• |
This
prospectus relates to the sale of up to 54,000,000 shares of our
common
stock by Fusion Capital Fund II, LLC. We will not receive any proceeds
from the sale of our shares in this
offering.
|
• |
Our
common stock is registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended, and quoted on the Nasdaq
Over-the-Counter Bulletin Board under the symbol "CBMC." On April
11,
2008, the last reported sale price for our common stock as reported
on the
Nasdaq Over-the-Counter Bulletin Board was $0.069 per
share.
|
|
Page
|
|||
Part
I. Information Required in Prospectus
|
||||
Cautionary
Note Regarding Forward-Looking Statements
|
1
|
|||
Prospectus
Summary
|
2
|
|||
Risk
Factors
|
3
|
|||
The
Fusion CapitalTransaction
|
16
|
|||
Use
of Proceeds
|
19
|
|||
Selling
Security Holder
|
19
|
|||
Plan
of Distribution
|
19
|
|||
Legal
Proceedings
|
20
|
|||
Directors,
Executive Officers, Promoters and Control Persons
|
21
|
|||
Security
Ownership of Certain Beneficial Owners and Management
|
24
|
|||
Description
of the Securities
|
26
|
|||
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
27
|
|||
Description
of Business
|
27
|
|||
Management’s
Discussion and Analysis
|
36
|
|||
Description
of Property
|
45
|
|||
Certain
Relationships and Related Transactions
|
45
|
|||
Market
for Common Stock and Related Stockholder Matters
|
47
|
|||
Executive
Compensation
|
48
|
|||
Financial
Statements
|
51
|
|||
Legal
Matters
|
51
|
|||
Experts
|
51
|
|||
Where
You Can Find Additional Information
|
51
|
•
|
our
ability to obtain an increased market share in the diagnostic test
market;
|
•
|
the
perceived benefits of our test products to governmental and other
public
health agencies, health care providers and consumers;
|
•
|
our
ability to achieve growth;
|
•
|
the
success of our future marketing and brand-building
efforts;
|
•
|
FDA
and international regulatory actions;
|
•
|
the
further development of our technologies;
|
•
|
our
ability to protect our proprietary technologies;
|
•
|
our
ability to compete successfully against new and existing
competitors;
|
•
|
our
future financial and operating results;
|
•
|
our
liquidity and capital resources;
|
•
|
changes
in domestic or international conditions beyond our control that may
disrupt our or our customers’ or distributors’ ability to meet contractual
obligations;
|
•
|
changes
in health care policy in the United States or abroad;
|
•
|
our
ability to obtain additional financing as necessary to fund both
our
long-and short-term business plans;
|
•
|
fluctuations
in market demand for and supply of our products;
|
•
|
public
concern as to the safety of products that we or others develop and
public
concern regarding HIV and AIDS;
|
•
|
availability
of reimbursement for use of our products from private health insurers,
governmental health administration authorities and other third-party
payors;
|
•
|
our
ability to obtain additional financing as necessary to fund both
our
short- and long-term business plans and the possible impact on us
if we
are unable to satisfy these financing requirements;
|
•
|
our
ability to timely register shares issued or issuable in our private
placements and the impact of delays in registration on our ability
to
obtain additional financing;
|
•
|
our
ability to attract or retain key personnel; and
|
•
|
statements
under the caption “Risk Factors,” and other statements regarding matters
not of historical fact.
|
•
|
price
and volume fluctuations in the stock market at large which do not
relate
to our operating performance;
|
•
|
fluctuations
in our operating results;
|
•
|
concerns
about our ability to finance our continuing operations;
|
•
|
concerns
about the liquidity of our stock;
|
•
|
concerns
about the stability of our stock as a result of delisting from the
American Stock Exchange;
|
•
|
financing
arrangements which may require the issuance of a significant number
of
shares in relation to the number of shares currently outstanding,
including anti-dilution provisions;
|
•
|
announcements
of technological innovations or new products which we or our competitors
make;
|
•
|
FDA,
SEC and international regulatory actions;
|
•
|
availability
of reimbursement for use of our products from private health insurers,
governmental health administration authorities and other third-party
payors;
|
•
|
developments
with respect to patents or proprietary rights;
|
•
|
public
concern as to the safety of products that we or others develop;
|
•
|
changes
in health care policy in the United States or abroad;
|
•
|
changes
in stock market analysts’ recommendations regarding Calypte, other medical
products companies or the medical product industry generally;
|
•
|
fluctuations
in market demand for and supply of our products;
|
•
|
certain
world conditions, such as an economic downturn, natural disasters
or
terrorist attacks; and
|
•
|
anti-American
sentiment in certain international markets where we market or anticipate
marketing our products.
|
•
|
discourage
potential acquisition proposals (i.e. stockholder rights plan also
known
as a “poison pill”);
|
•
|
delay
or prevent a change in control;
|
•
|
diminish
stockholders’ opportunities to participate in tender offers for our common
stock, including tender offers at prices above the then-current market
price;
|
•
|
inhibit
increases in the market price of our common stock that could result
from
takeover attempts; or
|
•
|
grant
to our board of directors (the “Board“) the discretionary right to
designate specific rights and preferences of preferred stock greater
than
those of our common stock.
|
•
|
restricting
dividends;
|
•
|
dilution
of voting power;
|
•
|
impairment
of liquidation rights; and
|
•
|
delaying
or preventing a change in control of the Company.
|
•
|
the
bid and offer price quotes in and for the “penny stock”, and the number of
shares to which the quoted prices apply.
|
•
|
the
brokerage firm’s compensation for the trade.
|
•
|
the
compensation received by the brokerage firm’s sales person for the trade.
|
•
|
a
monthly account statement that gives an estimate of the value of
each
“penny stock” in the investor's account.
|
•
|
a
written statement of the investor’s financial situation and investment
goals.
|
•
|
if
“penny stock” is sold to you in violation of your rights listed above, or
other federal or states securities laws, you may be able to cancel
your
purchase and get your money back.
|
•
|
if
the stocks are sold in a fraudulent manner, you may be able to sue
the
persons and firms that caused the fraud for damages.
|
•
|
if
you have signed an arbitration agreement, however, you may have to
pursue
your claim through arbitration.
