þ
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
(State
of incorporation)
75
Town Centre Drive
Rochester, New
York
(Address
of principal executive office)
|
04-3392453
(I.R.S.
employer identification no.)
14623
(Zip
code)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
(Do
not check if a smaller reporting company)
|
Smaller
reporting company þ
|
Page
|
||
Item 1
|
Business
|
3
|
Item 1A
|
Risk
Factors
|
16
|
Item 1B
|
Unresolved
Staff Comments
|
32
|
Item 2
|
Properties
|
32
|
Item 3
|
Legal
Proceedings
|
32
|
Item 4
|
Submission
of Matters to a Vote of Security Holders
|
32
|
Item 5
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
33
|
Item 6
|
Selected
Financial Data
|
33
|
Item 7
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
35
|
Item 8
|
Financial
Statements and Supplementary Data
|
44
|
Item 9
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
44
|
Item 9A(T)
|
Controls
and Procedures
|
44
|
Item 9B
|
Other
Information
|
45
|
Item 10
|
Directors,
Executive Officers and Corporate Governance
|
45
|
Item 11
|
Executive
Compensation
|
45
|
Item 12
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
45
|
Item 13
|
Certain
Relationships and Related Transactions, and Director
Independence
|
45
|
Item 14
|
Principal
Accounting Fees and Services
|
45
|
Item 15
|
Exhibits
and Financial Statement Schedules
|
45
|
Item
1.
|
Business
|
|
•
|
our
possible or assumed future results of
operations;
|
|
•
|
our
business strategies;
|
|
•
|
our
ability to attract and retain
customers;
|
|
•
|
our
ability to sell additional products and services to
customers;
|
|
•
|
our
cash needs and financing plans;
|
|
•
|
our
competitive position;
|
|
•
|
our
industry environment;
|
|
•
|
our
potential growth opportunities;
|
|
•
|
expected
technological advances by us or by third parties and our ability to
leverage them;
|
|
•
|
the
effects of future
regulation; and
|
|
•
|
the
effects of competition.
|
•
|
improve
brand name recognition;
|
•
|
provide
excellent products and service;
|
•
|
develop
products for large markets;
|
•
|
broaden
and develop strategic relationships and
partnerships;
|
•
|
promote
and enhance development of third party software that can take advantage of
our products;
|
•
|
expand
market awareness for Video Eyewear, including use for Virtual Reality and
Augmented Reality;
|
•
|
obtain
and maintain market leadership and expand customer
base;
|
•
|
Reduce
production costs and exploit our technologies cost
advantages;
|
•
|
extend
our proprietary technology
leadership;
|
•
|
enhance
and protect our intellectual property
portfolio;
|
•
|
establish
multiple revenue sources;
|
•
|
continue
to invest in highly qualified
personnel;
|
•
|
build
and maintain strong design
capabilities; and
|
•
|
leverage
our outsourcing model.
|
•
|
Increasing use of the Internet in
all aspects of society and business, which is increasing demand for
Internet access “anywhere,
anytime”.
|
•
|
Increased spending by consumers
on mobile entertainment devices such as iPods and smart cellular
telephones with video capabilities. Our Video Eyewear products can provide
viewable high-resolution mobile displays for users of these devices, with
better viewing capability and higher detailed resolution than the small
screens on existing mobile
devices.
|
•
|
Industrial, defense and security
sectors are employing mobile communications, sensors and surveillance
devices that are light, durable and easy to use but require displaying
their high-resolution content on an external device and often in a
hands-free way. Our wearable Video Eyewear products can be ideal for this
and will allow a user their physical
mobility.
|
•
|
Video gaming on PCs and consoles
continues to grow in North America and around the world. We believe that
our Virtual Display technologies will significantly increase user
satisfaction with gaming applications by engaging the user through the use
of stereoscopic imagery and interactive head tracking. Our Virtual Reality
and Augmented Reality Video Eyewear are designed to provide this
capability.
|
•
|
The widening distribution of new
three dimensional (3D) movies and other 3D content in North America is
creating a need for a method to play this content outside movie theaters.
We believe that Video Eyewear, with its inherent dual display design, is
well suited for the playback of 3D content. Stereoscopic 3D video playback
on Video Eyewear also avoids many of the negative issues commonly
encountered by shutter, polarized or color anaglyph glasses used in
competing technologies and allows the user to view 3D content without
purchasing new computer or television
equipment.
|
•
|
People with low-vision problems
require devices to magnify and capture images that they wish to see and to
display them in a manner that they can view with their remaining vision.
Our Video Eyewear, with the addition of a camera and digital signal
processing in a single device, can provide this capability to many people
suffering from certain types of vision
problems.
|
•
|
Night vision and thermal sighting
systems;
|
•
|
Unmanned vehicle and robotic
systems; and
|
•
|
Training and simulation systems,
including AR Video Eyewear.
|
•
|
Wrap 230 — QVGA (320x240
three-color pixels) resolution and simulating a 44-inch screen at nine
feet.
|
•
|
Wrap 310 widescreen — WQVGA
(420x240 three-color pixels) resolution and simulating a 52-inch screen at
nine feet.
|
•
|
Wrap 920 — VGA (640x480
three-color pixels) resolution and simulating a 62-inch screen at nine
feet.
|
•
|
VR920 — VGA (640x480
three-color pixels) resolution, simulating a 62-inch screen at nine feet,
designed to plug into a computer’s USB and video ports, and containing our
proprietary three degrees of freedom head tracking technology, which
enables the user to look around the environment being displayed by simply
moving his or her head. A microphone allows the user to communicate with
others. We expect those features to be of particular interest to users
playing games using the VR920, but they also can be used in commercial 3D
applications and for exploring Internet virtual worlds like Second Life.
The VR920 is currently compatible with over 80 titles that work with it
out of the box, including popular games such as Microsoft’s Flight
Simulator X and World of Warcraft. We currently have over 1700 software
developers’ kits being used in applications from college research programs
to commercial developers to develop additional titles for the VR920. With
the addition of a clip-on camera which we are currently tooling the VR920
can also used in AR
applications.
|
•
|
51 total patents issued
worldwide;
|
•
|
31 US patents issued (14
non-provisional, 17 design);
|
•
|
10 US patents pending (1 design,
8 non-provisional, 1
provisional);
|
•
|
20 international (non-US) patents
issued (18 design, 2
non-provisional);
|
•
|
8 international (non-US) patents
pending (6
non-provisional); and
|
•
|
3 new invention disclosures are
being prepared for purposes of preparing patent applications, covering
additional aspects of our virtual display
technology.
|
•
|
MyVu
has based its most recent product line on an optic design that results in
relatively small virtual image sizes. While this allows for a smaller form
factor, it does not provide the large virtual image that we believe
consumers desire from Video Eyewear products. Images on our Video Eyewear
products appear as much as four times larger than those on MyVu products.
