ý
|
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
|
94-1517641
|
(State
or other jurisdiction of
|
(IRS
Employer Identification
|
incorporation
or organization)
|
Number)
|
PART
I
|
|||
Item
1
|
Business
|
4
|
|
Item
1A
|
Risk
Factors
|
12
|
|
Item
2
|
Properties
|
17
|
|
Item
3
|
Legal
Proceedings
|
17
|
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
17
|
|
PART
II
|
|||
Item
5
|
Market
for Registrant's Common Equity,
|
||
Related
Stockholder Matters and Issuer
|
|||
Purchases
of Equity Securities
|
19
|
||
Item
6
|
Selected
Financial Data
|
20
|
|
Item
7
|
Management's
Discussion and Analysis of
|
||
Financial
Condition and Results of Operations
|
20
|
||
Item
7A
|
Quantitative
and Qualitative Disclosures about Market Risk
|
34
|
|
Item
8
|
Financial
Statements and Supplementary Data
|
35
|
|
Item
9
|
Changes
in and Disagreements with Accountants
|
||
on
Accounting and Financial Disclosure
|
35
|
||
Item
9A
|
Controls
and Procedures
|
35
|
|
Item
9B
|
Other
Information
|
36
|
|
PART
III
|
|||
Item
10
|
Directors
and Executive Officers of the Registrant
|
37
|
|
Item
11
|
Executive
Compensation
|
42
|
|
Item
12
|
Security
Ownership of Certain Beneficial Owners
|
||
and
Management and Related Stockholder Matters
|
46
|
||
Item
13
|
Certain
Relationships and Related Transactions
|
47
|
|
Item
14
|
Principal
Accountant Fees and Services
|
48
|
|
PART
IV
|
|||
Item
15
|
Exhibits
and Financial Statement Schedules
|
50
|
|
SIGNATURES
|
54
|
Year
Ended October 31,
|
|
|||||||||
|
|
2006
|
|
2005
|
|
2004
|
||||
(percentage
of net sales)
|
||||||||||
VME
|
8
|
%
|
20
|
%
|
43
|
%
|
||||
Adapters
|
59
|
48
|
46
|
|||||||
HighWire
|
32
|
32
|
11
|
|||||||
Storage
Software
|
1
|
---
|
---
|
|||||||
100%
|
100
|
%
|
100
|
%
|
Name
|
Age
|
Position
|
Kenneth
G. Yamamoto
|
51
|
President
and Chief Executive Officer
|
David
W. Brunton
|
56
|
Vice
President, Finance, Chief Financial
|
Officer,
Treasurer and Secretary
|
||
Leo
Fang
|
35
|
Executive
Vice President
|
Nelson
Abal
|
49
|
Vice
President, Sales
|
Fiscal
quarter ended
|
|||||||||||||
Fiscal
2006
|
January
31
|
|
April
30
|
|
July
31
|
|
October
31
|
||||||
High
|
$
|
1.44
|
$
|
1.08
|
$
|
0.40
|
$
|
0.38
|
|||||
Low
|
1.33
|
1.05
|
0.36
|
0.35
|
|||||||||
Fiscal
2005
|
|||||||||||||
High
|
$
|
4.59
|
$
|
3.55
|
$
|
3.65
|
$
|
3.50
|
|||||
Low
|
3.03
|
2.30
|
2.09
|
2.17
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding
options,
warrants
and rights
|
|
Weighted-average
exercise price of outstanding options, warrants
and
rights
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities
reflected
in column (a))
|
|||||
(a)
|
||||||||||
Equity
compensation plans approved by security holders
|
3,661,087(1
|
)
|
$
|
2.53
|
108,750
|
|||||
Equity
compensation plans not approved by security holders
|
388,785(2
|
)
|
$
|
2.24
|
135,699
|
|||||
Total
|
4,049,872
|
$
|
2.50
|
244,449
|
(1) |
Includes
options to purchase 1,021,200 shares our common stock at $2.17 per
share
pursuant to the PyX 2005 Employee Stock Option Plan assumed by us
as part
of the PyX acquisition.
|
(2) |
See
Footnote 11 “Stock Option and Stock Purchase Plans“ to the SBE, Inc.
financial statements.
|
For
years ended October 31,
|
||||||||||||||||
and
at October 31
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|||||||
(in
thousands, except for per share amounts and number of
employees)
|
||||||||||||||||
Net
sales
|
$
|
6,127
|
$
|
8,056
|
$
|
11,066
|
$
|
7,456
|
$
|
6,898
|
||||||
Net
income (loss)
|
$
|
(16,183
|
)
|
$
|
(4,230
|
)
|
$
|
(1,679
|
)
|
$
|
563
|
$
|
(1,731
|
)
|
||
Net
income (loss) per share - basic
|
$
|
(1.57
|
)
|
$
|
(0.66
|
)
|
$
|
(0.33
|
)
|
$
|
0.13
|
$
|
(0.46
|
)
|
||
Net
income (loss) per share - diluted
|
$
|
(1.57
|
)
|
$
|
(0.66
|
)
|
$
|
(0.33
|
)
|
$
|
0.12
|
$
|
(0.46
|
)
|
||
Product
research and development
|
$
|
3,979
|
$
|
2,694
|
$
|
2,411
|
$
|
1,330
|
$
|
3,027
|
||||||
Expenses
|
||||||||||||||||
Working
capital
|
$
|
1,701
|
$
|
5,520
|
$
|
3,939
|
$
|
3,945
|
$
|
2,985
|
||||||
Total
assets
|
$
|
4,868
|
$
|
18,832
|
$
|
6,173
|
$
|
6,975
|
$
|
5,321
|
||||||
Long-term
liabilities
|
$
|
255
|
$
|
241
|
$
|
139
|
$
|
217
|
$
|
10
|
||||||
Stockholders'
equity
|
$
|
3,321
|
$
|
17,348
|
$
|
4,303
|
$
|
5,387
|
$
|
3,696
|
||||||
Number
of employees
|
34
|
37
|
36
|
32
|
24
|
- |
all
prices are fixed and determinable at the time of
sale;
|
- |
title
and risk of loss pass at the time of shipment (FOB shipping
point);
|
- |
collectibility
of the sales price is probable (the OEM is creditworthy, the OEM
is
obligated to pay and such obligation is not contingent on the ultimate
sale of the OEM’s integrated
solution);
|
- |
the
OEM’s obligation to us will not be changed in the event of theft or
physical destruction or damage of the
product;
|
- |
we
do not have significant obligations for future performance to directly
assist in the resale of the product by the OEMs;
and
|
- |
there
is no contractual right of return other than for defective
products.
