Delaware
|
33-0325826
|
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
|
Incorporation
or Organization)
|
Identification
No.)
|
Accelerated
filer o
|
||
Non-accelerated
filer o
|
Smaller
reporting company x
|
|
|
Page
|
|
Part
I
|
|||
Item 1.
|
Business
|
4
|
|
Item 1A.
|
Risk
Factors
|
10
|
|
Item 2.
|
Properties
|
14
|
|
Item 3.
|
Legal
Proceedings
|
14
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
14
|
|
|
|
||
Part
II
|
|||
Item 5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
15
|
|
Item 6.
|
Selected
Financial Data
|
16
|
|
Item 7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
16
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
24
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
24
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
51
|
|
Item 9A.
|
Controls
and Procedures
|
51
|
|
Item 9B.
|
Other
Information
|
51
|
|
|
|
||
Part
III
|
|||
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
52
|
|
Item 11.
|
Executive
Compensation
|
52
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
52
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
52
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
52
|
|
|
|
||
Part
IV
|
|||
Item 15.
|
Exhibits
and Financial Statement Schedules
|
53
|
|
Signatures
|
58
|
||
Ex-18.1
|
Preferability
Letter – BDO Seidman, LLP
|
|
Ex-23.1
|
Consent
of BDO Seidman, LLP
|
|
Ex-23.2
|
Consent
of Farber Hass Hurley LLP
|
|
Ex-31.1
|
Section
302 Certification of CEO
|
|
Ex-31.2
|
Section
302 Certification of CFO
|
|
Ex-32.1
|
Section
906 Certification of CEO
|
|
Ex-32.2
|
Section
906 Certification of CFO
|
·
|
Optoelectronic
semiconductor design and micro fabrication of Silicon (Si) and III-V
compound semiconductor devices including photodetectors and terahertz
transmitters/receiver antenna,
|
·
|
MBE
growth of high-speed III-V compound semiconductor material including
GaAs,
InAlAs and InP,
|
·
|
Opto-electronic
hybrid packaging of semiconductor devices combining opto-electronic
devices with high-speed electronics and fiber
optics,
|
·
|
Vapor
deposition and/or ion implantation for Silicon based PIN & APD
photo-detectors,
|
·
|
Terahertz
(THz) systems, subsystems, transmitters and receivers,
and
|
·
|
Femtosecond
laser pulse control and system integration.
|
·
|
High
Speed Optical Receivers (10Gb/s & 40Gb/s) which are packaged InP,
InAlAs, or GaAs PIN and/or APD photodiodes with
amplifiers
|
·
|
Packaged
PIN and APD photodiodes in S
|
·
|
Packaged
Si APD components, with and without thermo-electric
coolers
|
·
|
Packaged
Si LAAPD
components
|
·
|
Packaged
Si photodiodes with patented FILTRODE® technology integrating optical
filters directly on photodiode
chips
|
·
|
Terahertz
Systems & subsystems utilizing III-V materials for Terahertz
transmitters &/or receivers
|
Military:
· Space
· Defense
|
Industrial/NDT:
· Manufacturing
· Instrumentation
· Display
|
Medical:
· Diagnostic
& Monitoring
· Ophthalmic
Equipment
· Medical
Imaging
Telecommunications:
· Telecom
Equipment
· Test
and Measurement
· Wireless
Communications Equipment
Homeland
Security:
· Baggage/Cargo
Scanning
· Passenger
Screening
|
· |
The
next generation photodiodes and high-speed optical receivers for
both the
10G and 40G telecommunications market,
|
o |
40G
Long haul market
|
o |
100G
Metro market
|
o |
Cost
Reduction through vertical integration of strategic 40G and 100G
components
|
· |
THz–
|
o |
Application
development of the T-Ray™ 4000 product platform for industrial QC
including pharmaceutical, aerospace and consumer
markets
|
o |
T-Ray™
4000 product platform research and development for homeland
security/military markets
|
o |
T-Ray™
4000 cost reduction initiatives for high volume industrial QC
markets
|
· |
Si
APD performance enhancements – designed specifically for certain military
and medical imaging applications,
and
|
· |
Si
PIN photodiodes developments to meet unique customer requirements,
such as
higher speeds, lower electrical noise, and unique multi-element
geometries.