MyVu products also do not currently support 3D, VGA video from a PC or
tracking. Finally, MyVu does not have a Video Eyewear product designed
specifically for the gaming market.
|
•
|
Zeiss
introduced its first Video Eyewear product in the spring of 2008. This
product is bigger and bulkier than ours and we believe it will be less
acceptable in the mobile markets. And while Zeiss does provide some level
of 3D video support, it does not currently offer PC products nor does it
support the tracking technology that would allow its products to be
interactive.
|
•
|
product reviews, case studies and
promotions in trade
publications;
|
•
|
enhancement and maintenance of
our Website;
|
•
|
Internet and web page advertising
and targeted emails;
|
•
|
public relations, print
advertising, catalogs and point of purchase
displays
|
•
|
trade shows and sponsorships;
and
|
•
|
co-marketing relationships with
relevant companies in selected
markets.
|
•
|
distinguishing
our Video Eyewear product category from current competitors and legacy
head mounted displays;
|
•
|
building
consumer acceptance and momentum around the new Video Eyewear
category;
|
•
|
creating
awareness of the benefits of Video Eyewear as compared to existing
technologies; and
|
•
|
creating
brand awareness of the Vuzix, iWear® and Wrap™
brands.
|
Item
1A
|
Risk
Factors
|
•
|
create awareness of our brand and
products, including general awareness of this new Video Eyewear product
category;
|
•
|
identify the most effective and
efficient levels of spending for marketing expenditures in our new target
market;
|
•
|
effectively manage marketing
costs (including creative and media) in order to maintain acceptable
operating margins and return on marketing
investment;
|
•
|
select the right markets in which
to market; and
|
•
|
convert consumer awareness into
actual product purchases.
|
•
|
discontinuing selling the
products that incorporate or otherwise use technology that contains our
allegedly infringing intellectual
property;
|
•
|
attempting to obtain a license to
the relevant third party intellectual property, which may not be available
on reasonable terms or at
all; or
|
•
|
attempting to redesign our
products to remove our allegedly infringing intellectual
property.
|
•
|
compliance with a wide variety of
foreign laws and regulations, particularly labor, environmental and other
laws and regulations that govern our operations in those
countries;
|
•
|
legal uncertainties regarding
taxes, tariffs, quotas, export controls, export licenses, import controls
and other trade barriers;
|
•
|
economic instability in the
countries of our suppliers and customers, particularly in the Asia-Pacific
region, causing delays or reductions in orders for their products and
therefore our sales;
|
•
|
political instability in the
countries in which our suppliers operate, particularly in China and
Taiwan;
|
•
|
difficulties in collecting
accounts receivable and longer accounts receivable payment
cycles; and
|
•
|
potentially adverse tax
consequences.
|
•
|
New Product
Launch:
With the growth of our product portfolio, we experience
increased complexity in coordinating product development, manufacturing,
and shipping. As this complexity increases, it places a strain on our
ability to accurately coordinate the commercial launch of our products
with adequate supply to meet anticipated customer demand and effective
marketing to stimulate demand and market acceptance. If we are unable to
scale and improve our product launch coordination, we could frustrate our
customers and lose retail shelf space and product
sales;
|
•
|
Forecasting,
Planning and Supply Chain Logistics: With the growth of
our product portfolio, we also experience increased complexity in
forecasting customer demand, in planning for production, and in
transportation and logistics management. If we are unable to scale and
improve our forecasting, planning and logistics management, we could
frustrate our customers, lose product sales or accumulate excess
inventory; and
|
•
|
Support
Processes:
To manage the growth of our operations, we will need to
continue to improve our transaction processing, operational and financial
systems, and procedures and controls to effectively manage the increased
complexity. If we are unable to scale and improve these areas, the
consequences could include: delays in shipment of product, degradation in
levels of customer support, lost sales, decreased cash flows, and
increased inventory. These difficulties could harm or limit our ability to
expand.
|
•
|
potential disruption of our
ongoing business and distraction of
management;
|
•
|
difficulty integrating the
operations and products of the acquired
business;
|
•
|
unanticipated expenses related to
technology integration;
|
•
|
exposure to unknown liabilities,
including litigation against the companies we may
acquire;
|
•
|
additional costs due to
differences in culture, geographic locations and duplication of key
talent; and
|
•
|
potential loss of key employees
or customers of the acquired
company.
|
•
|
provide that the authorized
number of directors may be changed only by resolution of the board of
directors;
|
•
|
provide that all vacancies,
including newly created directorships, may, except as otherwise required
by law, be filled by the affirmative vote of a majority of directors then
in office, even if such number is less than a
quorum;
|
•
|
require that any action to be
taken by our stockholders be effected at a duly called annual or special
meeting of stockholders and not by written
consent;
|
•
|
provide that stockholders seeking
to present proposals before a meeting of stockholders or to nominate
candidates for election as directors at a meeting of stockholders must
provide notice in writing in a timely manner, and also specify
requirements as to the form and content of a stockholder’s
notice;
|
•
|
do not provide for cumulative
voting rights, therefore allowing the holders of a majority of the shares
of our common stock entitled to vote in any election of directors to elect
all of the directors standing for election, if they should so
choose; and
|
•
|
provide that special meetings of
our stockholders may be called only by the chairman of the board, our
chief executive officer or by the board of directors pursuant to a
resolution adopted by a majority of the total number of authorized
directors.
|
•
|
adversely affect the voting power
of the holders of our common
stock;
|
•
|
make it more difficult for a
third party to gain control of
us;
|
•
|
discourage bids for our common
stock;
|
•
|
limit or eliminate any payments
that the holders of our common stock could expect to receive upon our
liquidation; or
|
•
|
adversely affect the market price
of our common stock.
|
Item
1B.
|
Unresolved
Staff Comments
|
Number of
Securities to
|
Weighted
Average
|
||||||||
be Issued Upon
Exercise
|
Exercise Price
of
|
Number of
Securities
|
|||||||
of Outstanding
Options,
|
Outstanding
Options,
|
Remaining
Available for
|
|||||||
Plan Category
|
Warrants and
Rights
|
Warrants
and Rights
|
Future Issuance
(1)
|
||||||
Equity
compensation plans approved by security holders
|
15,885,578
|
$
|
0.0914
|
35,800,000
|
|||||
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
||||||
Total
|
15,885,578
|
$
|
0.0914
|
35,800,000
|
|
(1)
|
The amount appearing under
“Number of securities remaining available for future issuance under equity
compensation plans” includes shares available under our 2009 Stock Option
Plan.
|
Item
6.