|
Year
Ended October 31,
|
|
|||||||||
|
|
2006
|
|
2005
|
|
2004
|
||||
Net
sales
|
100
|
%
|
100
|
%
|
100
|
%
|
||||
Operating
expenses:
|
||||||||||
Amortization
and impairment of acquired
|
||||||||||
software
and intellectual property
|
161
|
13
|
11
|
|||||||
Cost
of hardware and other revenue
|
66
|
54
|
49
|
|||||||
Product
research and development
|
65
|
33
|
22
|
|||||||
Sales
and marketing
|
36
|
28
|
19
|
|||||||
General
and administrative
|
37
|
24
|
16
|
|||||||
Loan
loss recovery
|
---
|
---
|
(2
|
)
|
||||||
Total
operating expenses
|
365
|
85
|
55
|
|||||||
Operating
loss before income taxes
|
(265
|
)
|
(52
|
)
|
(15
|
)
|
||||
Income
tax (provision) benefit
|
---
|
---
|
---
|
|||||||
Net
loss
|
(265
|
)%
|
(52
|
)%
|
(15
|
)%
|
· |
the
inclusion of $543,300 of non-cash compensation expense related to
stock
option expense under SFAS 123(R) compared to none in 2005 and
2004;
|
· |
an
increase in engineering design projects related expenditures related
to
the development of our storage software;
and
|
· |
a
$256,000 asset impairment write-off of previously capitalized VoIP
development expense that was written-off to expense in fiscal 2006
due to
the cancellation of the VoIP development
project.
|
· |
the
inclusion of increases related to our Storage business segment when
we
hired seven employees in conjunction with the PyX acquisition; and
|
· |
an
increase in engineering design project related expenditures related
to the
development of our storage software and VoIP/DSP gateway
products.
|
|
Payments
due by period (in thousands)
|
|||||||||||||||
|
|
Less
than
|
1-2
|
3-5
|
More
than
|
|||||||||||
Contractual
Obligations
|
Total
|
1
year
|
Years
|
Years
|
5
Years
|
|||||||||||
Building
leases
|
$
|
2,223
|
$
|
580
|
$
|
1,160
|
$
|
483
|
$
|
—
|
||||||
Capital
leases
|
255
|
74
|
149
|
32
|
—
|
|||||||||||
Total
net lease payments
|
$
|
2,478
|
$
|
654
|
$
|
1,309
|
$
|
515
|
$
|
—
|
- |
actual
versus anticipated sales of Neonode’s
products;
|
- |
our
actual versus anticipated operating
expenses;
|
- |
the
timing of Neonode’s product
shipments;
|
- |
our
actual versus anticipated Neonode’s gross profit
margin;
|
- |
our
ability to raise additional capital, if necessary;
and
|
- |
our
ability to secure credit facilities, if
necessary.
|
Annual
Compensation
|
Long-Term
Compensation Awards
|
||||||
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual
Compen-sation
($)(1)
|
Stock
Awards
(#)(8)
|
Securities
Underlying
Options
(#)
|
All
Other Compen-sation
($)(2)
|
Mr.
Kenneth Yamamoto
President
and Chief Executive Officer (7)
|
2006
2005
2004
|
143,617
75,104
--
|
--
--
--
|
708
--
--
|
74,088
--
--
|
100,000
--
--
|
1,094
--
--
|
Mr.
Leo Fang
Executive
Vice President(6)
|
2006
2005
2004
|
143,643
75,104
--
|
--
--
--
|
242
--
--
|
62,562
--
--
|
25,000
--
--
|
1,094
--
--
|
Mr.
David Brunton
Vice
President, Finance and Chief Financial Officer
|
2006
2005
2004
|
144,649
170,000
167,500
|
--
--
--
|
1,103
1,058
541
|
49,683
--
--
|
25,000
100,000
25,000
|
425
3,613
4,875
|
Mr.
Kirk Anderson
Vice
President, Operations
|
2006
2005
2004
|
136,740
132,888
130,000
|
--
--
--
|
324
270
263
|
45,502
--
--
|
75,000
--
--
|
853
3,879
3,828
|
Mr.
Nelson Abal
Vice
President of Sales (10)
|
2006
2005
2004
|
118,789
105,416
100,000
|
13,599
37,677
61,315
|
185
128
121
|
29,791
--
--
|
20,000
70,000
--
|
813
3,163
2,250
|
Mr.
Daniel Grey
President
and Chief Executive Officer (3)
|
2006
2005
2004
|
77,492
200,000
200,904
|
--
--
--
|
317
4,052
4,052
|
13,286
--
--
|
--
250,000
25,000
|
625
2,875
6,000
|
Mr.
Steve Nester
Vice
President of Business Development(11)
|
2006
2005
2004
|
82,132
158,583
105,849
|
--
11,500
--
|
521
883
269
|
25,072
--
--
|
5,000
50,000
--
|
1,062
4,413
3,532
|
Ms.
Yee-Ling Chin
Vice
President, Marketing (9)
|
2006
2005
2004
|
67,725
120,000
120,000
|
--
--
--
|
83
125
94
|
9,795
--
--
|
10,000
25,000
--
|
750
3,600
3,600
|
Mr.
William B. Heye, Jr.
President
and Chief Executive Officer (4)
|
2006
2005
2004
|
--
--
250,000
|
--
--
--
|
--
--
4,968
|
30,545
--
--
|
10,000
75,000
125,000
|
--
208,333
6,000
|
Mr.
Ignacio C. Munio
Vice
President, Engineering (5)
|
2006
2005
2004
|
--
168,767
175,000
|
--
--
25,000
|
--
870
1,099
|
--
195,896
85,800(5)
|
--
28,945
--
|
--
5,075
5,250
|
(1)
|
Includes
$708, $242, $317, $1,103, $185, $521, $324 and $83 attributable in
fiscal
2006 to Messrs. Yamamoto, Fang, Grey, Brunton, Abal, Nester, Anderson
and
Ms. Chin, respectively, $693, $1,058, $128, $883, $270, $125 and
$870
attributable in fiscal 2005 to Messrs. Grey, Brunton, Abal, Nester,
Anderson, Ms. Chin and Mr. Munio, respectively, $4,052, $541,$121,$269,
$263, $94, $4,968 and $1,099 attributable in fiscal 2004 to Messrs.
Grey,
Brunton, Abal, Nester, Anderson, Ms. Chin and Messrs. Heye and Munio,
respectively, for premiums paid by us for group term life insurance.
Also
includes $3,600 attributable in each of fiscal 2004 to Mr. Grey for
an
automobile allowance.
|
(2)
|
The
sum for each Named Executive Officer was paid by us as matching and
profit
sharing contributions to our Savings and Investment Plan and Trust.
The
sum of $208,333 was paid to Mr. Heye and we granted Mr. Heye an option
to
purchase 75,000 shares of common stock at an exercise price of $4.00
per
share as severance in connection with his retirement as President
and
Chief Executive Officer effective December 31,
2004.
|
(3)
|
Mr.
Grey was Vice President, Sales prior to being promoted to the office
of
President and Chief Executive Officer effective January 1, 2005.
Mr. Grey
resigned as President and Chief Executive officer on March 3,
2006.
|
(4)
|
Mr.
Heye retired on December 31, 2004. Mr. Heye retired from the Board
of
Directors on October 31, 2006.
|
(5)
|
Mr.
Munio left the Company on October 4, 2005.
|
(6)
|
Mr.
Fang was promoted to Executive Vice President on May 22,
2006.
|
(7)
|
Mr.
Yamamoto was Vice President of Storage Software prior to being promoted
to
the office of President and Chief Executive Officer effective March
3,
2006.
|
(8)
|
Stock
granted to executive officers as part of our wide salary reductions
and
Stock-For-Pay program instituted in January
2006.
|
(9)
|
Ms.
Chin left the company on June 23,
2006.
|
(10)
|
Mr.
Abal was appointed to his current position in July
2005.
|
(11)
|
Mr.