|
•
|
our
international distributors and joint ventures will successfully market
our
products;
|
•
|
our
future selling efforts will be effective, as we have not yet introduced
in
significant volume either an HIV-1/2 product or other point of care
test;
|
•
|
we
will obtain market acceptance in the medical or public health community,
including government and humanitarian funding sources critical in
many
international markets, which are essential for acceptance of our
products;
or that the relationships we develop with humanitarian agencies or
their
intermediaries will prove to be reliable and sustainable; or
|
•
|
if
our relationships with distributors or marketing partners terminate,
we
will be able to establish relationships with other distributors or
marketing partners on satisfactory terms, if at all.
|
•
|
transferring
the technology from the laboratory or pilot operation to the contract
manufacturer on a commercial scale;
|
•
|
lack
of technical knowledge regarding regulated procedures and the ability
of
the contract manufacturer to obtain and maintain the necessary GMP
or
other regulatory certifications;
|
•
|
uncertain
or unreliable production yields;
|
•
|
maintaining
quality control and assurance;
|
•
|
regulatory
compliance, since most rapid test manufacturers do not produce products
that are as stringently controlled as HIV diagnostics;
|
•
|
misappropriation
of intellectual property, particularly in foreign countries where
patent
protection is less stringent, and depending on the extent of manufacturing
processes that are outsourced;
|
•
|
developing
market acceptance for new product;
|
•
|
production
yields;
|
•
|
quality
control and assurance;
|
•
|
raw
material supply;
|
•
|
shortages
of qualified personnel; and
|
•
|
maintaining
appropriate financial controls and
procedures.
|
•
|
actions
taken by the FDA or foreign regulatory bodies relating to products
we are
commercializing or seeking to develop;
|
•
|
the
extent to which our current or proposed new products gain market
acceptance;
|
•
|
the
timing and size of purchases by our customers, distributors or joint
venture partners;
|
•
|
introductions
of alternative means for testing for HIV by competitors;
|
•
|
Changes
in the way regulatory authorities evaluate HIV testing, including
supplemental testing of the results of a rapid HIV screening test;
and
|
•
|
customer
concerns about the stability of our business which could cause them
to
seek alternatives to our product.
|
•
|
the
imposition of government controls (regulatory approval);
|
•
|
export
license requirements;
|
•
|
political
and economic instability;
|
•
|
trade
restrictions;
|
•
|
changes
in tariffs;
|
•
|
difficulties
in managing international operations (difficulty in establishing
a
relationship with a foreign distributor, joint venture partner, or
contract manufacturer with the financial and logistical ability to
maintain quality control of product);
|
•
|
the
ability to secure licenses for intellectual property or technology
that
are necessary to manufacture or sell our products in the selected
countries;
|
•
|
fluctuations
in foreign currency exchanges rates;
|
•
|
the
financial stability of our distributors and/or their expertise in
obtaining local country regulatory approvals;
|
•
|
the
financial capabilities of potential customers in lesser-developed
countries or, alternatively, our inability to obtain approvals which
would
enable such countries access to outside financing, such as the World
Bank;
|
•
|
the
ability of our distributors to successfully sell into their contractual
market territory or to successfully cover their entire territory;
|
•
|
the
possibility that a distributor may be unable to meet minimum contractual
commitments;
|
•
|
establishing
market awareness; and
|
•
|
external
conditions such as regional conflicts, health crises or natural
disasters.
|
•
|
the
lowest sale price of our common stock on the purchase date;
or
|
•
|
the
average of the three lowest closing sale prices of our common stock
during
the 12 consecutive business days prior to the date of a purchase
by Fusion
Capital.
|
•
|
the
effectiveness of the registration statement of which this prospectus
is a
part of lapses for any reason (including, without limitation, the
issuance
of a stop order) or is unavailable to Fusion Capital for sale of
our
common stock offered hereby and such lapse or unavailability continues
for
a period of 10 consecutive business days or for more than an aggregate
of
30 business days in any 365-day
period;
|
•
|
suspension
by our principal market of trading in our common stock for a period
of
three consecutive business days;
|
•
|
the
de-listing or de-quoting of our common stock from our principal market,
provided our common stock is not immediately thereafter trading on
the the
Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock
Exchange or the American Stock
Exchange;
|
•
|
our
transfer agent‘s failure, for five business days, to issue to Fusion
Capital shares of our common stock which Fusion Capital is entitled
to
under the Purchase Agreement;
|
•
|
any
material breach of the representations or warranties or covenants
contained in the Purchase Agreement or any related agreements which
has or
which could have a material adverse effect on us, subject to a cure
period
of five business days;
|
•
|
any
participation or threatened participation in insolvency or bankruptcy
proceedings by or against us.
|
|
|
|
|
|
|
Additional
|
|
||||
|
|
|
|
Percentage
of
|
|
Proceeds
from the
|
|
||||
|
|
|
|
Outstanding
Shares
|
|
Sale
of Shares to
|
|
||||
Assumed
|
|
Number
of shares
|
|
After
Giving Effect to
|
|
Fusion Capital Under the
|
|
||||
Average
|
|
to
be Issued if
|
|
the
Issuance to
|
|
Common
Stock
|
|
||||
Purchase
Price
|
|
Full
Purchase
|
|
Fusion
Capital (1)
|
|
Purchase
Agreement
|
|
||||
$
|
0.052
|
46,281,821
|
12.89
|
%
|
$
|
2,406,655
|
|||||
$ |
0.069
|
(2) |
46,281,821
|
12.89
|
%
|
$
|
3,193,446
|
||||
$
|
0.08
|
46,281,821
|
12.89
|
%
|
$
|
3,702,546
|
|||||
$
|
0.10
|
46,281,821
|
12.89
|
%
|
$
|
4,628,182
|
|||||
$
|
0.12
|
46,281,821
|
12.89
|
%
|
$
|
5,553,819
|
|||||
$
|
0.14
|
46,281,821
|
12.89
|
%
|
$
|
6,479,455
|
|||||
$
|
0.16
|
46,281,821
|
12.89
|
%
|
$
|
7,405,091
|
|||||
$
|
0.20
|
38,250,000
|
11.19
|
%
|
$
|
7,650,000
|
|||||
$
|
0.25
|
30,600,000
|
9.50
|
%
|
$
|
7,650,000
|
(1)
|
The
denominator is based on 372,711,356 shares outstanding as of April
11,
2008, which includes the 7,718,179 shares previously issued to Fusion
Capital plus the number of shares set forth in the adjacent column.