|
Selected
Financial Data
|
Year
Ended December 31,
|
||||||||||||
Statement of Operations
Data
|
2009
|
2008
|
2007
|
|||||||||
Sales
|
$ | 11,886,098 | $ | 12,489,884 | $ | 10,146,379 | ||||||
Cost
of Sales
|
7,609,091 | 8,788,905 | 6,783,473 | |||||||||
Gross
Margin
|
4,277,007 | 3,700,979 | 3,362,906 | |||||||||
Operating
Expenses
|
||||||||||||
Research
and development
|
2,217,627 | 3,366,518 | 2,365,412 | |||||||||
Selling
and marketing
|
2,143,628 | 2,128,625 | 1,920,164 | |||||||||
General
and administrative
|
2,354,573 | 2,299,685 | 1,718,627 | |||||||||
Depreciation
and amortization
|
522,457 | 510,133 | 374,078 | |||||||||
Total
operating expenses
|
7,238,285 | 8,304,961 | 6,378,281 | |||||||||
Profit
(Loss) from operations
|
(2,961,278 | ) | (4,603,982 | ) | (3,015,375 | ) | ||||||
Interest
and other income (expense)
|
63 | 188 | 2,549 | |||||||||
Foreign
exchange (loss) gain
|
(22,226 | ) | (24,216 | ) | — | |||||||
Interest
expense
|
(297,200 | ) | (260,977 | ) | (241,692 | ) | ||||||
Legal
settlement
|
— | — | 96,632 | |||||||||
Tax
(expense) benefit
|
(30,217 | ) | (5,212 | ) | 98,372 | |||||||
Total
tax and other income (expense)
|
(349,580 | ) | (290,217 | ) | (44,139 | ) | ||||||
Net
(Loss)
|
$ | (3,250,424 | ) | $ | (4,894,199 | ) | $ | (3,059,514 | ) | |||
Income
(loss) per share:
|
||||||||||||
Basic
and fully diluted*
|
$ | (0.0151 | ) | $ | (0.0240 | ) | $ | (0.0176 | ) | |||
Weighted
average common shares outstanding:
|
||||||||||||
Basic
and fully diluted*
|
221,469,554 | 207,710,498 | 185,263,660 |
Year Ended
December 31,
|
||||||||||||
Cash
Flow Data
|
2009
|
2008
|
2007
|
|||||||||
Cash
flows (used in) operating activities
|
$
|
(2,318,827
|
)
|
$
|
(1,285,449
|
)
|
$
|
(3,295,900
|
)
|
|||
Cash
flows (used in) investing activities
|
(472,456
|
)
|
(549,804
|
)
|
(316,743
|
)
|
||||||
Cash
flows provided by financing activities
|
4,473,087
|
2,289,116
|
3,408,328
|
As of
December 31,
|
||||||||||||
Balance
Sheet Data
|
2009
|
2008
|
2007
|
|||||||||
Cash
and cash equivalents
|
$
|
2,500,523
|
$
|
818,719
|
$
|
364,856
|
||||||
Working
Capital (deficiency)
|
1,042,257
|
(1,846,289
|
)
|
966,658
|
||||||||
Total
Assets
|
8,408,825
|
6,221,897
|
6,967,254
|
|||||||||
Long-Term
Liabilities
|
2,833,206
|
1,754,379
|
2,014,476
|
|||||||||
Accumulated
(deficit)
|
(18,032,430
|
)
|
(14,687,276
|
)
|
(9,691,977
|
)
|
||||||
Total
Stockholders’ equity (deficit)
|
(330,225
|
)
|
(2,089,942
|
)
|
423,236
|
•
|
valuation of
inventories;
|
•
|
carrying value of long-lived
assets;
|
•
|
valuation of intangible
assets;
|
•
|
revenue
recognition;
|
•
|
product
warranty;
|
•
|
stock-based
compensation; and
|
•
|
income
taxes.
|
•
|
anaging our working capital
through better optimization of inventory
levels;
|
•
|
focusing
on selling higher gross margin products, which will mean a greater
emphasis on defense versus consumer
products;
|
•
|
restructuring
and reengineering our organization and processes to increase efficiency
and reduce our operating costs for fiscal
2010;
|
•
|
reducing
public relations expenses for fiscal
2010;
|
•
|
minimizing
our capital expenditures by eliminating, delaying or curtailing
discretionary and non-essential
spending;
|
•
|
reducing
the square footage we rent;
|
•
|
reducing and deferring some
research and development and delaying some planned product and new
technology introductions;
and
|
•
|
exploring our options with
respect to new debt
borrowings;
|
Page
|
||
Report of EFP Rotenberg, LLP,
Independent Registered Public Accounting Firm
|
F-2
|
|
Report of Davie Kaplan, CPA, P.C. Independent Registered Public Accounting Firm | F-3 | |
Consolidated Balance
Sheets - For the Years Ended December 31, 2009 and
2008
|
F-4
|
|
Consolidated Statements of
Stockholders’ (Deficit) Equity - For the Years Ended
December 31, 2009, 2008 and 2007
|
F-5
|
|
Consolidated Statements of
Operations - For the Years Ended December 31, 2009, 2008 and
2007
|
F-6
|
|
Consolidated Statement of Cash
Flows - For the Years Ended December 31, 2009, 2008 and
2007
|
F-7
|
|
Notes to Consolidated Financial
Statements
|
F-8
|
VUZIX
CORPORATION
|
|
/s/ Paul J. Travers
|
|
Paul
J. Travers
|
|
Chief
Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/ Paul J.
Travers
|
President,
Chief Executive Officer
|
March
31, 2010
|
||
Paul
J. Travers
|
and
Director
|
|||
(Principal
Executive Officer)
|
||||
/s/ Grant
Russell
|
Chief
Financial Officer and Director
|
March
31, 2010
|
||
Grant
Russell
|
(Principal
Financial and
|
|||
Accounting
Officer)
|
||||
/s/ William Lee
|
Director
|
March
31, 2010
|
||
William
Lee
|
||||
/s/ Frank
Zammataro
|
Director
|
March
31, 2010
|
||
Frank
Zammataro
|
||||
/s/ Kathryn
Sayko
|
Director
|
March
31, 2010
|
||
Kathryn
Sayko
|
||||
/s/ Bernard
Perrine
|
Director
|
March
31, 2010
|
||
Bernard
Perrine
|
1
|
.1(4)
|
Form
of Agency Agreement
|
|
3
|
.1(3)
|
Amended
and Restated Certificate of Incorporation to be effective immediately
following the closing of the offering
|
|
3
|
.2(3)
|
Amended
and Restated Bylaws to be effective immediately following the closing of
the offering
|
|
4
|
.1(4)
|
Specimen
certificate evidencing shares of common stock
|
|
4
|
.2(4)
|
Specimen
common stock purchase warrant
|
|
4
|
.3(6)
|
Form
of Warrant Indenture between the registrant and Computershare
Trust Company of Canada Certain instruments defining the rights of
the holders of long-term debt of the registrant, none of which authorize a
total amount of indebtedness in excess of 10% of the total assets of the
registrant and its subsidiary on a consolidated basis, have not been filed
as exhibits. The registrant hereby agrees to furnish a copy of any of
these agreements to the Commission upon request
|
|
10
|
.1(1)+
|
2007
Amended and Restated Stock Option Plan
|
|
10
|
.2(1)+
|
2009
Stock Option Plan
|
|
10
|
.3(2)+
|
Form
of Option Agreement under 2009 Stock Plan
|
|
10
|
.4(1)+
|
Form
of Indemnification Agreement by and between the registrant and each
director and executive officer
|
|
10
|
.5(1)+
|
Employment
Agreement dated as of August 1, 2007 by and between the registrant
and Paul J. Travers
|
|
10
|
.6(1)+
|
Employment
Agreement dated as of August 1, 2007 by and between the registrant
and Grant Russell
|
|
10
|
.7(1)
|
Shareholders
Agreement dated as of October 11, 2000 by and among the registrant
and Shareholders (as defined therein)
|
|
10
|
.81(1)
|
Registration
Rights Agreement dated as of October 11, 2000 by and among the
registrant and the Investors (as defined therein)
|
|
10
|
.9(1)
|
Registration
Rights Agreement dated as of June 2005 by and among the registrant and the
Investors (as defined therein)
|
|
10
|
.10(3)†
|
Technology
Purchase and Royalty Agreement dated as of December 23, 2005 between
the registrant and New Light Industries, Ltd.
|
|
10
|
.11(1)
|
Warrant
to purchase common stock dated as of December 23, 2005 issued by the
registrant to New Light Industries, Ltd.
|
|
10
|
.12(1)
|
Rights
Agreement dated as of December 23, 2005 by and between the registrant
and New Light Industries, Ltd.
|
|
10
|
.13(1)
|
Agency
Agreement dated as of June 29, 2007 by and between the registrant and
Canaccord Capital Corporation
|
|
10
|
.14(1)
|
Form
of warrant to purchase common stock issued by the registrant pursuant to
the Agency Agreement dated as of June 29, 2007 by and between the
registrant and Canaccord Capital Corporation
|
|
10
|
.15(1)
|
Demand
Note in the original principal amount of $247,690.92 by the registrant to
the order of Paul J. Travers
|
|
10
|
.16(1)
|
Loan
Agreement dated as of October 2008 by and between the registrant and Paul
J. Travers
|
|
10
|
.17(3)
|
Promissory
Note dated as of October 2008 by the registrant to the order of Paul J.
