilities supplemented by outsourced design
services. Building and maintaining this capacity will allow us to
reduce
engineering costs, accelerate the design process and enhance design
accuracy to respond to our customers' needs as new markets develop.
In
addition, we intend to maintain a product design staff capable of
rapidly
developing prototype products for our customers and strategic partners.
Contracting third party design support to meet demand and for specialized
design skills will also remain a part of our overall long term strategy.
|
· |
Low
manufacturing cost;
|
· |
Low
cost system solutions;
|
· |
Wide
angle light emission resulting in large apparent screen size;
|
· |
Low
power consumption for improved battery life and longer system life;
|
· |
High
brightness for improved viewing;
|
· |
High-speed
performance resulting in clear video images;
|
· |
Wide
operating temperature range; and
|
· |
Good
environmental stability (vibration and humidity).
|
· |
Can
be very low cost, with minimal assembly. A one piece, molded plastic
optic
attached to the microdisplay has been introduced and may potentially
serve
consumer end-product markets. Since our process is plastic molding,
our
per unit production costs are low;
|
· |
Allows
a compact and lightweight lens system that can greatly magnify a
microdisplay to produce a large field of view. For example, our WF05
prism
lens, in combination with our SVGA OLED microdisplay, provides a
virtual
view equivalent to that of a 105-inch diagonal display viewed at
12 feet;
|
· |
Can
use single-piece molded microdisplay lenses to permit high light
throughput making the display image brighter or permitting the use
of less
power for an acceptable brightness;
|
· |
Can
be designed to provide focusing to enable users with various eyesight
qualities to view images clearly; and
|
· |
Can
optionally provide focal plane adjustment for simultaneous focusing
of
computer images and real world objects. For example, this characteristic
is beneficial for word processing or spreadsheet applications where
a
person is typing data in from reference material. This feature can
make it
easier for people with moderately poor accommodation to use a
head-wearable display as a portable computer-viewing accessory.
|
· |
OLED
Materials, Structures, and Processes;
|
· |
Display
Color Processing and Sealing;
|
· |
Active
Matrix Circuit Methodologies and Designs;
|
· |
Field
Emission and General Display Technologies;
|
· |
Lenses
and Tracking (Eye and Head);
|
· |
Ergonomics
and Industrial Design; and
|
· |
Wearable
Computer Interface Methodology
|
Name
|
Age
|
Position
|
K.C.
Park
|
70
|
Interim
Chief Executive Officer, President
|
John
Atherly
|
47
|
Chief
Financial Officer
|
Susan
K. Jones
|
55
|
Chief
Marketing and Strategy Officer,
Secretary
|
· |
our
success in designing, manufacturing and delivering expected new products,
including those implementing new technologies on a timely basis;
|
· |
our
ability to address the needs of our customers and the quality of
our
customer services;
|
· |
the
quality, performance, reliability, features, ease of use and pricing
of
our products;
|
· |
successful
expansion of our manufacturing capabilities;
|
· |
our
efficiency of production, and ability to manufacture and ship products
on
time;
|
· |
the
rate at which original equipment manufacturing customers incorporate
our
product solutions into their own products;
|
· |
the
market acceptance of our customers' products; and
|
· |
product
or technology introductions by our competitors.
|
Nominee
|
Number
of Shares
|
|
Paul
C. Cronson
|
7,716,533
|
|
Rear
Admiral Thomas Paulsen, USN (Ret.)
|
7,800,344
|
|
Brigadier
Gen. Stephen Seay, US Army (Ret.)