Nester left the Company on May 31,
2006.
|
Individual
Grants
|
Potential
Realizable Value at Assumed Annual Rates of Stock Price Appreciation
for
Option Term(1)
|
||||||||||||||||||
Name
|
Number
of Securities
Underlying Options
Granted (#)
|
%
of Total Options
Granted to Employees in Fiscal Year
|
Exercise
Or Base Price
($/Sh)
|
Expiration
Date
|
5%
($)
|
10%
($)
|
|||||||||||||
Mr.
Kenneth Yamamoto
|
100,000
|
12.2
|
%
|
1.00
|
03/21/2013
|
140,710
|
194,871
|
||||||||||||
Mr.
David Brunton
|
25,000
|
3.1
|
%
|
1.00
|
03/21/2013
|
35,177
|
48,717
|
||||||||||||
Mr.
Leo Fang
|
25,000
|
3.1
|
%
|
1.00
|
03/21/2013
|
35,177
|
48,717
|
||||||||||||
Mr.
Kirk Anderson
|
75,000
|
9.2
|
%
|
1.00
|
03/21/2013
|
105,532
|
146,153
|
||||||||||||
Mr.
Nelson Abal
|
20,000
|
2.5
|
%
|
1.00
|
03/21/2013
|
28,142
|
38,974
|
(1)
|
The
potential realizable value is based on the term of the option at
the time
of grant. It is calculated by assuming that the stock price on the
date of
grant appreciates at the indicated annual rate, compounded annually
for
the entire term of the option and that the option is exercised and
sold on
the last day of its term for the appreciated stock price. These amounts
represent certain assumed rates of appreciation only, in accordance
with
the rules of the SEC, and do not reflect our estimate or projection
of
future stock price performance or take
into account any taxes that may be payable in connection with the
transaction.
Actual gains, if any, are dependent on the actual future performance
of
our common stock and no gain to the optionee is possible unless the
stock
price increases after the date of grant, which increase, if any,
would
benefit all stockholders.
|
Name
|
Shares
Acquired
on
Exercise (#)
|
Value
Realized
($)(1)
|
Number
of
Securities
Underlying
Unexercised
Options
at
Fiscal
Year-End (#)
Exercisable/
Unexercisable(2)(3)
|
Value
of Unexercised
In-the-Money
Options
at
Fiscal
Year-End ($)
Exercisable/
Unexercisable(2)(4)
|
|||||||||
Mr.
Kenneth Yamamoto
|
--
|
|
|
--
|
|
|
143,747/301,253
|
|
|
0/0
|
|
||
Mr.
David Brunton
|
|
|
--
|
|
|
--
|
|
|
230,187/89,813
|
|
|
0/0
|
|
Mr.
Leo Fang
|
|
|
--
|
|
|
--
|
|
|
95/831/159,169
|
|
|
0/0
|
|
Mr.
Kirk Anderson
|
|
|
--
|
|
|
--
|
|
|
117,000/75,000
|
|
|
0/0
|
|
Mr.
Nelson Abal
|
|
|
--
|
|
|
--
|
|
|
39,761/50,239
|
|
|
0/0
|
(1)
|
Value
realized is based on the fair market value of our common stock on
the date
of exercise minus the exercise price without taking into account
any taxes
that may be payable in connection with the
transaction.
|
(2)
|
Reflects
shares vested and unvested at October 31,
2006.
|
(3)
|
Includes
both “in the money” and “out of the money” options. “In the money” options
are options with exercise prices below the market price of our common
stock at October 31, 2006 ($0.37).
|
(4)
|
Fair
market value of our common stock at October 31, 2006 ($0.37) minus
the
exercise price of the options.
|
Beneficial
Ownership (1)
|
||
Beneficial
Owner
|
Number
of Shares
|
Percent
of Total(2)
|
AIGH
Investment Partners LLC
6006
Berkeley Avenue
Baltimore,
MD 21209
|
788,120
|
7.1%
|
Mr.
Andre Hedrick
4419
Sugarland Court
Concord,
CA 94521
|
1,436,943
|
12.9%
|
Mr.
Kenneth G. Yamamoto (3)(6)
|
853,031
|
7.7%
|
Mr.
John Reardon (3)
|
75,545
|
0.07%
|
Mr.
Ronald J. Ritchie (3)
|
95,817
|
0.09%
|
Mr.
Marion M. (Mel) Stuckey (3)
|
75,545
|
0.07%
|
Mr.
John D’Errico (3)
|
70,863
|
0.06%
|
Mr.
David Brunton (3)
|
453,982
|
4.1%
|
Mr.
Kirk Anderson (3)
|
244,392
|
2.2%
|
Mr.
Nelson Abal (3)
|
132,271
|
1.2%
|
Mr.
Leo Fang (3)
|
354,251
|
3.2%
|
All
executive officers and directors as a group (10 persons) (3)
|
2,355,697
|
21.2%
|
(1) |
This
table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G, if any, filed with
the
SEC. Unless otherwise indicated in the footnotes to this table and
subject
to community property laws where applicable, we believe that each
of the
stockholders named in this table has sole voting and investment power
with
respect to the shares indicated as beneficially
owned.
|
(2) |
Applicable
percentages are based on 11,101,554 shares outstanding on January
10,
2007, adjusted as required by rules promulgated by the
SEC.
|
(3) |
Includes,
445,000, 45,000, 35,000, 45,000, 50,000, 320,000, 202,000, 110,000
and
255,000 shares that Messrs. Yamamoto, Reardon, Ritchie, Stuckey,
D’Errico,
Brunton, Anderson, Abal and Fang, respectively, have the right to
acquire
within 60 days after the date of this table under outstanding stock
options.
|
(4) |
Includes
60,000 shares
held by UTMA as Custodian for Melanie Yamamoto and 60,000 shares
held by
UTMA as Custodian for Nicholas Yamamoto, the children of Mr.
Yamamoto.
|
Prior
to Reduction
|
|
After
Reduction
|
|||||
Kenneth
Yamamoto
|
$
|
225,000
|
$
|
140,000
|
|||
David
Brunton
|
$
|
180,000
|
$
|
142,000
|
|||
Leo
Fang
|
$
|
200,000
|
$
|
140,000
|
|||
Kirk
Anderson
|
$
|
165,000
|
$
|
132,000
|
|||
Nelson
Abal
|
$
|
140,000
|
$
|
126,000
|
Fiscal
Year Ended
(in
thousands)
|
|||||||
2006
|
2005
|
||||||
Audit
Fees
|
$
|
137
|
$
|
116
|
|||
Audit-related
Fees (1)
|
0
|
36
|
|||||
Tax
Fees (2)
|
12
|
12
|
|||||
All
Other Fees
|
0
|
0
|
|||||
Total
Fees
|
$
|
149
|
$
|
164
|
(1) |
Fees
paid in relation to our acquisition of PyX Technologies,
Inc.
|
(2) |
Fees
paid for preparation and filing of our federal and state income tax
returns.