The
numerator is based on the number of shares issuable under the common
stock
purchase agreement at the corresponding assumed purchase price set
forth
in the adjacent column.
|
(2)
|
Closing
sale price of our shares on April 11,
2008.
|
Selling Stockholder
|
Shares Beneficially
Owned Before Offering |
|
Percentage of Outstanding
Shares Beneficially Owned Before Offering (1) |
|
Shares to be
Sold in the Offering |
|
Percentage of Outstanding
Shares Beneficially Owned After Offering |
|
|||||
Fusion
Capital Fund II, LLC (1) (2)
|
7,718,179
|
2.07
|
%
|
54,000,000
|
0
|
%
|
(1)
|
As
of the date hereof, 7,718,179 shares of our common stock have been
acquired by Fusion Capital under the Purchase Agreement. Fusion Capital
may acquire up to an additional 46,281,821 shares under the Purchase
Agreement, which are also being offered pursuant to this prospectus.
Percentage of outstanding shares is based on 372,711,356 shares of
common
stock outstanding as of April 11, 2008.
|
(2)
|
Steven
G. Martin and Joshua B. Scheinfeld, the principals of Fusion Capital,
are
deemed to be beneficial owners of all of the shares of common stock
owned
by Fusion Capital. Messrs. Martin and Scheinfeld have shared voting
and
disposition power over the shares being offered under this
prospectus.
|
•
|
ordinary
brokers’ transactions;
|
•
|
transactions
involving cross or block trades;
|
•
|
through
brokers, dealers, or underwriters who may act solely as
agents
|
•
|
“at
the market” into an existing market for the common
stock;
|
•
|
in
other ways not involving market makers or established business markets,
including direct sales to purchasers or sales effected through
agents;
|
•
|
in
privately negotiated transactions;
or
|
•
|
any
combination of the foregoing.
|
Name
|
|
Age
|
|
Calypte
Position; Principal Occupation
|
|
Director
Since |
Roger
I. Gale
|
|
55
|
|
Chairman,
President and Chief Executive Officer; Calypte Biomedical Corporation
|
|
11/04
|
John
J. DiPietro
|
|
49
|
|
Director;
Chief Financial Officer, Chronix Biomedical, Inc.
|
|
10/99
|
Paul
E. Freiman
|
|
73
|
|
Director;
President and Chief Executive Officer, Neurobiological Technologies,
Inc.
|
|
12/97
|
Adel
Karas
|
64
|
Director,
Regional Director, World Agency of Planetary Monitoring & Earthquake
Risk Reduction
|
5/07
|
|||
Julius
R. Krevans, M.D.
|
|
83
|
|
Director;
Retired Chancellor Emeritus, Director of International Medical Services,
University of California, San Francisco
|
|
3/95
|
Maxim
A. Soulimov
|
35
|
Director;
Director of Legal Affairs, Global Corporate Ventures,
Limited
|
4/04
|
|||
Ronald
W. Mink
|
55
|
Chief
Science Officer, Calypte Biomedical Corporation
|
N/A
|
|||
Jerrold
D. Dotson
|
54
|
Vice
President, Finance and Administration and Secretary, Calypte Biomedical
Corporation
|
N/A
|
5%
Stockholders, Directors and Officers (1)
|
Shares
Beneficially Owned |
%
of
Total (2) |
|||||
Marr
Technologies BV (3)
|
125,941,441
|
29.65
|
|||||
Strawinskylaan
1431
|
|||||||
1077XX,
Amsterdam
|
|||||||
The
Netherlands
|
|||||||
David
Khidasheli (4)
|
75,000,000
|
18.04
|
|||||
Sheikh
Zayed Road
|
|||||||
Fairmont
Building, # 3104
|
|||||||
Dubai,
United Arab Emirates
|
|||||||
Mohamed
Yousif Ahmed Saleh Sulaiman (5)
|
70,000,000
|
16.94
|
|||||
P.O.
Box 19533
|
|||||||
Sharjah,
United Arab Emirates
|
|||||||
Mohamed
Ahmed (6)
|
55,000,000
|
13.70
|
|||||
P.O.
Box 33280
|
|||||||
Dubai,
United Arab Emirates
|
|||||||
Ahmed
Abdalla Deemas Alsuwaidi (7)
|
50,000,000
|
12.54
|
|||||
P.O.
Box 681
|
|||||||
Sharjah,
United Arab Emirates
|
|||||||
SF
Capital Partners Ltd. (8)
|
28,205,356
|
7.05
|
|||||
3600
South Lake Drive
|
|||||||
St.
Francis, WI 53235
|
|||||||
Roger
I. Gale (9)
|
25,206,411
|
7.13
|
|||||
Richard
D. Brounstein (10)
|
11,139,423
|
2.93
|
|||||
606
Bella Vista Court
|
|||||||
Fremont,
CA 94539
|
|||||||
John
J. DiPietro (11)
|
2,010,711
|
*
|
|||||
Jerrold
D. Dotson (12)
|
2,951,377
|
*
|
|||||
Paul
E. Freiman (13)
|
2,010,335
|
*
|
|||||
Theodore
R. Gwin (14)
|
500,000
|
*
|
|||||
Adel
Karas (15)
|
1,550,000
|
*
|
|||||
Julius
R. Krevans, M.D. (16)
|
2,011,135
|
*
|
|||||
Ronald
L. Mink (17)
|
2,443,584
|
*
|
|||||
Maxim
A. Soulimov (18)
|
1,900,000
|
*
|
|||||
All
current directors and executive officers as a group (8
persons)
|
42,585,553
|
10.56
|
*
|
Represents
beneficial ownership of less than 1%.
|
(1)
|
To
our knowledge, except as set forth in the footnotes to this table
and
subject to applicable community property laws, each person named
in this
table has sole voting and investment power with respect to the shares
set
forth opposite such person’s name. Except as otherwise indicated, the
address of each of the persons in this table is as follows: c/o Calypte
Biomedical Corporation, 16290 S.W. Upper Boones Ferry Road, Portland,
Oregon 97224.
|
|
(2)
|
Based
on 372,711,356 shares
outstanding as of April 11, 2008.
|
|
(3)
|
Based
on holdings reported in Amendment No. 6 to Schedule 13D dated December
6,
2007 filed with the Commission on March 20, 2008 plus 441,360 shares
issuable subject to a Secured 8% Convertible Note issued in payment
of
quarterly interest through April 3, 2008, which is convertible at
$0.16
per share, plus 367,488 shares subject to accrued interest payable
within
60 days on 7% Promissory Notes having an aggregate face value of
$4,199,857.26 which Notes and accrued interest are immediately convertible
at $0.16 per share. Marat Safin has voting and investment control
over
shares held by Marr Technologies BV.