Travers
|
|
10
|
.18(1)
|
Fiscal
Advisory Fee Agreement dated as of June 29, 2009 by and between the
registrant and Canaccord Capital Corporation and Bolder Investment
Partners, Ltd.
|
|
10
|
.19(6)†
|
Distribution
and Manufacturing Agreement dated August 27, 2009 between the
registrant and YuView Holdings
Ltd.
|
10
|
.20(3)
|
Convertible
Promissory Note dated September 19, 2006 in the original principal
amount of $500,000 by the registrant to Sally Hyde
Burdick
|
|
10
|
.21(5)
|
Form
of Escrow Agreement by and among the registrant, Canaccord Capital
Corporation the other Offering Agents (as defined therein) and JP Morgan
Chase Bank, National Association, as escrow agent
|
|
10
|
.22(5)
|
Amended
and Restated Fiscal Advisory Fee Agreement dated as of November 12,
2009 by and between the registrant and Canaccord Capital Corporation and
Bolder Investment Partners Ltd.
|
|
10
|
.23(6)
|
Amendment
No. 1 to Amended and Restated Fiscal Advisory Fee Agreement dated as of
November 12, 2009 by and among the registrant and Canaccord Capital
Corporation and Bolder Investment Partners Ltd.
|
|
10
|
.24(6)
|
Form
of Escrow Agreement by and among the Registration of Computershare
Investor Services, Inc., as escrow agent, and the Securityholders (as
defined therein) entered into pursuant to Canadian National Policy 46-201
and TSX Venture Exchange
Policy 5.4
|
(1)
|
Previously
filed as exhibit to the Registration Statement on Form S-1 filed on
July 2, 2009
|
|
(2)
|
Previously
filed as exhibit to Amendment No. 2 to the Registration Statement on
Form S-1 filed on September 4, 2009
|
|
(3)
|
Previously
filed as exhibit to Amendment No. 3 to the Registration Statement on
Form S-1 filed October 16, 2009
|
|
(4)
|
Previously
filed as exhibit to Amendment No. 4 to the Registration Statement on
Form S-1 filed November 10, 2009
|
|
(5)
|
Previously
filed as exhibit to Amendment No. 5 to the Registration Statement on
Form S-1 filed November 27, 2009
|
|
(6)
|
Previously
filed as exhibit to Amendment No. 6 to the Registration Statement on
Form S-1 filed December 7,
2009
|
+
|
Management
contract or compensation plan or arrangement
|
|
†
|
Confidential
treatment granted as to certain
portions
|
Page
|
||
Report
of EFP Rotenberg, LLP, Independent Registered Public Accounting
Firm
|
F-2
|
|
Report
of Davie Kaplan, CPA, P.C., Independent Registered Public Accounting
Firm
|
F-3
|
|
Consolidated
Balance Sheets — For the Years Ended December 31, 2009 and
2008
|
F-4
|
|
Consolidated
Statements of Stockholders’ (Deficit) Equity — For the Years Ended
December 31, 2009, 2008 and 2007
|
F-5
|
|
Consolidated
Statements of Operations — For the Years Ended December 31,
2009, 2008 and 2007
|
F-6
|
|
Consolidated
Statements of Cash Flows — For the Years Ended December 31,
2009, 2008 and 2007
|
F-7
|
|
Notes
to Consolidated Financial Statements
|
F-8
|
December 31,
2009
|
December 31,
2008
|
December 31,
2007
|
||||||||||
Current
Assets
|
||||||||||||
Cash
and Cash Equivalents
|
$ | 2,500,523 | $ | 818,719 | $ | 364,856 | ||||||
Accounts
Receivable, Net (Note 3)
|
1,446,750 | 1,413,611 | 2,908,224 | |||||||||
Inventories
(Note 4)
|
2,959,636 | 2,307,321 | 1,984,465 | |||||||||
Prepaid
Income Taxes
|
— | 130,130 | 130,130 | |||||||||
Prepaid
Expenses and Other Assets
|
41,192 | 41,390 | 108,525 | |||||||||
Total
Current Assets
|
6,948,101 | 4,711,171 | 5,496,200 | |||||||||
Tooling
and Equipment, Net (Note 5)
|
701,368 | 825,924 | 857,170 | |||||||||
Patents
and Trademarks, Net (Note 6)
|
759,356 | 684,802 | 613,884 | |||||||||
Total
Assets
|
$ | 8,408,825 | $ | 6,221,897 | $ | 6,967,254 | ||||||
Current
Liabilities
|
||||||||||||
Accounts
Payable
|
$ | 3,936,914 | $ | 4,763,321 | $ | 4,029,630 | ||||||
Lines
of Credit (Note 7)
|
178,107 | 202,290 | 78,400 | |||||||||
Current
Portion of Long-term Debt
|
715,500 | 500,000 | — | |||||||||
Notes
Payable (Note 26)
|
246,417 | — | — | |||||||||
Current
Portion of Capital Leases
|
100,661 | 139,800 | 171,778 | |||||||||
Customer
Deposits (Note 8)
|
170,671 | 729,677 | 46,637 | |||||||||
Accrued
Interest
|
154,016 | — | — | |||||||||
Accrued
Expenses (Note 9)
|
399,966 | 185,960 | 171,872 | |||||||||
Income
Taxes Payable
|
3,592 | 36,412 | 31,225 | |||||||||
Total
Current Liabilities
|
5,905,844 | 6,557,460 | 4,529,542 | |||||||||
Long-Term
Liabilities
|
||||||||||||
Accrued
Compensation (Note 10)
|
445,096 | 445,096 | 445,096 | |||||||||
Long
Term Portion of Long-Term Debt (Note 12)
|
209,208 | 379,208 | 784,208 | |||||||||
Long
Term Portion of Trade Payables (Note 11)
|
1,746,500 | — | — | |||||||||
Long
Term Portion of Capital Leases (Note 13)
|
94,176 | 180,328 | 247,052 | |||||||||
Accrued
Interest
|
338,226 | 425,448 | 314,921 | |||||||||
Cumulative
Dividends Payable on Preferred Stock
|
— | 324,299 | 223,199 | |||||||||
Total
Long-Term Liabilities
|
2,833,206 | 1,754,379 | 2,014,476 | |||||||||
Total
Liabilities
|
8,739,050 | 8,311,839 | 6,544,018 | |||||||||
Stockholders’
Equity
|
||||||||||||
Preferred
Stock — $.001 Par Value, 5,000,000 Shares Authorized;
0, 168,500 and 168,500 Shares Issued and Outstanding December
31, Respectively (Note 15)
|
— | 169 | 169 | |||||||||
Common
Stock — $.001 Par Value,
700,000,000 Shares Authorized; 263,600,274, 218,268,927, and