|
7,814,189
|
2005
|
2006
|
||||||
High
|
Low
|
High
|
Low
|
||||
First
quarter
|
$13.00
|
$8.40
|
$7.10
|
$4.60
|
|||
Second
quarter
|
$10.40
|
$7.00
|
$5.70
|
$2.50
|
|||
Third
quarter
|
$10.30
|
$5.30
|
$3.80
|
$1.80
|
|||
Fourth
quarter
|
$
9.00
|
$5.40
|
$2.50
|
$1.01
|
For
the Year Ended December 31,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
(In
thousands, except per share data)
|
||||||||||||||||
Revenue
|
$
|
8,169
|
$
|
3,745
|
$
|
3,593
|
$
|
2,578
|
$
|
2,128
|
||||||
Cost
of goods sold
|
11,359
|
10,219
|
5,966
|
5,141
|
—
|
|||||||||||
Gross
(loss) profit
|
(3,190
|
)
|
(6,474
|
)
|
(2,373
|
)
|
(2,563
|
)
|
2,128
|
|||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
4,406
|
4,020
|
898
|
19
|
7,255
|
|||||||||||
Stock
based compensation (1)
|
—
|
—
|
88
|
2,183
|
1,647
|
|||||||||||
Selling,
general and administrative
|
8,860
|
6,316
|
4,340
|
3,529
|
5,832
|
|||||||||||
Total
operating expenses
|
13,266
|
10,336
|
5,326
|
5,731
|
14,734
|
|||||||||||
Loss
from operations
|
(16,456
|
)
|
(16,810
|
)
|
(7,699
|
)
|
(8,294
|
)
|
(12,606
|
)
|
||||||
Other
income (expense), net
|
1,190
|
282
|
(5,012
|
)
|
3,571
|
(2,306
|
)
|
|||||||||
Net
loss
|
$
|
(15,266
|
)
|
$
|
(16,528
|
)
|
$
|
(12,711
|
)
|
$
|
(4,723
|
)
|
$
|
(14,912
|
)
|
|
Basic
and diluted loss per share
|
$
|
(1.52
|
)
|
$
|
(1.94
|
)
|
$
|
(1.98
|
)
|
$
|
(1.31
|
)
|
$
|
(5.07
|
)
|
|
Shares
used in calculation of loss per share:
|
||||||||||||||||
Basic
and diluted
|
10,058
|
8,541
|
6,428
|
3,599
|
2,941
|
|||||||||||
December
31,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
Cash,
cash equivalents
|
$
|
1,415
|
$
|
6,727
|
$
|
13,457
|
$
|
1,054
|
$
|
83
|
||||||
Working
capital (deficit)
|
$
|
(305
|
)
|
$
|
8,868
|
$
|
14,925
|
$
|
106
|
$
|
(13,602
|
)
|
||||
Total
assets
|
$
|
7,005
|
$
|
14,142
|
$
|
18,436
|
$
|
3,749
|
$
|
1,834
|
||||||
Long-term
obligations
|
$
|
2,229
|
$
|
56
|
$
|
22
|
$
|
6,161
|
$
|
228
|
||||||
Total
Shareholders’ equity (capital deficit)
|
$
|
(1,164
|
)
|
$
|
10,401
|
$
|
16,447
|
$
|
(4,767
|
)
|
$
|
(12,808
|
)
|
|
As
a Percentage of Total
Revenue
Year
Ended December 31,
|
|||||||||
|
2006
|
2005
|
2004
|
|||||||
Consolidated
Statements of Operations Data:
|
||||||||||
Revenue
|
100
|
%
|
100
|
%
|
100
|
%
|
||||
Cost
of goods sold
|
139
|
273
|
166
|
|||||||
Gross loss
|
(39
|
)
|
(173
|
)
|
(66
|
)
|
||||
Operating
expenses:
|
||||||||||
Research
and development
|
54
|
107
|
25
|
|||||||
Stock
based compensation
|
----
|
----
|
2
|
|||||||
Selling,
general and administrative
|
109
|
169
|
121
|
|||||||
Total operating expenses
|
163
|
276
|
148
|
|||||||
Loss
from operations
|
(202
|
)
|
(449
|
)
|
(214
|
)
|
||||
Other
income (expense)
|
15
|
8
|
(140
|
)
|
||||||
Net
loss
|
(187
|
)%
|
(441
|
)%
|
(354
|
)%
|
||||
Payments
due by period
|
|||||||||||||
Total
|
1
Year
|
2-3
Years
|
4-5
Years
|
||||||||||
Capital
lease obligations
|
$
|
6
|
$
|
6
|
$
|
—
|
$
|
—
|
|||||
Operating
lease obligations
|
3,387
|
1,405
|
1,982
|
—
|
|||||||||
Purchase
obligations (a)
|
1,476
|