|
(4)
|
Based
on holdings reported in Schedule 13G dated March 28, 2007 filed with
the
Commission on October 31, 2007. Includes 43,000,000 shares underlying
warrants exercisable within 60 days of April 11, 2008.
|
(5)
|
Based
on holdings reported in Schedule 13G dated March 28, 2007 filed with
the
Commission on November 2, 2007. Includes 40,625,000 shares underlying
warrants exercisable within 60 days of April 11, 2008.
|
(6)
|
Based
on holdings reported in Schedule 13G dated March 28, 2007 filed with
the
Commission on October 30, 2007. Includes 28,625,000 shares underlying
warrants exercisable within 60 days of April 11, 2008.
|
(7)
|
Based
on holdings reported in Schedule 13G dated March 28, 2007 filed with
the
Commission on October 29, 2007. Includes 26,000,000 shares underlying
warrants exercisable within 60 days of April 11, 2008.
|
(8)
|
Based
on holdings reported in Amendment No. 5 to Schedule 13G dated December
31,
2007 filed with the Commission on February 14, 2008 plus shares underlying
Secured 8% Convertible Notes issued in payment of interest through
April
3, 2008 that are immediately convertible at $0.30 per share. The
Secured
8% Convertible Notes which are immediately convertible and the immediately
exercisable warrants contain conversion caps that preclude SF Capital
Partners Ltd. From utilizing its exercise rights within 60 days to
the
extent that it would beneficially own (determined in accordance with
Section 13(d) of the Securities Act) in excess of 9.999% of the Company’s
common stock, giving effect to such exercise. Those conversion caps
are
currently not applicable. Michael A. Roth and Brian J. Stark possess
voting and dispositive power over all of the shares owned by SF Capital
Partners Ltd.
|
(9)
|
Includes
3,550,000 shares underlying options exercisable within 60 days of
April
11, 2008 and 12,084,136 shares underlying warrants exercisable within
60
days of April 11, 2008. Marr Technologies BV, the beneficial owner
of
125,941,441 shares of our Common stock, was granted the right to
nominate
two (2) mutually-agreeable candidates for appointment to our Board
pursuant to an August 2003 agreement. Mr. Gale was nominated by Marr
and
subsequently appointed as a Director on November 15, 2004 upon the
recommendation of the Nominating Committee and the approval of our
Board.
He has been re-elected as a director at each of the Annual Meetings
of
Stockholders since his appointment. Mr. Gale disclaims any direct
or
indirect beneficial ownership of shares held by Marr and does not
exercise
any control nor does he take part in any investment decisions undertaken
by Marr and does not have a direct or indirect pecuniary interest
in
shares held by Marr.
|
(10)
|
Includes
1,500,000 shares underlying options exercisable through May 23, 2008
and
5,769,231 shares underlying warrants exercisable within 60 days of
April
11, 2008.
|
(11)
|
Includes
2,010,468 shares underlying options exercisable within 60 days of
April
11, 2008.
|
(12)
|
Includes
2,930,633 shares underlying options exercisable within 60 days of
April
11, 2008.
|
(13)
|
Includes
2,012,335 shares underlying options exercisable within 60 days of
April
11, 2008.
|
(14)
|
Includes
500,000 shares underlying options exercisable within 60 days of April
11,
2008.
|
(15)
|
Includes
1,500,000 shares underlying options exercisable within 60 days of
April
11, 2008.
|
(16)
|
Includes
2,010,668 shares underlying options exercisable within 60 days of
April
11, 2008.
|
(17)
|
Includes
2,441,667 shares underlying options exercisable within 60 days of
April
11, 2008.
|
(18)
|
Includes
1,900,000 shares underlying options exercisable within 60 days of
April
11, 2008. Marr
Technologies BV, the beneficial owner of 125,941,441 shares of our
Common
stock, was granted the right to nominate two (2) mutually-agreeable
candidates for appointment to our Board pursuant to an August 2003
agreement. Mr. Soulimov was nominated by Marr and subsequently appointed
as a director on April 2, 2004 upon the recommendation of the Nominating
Committee and the approval of our Board. He has been re-elected as
a
director at each of the Annual Meetings of Stockholders since his
appointment. Mr. Soulimov disclaims any direct or indirect beneficial
ownership of shares held by Marr and does not exercise any control
nor
does he take part in any investment decisions undertaken by Marr
and does
not have a direct or indirect pecuniary interest in shares held by
Marr.
|
·
|
It
has a true IgG control line that indicates not only that the device
is
functional but that a human sample has been added (some assays feature
a
control line that appears even if the correct sample is not
added)
|
·
|
Kit
packaging is designed to permit multiple users to use the kit
simultaneously
|
·
|
Unlike
its primary competitor, the AwareTM
OMT sample preparation step produces surplus sample, which can be
used to
repeat the test, or to perform a confirmatory assay such as an oral
fluid
Western Blot test or a second rapid oral fluid
test.
|
·
|
AwareTM
OMT testing is painless, safe, and
non-invasive
|
·
|
Although
more expensive than blood tests, the all-in costs (including costs
of
handling and disposal of blood) are less. Further, we expect the
AwareTM
OMT to have a cost advantage over its primary current oral fluid
competitor. Additionally, it has a significantly longer shelf life
than
that of its primary competitor.
|
·
|
It
has a true IgG control line that indicates not only that the device
is
functional but that a human sample has been added (some assays feature
a
control line that appears even if the correct sample is not
added)
|
·
|
Kit
packaging is designed to permit multiple users to use the kit
simultaneously
|
·
|
The
test can be used on all types of blood: serum, plasma, venous whole
blood
and finger-stick whole blood. This flexibility is not found in all
rapid
HIV blood tests
|
·
|
Its
clinical performance effectively competes with the top brands of
rapid
blood HIV test
|
·
|
As
with all rapid blood tests, the sampling procedure can be easily
modified
to permit routine and convenient sample collection for epidemiology
purposes (BED Incidence EIA)
|
§
|
Non-invasive
and painless sampling. Studies show greater acceptance of HIV testing
without the pain and risks of drawing blood, which translates into
higher
testing rates. Increasing testing rates is one of the keys to controlling
the spread of HIV/AIDS
|
§
|
Safer
than blood tests. Eliminates the risk of infection through accidental
needle or lancet stick injuries for both patients and health care
workers
|
§
|
Easier
to use. Enables self sampling and self testing--no technicians, no
needles, no lancets
|
§
|
Sample
can be collected anywhere, anytime, including open public
settings
|
§
|
More
cost effective than blood diagnostic tests (considering the all-in
costs
of drawing, handling and disposing of venous
blood)
|
§
|
Risk
of exposure to infectious agents during handling is minimal to
non-existent
|
§
|
The
Over-The-Counter (OTC) version may foster increased use as a result
of
increased privacy
|
§
|
Unlike
other oral fluid tests, the AwareTM
sampling system allows for a sample to be tested multiple times with
different test devices and stored for future
use
|
1.