|
(a)(1)
Financial
Statements
|
||
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
56
|
|
|
||
Balance
Sheets at October 31, 2006 and 2005
|
57
|
|
|
||
Statements
of Operations for fiscal years 2006, 2005
|
|
|
and
2004
|
58
|
|
|
||
Statements
of Stockholders' Equity for fiscal years 2006,
|
||
2005
and 2004
|
59
|
|
Statements
of Cash Flows for fiscal years 2006, 2005
|
||
and
2004
|
60
|
|
Notes
to Financial Statements
|
61
|
|
|
||
(a)(2)
Financial
Statement Schedule
|
||
Schedule
II — Valuation and Qualifying Accounts
|
87
|
|
All
other schedules are omitted as the required information is not applicable
or has been included in the financial statements or the notes
thereto.
|
||
(a)(3) List of Exhibits |
Exhibit
|
||||
Number
|
Description
|
|||
3.1(1)
|
Certificate
of Incorporation, as amended through December
15, 1997.
|
|||
3.2(2)
|
Bylaws,
as amended through December 8, 1998.
|
|||
3.3
|
Certificate
of Amendment of Certificate of Incorporation, dated March 26,
2004.
|
|||
10.1(3)*
|
1996
Stock Option Plan, as amended.
|
|||
10.2(3)*
|
2001
Non-Employee Directors' Stock Option Plan, as
amended.
|
10.3(3)
|
1992
Employee Stock Purchase Plan, as amended.
|
|||
10.4(3)
|
1998
Non-Officer Stock Option Plan as amended.
|
|||
10.5(4)
|
2005
PyX Technologies Stock Option Plan.
|
||
10.6(5)
|
2006
Equity Incentive Plan.
|
||
10.6(6)
|
Lease
for 4000 Executive Parkway, Suite 200 dated July 27, 2005 between
the
Company and Alexander Properties Company.
|
||
10.8+
|
Letter
Agreement, dated October 30, 2001, amending (i) Amendment No. S/M018-4
dated April 3, 2001, and (ii) Purchase Agreement dated May 6, 1991,
each
between SBE, Inc. and Compaq Computer Corporation.
|
||
10.10(7)
|
Form
of warrant issued to associates of Puglisi & Co. ($1.50 exercise
price).
|
||
10.11(7)
|
Form
of warrant issued to associates of Puglisi & Co. ($1.75 and $2.00
exercise price).
|
||
10.12(8)
|
Unit
Subscription Agreement, dated May 4, 2005, by and between SBE, Inc.
and
the other parties thereto.
|
||
10.13(8)
|
Agreement
and Plan of Merger and Reorganization, dated March 28, 2005, by and
among
SBE, Inc., PyX Acquisition Sub, LLC, PyX Technologies, Inc. and the
parties identified on Exhibit A thereto.
|
||
10.14(8)
|
Investor
Rights Agreement, dated July 26, 2005, between SBE, Inc. and the
investors
listed on Exhibit A thereto.
|
||
10.15(8)
|
Form of warrant issued on July 26, 2005. | ||
10.16(9)
|
Executive
Severance Benefits Agreement between the Company and Leo Fang, dated
May
24, 2006.
|
||
10.17
|
Executive
Severance Benefits Agreement between the Company and Kenneth G. Yamamoto,
dated March 15, 2006.
|
||
10.18(10)
|
Executive
Severance Benefits Agreement between the Company and David W. Brunton,
dated April 12, 2004.
|
||
10.19(10)
|
Executive Severance Benefits Agreement between the Company and Kirk Anderson, dated April 12, 2004. | ||
11
|
Executive
Severance Benefits Agreement between the Company and Nelson
Abal, dated August 4, 2006.
|
||
12
|
Director
and Officer Bonus Plan, dated September 21, 2006
|
||
|
13
|
Asset purchase agreement with One Stop Systems, Inc., dated January 11, 2007. | |
|
14
|
Agreement and Plan of Merger and Reorganization, with Neonode Inc., dated January 19, 2007 |
23.1 |
Consent
of BDO Seidman LLP Independent Registered Public Accounting
Firm
|
31.1 |
Certification
of Chief Executive Officer
|
31.2 |
Certification
of Chief Financial Officer
|
32.1 |
Certification
of Chief Executive Officer and Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002
|
*
|
Indicates
management contract or compensation plans or arrangements filed pursuant
to Item 601(b)(10) of Regulation SK.
|
+ |
Certain
confidential information has been deleted from this exhibit pursuant
to a
confidential treatment order that has been
granted.
|
(1)
|
Filed
as an exhibit to Annual Report on Form 10-K for the year ended October
31,
1997 and incorporated herein by
reference.
|
(2) |
Filed
as an exhibit to Annual Report on Form 10-K for the year ended
October
31, 1998 and incorporated herein by reference.
|
(3)
|
Filed
as an exhibit to Annual Report on Form 10-K for the year ended October
31,
2002 and incorporated herein by
reference.
|
(4) |
Filed
as an exhibit to Registration Statement on Form S-8 dated September
20, 2005 and incorporated herein by
reference.
|
(5) |
Filed
as an exhibit to Registration Statement on Form S-8 dated March
24,
2006 and incorporated herein by
reference.
|
(6) |
Filed
as an exhibit to Annual Report on Form 10-K for the year ended
October
31, 2005 and incorporated herein by
reference.
|
(7)
|
Filed
as an exhibit to Registration Statement on Form S-3 dated July 11,
2003
and incorporated herein by
reference.
|
(8)
|
Filed
as an exhibit to Proxy Statement on Form 14A dated June 24, 2005
and
incorporated herein by reference.
|
(9)
|
Filed
as an exhibit to Current Report on Form 8-K dated May 26, 2006 and
incorporated herein by reference.
|
(10)
|
Filed
as an exhibit to Quarterly Report on Form 10-Q for the quarter ended
January 31, 2005.
|
(11) |
Filed
as an exhibit to Current Report on Form 8-K dated August 7, 2006
and incorporated
herein by reference.
|
(12) |
Filed
as an exhibit to Current Report on Form 8-K dated September 21, 2006
and
incorporated herein by
reference
|
(13) |
Filed
as an exhibit to Current Report on Form 8-K dated January 12,
2007 and
incorporated herein by
reference.
|
(14) |
Filed
as an exhibit to Current Report on Form 8-K dated January 19, 2007
and
incorporated herein by
reference.
|
SBE,
Inc.
|
||
Date:
January 26, 2007
|
By:
|
/s/
Kenneth G.
Yamamoto
|
Kenneth
G. Yamamoto
|
||
Chief
Executive Officer and
|
||
President
|
||
(Principal
Executive Officer)
|
||
Date:
January 26, 2007
|
By:
|
/s/
David W.