1,476
|
—
|
—
|
|||||||||
Other
long-term liabilities (b)
|
787
|
183
|
354
|
250
|
|||||||||
Total
|
$
|
5,656
|
$
|
3,070
|
$
|
2,336
|
$
|
250
|
|
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
30
|
Consolidated
Balance Sheets as of December 31, 2006 and 2005
|
31
|
Consolidated
Statements of Operations for the years ended December 31, 2006, 2005
and
2004
|
32
|
Consolidated
Statements of Changes in Shareholders’ Equity (Deficit) for the years
ended December 31, 2006, 2005 and 2004
|
33
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2006, 2005
and
2004
|
34
|
Notes
to the Consolidated Financial Statements
|
35
|
December
31,
|
|||||||
|
2006
|
2005
|
|||||
(In
thousands, except share
and per share amounts)
|
|||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
1,415
|
$
|
6,727
|
|||
Investments
- held to maturity
|
171
|
120
|
|||||
Accounts
receivable, net
|
908
|
822
|
|||||
Inventory
|
2,485
|
3,839
|
|||||
Prepaid
expenses and other current assets
|
656
|
1,045
|
|||||
Total
current assets
|
5,635
|
12,553
|
|||||
Equipment,
furniture and leasehold improvements, net
|
666
|
1,299
|
|||||
Intangible
assets, net
|
55
|
57
|
|||||
Other
assets
|
233
|
233
|
|||||
Deferred
financing costs, net
|
416
|
—
|
|||||
Total
assets
|
$
|
7,005
|
$
|
14,142
|
|||
LIABILITIES
AND SHAREHOLDERS’ (DEFICIT) EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
1,192
|
$
|
562
|
|||
Accrued
compensation
|
959
|
1,010
|
|||||
Other
accrued expenses
|
749
|
1,894
|
|||||
Advanced
payments
|
444
|
60
|
|||||
Deferred
revenue
|
126
|
96
|
|||||
Current
portion of capitalized lease obligations
|
6
|
16
|
|||||
Current
portion of debt
|
1,217
|
—
|
|||||
Derivative
liability - warrants
|
1,195
|
—
|
|||||
Other
current liabilities
|
52
|
47
|
|||||
Total
current liabilities
|
5,940
|
3,685
|
|||||
Capitalized
lease obligations
|
—
|
6
|
|||||
Other
long-term liabilities
|
2,229
|
50
|
|||||
Total
liabilities
|
8,169
|
3,741
|
|||||
Commitments
and contingencies
|
|||||||
Shareholders’
(deficit) equity:
|
|||||||
Preferred
stock, $.001 par value: authorized 10,000,000 shares; no shares issued
and
outstanding
|
—
|
—
|
|||||
Common
stock, $.001 par value: authorized 200,000,000 shares, issued and
outstanding, 10,341,029 shares in 2006 and 9,997,246 shares in
2005
|
10
|
10
|
|||||
Additional
paid in capital
|
179,651
|
175,950
|
|||||
Accumulated
deficit
|
(180,825
|
)
|
(165,559
|
)
|
|||
Total
shareholders’ (deficit) equity
|
(
1,164
|
)
|
10,401
|
||||
Total
liabilities and shareholders’ (deficit) equity
|
$
|
7,005
|
$
|
14,142
|
|||
For
the Year Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
(In
thousands, except per share data)
|
||||||||||
Revenue:
|
||||||||||
Product
revenue
|
$
|
7,983
|
$
|
3,719
|
$
|
3,502
|
||||
Contract
revenue
|
186
|
36
|
108
|
|||||||
Sales
returns and allowance
|
—
|
(10
|
)
|
(17
|
)
|
|||||
Total
revenue, net
|
8,169
|
3,745
|
3,593
|
|||||||
Cost
of goods sold
|
11,359
|
10,219
|
5,966
|
|||||||
Gross
loss
|
(3,190
|
)
|
(6,474
|
)
|
(2,373
|
)
|
||||
Operating
expenses:
|
||||||||||
Research
and development
|
4,406
|
4,020
|
898
|
|||||||
Selling,
general and administrative
|
8,860
|
6,316
|
4,428
|
|||||||
Total
operating expenses
|
13,266
|
10,336
|
5,326
|
|||||||
Loss
from operations
|
(16,456
|
)
|
(16,810
|
)
|
(7,699
|
)
|
||||
Other
income (expense):
|
||||||||||
Interest
expense
|
(1,306
|
)
|
(4
|
)
|
(5,087
|
)
|
||||
Gain
on warrant derivative liability
|
2,405
|
—
|
—
|
|||||||
Other
income, net
|
91
|
286
|
75
|
|||||||
Total other income (expense), net
|
1,190
|
282
|
(5,012
|
)
|
||||||
Net
loss
|
$
|
(15,266
|
)
|
$
|
(16,528
|
)
|
$
|
(12,711
|
)
|
|
Loss
per share, basic and diluted
|
$
|
(1.52
|
)
|
$
|
(1.94
|
)
|
$
|
(1.98
|
)
|
|
Weighted
average number of shares outstanding:
|
||||||||||
Basic
and diluted
|
10,058
|
8,541
|
6,428
|
|||||||
Additional
|
Total
|
||||||||||||||||||
Common
Stock
|
Deferred
|
Paid-In
|
Accumulated
|
Shareholders’
|
|||||||||||||||
Shares
|
Amount
|
Compensation
|
Capital
|
Deficit
|
Equity
|
||||||||||||||
(In
thousands, except share amounts)
|
|||||||||||||||||||
Balance,
December 31, 2003
|
4,270
|
$
|
4
|
$
|
(88
|
)
|
$
|
131,638
|
$
|
(136,320
|
)
|
$
|
(4,766
|
)
|
|||||
Sale
of common stock, net of issuance costs
|
1,641
|
2
|
—
|
16,383
|
—
|
16,385
|
|||||||||||||
Debt
to equity conversion
|
1,139
|
1
|
—
|
8,566
|
—
|
8,567
|
|||||||||||||
Issuance
of warrants for early conversion of debt to equity
|
—
|
3,180
|
—
|
3,180
|
|||||||||||||||
Exercise
of common stock warrants
|
353
|
—
|
—
|
3,790
|
—
|
3,790
|
|||||||||||||
Stock
options exercised
|
522
|
1
|
—
|
1,383
|
—
|
1,384
|
|||||||||||||
Issuance
of common stock for services
|
39
|
—
|
—
|
531
|
—
|
531
|
|||||||||||||
Amortization
of deferred stock compensation
|
—
|
—
|
88
|
—
|
—
|
88
|
|||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
(12,711
|
)
|
(12,711
|
)
|
|||||||||||
Balance,
December 31, 2004
|
7,964
|
$
|
8
|
$
|
—
|
$
|
165,471
|
$
|
(149,031
|
)
|
$
|
16,448
|
|||||||
Sale
of common stock, net of issuance costs
|
1,662
|
2
|
—
|
8,398
|
—
|
8,400
|
|||||||||||||
Stock
options exercised
|
11
|
—
|
—
|
37
|
—
|
37
|
|||||||||||||
Exercise
of common stock warrants
|
306
|
—
|
—
|
1,584
|
—
|
1,584
|
|||||||||||||
Issuance
of common stock for services
|
54
|
—
|
—
|
461
|
—
|
460
|
|||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
(16,528
|
)
|
(16,528
|
)
|
|||||||||||
Balance,
December 31, 2005
|
9,997
|
$
|
10
|
$
|
—
|
$
|
175,950
|
$
|
(165,559
|
)
|
$
|
10,401
|
|||||||
Debt
to equity conversion
|
85
|
—
|
—
|
220
|
—
|
220
|
|||||||||||||
Issuance
of common stock for services
|
254
|
—
|
—
|
580
|
—
|
580
|
|||||||||||||
Stock-based
compensation
|
—
|
—
|
—
|
2,891
|
—
|
2,891
|
|||||||||||||
Stock
options exercised
|
5
|
—
|
—
|
10
|
—
|
10
|
|||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
(15,266
|
)
|
(15,266
|
)
|
|||||||||||
Balance,
December 31, 2006
|
10,341
|
$
|
10
|
$
|
—
|
$
|
179,651
|
$
|
(180,825
|
)
|
$
|
(
1,164
|
)
|
|
Year
Ended December 31,
|
|||||||||
|
2006
|
2005
|
2004
|
|||||||
(In
thousands)
|