197,973,139 Shares Issued and Outstanding December 31,
Respectively
|
263,600 | 218,269 | 197,972 | |||||||||
Additional
Paid-in Capital
|
17,665,941 | 12,700,413 | 10,238,589 | |||||||||
Accumulated
(Deficit)
|
(18,032,430 | ) | (14,687,276 | ) | (9,691,977 | ) | ||||||
Subscriptions
Receivable (Note 20)
|
(227,336 | ) | (321,517 | ) | (321,517 | ) | ||||||
Total
Stockholders’ Equity
|
(330,225 | ) | (2,089,942 | ) | 423,236 | |||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 8,408,825 | $ | 6,221,897 | $ | 6,967,254 |
Common Stock
|
Additional
|
Accumulated
|
Preferred Stock
|
Subscriptions
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Paid-In Capital
|
Deficit
|
Shares
|
Amount
|
Receivable
|
Total
|
||||||||||||||||||||||||
Balance —
December 31,
2006
|
173,268,048 | 173,268 | 6,115,622 | (6,531,363 | ) | 168,500 | 169 | (361,650 | ) | (603,954 | ) | ||||||||||||||||||||
Warrants
Issued for
Services
|
— | — | 78,275 | — | — | — | — | 78,275 | |||||||||||||||||||||||
Exercise
of Stock
Options
|
402,483 | 402 | 5,328 | — | — | — | — | 5,730 | |||||||||||||||||||||||
Exercise
of Stock
Warrants
|
177,136 | 177 | 1,373 | — | — | — | — | 1,550 | |||||||||||||||||||||||
Issuance
of Common
Stock
|
23,125,472 | 23,125 | 3,767,686 |
—
|
— | — | — | 3,790,811 | |||||||||||||||||||||||
Conversion
of Debt into
Stock
|
1,000,000 | 1,000 | 199,000 | — | — | — | — | 200,000 | |||||||||||||||||||||||
Stock
Compensation
Expense
|
— | — | 111,438 | — | — | — | — | 111,438 | |||||||||||||||||||||||
Dividends
|
— | — | — | (101,100 | ) | — | — | — | (101,100 | ) | |||||||||||||||||||||
Extension
of Subscriptions
Receivable
|
— | — | (40,133 | ) | — | — | — | 40,133 | — | ||||||||||||||||||||||
2007
Net
Loss
|
— | — | — | (3,059,514 | ) | — | — | — | (3,059,514 | ) | |||||||||||||||||||||
Balance —
December 31,
2007
|
197,973,139 | 197,972 | 10,238,589 | (9,691,977 | ) | 168,500 | 169 | (321,517 | ) | 423,236 | |||||||||||||||||||||
Exercise
of
Options
|
2,450,888 | 2,451 | 14,245 | — | — | — | — | 16,696 | |||||||||||||||||||||||
Issuance
of Common
Stock
|
15,847,517 | 15,848 | 2,122,798 | — | — | — | — | 2,138,646 | |||||||||||||||||||||||
Exercise
of Stock
Warrants
|
1,552,936 | 1,553 | 12,033 | — | — | — | — | 13,586 | |||||||||||||||||||||||
Stock
Issued for
Services
|
444,447 | 444 | 66,223 | — | — | — | — | 66,667 | |||||||||||||||||||||||
Dividends
|
— | — | — | (101,100 | ) | — | — | — | (101,100 | ) | |||||||||||||||||||||
Warrants
Issued for
Services
|
— | — | 66,227 | — | — | — | — | 66,227 | |||||||||||||||||||||||
Stock
Compensation
Expense
|
— | — | 180,298 | — | — | — | — | 180,298 | |||||||||||||||||||||||
2008
Net
Loss
|
— | — | — | (4,894,199 | ) | — | — | — | (4,894,199 | ) | |||||||||||||||||||||
|
|||||||||||||||||||||||||||||||
Balance —
December 31,
2008
|
218,268,927 | $ | 218,269 | $ | 12,700,413 | $ | (14,687,276 | ) | 168,500 | $ | 169 | $ | (321,517 | ) | $ | (2,089,942 | ) | ||||||||||||||
Exercise
of
Options
|
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
Issuance
of Common Stock from Private Placement of
Cash
|
2,000,000 | 2,000 | 298,000 | — | — | — | — | 300,000 | |||||||||||||||||||||||
Issuance
of Common Stock in IPO
|
33,790,060 | 33,790 | 5,776,867 | 5,810,657 | |||||||||||||||||||||||||||
Conversion
of Preferred Stock and Accrued Dividends
|
7,213,797 | 7,214 | 411,815 | — | (168,500 | ) | (169 | ) | — | 418,860 | |||||||||||||||||||||
Conversion
of Convertible Debt
|
2,327,490 | 2,327 | 130,546 | — | — | — | — | 132,873 | |||||||||||||||||||||||
Repurchase
of Fractional
Shares
|
— | — | (2 | ) | — | — | — | (2 | ) | ||||||||||||||||||||||
Dividends
|
— | — | — | (94,730 | ) | — | — | — | (94,730 | ) | |||||||||||||||||||||
Warrants
Issued for
Services
|
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
Stock
Compensation
Expense
|
— | — | 274,152 | — | — | — | — | 274,152 | |||||||||||||||||||||||
Direct
IPO Associated
Expense
|
— | — | (1,912,715 | ) | — | — | — | (1,912,715 | ) | ||||||||||||||||||||||
Adjustment
of Subscriptions
Receivable
|
— | — | (13,135 | ) | — | — | — | 94,181 | 81,046 | ||||||||||||||||||||||
2009
Net
Loss
|
— | — | — | (3,250,424 | ) | — | — | — | (3,250,424 | ) | |||||||||||||||||||||
|
|||||||||||||||||||||||||||||||
Balance —
December 31,
2009
|
263,600,274 | $ | 263,600 | $ | 17,665,941 | $ | (18,032,430 | ) | — | $ | — | $ | (227,336 | ) | $ | (330,225 | ) |
For
Years Ended
|
||||||||||||
December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Sales
of Products
|
$
|
10,961,235
|
$
|
10,941,181
|
$
|
4,701,004
|
||||||
Sales
of Engineering Services
|
924,863
|
1,548,703
|
5,445,375
|
|||||||||
Total
Sales
|
11,886,098
|
12,489,884
|
10,146,379
|
|||||||||
Cost
of Sales — Products
|
7,157,573
|
7,769,916
|
3,407,340
|
|||||||||
Cost
of Sales — Engineering Services
|
451,518
|
1,018,989
|
3,376,133
|
|||||||||
Total
Cost of Sales
|
7,609,091
|
8,788,905
|
6,783,473
|
|||||||||
Gross
Profit
|
4,277,007
|
3,700,979
|
3,362,906
|
|||||||||
Operating
Expenses:
|
||||||||||||
Research
and Development
|
2,217,627
|
3,366,518
|
2,365,412
|
|||||||||
Selling
and Marketing
|
2,143,628
|
2,128,625
|
1,920,164
|
|||||||||
General
and Administrative
|
2,354,573
|
2,299,685
|
1,718,627
|
|||||||||