Brunton
|
David
W. Brunton
|
||
Chief
Financial Officer,
|
||
Vice
President, Finance
|
||
and
Secretary
|
||
(Principal
Financial and
|
||
Accounting
Officer)
|
Signature
|
Title
|
|
/s/
Kenneth G. Yamamoto
|
||
Kenneth
G. Yamamoto
|
Chief
Executive Officer and President
|
|
(Principal
Executive Officer)
|
||
/s/
David W. Brunton
|
||
David
W. Brunton
|
Chief
Financial Officer, Vice President,
|
|
Finance
and Secretary
(Principal
Financial and Accounting Officer)
|
||
/s/
Ronald J. Ritchie
|
||
Ronald
J. Ritchie
|
Director,
Chairman of the Board
|
|
/s/
John Reardon
|
||
John
Reardon
|
Director
|
|
/s/
Marion M. Stuckey
|
Director
|
|
Marion
M. Stuckey
|
||
/s/
John D’Errico
|
Director
|
|
John
D’Errico
|
October
31
|
2006
|
|
2005
|
||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
1,147
|
$
|
3,632
|
|||
Trade
accounts receivable, net of allowance for
|
|||||||
doubtful
accounts of $26 and $54
|
930
|
1,555
|
|||||
Inventories
|
739
|
1,283
|
|||||
Other
|
177
|
293
|
|||||
Total
current assets
|
2,993
|
6,763
|
|||||
Property
and equipment, net
|
508
|
563
|
|||||
Capitalized
software costs, net
|
1,314
|
11,424
|
|||||
Other
|
53
|
82
|
|||||
|
|||||||
Total
assets
|
$
|
4,868
|
$
|
18,832
|
|||
|
|||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
|||||||
Current
liabilities:
|
|||||||
Trade
accounts payable
|
$
|
557
|
$
|
743
|
|||
Accrued
payroll and employee benefits
|
105
|
155
|
|||||
Capital
lease obligations - current portion
|
54
|
29
|
|||||
Deferred
software revenue
|
432
|
138
|
|||||
Other
|
144
|
178
|
|||||
Total
current liabilities
|
1,292
|
1,243
|
|||||
|
|||||||
Capital
lease obligations
|
158
|
111
|
|||||
Deferred
rent
|
97
|
130
|
|||||
|
|||||||
Total
long-term liabilities
|
255
|
241
|
|||||
|
|||||||
Total
liabilities
|
1,547
|
1,484
|
|||||
|
|||||||
Commitments
(Notes 9, 10 and 13)
|
|||||||
Stockholders'
equity:
|
|||||||
Convertible
preferred stock:
|
|||||||
$0.001
par value; authorized 2,000,000 shares; none
|
|||||||
outstanding
|
---
|
---
|
|||||
Common
stock and additional paid-in capital:
|
|||||||
$0.001
par value; authorized 25,000,000 shares;
|
|||||||
issued
and outstanding 10,951,348 and 9,892,347
|
35,186
|
35,431
|
|||||
Deferred
compensation
|
---
|
(2,401
|
)
|
||||
Accumulated
deficit
|
(31,865
|
)
|
(15,682
|
)
|
|||
|
|||||||
Total
stockholders' equity
|
3,321
|
17,348
|
|||||
Total
liabilities and stockholders' equity
|
$
|
4,868
|
$
|
18,832
|
For
the years ended October 31,
|
2006
|
2005
|
2004
|
|||||||
Net
sales
|
$
|
6,127
|
$
|
8,056
|
$
|
11,066
|
||||
Operating
expenses:
|
||||||||||
Amortization
and impairment of acquired
|
||||||||||
software
and intellectual property
|
9,894
|
1,048
|
1,213
|
|||||||
Cost
of hardware and other revenue
|
4,046
|
4,356
|
5,433
|
|||||||
Product
research and development
|
3,979
|
2,694
|
2,411
|
|||||||
Sales
and marketing
|
2,180
|
2,293
|
2,177
|
|||||||
General
and administrative
|
2,246
|
1,906
|
1,755
|
|||||||
Loan
loss recovery
|
---
|
---
|
(239
|
)
|
||||||
Total
operating expenses
|
22,345
|
12,297
|
12,750
|
|||||||
Operating
loss
|
(16,218
|
)
|
(4,241
|
)
|
(1,684
|
)
|
||||
Interest
income
|
42
|
22
|
5
|
|||||||
Other
expense
|
---
|
(6
|
)
|
---
|
||||||
Loss
before income taxes
|
(16,176
|
)
|
(4,225
|
)
|
(1,679
|
)
|
||||
Income
tax benefit (provision)
|
7
|
(5
|
)
|
---
|
||||||
Net
loss
|
$
|
(16,183
|
)
|
$
|
(4,230
|
)
|
$
|
(1,679
|
)
|
|
Basic
and diluted loss per common share
|
$
|
(1.57
|
)
|
$
|
(0.66
|
)
|
$
|
(0.33
|
)
|
|
Basic
and diluted - Shares used in per share
|
||||||||||
computations
|
10,304
|
6,439
|
5,022
|
Common
Stock and Additional Paid-in Capital
|
|
Note
Receivable from
|
|
Deferred
|
|
Retained
Earnings (Accumulated
|
|
|
||||||||||
Shares
|
|
Amount
|
|
Stockholder
|
|
Compensation
|
|
deficit)
|
|
Total
|
||||||||
Balance,
October 31, 2003
|
4,808,650
|
15,302
|
(142
|
)
|
-
|
(9,773
|
)
|
5,387
|
||||||||||
Stock
issued in connection with stock purchase plan
|
9,903
|
18
|
-
|
-
|
-
|
18
|
||||||||||||
Stock
issued in connection with Stock Option Plans
|
164,136
|
233
|
-
|
-
|
-
|
233
|
||||||||||||
Stock
issued in connection with warrant exercise
|
81,429
|
116
|
-
|
-
|
-
|
116
|
||||||||||||
Stock
issued in connection with the acquisition of Antares
|
30,000
|
86
|
-
|
-
|
-
|
86
|
||||||||||||
Reversal
of valuation allowance on note receivable from officer
|
-
|
-
|
(239
|
)
|
-
|
-
|
(239
|
)
|
||||||||||
Collection
of note receivable from officer
|
-
|
-
|
381
|
-
|
381
|
|||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
(1,679
|
)
|
(1,679
|
)
|
||||||||||
Balance,
October 31, 2004
|
5,094,118
|
15,755
|
-
|
-
|
(11,452
|
)
|
4,303
|
|||||||||||
Stock
issued in connection with Stock Option Plans
|
108,234
|
130
|
-
|
-
|
-
|
130
|
||||||||||||
Stock
issued in connection with the acquisition of Antares
|
68,945
|
197
|
-
|
-
|
-
|
197
|
||||||||||||
Stock
issued in connection with the acquisition of PyX
|
2,561,050
|
11,714
|
-
|
-
|
-
|
11,714
|
||||||||||||
Stock
issued in connection with private placement financing, net of
financing
costs of $175
|
2,060,000
|
4,975
|
-
|
-
|
-
|
4,975
|
||||||||||||
Deferred
compensation related to Stock Option Plans
|
-
|
2,660
|
-
|
(2,660
|
)
|
-
|
-
|
|||||||||||
Stock-based
compensation
|
-
|
-
|
-
|
259
|
-
|
259
|
||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
(4,230
|
)
|
(4,230
|
)
|
||||||||||
Balance,
October 31, 2005
|
9,892,347
|
35,431
|
-
|
(2,401
|
)
|
(15,682
|
)
|
17,348
|
||||||||||
Reclassification
of deferred compensation
|
(2,401
|
)
|
2,401
|
-
|
||||||||||||||
Stock
issued in connection with Stock Option Plans
|
42,666
|
37
|
-
|
-
|
-
|
37
|
||||||||||||
Stock
issued in connection with the Stock for Pay program
|
1,016,335
|
763
|
-
|
-
|
-
|
763
|
||||||||||||
Compensation
related to restricted stock issued to employees
|
-
|
89
|
-
|
-
|
-
|
89
|
||||||||||||
Stock-based
compensation
|
-
|
1,267
|
-
|
-
|
-
|
1,267
|
||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
(16,183
|
)
|
(16,183
|
)
|
||||||||||
Balance,
October 31, 2006
|
10,951,348
|
$
|
35,186
|
$
|
-
|
$
|
-
|
$
|
(31,865
|
)
|
$
|
3,321
|
||||||
For
the years ended October 31