|
Those
requiring no local approval;
|
2.
|
Those
requiring local approvals, and possibly clinical trials; or those
requiring approval in the country of manufacture; or
|
3.
|
Those
that may or may not require local approvals, but that rely on
organizations such as the United States Agency for International
Development (USAID) “approval” as a proxy for their own and for access to
U.S. PEPFAR funding.
|
Aware
OMT
|
Aware
BSP
|
|
§
India
§
Kenya
§
Russia
§
South
Africa
§
Uganda
§
Iraq
§
United
Arab Emirates
§
USAID
|
§
Kenya
§
Malaysia
§
South
Africa
§
Uganda
§
Zimbabwe
§
USAID
|
·
|
Revenue
Recognition.
We recognize revenue from product sales upon shipment to customers
and
when all requirements related to the shipments have occurred. Should
changes in terms cause us to determine these criteria are not met
for
certain future transactions, revenue recognized for any reporting
period
could be adversely affected.
|
·
|
Inventory
Valuation.
We adjust the value of our inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of
inventory and the estimated market value based upon assumptions about
future demand and market conditions and development of new products
by our
competitors. Further, we also review our inventories for lower of
cost or
market valuation. At December 31, 2007 and 2006, our inventories
consisted
of only BED Incidence Test and HIV-1/2 rapid test raw materials,
components and finished products.
|
·
|
Deferred
Tax Asset Realization.
We record a full valuation allowance to reduce our deferred tax assets
to
the amount that is more likely than not to be realized. While we
have
considered future taxable income and ongoing prudent and feasible
tax
planning strategies in assessing the need for the valuation allowance,
in
the event we were to determine that we would be able to realize our
deferred tax assets in the future in excess of its net recorded amount,
an
adjustment to the deferred tax asset would increase income in the
period
such determination was made.
|
· |
Classification
of Financial Instruments with Characteristics of both Liability and
Equity
We
account for financial instruments that we have issued and that have
characteristics of both liability and equity in accordance with SFAS
No.
150, Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities
and Equity.
SFAS No. 150 specifies that mandatorily redeemable financial instruments
are to be recorded as liabilities unless the redemption is required
to
occur upon the liquidation or termination of the issuer. SFAS No.
150 also
specifies that a financial instrument that embodies a conditional
obligation that an issuer may settle by issuing a variable number
of its
equity shares is to be classified as a liability if, at inception,
the
value of the obligation is based solely or predominantly on variations
inversely related to changes in the fair value of the issuer’s equity
shares. Should a financial instrument not be classified as a liability
under the provisions of SFAS No. 150, we further apply the criteria
in
Emerging Issues Task Force (EITF) Issue No. 00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled
in, a
Company’s Own Stock, which
enumerates additional criteria to determine the appropriate classification
as liability or equity. We also evaluate the anti-dilution and/or
beneficial conversion features that may be included in our financial
instruments in accordance with the provisions of SFAS No. 133,
Accounting
for Derivative Instruments and Hedging Activities, which
may classify the feature as an embedded derivative and require that
the
financial instrument be bifurcated and the feature accounted for
separately. We evaluate each financial instrument on its own merits
at
inception or other prescribed measurement or valuation dates and
may
engage the services of valuation experts and other professionals
to assist
us in our determination of the appropriate classification.
|
·
|
Stock
based compensation
We
adopted Statement
of Financial Accounting Standards No. 123 (revised 2004), Share-Based
Payment
(“SFAS 123R”) effective January 1, 2006. We adopted SFAS 123R using
the modified prospective method, which requires that we apply the
provisions of SFAS 123R to all awards granted or modified after the
date
of adoption. The unrecognized expense attributable to awards not
fully
vested at our January 1, 2006 date of adoption is recognized in our
net
loss in the periods after the date of adoption using the same valuation
method (i.e. Black-Scholes) and assumptions determined under the
original
provisions of SFAS 123, “Accounting for Stock-Based Compensation,” as
disclosed on a pro-forma basis in our previous financial statements.
Under
the fair value recognition provisions of SFAS 123R, we recognize
stock-based compensation, net of an estimated forfeiture rate which
results in recognizing compensation expense for only those awards
expected
to vest, over the service period of the award. Since
our adoption of SFAS 123R, we have estimated
the fair value of options granted to employees and directors, and
we
expect to estimate the fair value of future grants, using the
Black-Scholes option pricing model. This model requires the input
of
highly subjective assumptions, including the expected term of the
stock-based awards, stock price volatility, and pre-vesting option
forfeitures. To date, we have generally estimated the expected life
of options granted based on the simplified method provided in Staff
Accounting Bulletin No. 107 for “plain vanilla” options. Where
appropriate, we will consider separately for valuation purposes groups
of
employees or directors that have similar historical exercise behavior.