Depreciation
and Amortization
|
522,457
|
510,133
|
374,078
|
|||||||||
Total
Operating Expenses
|
7,238,285
|
8,304,961
|
6,378,281
|
|||||||||
Loss
from Operations
|
(2,961,278
|
)
|
(4,603,982
|
)
|
(3,015,375
|
)
|
||||||
Other
Income (Expense)
|
||||||||||||
Interest
and Other (Expense) Income
|
63
|
188
|
2,549
|
|||||||||
Foreign
Exchange Gain (Loss)
|
(22,226
|
)
|
(24,216
|
)
|
—
|
|||||||
Legal
Settlement
|
—
|
—
|
96,632
|
|||||||||
Interest
Expenses
|
(297,200
|
)
|
(260,977
|
)
|
(241,692
|
)
|
||||||
Total
Other Income (Expense)
|
(319,363
|
)
|
(285,005
|
)
|
(142,511
|
)
|
||||||
Loss
Before Provision for Income Taxes
|
(3,280,641
|
)
|
(4,888,987
|
)
|
(3,157,886
|
)
|
||||||
Provision
(Benefit) for Income Taxes (Note 14)
|
(30,217
|
) |
5,212
|
(98,372
|
)
|
|||||||
Net
Loss
|
$
|
(3,250,424
|
)
|
$
|
(4,894,199
|
)
|
$
|
(3,059,514
|
)
|
|||
Basic
and Diluted Loss per Share
|
$
|
(0.0151
|
)
|
$
|
(0.0240
|
)
|
$
|
(0.0176
|
)
|
|||
Weighted-average
Shares Outstanding —
Basic and Diluted
|
221,469,554
|
207,710,498
|
185,263,660
|
For Years Ended
|
||||||||||||
December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
Loss
|
$
|
(3,250,424
|
)
|
$
|
(4,894,199
|
)
|
$
|
(3,059,514
|
)
|
|||
Non-Cash
Adjustments
|
||||||||||||
Depreciation
and Amortization
|
522,458
|
510,133
|
374,078
|
|||||||||
Stock-Based
Compensation Expense
|
274,152
|
180,298
|
111,438
|
|||||||||
Non-Cash
Compensation
|
81,046
|
—
|
—
|
|||||||||
Stock
Issued for Services
|
—
|
66,667
|
—
|
|||||||||
Warrants
Issued for Services
|
—
|
66,227
|
78,275
|
|||||||||
(Increase)
Decrease in Operating Assets
|
||||||||||||
Accounts
Receivable
|
(33,139
|
)
|
1,494,613
|
(931,121
|
)
|
|||||||
Inventories
|
(652,315
|
)
|
(322,856
|
)
|
(826,732
|
)
|
||||||
Prepaid
Income Taxes
|
130,130
|
—
|
(130,130
|
)
|
||||||||
Prepaid
Expenses and Other Assets
|
198
|
67,135
|
(106,025
|
)
|
||||||||
Increase
(Decrease) in Operating Liabilities
|
||||||||||||
Accounts
Payable
|
(826,407
|
)
|
733,691
|
1,580,255
|
||||||||
Long
Term Portion of Trade Payables
|
1,746,500
|
—
|
—
|
|||||||||
Accrued
Expenses
|
214,006
|
14,088
|
(175,574
|
)
|
||||||||
Customer
Deposits
|
(559,006
|
)
|
683,040
|
(78,947
|
)
|
|||||||
Income
Taxes Payable
|
(32,820
|
)
|
5,187
|
31,225
|
||||||||
Accrued
Commissions
|
—
|
—
|
(266,475
|
)
|
||||||||
Accrued
Interest
|
124,498
|
110,527
|
103,347
|
|||||||||
Net
Cash Flows Used in Operating Activities
|
(2,261,123
|
)
|
(1,285,449
|
)
|
(3,295,900
|
)
|
||||||
Cash
Flows from Investing Activities
|
||||||||||||
Purchases
of Tooling and Equipment
|
(337,862
|
)
|
(424,166
|
)
|
(180,310
|
)
|
||||||
Investments
in Patents and Trademarks
|
(134,594
|
)
|
(125,638
|
)
|
(136,433
|
)
|
||||||
Net
Cash Used in Investing Activities
|
(472,456
|
)
|
(549,804
|
)
|
(316,743
|
)
|
||||||
Cash
Flows from Financing Activities
|
||||||||||||
Net
Change in Lines of Credit
|
(24,183
|
)
|
123,890
|
(13,837
|
)
|
|||||||
Issuance
of Common Stock
|
6,110,657
|
2,138,646
|
3,792,362
|
|||||||||
Repayment
of Capital Leases
|
(125,291
|
)
|
(98,702
|
)
|
(168,947
|
)
|
||||||
Prepayment
of Long-Term Debt
|
—
|
—
|
(206,980
|
)
|
||||||||
Exercise
of Stock Options
|
—
|
16,696
|
5,730
|
|||||||||
Exercise
of Stock Warrants
|
—
|
13,586
|
—
|
|||||||||
Repurchase
of Fractional Shares
|
(2
|
) |
—
|
—
|
||||||||
Direct
IPO Associated Costs
|
(1,912,715
|
)
|
—
|
—
|
||||||||
Proceeds
from Notes Payable
|
246,417
|
—
|
—
|
|||||||||
Proceeds
from Long-Term Debt
|
120,500
|
95,000
|
—
|
|||||||||
Net
Cash Flows Provided by Financing Activities
|
4,415,383
|
2,289,116
|
3,408,328
|
|||||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
1,681,804
|
453,863
|
(204,315
|
)
|
||||||||
Cash
and Cash Equivalents — Beginning of Year
|
818,719
|
364,856
|
569,171
|
|||||||||
Cash
and Cash Equivalents — End of Year
|
$
|
2,500,523
|
$
|
818,719
|
$
|
364,856
|
||||||
Supplemental
Disclosures
|
||||||||||||
Interest
Paid
|
172,533
|
149,214
|
138,345
|
|||||||||
Interest
Accrued Converted into Common Stock
|
57,874
|
—
|
—
|
|||||||||
Income
Tax Credit (Refund)
|
(164,214
|
) |
—
|
—
|
||||||||
Income
Taxes Paid
|
36,687
|
425
|
3,725
|
|||||||||
Non-Cash
Investing Transactions
|
||||||||||||
Equipment
Acquired Under Capital Lease
|
12,924
|
89,833
|
221,633
|
|||||||||
Dividends
Declared but Not Paid
|
94,730
|
101,100
|
101,100
|
|||||||||
Debt
Converted to Equity
|
75,000
|
—
|
200,000
|
|||||||||
Non-Cash Financing Transactions | ||||||||||||
Conversion of Preferred Shares and Accrued Dividends | 418,860 | |||||||||||
Conversion of Convertible Debt and Interest | 132,874 |
Computers
and Software
|
3 years
|
|||
Manufacturing
Equipment
|
5 years
|
|||
Tooling
|
3 years
|
|||
Furniture
and Equipment
|
5 years
|
December
31,
|
2009
|
2008
|
||||||
Accounts
Receivable
|
$ | 1,446,750 | $ | 1,417,870 | ||||
Less:
Allowance for Doubtful Accounts
|
— | (4,259 | ) | |||||
Net
|
$ | 1,446,750 | $ | 1,413,611 |
December
31,
|
2009
|
2008
|
||||||
Purchased
Parts and Components
|
$
|
1,992,894
|
$
|
2,091,734
|
||||
Work
in Process
|
926,343
|
130,351
|
||||||
Finished
Goods
|
508,636
|
539,883
|
||||||
Less:
Reserve for Obsolescence
|
(468,237
|
)
|
(454,647
|
)
|
||||
Net
|
$
|
2,959,636