|
Patent
#
|
Title
|
Issue Date
|
||
142,195
|
HIGHLY-DOPED
P-TYPE CONTACT FOR HIGH-SPEED, FRONT-SIDE ILLUMINATED
PHOTODIODE
|
Apr-05
|
||
660,471
|
HIGHLY-DOPED
P-TYPE CONTRACT FOR HIGH-SPEED, FRONT-SIDE ILLUMINATED
PHOTODIODE
|
Apr-06
|
||
765,715
|
HIGHLY-DOPED
P-TYPE CONTACT FOR HIGH-SPEED, FRONT-SIDE ILLUMINATED
PHOTODIODE
|
Jan-04
|
||
766,174
|
ENHANCED
PHOTODETECTOR
|
Oct-07
|
||
809,655
|
METHOD
AND APPARATUS TO MONITOR PHASE CHANGES IN MATTER WITH TERAHERTZ
RADIATION
|
Feb-08
|
||
934,665
|
TRADEMARK
APPLICATION FOR T-RAY
|
Aug-07
|
||
1,116,280
|
HIGHLY-DOPED
P-TYPE CONTACT FOR HIGH-SPEED, FRONT-SIDE ILLUMINATED
PHOTODIODE
|
Oct-07
|
||
1,230,578
|
COMPACT
FIBER PIGTAIL TERAHERTZ IMAGING SYSTEM
|
Aug-06
|
||
2,345,153
|
HIGHLY-DOPED
P-TYPE CONTACT FOR HIGH-SPEED, FRONT-SIDE ILLUMINATED
PHOTODIODE
|
Mar-04
|
||
4,717,946
|
THIN
LINE JUNCTION PHOTODIODE
|
Jan-88
(by predecessor co.)
|
||
4,782,382
|
HIGH
QUANTUM EFFICIENCY PHOTODIODE DEVICES
|
Nov-88
(by predecessor co.)
|
||
5,021,854
|
SILICON
AVALANCHE PHOTODIODE ARRAY
|
Jun-91
|
||
5,057,892
|
LIGHT
RESPONSIVE AVALANCHE DIODE
|
Oct-91
|
||
5,146,296
|
DEVICES
FOR DETECTING AND/OR IMAGING SINGLE PHOTOELECTRON
|
Sep-92
|
||
5,311,044
|
AVALANCHE
PHOTOMULTIPLIER TUBE
|
May-94
|
||
5,477,075
|
SOLID
STATE PHOTODETECTOR WITH LIGHT RESPONSIVE REAR FACE
|
Dec-95
|
||
5,757,057
|
LARGE
AREA AVALANCHE ARRAY
|
May-98
|
||
5,801,430
|
SOLID
STATE PHOTODETECTOR WITH LIGHT RESPONSIVE REAR FACE
|
Sep-98
|
||
6,005,276
|
SOLID
STATE PHOTODETECTOR WITH LIGHT RESPONSIVE REAR FACE
|
Dec-99
|
||
6,029,988
|
COMPACT
FIBER PIGTAILED TERAHERTZ IMAGING SYSTEM
|
Aug-06
|
||
6,111,299
|
ACTIVE
LARGE AREA AVLANCHE PHOTODIODE ARRAY
|
Aug-00
|
||
6,262,465
|
HIGHLY-DOPED
P-TYPE CONTACT FOR HIGH-SPEED, FRONT-SIDE ILLUMINATED
PHOTODIODE
|
Jul-01
|
||
6,320,191
|
A
DISPERSIVE PRECOMPENSATOR FOR USE IN AN ELECTROMAGNETIC RADIATION
GENERATION AND DETECTION SYSTEM
|
Nov-01
|
||
6,816,647
|
COMPACT
FIBER PIGTAILED TERAHERTZ IMAGING SYSTEM
|
Nov-04
|
||
6,849,852
|
SYSTEM
AND METHOD FOR MONITORING CHANGES IN STATE OF MATTER WITH TERAHERTZ
RADIATION
|
Feb-05
|
||
6,936,821
|
AMPLIFIED
PHOTOCONDUCTIVE GATE
|
Aug-05
|
||
7,039,275
|
FOCUSING
FIBER OPTIC
|
May-06
|
||
7,078,741
|
HIGH-SPEED
ENHANCED RESPONSIVITY PHOTO DETECTOR
|
Jul-06
|
||
7,263,266
|
PRECISION
FIBER ATTACHMENT
|
Aug-07
|
||
7,348,607
|
PLANAR
AVALANCHE PHOTODIODE
|
Mar-08
|
||
7,348,608
|
PLANAR
AVALANCHE PHOTODIODE
|
Mar-08
|
· |
foreign
countries could change regulations or impose currency restrictions
and
other restraints;
|
· |
changes
in foreign currency exchange rates and hyperinflation or deflation
in the
foreign countries in which we
operate;
|
· |
exchange
controls;
|
· |
some
countries impose burdensome tariffs and
quotas;
|
· |
political
changes and economic crises may lead to changes in the business
environment in which we operate;
|
· |
international
conflict, including terrorist acts, could significantly impact our
financial condition and results of operations;
and
|
· |
Economic
downturns, political instability and war or civil disturbances may
disrupt
distribution logistics or limit sales in individual
markets.