||||||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$
|
(15,266
|
)
|
$
|
(16,528
|
)
|
$
|
(12,711
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Depreciation
and amortization
|
841
|
908
|
620
|
|||||||
Amortization
of deferred financing fees
|
221
|
---
|
8
|
|||||||
Increase
(reduction) of provision for sales returns and doubtful
accounts
|
(39
|
)
|
(284
|
)
|
467
|
|||||
Stock
based compensation
|
2,891
|
---
|
88
|
|||||||
Non-cash
interest related charges
|
---
|
---
|
5,094
|
|||||||
Issuance
of common stock for services, net
|
553
|
470
|
531
|
|||||||
Amortization
of discount on notes payable
|
956
|
---
|
---
|
|||||||
Gain
on warrant derivative liability
|
(2,405
|
)
|
---
|
---
|
||||||
Loss
on other asset
|
157
|
|||||||||
Changes
in operating assets and liabilities:
|
||||||||||
Accounts
receivable
|
(42
|
)
|
(2
|
)
|
(235
|
)
|
||||
Unbilled
costs and estimated profits on contracts in progress
|
---
|
---
|
75
|
|||||||
Inventory
|
1,354
|
(1,821
|
)
|
(1,742
|
)
|
|||||
Prepaid
expenses and other current assets
|
389
|
(175
|
)
|
(400
|
)
|
|||||
Advance
Payments
|
384 | (4 | ) | (58 | ) | |||||
Deferred
revenue
|
30
|
96
|
---
|
|||||||
Accounts
payable, accrued compensation, and accrued expenses
|
(566
|
)
|
1,613
|
(51
|
)
|
|||||
Other
current liabilities
|
153
|
14
|
17
|
|||||||
Net
cash used in operating activities
|
(10,389
|
)
|
(15,713
|
)
|
(8,297
|
)
|
||||
Cash
flows from investing activities:
|
||||||||||
Purchase
of equipment
|
(204
|
)
|
(898
|
)
|
(721
|
)
|
||||
Purchase
of investments - held to maturity
|
(51
|
)
|
(120
|
)
|
||||||
Purchase
of intangibles and other assets
|
(2
|
)
|
(54
|
)
|
(99
|
)
|
||||
Net
cash used by investing activities
|
(257
|
)
|
(1,072
|
)
|
(820
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from sale of common stock, net of issuance costs
|
---
|
8,400
|
16,385
|
|||||||
Proceeds
from exercise of stock options and warrants
|
10
|
1,621
|
5,173
|
|||||||
Proceeds
from long-term debt
|
5,970
|
50
|
---
|
|||||||
Payments
related to deferred financing costs
|
(591
|
)
|
---
|
---
|
||||||
Payments
of long-term debt and capitalized lease obligations
|
(55
|
)
|
(16
|
)
|
(38
|
)
|
||||
Net
cash provided by financing activities
|
5,334
|
10,055
|
21,520
|
|||||||
Net
(decrease) increase in cash and cash equivalents
|
(5,312
|
)
|
(6,730
|
)
|
12,403
|
|||||
Cash
and cash equivalents, beginning of year
|
6,727
|
13,457
|
1,054
|
|||||||
Cash
and cash equivalents, end of year
|
$
|
1,415
|
$
|
6,727
|
$
|
13,457
|
||||
Cash
paid for interest
|
$
|
128
|
$
|
4
|
$
|
8
|
||||
Cash
paid for taxes
|
$
|
40
|
$
|
15
|
$
|
-----
|
||||
Supplemental
non-cash transactions:
|
||||||||||
Conversion
of debt to equity
|
$
|
220
|
$
|
---
|
$
|
8,567
|
||||
During
the year ended December 31, 2006, the Company
|
· |
entered
into several Note Purchase Agreements with investors and issued
warrants
that are exercisable at $3.60 per share into approximately 1.6
million
shares of common stock valued at $3.4
million;
|