We
estimate the volatility of our common stock at the date of grant
based on
its historical volatility over a period generally equivalent to the
expected term of the grant. We estimate the expected pre-vesting
forfeiture rate and recognize expense for only those shares expected
to
vest. We have estimated our forfeiture rate based on our historical
experience with stock-based awards that are granted and forfeited
prior to
vesting. If the actual forfeiture rate is materially different from
the
estimate, the stock-based compensation expense could also differ
from what
we have recorded in the current period. As required under SFAS 123R,
we will review our valuation assumptions at each grant date and,
as a
result, may periodically change the valuation assumptions used to
value
employee stock-based awards granted in future periods.
|
Year
Ended December 31,
|
|||||||
2007
|
2006
|
||||||
Product
sales revenue
|
$ |
589
|
$ |
547
|
|||
Cost
of product sales
|
559
|
395
|
|||||
Gross
margin
|
30
|
152
|
|||||
Operating
costs and expenses:
|
|||||||
Research
and development expenses
|
1,260
|
1,700
|
|||||
Selling,
general and administrative expenses
|
6,409
|
4,322
|
|||||
Impairment
of assets
|
1,528
|
-
|
|||||
Total
operating expenses
|
9,197
|
6,022
|
|||||
Loss
from operations
|
(9,167
|
)
|
(5,870
|
)
|
|||
Interest
income (expense), net
|
(235
|
)
|
(8,500
|
)
|
|||
Minority
interest in losses of consolidated joint ventures
|
1,206
|
517
|
|||||
Other
income (expense), net
|
(72
|
)
|
105
|
||||
Loss
before income taxes
|
(8,268
|
)
|
(13,748
|
)
|
|||
Income
taxes
|
(2
|
)
|
(2
|
)
|
|||
Net
loss
|
$
|
(8,270
|
)
|
$
|
(13,750
|
)
|
·
|
increases
in compensation costs, including approximately $886,000 of non-cash
expense related to the grants of options to our non-employee directors
in
the fourth quarter of 2007;
|
·
|
increased
consulting expenses, including costs attributable to new staffing
and
related expenses for local representation and business development
functions based in Dubai, Geneva and India ;
|
·
|
increased
travel expense, product donations, trade show participation and corporate
sponsorships incurred in pursuing business development opportunities,
primarily in the Middle East, Africa and India; and
|
·
|
a
net increase of $242,000 incurred by our Chinese joint ventures as
a
result of pre-manufacturing staffing and overhead expenses recognized
as
administrative expense in 2007, offset by personnel reductions and
reorganizations within those
entities.
|
(Increase)
|
|
|||||||||
|
|
Year
ended December 31,
|
|
Decrease
|
|
|||||
|
|
2007
|
|
2006
|
|
Expense
|
||||
Interest
expense on debt instruments paid or payable in cash
|
$
|
(315
|
)
|
$
|
(284
|
)
|
$
|
(31
|
)
|
|
Non-cash
expense composed of:
|
||||||||||
Accrued
interest on 8% Convertible Notes (paid by issuing additional
Notes)
|
(416
|
)
|
(481
|
)
|
65
|
|||||
Amortization
and proportional write-off upon conversion of 8% convertible note
discounts and deferred offering costs through original maturity
date
|
(1,208
|
)
|
(5,694
|
)
|
4,486
|
|||||
Amortization
of discounts associated with March 2007 extension and December 2007
restuctructuring of 8% convertible notes and Marr Credit Facility
notes
|
(449
|
)
|
-
|
(449
|
)
|
|||||
Mark
to market adjustment of and intrinsic value of shares issued under
anti-dilution obligations arising from the February and March 2007
financings
|
2,281
|
-
|
2,281
|
|||||||
Expense
attributable to extension of maturity of August 2006 Additional
Warrants
|
(29
|
)
|
-
|
(29
|
)
|
|||||
Expense
attributable to extension of maturity of August 2006 obligations
arising
from the April 2005 financing
|
-
|
(375
|
)
|
375
|
||||||
Expense
attributable to extinguishment of 7% Promissory Notes and induced
conversion of 8% Convertible Notes resulting from warrant re-pricing
and
exercise, and debt cancellation
|
-
|
(1,549
|
)
|
1,549
|
||||||
Expense
attributable to dividends on mandatorily redeemable Series A preferred
stock
|
(120
|
)
|
(120
|
)
|
-
|
|||||
Total
non-cash items
|
59
|
(8,219
|
)
|
8,278
|
||||||
Total
interest expense
|
(256
|
)
|
(8,503
|
)
|
8,247
|
|||||
21
|
3
|
18
|
||||||||
Net
interest expense
|
$
|
(235
|
)
|
$
|
(8,500
|
)
|
$
|
8,265
|
Fiscal
Year
|
Quarter
|
|
High
|
|
Low
|
|||||
2008
|
1st
|
$
|
0.17
|
$
|
0.06
|
|||||
2007
|
4th
|
0.23
|
0.09
|
|||||||
2007
|
3rd
|
0.22
|
0.07
|
|||||||
2007
|
2nd
|
0.11
|
0.06
|
|||||||
2007
|
1st
|
0.08
|
0.05
|
|||||||
2006
|
4th
|
0.11
|
0.06
|
|||||||
2006
|
3rd
|
0.22
|
0.09
|
|||||||
2006
|
2nd
|
0.24
|
0.17
|
|||||||
2006
|
1st
|
0.33
|
0.16
|
|||||||
2005
|
4th
|
0.24
|
0.16
|
|||||||
2005
|
3rd
|
0.35
|
0.13
|
|||||||
2005
|
2nd
|
0.28
|
0.15
|
|||||||
2005
|
1st
|
0.49
|
0.25
|
|||||||
2004
|
4th
|
0.44
|
0.18
|
|||||||
2004
|
3rd
|
0.74
|
0.36
|
|||||||
2004
|
2nd
|
0.67
|
0.38
|
|||||||
2004
|
1st
|
0.90
|
0.35
|
Stock
|
|
Option
|
|
All Other
|
|
|
|
|||||||||||||||
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
Bonus ($)
|
|
Awards ($)
|
|
Awards ($)
|
|
Compensation
|
|
Total ($)
|
|
|||||||
(a)
|
|
(b)
|
|
(c )
|
|
(d)
|
|
(e)
|
|
(f)(1)
|
|
(i)(2)
|
|
(j)
|
||||||||
Roger
I. Gale, Chief Executive
|
2007
|
$
|
350,000
|
(3)
|
$
|
-
|
$
|
150,000
|
$
|
-
|
$
|
50,515
|
(4)
|
$
|
550,515
|
|||||||
Officer,
President and Chairman of the Board
|
2006
|
$
|
294,141
|
(5)
|
$
|
-
|
$
|
250,000
|
$
|
-
|
$
|
37,537
|
(6)
|
$
|
581,678
|
|||||||
Richard
D. Brounstein, Executive
|
2007
|
$
|
181,169
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
200,000
|
(8)
|
$
|
381,169
|
||||||||
Vice
President (7)
|
2006
|
$
|
204,800
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
204,800
|
|||||||||
Theodore
R. Gwin, Chief
|
2007
|
$
|
7,692
|
$
|
-
|
$
|
-
|
$
|
39,700
|
(10)
|
$
|
40,734
|
(11)
|
$
|
88,126
|
|||||||
Financial
Officer (9)
|
2006
|
$
|
200,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
200,000
|
|||||||||
Ronald
W. Mink,
|
2007
|
$
|
226,135
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
226,135
|
|||||||||
Chief
Scientific Officer
|
2006
|
$
|
200,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
200,000
|
|||||||||
Jerrold
D. Dotson,
|
2007
|
$
|
184,615
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
15,000
|
(12)
|
$
|
199,615
|
||||||||
Vice
President-Finance
|
(1)
|
|
The
assumptions used to derive the fair value of the stock option award
noted
in this column are discussed in Footnote 11 to the Consolidated Financial
Statements included in Item 8 of this Form 10-K.