|
· |
quarterly
variations in our operating results;
|
· |
operating
results that vary from the expectations of securities analysts and
investors;
|
· |
changes
in expectations as to our future financial performance, including
financial estimates by securities analysts and investors;
|
· |
announcements
of technological innovations or new products by us or our competitors;
|
· |
announcements
by us or our competitors of significant contracts, acquisitions,
strategic
partnerships, joint ventures or capital commitments;
|
· |
changes
in the status of our intellectual property rights;
|
· |
announcements
by third parties of significant claims or proceedings against us;
|
· |
additions
or departures of key personnel;
|
· |
future
sales of our ordinary shares; and
|
· |
stock
market price and volume fluctuations.
|
Item 2. |
PROPERTIES
|
Item 3. |
LEGAL
PROCEEDINGS
|
Item 4. |
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
1st Quarter
|
2nd Quarter
|
3rd Quarter
|
4th Quarter
|
||||||||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
||||||||||||||||||
Common
Stock1
|
|||||||||||||||||||||||||
High
|
$
|
1.99
|
$
|
2.74
|
$
|
2.20
|
$
|
2.35
|
$
|
2.84
|
$
|
2.30
|
$
|
1.87
|
$
|
2.30
|
|||||||||
Low
|
1.55
|
1.57
|
1.43
|
1.44
|
1.70
|
1.68
|
1.30
|
1.90
|
Year
ended
|
|||||||||||||
March 31,2008
|
March 31, 2007
|
||||||||||||
Telecommunications
|
$
|
5,349,000
|
23
|
%
|
$
|
5,850,000
|
25
|
%
|
|||||
Industrial
Sensing/NDT
|
9,993,000
|
43
|
%
|
10,041,000
|
43
|
%
|
|||||||
Military/Aerospace
|
4,412,000
|
19
|
%
|
5,157,000
|
22
|
%
|
|||||||
Medical
|
3,132,000
|
14
|
%
|
2,467,000
|
10
|
%
|
|||||||
Homeland
Security
|
329,000
|
1
|
%
|
73,000
|
—
|
||||||||
Total
Revenues
|
$
|
23,215,000
|
100
|
%
|
$
|
23,588,000
|
100
|
%
|
Contractual Obligations
|
Payments due by period
|
|||||||||||||||
Total
|
Within 1
year
|
1 – 3 years
|
3 – 5 years
|
More than
5 years
|
||||||||||||
Bank
line of credit
|
$
|
1,300,000
|
$
|
1,300,000
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Capital
lease obligations
|
1,917,000
|
460,000
|
1,380,000
|
77,000
|
||||||||||||
Long-term
MEDC loans
|
2,311,000
|
62,000
|
1,733,000
|
516,000
|
-
|
|||||||||||
Debt
to related parties
|
1,851,000
|
900,000
|
951,000
|
-
|
-
|
|||||||||||
Subtotal –
Balance Sheet
|
7,379,000
|
2,722,000
|
4,064,000
|
593,000
|
-
|
|||||||||||
Expected
interest expense on current debt obligations
|
838,000
|
416,000
|
418,000
|
4,000
|
-
|
|||||||||||
Operating
lease obligations
|
2,133,000
|
1,227,000
|
902,000
|
4,000
|
-
|
|||||||||||
Purchase
obligations
|
2,373,000
|
2,284,000
|
89,000
|
-
|
-
|
|||||||||||
Total
|
$
|
12,723,000
|
$
|
6,649,000
|
$
|
5,473,000
|
$
|
601,000
|
$
|
-
|
Item 7A. |
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Item 8. |
FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA
|
Page
|
||
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
25
|
|
FINANCIAL
STATEMENTS:
|
||
Consolidated
Balance Sheets, as of March 31, 2008 and March 31, 2007
|
27
|
|
Consolidated
Statements of Operations
|
||
for
the years ended March 31, 2008 and March 31, 2007
|
28
|
|
Consolidated
Statements of Shareholders' Equity
|
||
for
the years ended March 31, 2008 and March 31, 2007