|
|
2006
|
2005
|
2004
|
||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$
|
(16,183
|
)
|
$
|
(4,230
|
)
|
$
|
(1,679
|
)
|
|
Adjustments
to reconcile loss to net cash
|
||||||||||
used
in operating activities:
|
||||||||||
Depreciation
and amortization
|
3,880
|
1,241
|
829
|
|||||||
Impairment
of intellectual property and software
|
6,500
|
---
|
713
|
|||||||
Stock-based
compensation expense
|
2,119
|
259
|
--
|
|||||||
Non-cash
valuation allowance (recovery) on loan from officer
|
---
|
---
|
(240
|
)
|
||||||
Loss
on sale of assets
|
---
|
6
|
---
|
|||||||
Changes
in operating assets and liabilities:
|
||||||||||
Trade
accounts receivable
|
625
|
113
|
150
|
|||||||
Inventories
|
544
|
643
|
(46
|
)
|
||||||
Other
assets
|
146
|
(121
|
)
|
13
|
||||||
Trade
accounts payable
|
(186
|
)
|
(113
|
)
|
160
|
|||||
Other
current liabilities
|
235
|
(319
|
)
|
(40
|
)
|
|||||
Non-current
liabilities
|
14
|
102
|
---
|
|||||||
Net
cash used in operating activities
|
(2,306
|
)
|
(2,419
|
)
|
(140
|
)
|
||||
Cash
flows from investing activities:
|
||||||||||
Purchases
of property and equipment
|
(176
|
)
|
(337
|
)
|
(87
|
)
|
||||
Cash
payments related to purchase of PyX, net of cash received
|
---
|
(359
|
)
|
---
|
||||||
Purchased
software
|
(40
|
)
|
(207
|
)
|
(136
|
)
|
||||
Net
cash used in investing activities
|
(216
|
)
|
(903
|
)
|
(223
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from stock plans
|
37
|
130
|
251
|
|||||||
Proceeds
from issuance of common stock and warrants, net
|
---
|
4,975
|
202
|
|||||||
Proceeds
from repayment of shareholder note
|
---
|
---
|
382
|
|||||||
Net
cash provided by financing activities
|
37
|
5,105
|
834
|
|||||||
Net
increase (decrease) in cash and cash equivalents
|
(2,485
|
)
|
1,783
|
471
|
||||||
Cash
and cash equivalents at beginning of year
|
3,632
|
1,849
|
1,378
|
|||||||
Cash
and cash equivalents at end of year
|
$
|
1,147
|
$
|
3,632
|
$
|
1,849
|
||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||||
Cash
paid during the year for:
|
||||||||||
Income
taxes
|
$
|
7
|
$
|
5
|
$
|
1
|
||||
SUPPLEMENTAL
SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
|
||||||||||
Assets
acquired under capital leases
|
$
|
---
|
$
|
---
|
$
|
164
|
||||
Non-cash
stock portion of PyX purchase price
|
$
|
---
|
$
|
11,714
|
$
|
---
|
||||
Non-cash
stock portion of Antares purchase price
|
$
|
---
|
$
|
197
|
$
|
86
|
||||
The
accompanying notes are an integral part of these financial
statements.
|
- |
all
prices are fixed and determinable at the time of
sale;
|
- |
title
and risk of loss pass at the time of shipment (FOB shipping
point);
|
- |
collectibility
of the sales price is probable (the OEM is creditworthy, the OEM
is
obligated to pay and such obligation is not contingent on the ultimate
sale of the OEM’s integrated
solution);
|
- |
the
OEM’s obligation to us will not be changed in the event of theft or
physical destruction or damage of the
product;
|
- |
we
do not have significant obligations for future performance to directly
assist in the resale of the product by the OEMs;
and
|
- |
there
is no contractual right of return other than for defective
products.
|
|
2006
|
|
2005
|
||||
Finished
goods
|
$
|
273
|
$
|
815
|
|||
Parts
and materials
|
466
|
468
|
|||||
Total
inventory
|
$
|
739
|
$
|
1,283
|
|
2006
|
|
2005
|
||||
Machinery
and equipment
|
$
|
3,792
|
$
|
3,476
|
|||
Furniture
and fixtures
|
64
|
226
|
|||||
Leasehold
improvements
|
153
|
145
|
|||||
4,009
|
3,847
|
||||||
Less
accumulated depreciation
|
|||||||
and
amortization
|
(3,502
|
)
|
(3,284
|
)
|
|||
|
$
|
508
|
$
|
563
|
2006
|
|
2005
|
|||||
Purchased
software
|
$
|
14,217
|
$
|
14,177
|
|||
Less
accumulated amortization
|
(12,903
|
)
|
(2,753
|
)
|
|||
$
|
1,314
|
$
|
11,424
|
2006
|
|
2005
|
|
2004
|
||||||
Federal:
|
||||||||||
Current
|
$
|
---
|
$
|
---
|
$
|
---
|
||||
Deferred
|
---
|
---
|
---
|
|||||||
State:
|
||||||||||
Current
|
7
|
5
|
---
|
|||||||
Deferred
|
---
|
---
|
---
|
|||||||
Net
income tax (benefit) provision
|
$
|
7
|
$
|
5
|
$
|
---
|
|
2006
|
|
2005
|
|
2004
|
|||||
Statutory
federal income tax rate
|
(34.0
|
)%
|
(34.0
|
)%
|
(34.0
|
)%
|
||||
Basis
difference in acquisition
|
---
|
104.5
|
---
|
|||||||
Change
in valuation allowance
|
47.6
|
(95.3
|
)
|
34.0
|
||||||
True-up
of prior year and other
|
(13.6
|
)
|
24.8
|
---
|
||||||
|
(0
|
)%
|
(0
|
)%
|
(0 | )% |
2006
|
|
2005
|
|||||
Deferred
tax assets:
|
|||||||
Current
|
|||||||
Accrued
employee benefits
|
$
|
27
|
$
|
32
|
|||
Inventory
allowances
|
1,039
|
926
|
|||||
Allowance
for doubtful accounts
|
26
|
21
|
|||||
Warranty
accruals and other assets
|
8
|
11
|
|||||
Distributor
reserves
|
4
|
8
|
|||||
Stock
compensation
|
506
|
103
|
|||||
Deferred
revenue
|
186
|
---
|
|||||
Noncurrent
|
|||||||
Deferred
rent
|
52
|
87
|
|||||
R&D
credit carryforward
|
3,053
|
2,859
|
|||||
Net
operating loss carryforwards
|
7,828
|
5,437
|
|||||
Depreciation
and amortization, net
|
446
|
---
|
|||||
Restructuring
costs
|
---
|
10
|
|||||
Total
deferred tax assets
|
13,175
|
9,494
|
|||||
Less:
Deferred tax asset valuation allowance
|
(12,649
|
)
|
(4,923
|
)
|
|||
Net
deferred tax asset
|
526
|
4,571
|
|||||
Deferred
tax liability - acquired software
|
(526
|
)
|
(4,461
|
)
|
|||
Deferred
tax liability - capitalized assets
|
---
|
(110
|
)
|
||||
Net
deferred tax assets
|
$
|
---
|
$
|
---
|
|
|
2006
|
|
2005
|
|
2004
|
||||
Warranty
reserve at beginning of period
|
$
|
22
|
$ | 20 | $ | 53 | ||||
Less:
Cost to service warranty obligations
|
(9
|
)
|
(12 | ) | (33 | ) | ||||
Plus:
Increases to reserves
|
---
|
14 | --- | |||||||
Total
warranty reserve included in other accrued expenses
|
$
|
13
|
$ | 22 | $ | 20 |
|
Operating
|
Capital
|
|||||
Year
ending October 31:
|
|||||||
2007
|
$
|
580
|
$ | 74 | |||
2008
|
580
|
74 | |||||
2009
|
580
|
74 | |||||
2010
|
483
|
32 | |||||
2011
and thereafter
|
--- | 1 | |||||
Total
minimum lease payments
|
$ | 2,223 | $ | 255 | |||
Less:
Amount representing interest1
|
(42 | ) | |||||
Present
value of net minimum lease payments2
|
$ | 213 |
· |
The
1996
Stock Option Plan (the 1996 Plan), terminated January 17, 2006;