|
$
|
2,307,321
|
December
31,
|
2009
|
2008
|
||||||
Tooling
and Manufacturing Equipment
|
$
|
1,849,663
|
$
|
1,567,537
|
||||
Computers
and Software
|
496,980
|
522,274
|
||||||
Furniture
and Equipment
|
380,385
|
360,695
|
||||||
$
|
2,727,028
|
$
|
2,450,506
|
|||||
Less:
Accumulated Depreciation
|
(2,025,660
|
)
|
(1,624,582
|
)
|
||||
Net
|
$
|
701,368
|
$
|
825,924
|
December
31,
|
2009
|
2008
|
||||||
Patents
and Trademarks
|
$
|
1,034,546
|
$
|
899,952
|
||||
Less:
Amortization
|
(275,190
|
)
|
(215,150
|
)
|
||||
Net
|
$
|
759,356
|
$
|
684,802
|
December
31,
|
2009
|
2008
|
||||||
Accrued
Wages and Related Costs
|
$
|
64,529
|
$
|
25,478
|
||||
Accrued
Professional Services
|
52,000
|
40,000
|
||||||
Accrued
Warranty Obligations
|
258,476
|
106,865
|
||||||
Other
Accrued Expenses
|
24,961
|
13,617
|
||||||
Total
|
$
|
399,966
|
$
|
185,960
|
Accrued
Warranty Obligations at December 31, 2006
|
$
|
42,475
|
||
Actual
Warranty Experience
|
(48,710
|
)
|
||
Warranty
Provisions
|
79,299
|
|||
Accrued
Warranty Obligations at December 31, 2007
|
$
|
73,064
|
||
Actual
Warranty Experience
|
(71,244
|
)
|
||
Warranty
Provisions
|
105,045
|
|||
Accrued
Warranty Obligations at December 31, 2008
|
$
|
106,865
|
||
Actual
Warranty Experience
|
(172,317
|
)
|
||
Warranty
Provisions
|
323,928
|
|||
Accrued
Warranty Obligations at December 31, 2009
|
$
|
258,476
|
December
31,
|
2009
|
2008
|
||||||
Note
payable to an officer of the Company. The principal is not subject to a
fixed repayment schedule, bears interest at 8% per annum and is secured by
all of the assets of the Company
|
$
|
209,208
|
$
|
209,208
|
||||
During
October 2008, entered into an agreement with an officer of the Company,
whereby the officer agrees to make loans from time to time to the Company
through December 31, 2010, accruing interest on the outstanding
balance at 12%, secured by all of the assets of the
Company
|
215,500
|
95,000
|
||||||
Bridge
loans in the original amount of $15,000 to stockholders of the Company
with no fixed date of repayment, accruing interest at 7.5% and are
unsecured. The Company has granted holders the same conversion terms as
the $60,000 in notes below
|
—
|
15,000
|
||||||
Convertible
promissory notes in the original amount of $60,000. These notes bear
interest at 8% and are unsecured. There is no set date of
repayment
|
—
|
60,000
|
||||||
Convertible
Notes payable bearing interest at 10% and is secured by all the assets of
the Company
|
500,000
|
500,000
|
||||||
$
|
924,708
|
$
|
879,208
|
|||||
Less:
Amount Due Within One Year
|
715,500
|
500,000
|
||||||
Amount
Due After One Year
|
$
|
209,208
|
$
|
379,208
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
Total
|
|||||||||||||
$ |
715,500
|
$ | 209,208 | $ | $ | — | $ | — | $ | 924,708 |
December
31,
|
2009
|
2008
|
||||||
Total
Principal Payments
|
$
|
194,837
|
$
|
320,128
|
||||
Less:
Amount Due Within One Year
|
(100,661
|
)
|
(139,800
|
)
|
||||
Amount
Due After One Year
|
$
|
94,176
|
$
|
180,328
|
December
31,
|
Amount
|
|||
2010
|
$
|
122,101
|
||
2011
|
72,674
|
|||
2012
|
30,392
|
|||
2013
|
—
|
|||
2015
|
—
|
|||
Total
Minimum Lease Payments
|
$
|
225,167
|
||
Less:
Amount Representing Interest
|
(30,330
|
)
|
||
Present
Value of Minimum Lease Payments
|
$
|
194,837
|
December
31,
|
2009
|
2008
|
||||||
Tooling
and Manufacturing Equipment
|
$
|
140,637
|
$
|
390,940
|
||||
Computers
and Software
|
184,604
|
315,591
|
||||||
Furniture
and Equipment
|
91,893
|
112,648
|
||||||
$
|
417,134
|
819,179
|
||||||
Less:
Accumulated Depreciation
|
(239,432
|
)
|
(490,866
|
)
|
||||
Net
|
$
|
177,702
|
$
|
328,313
|
December
31,
|
2009
|
2008
|
2007
|
|||||||||
Total
Pre-Tax (Loss) Earnings
|
$
|
(3,250,424
|
)
|
$
|
(4,888,987
|
)
|
$
|
(3,157,886
|
)
|
December
31,
|
2009
|
2008
|
2007
|
|||||||||
Current
Income Tax Provision (Benefit)
|
||||||||||||
Federal
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
State
|
3,867
|
5,212
|
31,758
|
|||||||||
State
Tax Credit Refund
|
(34,084
|
)
|
(130,130
|
)
|
||||||||
Net
Change in Liability for Unrecognized Tax Benefits
|
—
|
—
|
—
|
|||||||||
$
|
(30,217
|
)
|
$
|
5,212
|
$
|
(98,372
|
)
|
|||||
Deferred
Provision (Benefit)
|
—
|
—
|
—
|
|||||||||
Total
Provision (Benefit)
|
$
|
(30,217
|
)
|
$
|
5,212
|
$
|
(98,372
|
)
|
December
31,
|
2009
|
2008
|
2007
|
|||||||||
Federal
Income Tax at Statutory Rate
|
34.0
|
%
|
34.0
|
%
|
34.0
|
%
|
||||||
State
Tax Provision, Net of Federal Benefit
|
—
|
—
|
|
(0.3
|
)%
|
|||||||
Meals
and Entertainment
|
(0.3
|
)%
|
(0.3
|
)%
|
(0.3
|
)%
|
||||||
Stock
Compensation Expense
|
—
|
|
(1.3
|
)%
|
(1.2
|
)%
|
||||||
Research
and Development Credits
|
(0.9
|
)%
|
(2.1
|
)%
|
(2.5
|
)%
|
||||||
Other
|
—
|
—
|
—
|
)%
|
||||||||
Effective
Tax Rate
|
32.8
|
%
|
30.3
|
%
|
29.7
|
%
|
||||||
Change
in Valuations Allowance
|
(32.8
|
)%
|
(30.3
|
)%
|
(29.7
|
)%
|
||||||
Net
Effective Tax Rate
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
December
31,
|
2009
|
2008
|
||||||
Assets
|
||||||||
Current
|
||||||||
Inventory
and Inventory Related Items
|
$
|
70,000
|
$
|
68,000
|
||||
Bad
Debt and Note Receivable Reserves
|
—
|
1,000
|
||||||
Warranty
Reserves
|
39,000
|
16,000
|
||||||
Accrued
Interest
|
46,000
|
39,000
|