|
29
|
|
Consolidated
Statements of Cash Flows
|
||
for
the years ended March 31, 2008 and March 31, 2007
|
30
|
|
Notes
to Consolidated Financial Statements
|
32
|
March 31, 2008
|
March 31, 2007
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
82,000
|
$
|
1,774,000
|
|||
Restricted
cash
|
1,500,000
|
1,500,000
|
|||||
Accounts
receivable, net of allowance for doubtful accounts of $14,000 and
$51,000
in 2008 and 2007, respectively
|
3,202,000
|
3,587,000
|
|||||
Inventories
|
4,131,000
|
4,439,000
|
|||||
Prepaid
expenses and other current assets
|
195,000
|
377,000
|
|||||
Total
current assets
|
9,110,000
|
11,677,000
|
|||||
Equipment
and leasehold improvements, net
|
4,757,000
|
4,736,000
|
|||||
Goodwill
|
4,579,000
|
4,579,000
|
|||||
Intangibles,
net
|
10,871,000
|
12,640,000
|
|||||
Deferred
income taxes
|
—
|
1,225,000
|
|||||
Certificate
of deposit
|
276,000
|
285,000
|
|||||
Security
deposits and other assets
|
110,000
|
100,000
|
|||||
Total
other assets
|
15,836,000
|
18,829,000
|
|||||
TOTAL
ASSETS
|
$
|
29,703,000
|
$
|
35,242,000
|
|||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Line
of credit
|
$
|
1,300,000
|
$
|
741,000
|
|||
Accounts
payable
|
1,339,000
|
1,401,000
|
|||||
Other
accrued expenses
|
1,254000
|
2,026,000
|
|||||
Current
portion of long-term debt, related parties
|
900,000
|
550,000
|
|||||
Current
portion of long-term debt
|
62,000
|
4,255,000
|
|||||
Current
portion of long term debt, capital lease obligations
|
460,000
|
280,000
|
|||||
Total
current liabilities
|
5,315,000
|
9,253,000
|
|||||
Long-term
debt, less current portion
|
2,249,000
|
1,428,000
|
|||||
Long-term
debt-capital lease obligations, less current portion
|
1,457,000
|
1,587,000
|
|||||
Long-term
debt, less current portion - related parties
|
951,000
|
1,851,000
|
|||||
Total
liabilities
|
9,972,000
|
14,119,000
|
|||||
Commitments
and contingencies
|
|||||||
Class
A redeemable convertible preferred stock, $.001
par value; 780,000 shares authorized; 2008 and 2007 - 40,000 shares
issued
and outstanding; liquidation preference $32,000
|
—
|
32,000
|
|||||
Shareholders'
equity:
|
|||||||
Class
A Common
Stock,
$.001 par value, 50,000,000 authorized; 2008 – 23,977,678 shares
issued and outstanding; 2007 – 19,226,006 shares issued and
outstanding
|
24,000
|
19,000
|
|||||
Class
B Common
Stock,
$.001 par value; 4,420,113 shares authorized, 2008 and 2007 - 31,691
issued and outstanding
|
—
|
—
|
|||||
Additional
paid-in capital
|
52,150,000
|
43,887,000
|
|||||
Accumulated
deficit
|
(32,443,000
|
)
|
(22,815,000
|
)
|
|||
19,731,000
|
21,091,000
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
29,703,000
|
$
|
35,242,000
|
2008
|
2007
|
||||||
Sales,
net
|
$
|
23,215,000
|
$
|
23,588,000
|
|||
Cost
of products sold
|
14,340,000
|
12,693,000
|
|||||
Gross
profit
|
8,875,000
|
10,895,000
|
|||||
Research
and development expenses
|
4,218,000
|
4,012,000
|
|||||
Sales
and marketing expenses
|
2,312,000
|
2,174,000
|
|||||
General
and administrative expenses
|
4,593,000
|
5,020,000
|
|||||
Amortization
expense – intangible assets
|
1,963,000
|
1,528,000
|
|||||
Amortization –
capital finance expense
|
—
|
148,000
|
|||||
Dodgeville