· | issued 10,000 shares of common stock in lieu of cash payment of $26,000 as compensation for services performed and recorded as deferred costs; and |
· | issued approximately 85,000 shares for the conversion of Notes totaling $220,000. |
December
31,
|
|||||||
2006
|
2005
|
||||||
Trade
receivables
|
$
|
1,351
|
$
|
1,309
|
|||
Less
allowance for doubtful accounts
|
(443
|
)
|
(487
|
)
|
|||
Net
receivables
|
$
|
908
|
$
|
822
|
December
31,
|
|||||||
2006
|
2005
|
||||||
Raw
materials
|
$
|
1,146
|
$
|
2,353
|
|||
Work
in process
|
558
|
107
|
|||||
Finished
goods
|
781
|
1,379
|
|||||
Total
Inventory
|
$
|
2,485
|
$
|
3,839
|
December
31,
|
|||||||
2006
|
2005
|
||||||
Computer
hardware and software
|
$
|
1,017
|
$
|
893
|
|||
Lab
and factory equipment
|
3,312
|
3,182
|
|||||
Furniture,
fixtures, and office equipment
|
306
|
256
|
|||||
Assets
under capital leases
|
66
|
66
|
|||||
Leasehold
improvements
|
473
|
473
|
|||||
Construction
in progress
|
---
|
100
|
|||||
Total
equipment, furniture and leasehold improvements
|
5,174
|
4,970
|
|||||
Less:
accumulated depreciation
|
(4,508
|
)
|
(3,671
|
)
|
|||
Equipment,
furniture and leasehold improvements, net
|
$
|
666
|
$
|
1,299
|
December
31,
|
|||||||
2006
|
2005
|
||||||
Current
portion of long-term debt:
|
|||||||
Capitalized
lease obligations
|
$
|
6
|
$
|
16
|
|||
Other
debt
|
58
|
||||||
6%
Senior Secured Convertible Notes
|
2,880
|
—
|
|||||
Less:
Unamortized discount on notes payable
|
(1,721
|
)
|
—
|
||||
Current
portion of long-term debt, net
|
1,223
|
16
|
|||||
Long-term
debt:
|
|||||||
Capitalized
lease obligations
|
—
|
6
|
|||||
Other
debt
|
104
|
50
|
|||||
6%
Senior Secured Convertible Notes
|
2,890
|
—
|
|||||
Less:
Unamortized discount on notes payable
|
(765
|
)
|
—
|
||||
Long-term
debt, net
|
2,229
|
56
|
|||||
Total
debt, net
|
$
|
3,452
|
$
|
72
|
Years
Ending December 31,
|
||||
2007
|
$
|
2,944
|
||
2008
|
$
|
2,934
|
||
2009
|
$
|
60
|
||
Dividend
yield
|
0
|
%
|
||
Risk
free interest rates
|
4.99
|
%
|
||
Expected
volatility
|
122
|
%
|
||
Expected
term (in years)
|
5.0
years
|
|||
For
the years ended December 31,
|
||||||
2006
|
2005
|
2004
|
||||
U.S.
Federal income tax provision (benefit) at federal statutory
rate
|
(34)
%
|
(35)
%
|
(35)
%
|
|||
Change
in valuation allowance
|
32
%
|
35
%
|
35
%
|
|||
Permanent difference |
2 %
|
0
%
|
0
%
|
|||
For
the years ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Net
operating losses
|
$
|
53,974
|
$
|
54,607
|
$
|
39,262
|
||||
Goodwill
and other intangibles
|
14,422
|
17,957
|
19,894
|
|||||||
Allowance
for doubtful accounts
|
159
|
195
|
274
|
|||||||
Deferred
payroll
|
13
|
18
|
25
|
|||||||
Accrued
vacation payable
|
132
|
142
|
81
|
|||||||
Depreciation
|
(44
|
) |
(120
|
)
|
----
|
|||||
Stock compensation | 279 |
----
|
----
|
|||||||
Total
|
68,935
|
72,799
|
59,536
|
|||||||
Less
valuation allowance
|
(68,935
|
)
|
(72,799
|
)
|
(59,536
|
)
|
||||
Net
deferred tax asset
|
$
|
0
|
$
|
0
|
$
|
0
|
Dividend
yield
|
0
|
%
|
||
Risk
free interest rates
|
5.25
|
%
|
||
Expected
volatility
|
122
|
%
|
||