|
(2)
|
Does
not include the value of perquisites and other personal benefits
that do
not aggregate at least $10,000 in each fiscal year for each Named
Executive Officer.
|
|
(3)
|
|
This
amount reflects Mr. Gale’s total annual salary entitlement for fiscal year
2007. Mr. Gale elected to receive $309,615 in cash and to forego
$40,385
and instead receive shares of common stock and warrants to purchase
shares
of common stock on the same terms and conditions as the investors
in our
March 28, 2007 private placement. As indicated in notes (4), (5)
and (6),
Mr. Gale elected to forego cash payment of other amounts of compensation
earned in 2006 and 2007 and instead receive shares of our common
stock and
warrants. In aggregate, Mr. Gale received 8,271,870 shares of our
common
stock valued at $0.0.052 per share, a 12-month warrant to purchase
8,271,870 shares of our common stock at the exercise price of $0.08
per
share and an 18-month warrant to purchase 4,135,935 shares of our
common
stock at the exercise price of $0.11 per share based on an aggregate
investment of $430,137, including the compensation amounts described
in
this table. Mr. Gale’s aggregate investment also includes the repayment of
$90,000, plus accrued interest, of loans made to us by Mr. Gale in
2006
and 2007 and a $100,000 advance he made to us on November 16, 2006.
|
(4)
|
This
amount represents perquisites and other personal benefits paid to
Mr. Gale
under his employment agreement, including, without limitation, $36,000
for
his housing allowance and $9,600 for his automobile allowance, of
which he
elected to forego cash in the aggregate amount of $10,523 and receive
shares of common stock and warrants to purchase shares of common
stock on
the same terms and conditions as the investors in our March 28, 2007
private placement. See note (3) above for the details of this stock
and
warrant compensation.
|
|
(5)
|
This
amount reflects Mr. Gale’s total annual salary entitlement for fiscal year
2006. Mr. Gale received $105,000 in cash and elected to forego $15,000
and
instead receive 77,934 shares of our common stock. The remaining
$174,141
was accrued but not paid to Mr. Gale during fiscal year 2006. In
March
2007, Mr. Gale elected to forego cash payment of the accrued salary
amount
and to instead receive shares of our common stock and warrants to
purchase
shares of our common stock on the same terms and conditions as the
investors in our March 28, 2007 private placement. See note (3) above
for
the details of this stock and warrant
compensation.
|
(6)
|
This
amount includes $24,310 for Mr. Gale’s relocation expenses from Great
Britain to Oregon, $10,442 accrued, but not paid, for Mr. Gale’s housing
allowance and $2,785 accrued, but not paid, for Mr. Gale’s automobile
allowance. In March 2007, Mr. Gale elected to forego cash payment
of the
aggregate $13,227 accrued amounts and to instead receive shares of
our
common stock and warrants to purchase shares of our common stock
on the
same terms and conditions as the investors in our March 28, 2007
private
placement. See note (3) above for the details of this stock and warrant
compensation.
|
|
(7)
|
|
Mr.
Brounstein’s employment terminated in November 2007.
|
(8)
|
This
represents the amount accrued with
respect to
Mr. Brounstein as severance pursuant to the constructive termination
of
his employment agreement in July 2005. In March 2007, Mr. Brounstein
elected to forego his severance cash compensation and instead to
receive
shares of common stock and warrants to purchase shares of common
stock on
the same terms and conditions as the investors in our March 28, 2007
private placement. Mr. Brounstein received 3,846,154 shares of our
common
stock valued at $0.052 per share, a 12-month warrant to purchase
3,846,154
shares of our common stock at the exercise price of $0.08 per share
and an
18-month warrant to purchase 1,923,077 shares of our common stock
at the
exercise price of $0.11 per share.
|
|
(9)
|
Mr.
Gwin’s employment terminated in January 2007.
|
|
(10)
|
This
amount represents the fair value of an option to purchase 500,000
shares
of common stock at an exercise price of $0.03 per share, which was
granted
to Mr. Gwin as severance. The stock option was granted pursuant to
the
2004 Incentive Plan.
|
|
(11)
|
This
amount represents accrued vacation benefits of $17,637 and severance
of
$23,097 paid to Mr. Gwin upon termination of his employment.
|
|
(12)
|
This
amount represents amounts paid pursuant to a consulting agreement
with Mr.
Dotson prior to his employment as Vice President -
Finance.