consolidation expenses
|
534,000
|
—
|
|||||
Wafer
fabrication relocation expenses
|
1,256,000
|
720,000
|
|||||
Loss
on impairment of intangible assets
|
—
|
349,000
|
|||||
Loss
on impairment of goodwill
|
—
|
140,000
|
|||||
Total
operating expenses
|
14,876,000
|
14,091,000
|
|||||
Income
(loss) from operations
|
(6,001,000
|
)
|
(3,196,000
|
)
|
|||
Other
income (expense):
|
|||||||
Interest
income
|
96,000
|
213,000
|
|||||
Interest
expense on bank & MEDC loans
|
(419,000
|
)
|
(322,000
|
)
|
|||
Interest
expense related to convertible notes
|
(268,000
|
)
|
(504,000
|
)
|
|||
Interest
expense, warrant discount
|
(1,672,000
|
)
|
(1,528,000
|
)
|
|||
Interest
expense, related parties
|
(162,000
|
)
|
(224,000
|
)
|
|||
Other
income (expense)
|
23,000
|
(5,000
|
)
|
||||
Income
(Loss) before provision (benefit) for income taxes
|
(8,403,000
|
)
|
(5,566,000
|
)
|
|||
Provision
(benefit) for income taxes:
|
|||||||
Provision
(benefit) for income taxes - current
|
—
|
62,000
|
|||||
Provision
(benefit) for income taxes - deferred
|
1,225,000
|
(982,000
|
)
|
||||
Total
provision (benefit) for income taxes
|
1,225,000
|
(920,000
|
)
|
||||
Net
income (loss)
|
$
|
(9,628,000
|
)
|
$
|
(4,646,000
|
)
|
|
Basic
earnings (loss) per share
|
$
|
(0.44
|
)
|
$
|
(0.24
|
)
|
|
Diluted
earnings (loss) per share
|
$
|
(0.44
|
)
|
$
|
(0.24
|
)
|
|
Weighted
average common shares outstanding
|
21,770,000
|
19,065,000
|
(Dollars
in thousands, except share
data)
|
Class A
Common
Shares
|
Class A
Common
Amount
|
Class A
Preferred
Shares
|
Class A
Preferred
Amount
|
Class B
Common
Shares
|
Class B
Common
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||||
BALANCE,
APRIL 1, 2006
|
18,885,006
|
$
|
19
|
—
|
$
|
—
|
31,691
|
$
|
—
|
$
|
43,581
|
$
|
(18,169
|
)
|
$
|
25,431
|
||||||||||||
Exercise
of Stock Options
|
341,000
|
—
|
—
|
—
|
—
|
—
|
355
|
—
|
355
|
|||||||||||||||||||
Stock
based compensation
|
—
|
—
|
—
|
—
|
—
|
—
|
361
|
—
|
361
|
|||||||||||||||||||
Adjustment
of discount on convertible notes payable (fair value of detachable
warrants issued)
|
—
|
—
|
—
|
—
|
—
|
—
|
(31
|
)
|
—
|
(31
|
)
|
|||||||||||||||||
Deferred
tax liability on beneficial conversion
|
—
|
—
|
—
|
—
|
—
|
—
|
(379
|
)
|
—
|
(379
|
)
|
|||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(4,646
|
)
|
(4,646
|
)
|
|||||||||||||||||
BALANCE,
MARCH 31, 2007
|
19,226,006
|
$
|
19
|
—
|
$
|
—
|
31,691
|
$
|
—
|
$
|
43,887
|
$
|
(22,815
|
)
|
$
|
21,091
|
||||||||||||
Exercise
of Stock Options
|
98,200
|
—
|
—
|
—
|
—
|
—
|
76
|
—
|
76
|
|||||||||||||||||||
Reclassification
of Class A Redeemable Preferred Stock to Equity
|
—
|
—
|
40,000
|
-
|
—
|
-
|
32
|
—
|
32
|
|||||||||||||||||||
Stock
based compensation
|
—
|
—
|
—
|
—
|
—
|
—
|
230
|
—
|
230
|
|||||||||||||||||||
Shares
issued upon conversion of notes payable
|
1,601,323
|
2
|
—
|
—
|
—
|
—
|
3,150
|
—
|
3,152
|
|||||||||||||||||||
Warrants
exercised
|
86,817
|
—
|
—
|
—
|
—
|
—
|
151
|
—
|
151
|
|||||||||||||||||||
Issuance
of common stock
|
2,965,332
|
3
|
—
|
—
|
—
|
—
|
4,318
|
—
|
4,321
|
|||||||||||||||||||
Adjustment
of discount on convertible notes (anti-dilution
adjustment)
|
—
|
—
|
—
|
—
|
—
|
—
|
306
|
—
|
306
|