|
· |
the
1998 Non-Officer Stock Option Plan (the 1998 Plan);
|
· |
the
PyX 2005 Stock Option Plan (the PyX Plan); and
|
· |
the
2006 Equity Incentive Plan (the 2006 Plan).
|
· |
The
2001 Non-Employee Director Stock Option Plan (the Director
Plan).
|
Plan
|
Shares
Reserved
|
Options
Outstanding
|
Available
for
Issue
|
Outstanding
Options
Vested
|
|||||||||
1996
Plan
|
2,730,000
|
1,049,887
|
---
|
757,149
|
|||||||||
1998
Plan
|
650,000
|
258,785
|
135,699
|
220,545
|
|||||||||
PyX
Plan
|
2,038,950
|
1,021,200
|
---
|
425,495
|
|||||||||
2006
Plan
|
1,500,000
|
385,000
|
---
|
---
|
|||||||||
Director Plan
|
340,000
|
175,000
|
108,750
|
120,000
|
|||||||||
Total
|
7,258,950
|
2,889,872
|
244,449
|
1,523,189
|
Year
Ended
October
31,
2006
|
|
Remaining
Unamortized
Expense
|
|||||
Stock
option compensation
|
$
|
1,245
|
$
|
2,237
|
|
|
Options
Granted
|
|
||||
|
|
Unvested
Options
|
|
During
Year Ended
|
|
||
|
|
On
November 1,
|
|
October
31,
|
|
||
|
|
2005
|
|
2006
|
|||
Expected
life (in years)
|
4.19
|
5.13
|
|||||
Risk-free
interest rate
|
2.65%
- 4.36
|
%
|
4.63
|
%
|
|||
Volatility
|
53.76%
-151.22
|
%
|
106.4
|
%
|
|||
Dividend
yield
|
0.00
|
%
|
0.00
|
%
|
|||
Forfeiture
rate
|
6.71
|
%
|
6.01
|
%
|
Weighted
|
|
|
|
|
|
|||||
|
|
Average
|
|
Exercise
|
|
|
|
|||
|
|
Number
of
|
|
Price
Per
|
Exercise
|
|||||
|
Shares
|
Share
|
Price
|
|||||||
Outstanding
at
|
||||||||||
October
31, 2003
|
1,624,505
|
|
$0.70--$19.81
|
$
|
2.90
|
|||||
Granted
|
422,500
|
|
$2.86--$7.13
|
$
|
4.99
|
|||||
Cancelled
or expired
|
(67,874
|
)
|
|
$2.86--$7.00
|
$
|
3.98
|
||||
Exercised
|
(182,012
|
)
|
|
$0.90--$5.13
|
$
|
1.69
|
||||
Outstanding
at
|
||||||||||
October
31, 2004
|
1,797,119
|
|
$0.70--$19.41
|
$
|
3.48
|
|||||
Granted
|
856,154
|
|
$2.17--$4.00
|
$
|
3.48
|
|||||
PyX
Plan assumed
|
2,038,950
|
|
$2.17--$2.17
|
$
|
2.17
|
|||||
Cancelled
or expired
|
(301,340
|
)
|
|
$0.90--$7.13
|
$
|
4.03
|
||||
Exercised
|
(177,179
|
)
|
|
$0.70--$2.86
|
$
|
1.84
|
||||
Outstanding
at
|
||||||||||
October
31, 2005
|
4,213,704
|
$0.70--$18.38
|
$
|
3.05
|
||||||
Granted
|
817,500
|
|
$0.36--$2.59
|
$
|
1.42
|
|||||
Cancelled
or expired
|
(2,098,666
|
)
|
|
$0.90--$16.19
|
$
|
2.75
|
||||
Exercised
|
(42,666
|
)
|
|
$0.90--$0.90
|
$
|
0.90
|
||||
Outstanding
at
|
||||||||||
October
31, 2006
|
2,889,872
|
$0.36--$18,38
|
$ | 2.10 |
Options
Outstanding
|
|
Options
Exercisable
|
|
|||||||||||||
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|||||
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Weighted
|
|
|||||
|
|
Number
|
|
Remaining
|
|
Average
|
|
Number
|
|
Average
|
|
|||||
Range
of
|
|
Outstanding
|
|
Contractual
Life
|
|
Exercise
|
|
Exercisable
|
|
Exercise
|
|
|||||
Exercise
Price
|
|
at
10/31/06
|
|
(years)
|
|
Price
|
|
at
10/31/06
|
|
Price
|
||||||
$
0.00-$
1.00
|
806,500
|
4.76
|
$
|
0.72
|
430,666
|
$
|
0.91
|
|||||||||
$
1.01-$
2.00
|
145,000
|
3.18
|
$
|
1.33
|
63,000
|
$
|
1.64
|
|||||||||
$
2.01-$
3.00
|
1,424,076
|
5.32
|
$
|
2.34
|
589,659
|
$
|
2.35
|
|||||||||
$
3.01-$
4.00
|
206,000
|
3.14
|
$
|
3.55
|
141,912
|
$
|
3.71
|
|||||||||
$
4.01-$
5.00
|
175,796
|
1.64
|
$
|
4.51
|
171,601
|
$
|
4.51
|
|||||||||
$
5.01-
$
6.00
|
94,000
|
0.82
|
$
|
5.28
|
94,000
|
$ | 5.29 | |||||||||
$
6.01-$
7.00
|
13,000
|
3.44
|
$
|
6.87
|
9,977
|
$
|
6.85
|
|||||||||
$
7.01-$
8.00
|
25,000
|
4.16
|
$
|
7.09
|
21,874
|
$
|
7.10
|
|||||||||
$
8.01-$20.00
|
500
|
0.56
|
$
|
18.38
|
500
|
$
|
18.38
|
|||||||||
2,889,872
|
$
|
4.52
|
$
|
2.10
|
1,523,189 |
$
|
2.57
|
Weighted
Average
|
|
Average
|
|
||||
|
|
Shares
|
|
Grant
Date
|
|
||
|
|
Unvested
Stock Units
|
|
Fair Value
|
|||
Unvested
at November 1, 2005
|
--- | --- | |||||
Granted
|
290,000 | $ | 1.04 | ||||
Vested
|
--- | --- | |||||
Cancelled
|
(48,000 | ) | 1.04 | ||||
Unvested
at October 31, 2006
|
242,000
|
$ | 1.04 |
For
the Year Ended October 31,
|
|||||||
|
2005
|
|
2004
|
||||
Net
loss - as reported
|
$ | (4,230 | ) | $ | (1,679 | ) | |
Stock
based employee compensation
|
|||||||
expense
included in reported
|
|||||||
net
loss, net of related tax effects
|
168 | --- | |||||
Less
total stock based employee
|
|||||||
compensation
expense determined
|
|||||||