||||||
Non-Current
|
||||||||
Net
Operating Loss Carryforwards
|
2,177,000
|
1,825,000
|
||||||
Stock
Compensation Expense
|
108,000
|
67,000
|
||||||
Tax
Credit Carryforwards
|
1,209,000
|
946,000
|
||||||
Depreciation
|
10,000
|
—
|
||||||
Total
Gross Deferred Tax Assets
|
$
|
3,659,000
|
$
|
2,962,000
|
||||
Valuation
Allowance — 100%
|
(3,659,000
|
)
|
(2,962,000
|
)
|
||||
Total
Net Deferred Tax Assets
|
$
|
—
|
$
|
—
|
||||
Liabilities
|
||||||||
Current
|
||||||||
New
York State Refund
|
$
|
—
|
|
$
|
(19,000
|
)
|
||
Total
Gross Deferred Tax Liabilities
|
—
|
|
(19,000
|
)
|
||||
Valuation
Allowance — 100%
|
—
|
19,000
|
||||||
Total
Net Deferred Tax Liability
|
$
|
—
|
$
|
—
|
||||
Net
Deferred Tax
|
$
|
—
|
$
|
—
|
December
31,
|
2009
|
2008
|
||||||
Net
Current Deferred Tax Assets
|
$
|
—
|
$
|
—
|
||||
Net
Long-Term Deferred Tax Assets
|
$
|
—
|
$
|
—
|
Balance,
December 31, 2007
|
$
|
2,005,000
|
||
Additions
Relating to Uncertain Future Realization of
|
||||
Net
Operating Losses
|
855,000
|
|||
State
Research and Development Tax Credits
|
102,000
|
|||
Balance,
December 31, 2008
|
$
|
2,962,000
|
||
Additions
Relating to Uncertain Future Realization of
|
||||
Net
Operating Losses
|
453,000
|
|||
Federal
Tax Credits
|
82,000
|
|||
State
Research and Development Tax Credits
|
162,000
|
|||
Balance,
December 31, 2009
|
$
|
3,659,000
|
December
31,
|
2009
|
2008
|
||||||
Warrants
Outstanding, Beginning of Year
|
4,998,771
|
6,171,008
|
||||||
Exercised
During the Year
|
—
|
(1,552,936
|
)
|
|||||
Issued
During the Year
|
16,590,079
|
380,699
|
||||||
Forfeited
During the Year
|
(2,521,656
|
)
|
—
|
|||||
Warrants
Outstanding, End of Year
|
19,067,194
|
4,998,771
|
2007
Plan
|
2009
Plan
|
Total
|
||||||||||
Outstanding
as of December 31, 2009
|
14,685,578 | 1,200,000 | 15,885,578 | |||||||||
Available
for future issuance under plan
|
— | 35,800,000 | 35,800,000 | |||||||||
Totals
authorized by plan
|
14,685,578 | 37,000,000 | 51,685,578 |
Weighted
|
||||||||||||
Average
|
||||||||||||
Number
of
|
Exercise
|
Exercise
Price
|
||||||||||
Shares
|
Price
|
Range
|
||||||||||
Outstanding
at December 31, 2007
|
14,546,950
|
$
|
0.07254
|
$
|
0.0061
– $ 0.2334
|
|||||||
Granted
|
1,917,288
|
$
|
0.1846
|
$
|
0.15
– $ 0.20
|
|||||||
Exercised
|
(2,450,888
|
)
|
$
|
0.00694
|
$
|
0.06123
– $ 0.0875
|
||||||
Expired
or Forfeited
|
(934,336
|
)
|
$
|
0.1949
|
$
|
0.20
– $ 0.2334
|
||||||
Outstanding
at December 31, 2008
|
13,079,014
|
$
|
0.0914
|
$
|
0.0061
– $ 0.2334
|
|||||||
Granted
|
3,535,940
|
$
|
0.1676
|
$
|
0.15
– $ 0.20
|
|||||||
Exercised
|
—
|
$
|
—
|
$
|
—
|
|||||||
Expired
or Forfeited
|
(729,376
|
)
|
$
|
0.1996
|
$
|
0.15
– $ 0.2334
|
||||||
Outstanding
at December 31, 2009
|
15,885,578
|
$
|
0.0914
|
$
|
0.0061
– $ 0.2334
|
Total
Options Outstanding
|
||||||||||||
Weighted average
|
||||||||||||
remaining life
|
Weighted average
|
|||||||||||
Range
of exercise price
|
Shares
|
(yrs)
|
exercise price
|
|||||||||
$0.0062
to $0.0087
|
2,995,192
|
2.4
|
$
|
0.0076
|
||||||||
$0.0227
to $0.0289
|
3,560,702
|
3.9
|
$
|
0.0249
|
||||||||
$0.1500
to $0.2000
|
5,759,292
|
9.0
|
$
|
0.1676
|
||||||||
$0.2100
to $0.2334
|
3,570,392
|
6.3
|
$
|
0.2301
|
||||||||
15,885,578
|
6.0
|
$
|
0.1195
|
Exercisable
Options Outstanding
|
||||||||||||
Weighted average
|
||||||||||||
remaining life
|
Weighted average
|
|||||||||||
Range
of exercise price
|
Shares
|
(yrs)
|
exercise price
|
|||||||||
$0.0062
to $0.0087
|
2,995,192
|
2.4
|
$
|
0.0076
|
||||||||
$0.0227
to $0.0289
|
3,560,702
|
3.9
|
$
|
0.0249
|
||||||||
$0.1500
to $0.2000
|
2,167,424
|
8.8
|
$
|
0.1767
|
||||||||
$0.2100
to $0.2334
|
3,291,235
|
6.2
|
$
|
0.2298
|
||||||||
12,014,553
|
5.0
|
$
|
0.1041
|
Unvested
Options Outstanding
|
||||||||||||
Weighted average
|
||||||||||||
remaining life
|
Weighted average
|
|||||||||||
Range
of exercise price
|
Shares
|
(yrs)
|
exercise price
|
|||||||||
$0.0062
to $0.0087
|
—
|
—
|
$
|
—
|
||||||||
$0.0227
to $0.0289
|
—
|
—
|
$
|
—
|
||||||||
$0.1500
to $0.2000
|
3,591,868
|
9.1
|
$
|
0.1621
|
||||||||
$0.2100
to $0.2334
|
279,157
|
7.1
|
$
|
0.2332
|
||||||||
3,871,025
|
9.0
|
$
|
0.1672
|
December
31,
|
2009
|
2008
|
2007
|
|||||||||
Stock-Based
Compensation Expense:
|
|
|
||||||||||
Stock
Options
|
$ | 274,152 | $ | 180,298 | $ | 111,438 | ||||||
Income
Tax Benefit
|
— | — | — | |||||||||
Net
Decrease in Net Income
|
$ | 274,152 | $ | 180,298 | $ | 111,438 | ||||||
Decrease
in Earnings Per Share:
|
||||||||||||
Basic
and Diluted
|
$ | 0.0012 | $ | 0.0008 | $ | 0.0006 |
December
31,
|
2009
|
2008
|
2007
|
||||||||||
Expected
Term (Years)
|
6.25 years
|
6.25 years
|
6.25 years
|
||||||||||
Volatility
|
58.2 | % | 60.9 | % | 63.7 | % | |||||||
Risk
Free Interest Rate
|
2.95 | % | 4.39 | % | 4.39 | % |
|
Total Minimum
|
||||||||
2010
|
2011
|
Lease Payments
|
|||||||
$
|
120,066
|
$ | $22,914 | $ | 142,980 |
December
31,
|
2009
|
2008
|
2007
|
|||||||||
Consumer
Video Eyewear
|
$
|
4,912,591
|
$
|
4,451,121
|
$
|
3,282,755
|
||||||
Defense
Products
|
6,020,420
|
6,397,221
|
1,418,249
|
|||||||||
Engineering
Services
|
924,863
|
1,548,703
|
5,445,375
|
|||||||||
Low
Vision Products
|
28,224
|
92,839
|
—
|
|||||||||
Total
|
$
|
11,886,098
|
$
|
12,489,884
|
$
|
10,146,379
|