|||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(9,628
|
)
|
(9,628
|
)
|
|||||||||||||||||
BALANCE
MARCH 31, 2008
|
23,977,678
|
$
|
24
|
40,000
|
$
|
—
|
31,691
|
$
|
—
|
$
|
52,150
|
$
|
(32,443
|
)
|
$
|
19,731
|
2008
|
2007
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(9,628,000
|
)
|
$
|
(4,646,000
|
)
|
|
Adjustment
to reconcile net loss to net cash provided
by (used in) operating activities:
|
|||||||
Depreciation
|
1,130,000
|
1,076,000
|
|||||
Amortization
|
2,033,000
|
1,676,000
|
|||||
Stock
based compensation expense
|
230,000
|
361,000
|
|||||
Goodwill
impairment charges
|
—
|
140,000
|
|||||
Loss
on impairment of intangible asset
|
—
|
349,000
|
|||||
Amortization,
convertible note discount
|
1,672,000
|
1,528,000
|
|||||
Deferred
income taxes
|
1,225,000
|
(602,000
|
)
|
||||
Provision
for warranty expense
|
—
|
20,000
|
|||||
Other
|
—
|
128,000
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
385,000
|
800,000
|
|||||
Inventories
|
308,000
|
(1,133,000
|
)
|
||||
Prepaid
expenses and other current assets
|
70,000
|
284,000
|
|||||
Other
assets
|
41,000
|
(398,000
|
)
|
||||
Accounts
payable
|
(62,000
|
)
|
419,000
|
||||
Accrued
expenses
|
(772,000
|
)
|
254,000
|
||||
Net
cash provided by (used in) operating activities
|
(3,368,000
|
)
|
256,000
|
||||
Cash
flows from investing activities:
|
|||||||
Capital
expenditures
|
(1.151,000
|
)
|
(2,437,000
|
)
|
|||
Change
in restricted cash
|
—
|
(1,500,000
|
)
|
||||
Patent
expenditures
|
(195,000
|
)
|
(162,000
|
)
|
|||
Net
cash used in investing activities
|
(1,346,000
|
)
|
(4,099,000
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Payments
on bank loans
|
—
|
(1,950,000
|
)
|
||||
Proceeds
from capital lease financing
|
433,000
|
1,867,000
|
|||||
Payments
on capital lease financing
|
(383,000
|
)
|
—
|
||||
Net
borrowings(repayments) on revolving line of credit
|
559,000
|
(259,000
|
)
|
||||
Payments
of convertible note
|
(2,375,000
|
)
|
—
|
||||
Proceeds
from MEDC term loan
|
790,000
|
172,000
|
|||||
Net
proceeds from issuance of common stock
|
4,321,000
|
—
|
|||||
Proceeds
from exercise of warrants
|
151,000
|
—
|
|||||
Payments
on related party debt
|
(550,000
|
)
|
(501,000
|
)
|
|||
Proceeds
from exercise of stock options
|
76,000
|
355,000
|
|||||
Net
cash provided by (used in) financing activities
|
3,022,000
|
(316,000
|
)
|
||||
Net
increase (decrease) in cash and cash equivalents
|
(1,692,000
|
)
|
(4,159,000
|
)
|
|||
Cash
and cash equivalents, beginning of period
|
1,774,000
|
5,933,000
|
|||||
Cash
and cash equivalents, end of period
|
$
|
82,000
|
$
|
1,774,000
|
|||
Supplemental
cash flow information:
|
2008
|
2007
|
|||||
Cash
paid for interest
|
$
|
745,000
|
$
|
795,000
|
|||
Cash
paid for income taxes
|
$
|
81,000
|
$
|
26,000
|
|||
Supplemental
disclosure of non-cash operating, investing and financing
activities
|
|||||||
Adjustment
of discount on convertible notes (anti-dilution
adjustment)
|
(306,
000
|
)
|
—
|
1. |
Summary
of the Company and Significant Accounting Policies
|
Principles
of Consolidation
-
The consolidated financial statements include the financial statements
of
the Company and its wholly-owned subsidiaries (Silicon Sensors Inc.