under
fair value based method for
|
|||||||
all
awards, net of related tax effects
|
(1,237 | ) | (1,177 | ) | |||
Pro
forma net loss
|
$ | (5,299 | ) | $ | (2,856 | ) | |
Loss
per share:
|
|||||||
Basic
and diluted - as reported
|
$ | (0.66 | ) | $ | (0.33 | ) | |
Basic
and diluted - pro forma
|
$ | (0.82 | ) | $ | (0.57 | ) |
Options
granted in years ended October 31
|
2005
|
2004
|
|||||
Expected
life (in years)
|
4.00
|
4.00
|
|||||
Risk-free
interest rate
|
4.25
|
%
|
3.29
|
%
|
|||
Volatility
|
99.88
|
%
|
120.20
|
%
|
|||
Dividend
yield
|
0.00
|
%
|
0.00
|
%
|
(in
thousands, except per share amounts)
|
Years
ended October 31
|
|
||||||||
|
|
2006
|
|
2005
|
|
2004
|
||||
Basic
earnings per share:
|
||||||||||
Net
loss
|
$
|
(16,183
|
$)
|
$
|
(4,230
|
$)
|
$
|
(1,679
|
$)
|
|
Number
of shares for computation of
|
||||||||||
earnings
per share
|
10,304
|
6,439
|
5,022
|
|||||||
Basic
loss per share
|
$
|
(1.57
|
)
|
$
|
(0.66
|
)
|
$
|
(0.33
|
)
|
|
Diluted
earnings per share:
|
||||||||||
Weighted
average number of common
|
||||||||||
shares
outstanding during the year
|
10,304
|
6,439
|
5,022
|
|||||||
Assumed
issuance of stock under warrant
|
||||||||||
plus
stock issued the employee and
|
||||||||||
non-employee
stock option plans
|
(a
|
)
|
(a
|
)
|
(a
|
)
|
||||
Number
of shares for computation of
|
||||||||||
earnings
per share
|
10,304
|
6,439
|
5,022
|
|||||||
Diluted
loss per share
|
$
|
(1.57
|
)
|
$
|
(0.66
|
)
|
$
|
(0.33
|
)
|
(a)
|
In
loss periods, common share equivalents would have an anti-dilutive
effect
on
net
loss
per share and therefore have been
excluded.
|
Tangible
assets acquired
|
$
|
31,000
|
||
Software
|
12,217,000
|
|||
Total
assets acquired
|
12,248,000
|
|||
Liabilities
assumed
|
534,000
|
|||
Net
assets acquired
|
$
|
11,714,000
|
||
Fair
value of common stock provided
|
$
|
9,040,000
|
||
Fair
value of stock options assumed
|
5,158,000
|
|||
Less:
value of deferred compensation
|
||||
related
to stock options
|
(2,484,000
|
)
|
||
Total
consideration
|
$
|
11,714,000
|
(in thousands except |
First
|
Second
|
Third
|
Fourth
|
||||||||||
per share amounts) |
Quarter
|
Quarter
|
Quarter
|
Quarter
|
||||||||||
2006: |
Net
sales
|
$
|
1,400
|
$
|
1,816
|
$
|
1,552
|
$
|
1,359
|
|||||
Gross
loss
|
(425
|
)
|
(487
|
)
|
(6,010
|
)
|
(895
|
)
|
||||||
Net
loss
|
(2,727
|
)
|
(3,029
|
)
|
(7,842
|
)
|
(2,585
|
)
|
||||||
Basic
and diluted loss per
|
||||||||||||||
common
share
|
$
|
(0.28
|
)
|
$
|
(0.30
|
)
|
$
|
(0.76
|
)
|
$
|
(0.23
|
)
|
||
2005: |
Net
sales
|
$
|
2,815
|
$
|
1,706
|
$
|
1,720
|
$
|
1,815
|
|||||
Gross
profit (loss)
|
1,585
|
630
|
648
|
(212
|
)
|
|||||||||
Net
income (loss)
|
177
|
(936
|
)
|
(945
|
)
|
(2,526
|
)
|
|||||||
Basic
income (loss) per
|
||||||||||||||
common
share
|
$
|
0.03
|
$
|
(0.18
|
)
|
$
|
(0.17
|
)
|
$
|
(0.26
|
)
|
|||
Diluted
income (loss) per
|
||||||||||||||
common
share
|
$
|
0.03
|
$
|
(0.18
|
)
|
$
|
(0.17
|
)
|
$
|
(0.26
|
)
|
Column
A
|
|
|
Column
B
|
|
|
Column
C
|
|
|
Column
D
|
|
|
Column
E
|
|
|
|
|
Balance
at
|
|
|
Additions
|
|
|
|
|
|
Balance
|
|
|
|
|
Beginning
|
|
charged
to costs
|
|
|
|
|
End
of
|
|
||
Description
|
|
|
of
Period
|
|
|
and
expenses
|
|
|
Deductions
|
|
|
Period
|
|
Year
ended October 31, 2006
|
|||||||||||||
Allowance
for Doubtful Accounts
|
|||||||||||||
and
sales programs
|
$
|
54
|
$
|
---
|
$
|
(28
|
)
|
$
|
26
|
||||
Allowance
for Warranty Claims
|
22
|
---
|
(9
|
)
|
13
|
||||||||
Allowance
for Deferred Tax Assets
|
4,923
|
7,726
|
---
|
12,649
|
|||||||||
Year
ended October 31, 2005
|
|||||||||||||
Allowance
for Doubtful Accounts
|
|||||||||||||
and
sales programs
|
$
|
42
|
$
|
27
|
$
|
(15
|
)
|
$
|
54
|
||||
Allowance
for Warranty Claims
|
20
|
14
|
(12
|
)
|
22
|
||||||||
Allowance
for Deferred Tax Assets
|
8,944
|
---
|
(4,021
|
)
|
4,923
|
||||||||
Year
ended October 31, 2004
|
|||||||||||||
Allowance
for Doubtful Accounts
|
|||||||||||||
and
sales programs
|
$
|
90
|
$
|
---
|
$
|
(48
|
)
|
$
|
42
|
||||
Allowance
for Warranty Claims
|
53
|
---
|
(33
|
)
|
20
|
||||||||
Allowance
for Deferred Tax Assets
|
8,662
|
282
|
---
|
8,944
|
|||||||||
Allowance
for Stockholder Loan
|
239
|
---
|
(239
|
)
|
---
|