&
Picometrix LLC). All significant inter-company balances and transactions
have been eliminated in
consolidation.
|
Operating
Segment Information –
The Company operates as one segment in accordance with SFAS No. 131,
“Disclosures
about Segments of an Enterprise and Related Information”.
The
Company’s chief operating decision maker and management personnel view the
Company’s performance and make resource allocation decisions by looking at
the Company as a whole. Although there are different product lines
within
the Company, they are economically similar and are also similar in
terms
of the five criteria set forth in SFAS No. 131 that must be met to
combine
segments. The Company’s products are light and radiation detection
devices. The nature of the production process is similar for all
product
lines, and manufacturing for the different product lines occurs in
common
facilities. Generally, the same engineers with the same qualifications
design and manufacture products for all product lines. The types
and class
of customers are similar across all product lines, and products are
distributed through common channels and distributor
networks.
|
Fair
Value of Financial Instruments –
The carrying value of all financial instruments potentially subject
to
valuation risk (principally consisting of cash equivalents, accounts
receivable, accounts payable, notes receivable and notes payable)
approximates fair value based upon prevailing interest rates available
to
the Company.
|
Cash
and Cash Equivalents –
The Company considers all highly liquid investments, with an original
maturity of three months or less when purchased, to be cash
equivalents.
|
Leasehold
Improvements
|
term
of lease or useful life,
whichever
is less
|
|
Machinery
and Equipment
|
5 –
7 years
|
|
Office
Furniture
|
3 –
7 years
|
|
Computer
Hardware
|
3 –
7 years
|
|
Computer
Software
|
3 –
5 years
|
|
Automobiles
|
5
years
|
2. |
Inventories
|
2008
|
|
2007
|
|
||||
Raw
material
|
$
|
3,260,000
|
$
|
3,348,000
|
|||
Work-in-process
|
1,626,000
|
1,503,000
|
|||||
Finished
products
|
229,000
|
512,000
|
|||||
Total
inventories
|
5,115,000
|
5,363,000
|
|||||
Less
reserve
|
(984,000
|
)
|
(924,000
|
)
|
|||
Inventories,
net
|
$
|
4,131,000
|
$
|
4,439,000
|
3. |
Equipment
and Leasehold Improvements
|
2008
|
2007
|
||||||
Machinery
and equipment
|
$
|
7,912,000
|
$
|
6,449,000
|
|||
Furniture
and fixtures
|
715,000
|
521,000
|
|||||
Leasehold
improvements
|
952,000
|
554,000
|
|||||
Computer
hardware equipment
|
564,000
|
555,000
|
|||||
Vehicles
|
26,000
|
26,000
|
|||||
Capitalized
software
|
419,000
|
442,000
|
|||||
Total
assets
|
10,588,000
|
8,547,000
|
|||||
Accumulated
depreciation
|
(6,090,000
|
)
|
(5,565,000
|
)
|
|||
4,498,000
|
2,982,000
|
||||||
Construction-in-process
|
259,000
|
1,754,000
|
|||||
Net
equipment and leasehold improvements
|
$
|
4,757,000
|
$
|
4,736,000
|
4. |
Intangible
Assets and Goodwill
|
March 31, 2008
|
March 31, 2007
|
||||||||||||||||||||||||
Weighted
Average
Lives
|
Amortization
Method
|
Carrying
Value
|
Accumulated
Amortization
|
Intangibles
Net
|
Carrying
Value
|
Accumulated
Amortization
|
Intangibles
Net
|
||||||||||||||||||
Non-Compete
agreement
|
3
|
Cash
Flow
|
$
|
130
|
$
|
117
|
$
|
13
|
$
|
130
|
$
|
82
|
$
|
48
|
|||||||||||
Customer
list
|
15
|
Straight
Line
|
475
|
322
|
153
|
475
|
309
|
166
|
|||||||||||||||||
Trademarks
|
15
|
Cash
Flow
|
2,270
|
391
|
1,879
|
2,270
|
286
|
1,984
|
|||||||||||||||||
Customer
relationships
|
5
|
Cash
Flow
|
1,380
|
450
|
930
|
1,380
|
174
|
1,206
|
|||||||||||||||||
Technology
|
10
|
Cash
Flow
|
10,950
|
3,592
|
7,358
|
10,950
|
2,069
|
8,881
|
|||||||||||||||||
Patents
pending
|
|
424
|
—
|
424
|
310
|
—
|
310
|
||||||||||||||||||
Patents
|
Straight
Line
|
187
|
73
|
114
|
107
|
62
|
45
|
||||||||||||||||||
Total
Intangibles
|
|
$
|
15,816
|
$
|
4,945
|
$
|
10,871
|
$
|
15,622
|
$
|
2,982
|
$
|
12,640
|
1)
|
because
this asset is technology related (generated based on customer
relationships obtained from various customers) and technology-based
assets
would tend to have shorter useful lives
and
|
2)
|
to
reflect the attrition inherent in customer related intangibles.
|
Fiscal
Year
|
Future Amortization
As previously
Reported
|
Future Amortization
As Adjusted
|
Difference
|
|||||||
2008
|
$
|
1,394,000
|
$
|
1,952,000
|
$
|
558,000
|
||||
2009
|
1,356,000
|
2,090,000
|
734,000
|
|||||||
2010
|
1,351,000
|
2,035,000
|
684,000
|
|||||||
2011
|
1,351,000
|
1,584,000
|
233,000
|
|||||||
2012
|
1,351,000
|
1,305,000
|
(46,000
|
)
|
||||||
2013
& after
|
5,482,000
|
3,319,000
|
(2,163,000
|
)
|
||||||
Total
Amortization
|
$
|
12,285,000
|
$
|
12,285,000
|
$
|
-
|
Intangible
Assets (a)
|
Patents
(b)
|
|||||||||
2009
|
$
|
2,090,000
|
2009
|
$
|
14,000
|
|||||
2010
|
2,035,000
|
2010
|
12,000
|
|||||||
2011
|
1,584,000
|
2011
|
12,000
|
|||||||
2012
|
1,305,000
|
2012
|
12,000
|
|||||||
2013
|
1,088,000
|
2013
|
12,000
|
|||||||
2014
& after
|
2,231,000
|
2014
& after
|
52,000
|
|||||||
Total
|
$
|
10,333,000
|
Total
|
$
|
114,000
|
a. |
The
table reflects the revised future amortization expense as of March
31,
2008 for the Company’s intangible assets based on the changes discussed
above.
|
b. |
Patent
pending costs of $424,000 are not included in the chart above.
These costs
will be amortized beginning the month the patents are granted.
|
Impairment
of Goodwill –
The
Company’s evaluation of Goodwill for the year ended March 31, 2008
indicated that there was no impairment. As
a result of the Company’s annual goodwill impairment evaluation in prior
years, goodwill recorded from the 2003 Texas Optoelectronics Inc.
acquisition of approximately $1.4 million was reduced $140,000
in FY 2007,
based on the net present value of the estimated future cash flow
as a
result of the acquisition.
|
5. |
Line
of Credit
|
6. |
Long-Term
Debt and Notes Payable
|
Year Ended March 31,
|
Future minimum capital
lease payments
|
|||
2009
|
$
|
552,000
|
||
2010
|
527,000
|
|||
2011
|
502,000
|
|||
2012
|
477,000
|
|||
2013
|
78,000
|
|||
2014
& after
|
—
|
|||
Total
|
$
|
2,136,000
|
||
Less:
amounts representing interest
|
(219,000
|
)
|
||
Total
|
$
|
1,917,000
|
||
Current
portion
|
460,000
|
|||
Long-term
portion
|
1,457,000
|