|
Number
of
|
|
Number
of
|
|
|
|
|
|
||||||
|
|
Securities
|
|
Securities
|
|
|
|
|
|
||||
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
||||
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
||||
|
|
Options
(#)
|
|
Options
(#)
|
|
Exercise
Price
|
|
Expiration
|
|
||||
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
||||
(a)
|
|
(b)
|
|
(c
)
|
|
(e)
|
|
(f)
|
|||||
Roger
I Gale
|
200,000
|
-
|
$
|
0.31
|
1/6/2015
|
||||||||
850,000
|
-
|
$
|
0.35
|
2/9/2015
|
|||||||||
Ronald
W. Mink
|
1,667
|
-
|
$
|
0.32
|
5/29/2013
|
||||||||
40,000
|
-
|
$
|
0.32
|
5/29/2013
|
|||||||||
500,000
|
-
|
$
|
0.585
|
6/22/2014
|
|||||||||
25,000
|
-
|
$
|
0.38
|
2/10/2015
|
|||||||||
Richard
D. Brounstein
|
24,038
|
-
|
$
|
0.01
|
2/16/2008
|
||||||||
83,333
|
-
|
$
|
0.32
|
2/16/2008
|
|||||||||
25,000
|
-
|
$
|
0.32
|
2/16/2008
|
|||||||||
625,000
|
-
|
$
|
0.32
|
2/16/2008
|
|||||||||
1,500,000
|
-
|
$
|
0.585
|
5/23/2008
|
|||||||||
Theodore
R. Gwin
|
500,000
|
|
$
|
0.03
|
2/1/2017
|
||||||||
Jerrold
D. Dotson
|
15,633
|
-
|
$
|
0.32
|
5/29/2013
|
||||||||
40,000
|
-
|
$
|
0.32
|
5/29/2013
|
|||||||||
1,000,000
|
-
|
$
|
0.585
|
6/22/2014
|
All
Other
|
||||||||||||||||
Fees Earned or
|
|
Stock Awards
|
|
Option
|
|
Compensation
|
|
|
|
|||||||
Name
|
|
Paid in Cash ($)
|
|
($)
|
|
Awards ($)
|
|
($)
|
|
Total ($)
|
|
|||||
(a)
|
|
(b)
|
|
(c
)
|
|
(d)
|
|
(g)
|
|
(h)
|
||||||
Roger
I. Gale
|
$
|
-
|
$
|
-
|
$
|
-
|
(1)
|
$
|
-
|
$
|
-
|
|||||
John
J. DiPietro
|
$
|
-
|
$
|
-
|
$
|
190,879
|
(2)
|
$
|
-
|
$
|
190,879
|
|||||
Paul
E. Freiman
|
$
|
-
|
$
|
-
|
$
|
190,889
|
(3)
|
$
|
-
|
$
|
190,889
|
|||||
Adel
Karas
|
$
|
-
|
$
|
-
|
$
|
169,146
|
(4)
|
$
|
-
|
$
|
169,146
|
|||||
Julius
R. Krevans, M.D.
|
$
|
-
|
$
|
-
|
$
|
190,889
|
(5)
|
$
|
-
|
$
|
190,889
|
|||||
Maxim
A. Soulimov
|
$
|
-
|
$
|
-
|
$
|
190,586
|
(6)
|
$
|
-
|
$
|
190,586
|
(1) |
At
December 31, 2007, Mr. Gale has outstanding options to purchase
an
aggregate of 1,050,000 shares of our common
stock.
|
(2)
|
At
December 31, 2007, Mr. DiPietro has outstanding options to purchase
an
aggregate of 3,510,468 shares of our common
stock.
|
(3) |
At
December 31, 2007, Mr. Freiman has outstanding options to purchase
an
aggregate of 3,512,335 shares of our common
stock.
|
(4) |
At
December 31, 2007, Mr. Karas has outstanding options to purchase
an
aggregate of 3,000,000 shares of our common
stock.
|
(5) |
At
December 31, 2007, Dr. Krevans has outstanding options to purchase
an
aggregate of 3,510,668 shares of our common
stock.
|
(6) |
At
December 31, 2007, Mr. Soulimov has outstanding options to purchase
an
aggregate of 3,400,000 shares of our common
stock.
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
|
Consolidated
Balance Sheets
|
F-3
|
|
|
Consolidated
Statements of Operations
|
F-4
|
|
|
Consolidated
Statements of Stockholders’ Deficit
|
F-5
|
|
|
Consolidated
Statements of Cash Flows
|
F-7
|
|
|
Notes
to Consolidated Financial Statements
|
F-9
|
December
31,
|
|||||||
2007
|
2006
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
776
|
$
|
372
|
|||
Accounts
receivable, net of allowance of $1 at December 31, 2007 and 2006
|
-
|
16
|
|||||
Inventory
|
520
|
264
|
|||||
Prepaid
expenses
|
320
|
244
|
|||||
Other
current assets
|
21
|
74
|
|||||
Total
current assets
|
1,637
|
970
|
|||||
Property
and equipment, net
|
3,095
|
1,359
|
|||||
Intangible
assets, net of accumulated amortization of $436 and $218 at December
31,
2007 and 2006, respectively
|
2,498
|
2,716
|
|||||
Deposit
on China facility acquisition
|
-
|
2,001
|
|||||
Other
assets
|
226
|
972
|
|||||
Total
assets
|
$
|
7,456
|
$
|
8,018
|
|||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
2,976
|
$
|
3,545
|
|||
Advances
from related parties
|
2,071
|
1,871
|
|||||
8%
Notes payable to a related party
|
-
|
46
|
|||||
12%
Convertible debentures payable
|
60
|
60
|
|||||
Anti-dilution
obligation
|
32
|
-
|
|||||
Capital
lease obligations – current portion
|
-
|
131
|
|||||
Total
current liabilities
|
5,139
|
5,653
|
|||||
Deferred
rent obligation
|
28
|
-
|
|||||
8%
Convertible notes payable, net of discount of $1,283 and $1,144
at
December 31, 2007 and 2006, respectively
|
4,007
|
3,739
|
|||||
7%
Notes payable to a related party including accrued interest
of $443 and
$145 at December 31, 2007 and 2006, respectively, net of discount of
$715 at December 31, 2007
|
3,928
|
4,202
|
|||||
Minority
interest in consolidated joint ventures
|
69
|
766
|
|||||
Mandatorily
redeemable Series A preferred stock, $0.001 par value; no shares
authorized at December 31, 2007 and 2006; 100,000 shares issued
and
outstanding at December 31, 2007 and 2006; aggregate redemption
and
liquidation value of $1,000 plus cumulative dividends
|
3,176
|
3,056
|
|||||
Total
liabilities
|
16,347
|
17,416
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders’
deficit:
|
|||||||
Preferred
stock, $0.001 par value; 5,000,000 shares authorized; no shares
issued or
outstanding
|
-
|
-
|
|||||
Common
stock, $0.03 par value; 800,000,000 shares authorized at December
31, 2007
and 2006; 357,241,802 and 221,145,656 shares issued and outstanding
as of
December 31, 2007 and 2006, respectively
|
10,717
|
6,634
|
|||||
Common
stock subscribed
|
-
|
100
|
|||||
Additional
paid–in capital
|
156,202
|
151,511
|
|||||
Other
comprehensive income
|
103
|
-
|
|||||
Accumulated
deficit
|
(175,913
|
)
|
(167,643
|
)
|
|||
Total
stockholders’ deficit
|
$
|
(8,891
|
)
|
(9,398
|
)
|
||
Totsl
liabilities and stockholders' deficit
|
$
|
7,456
|
8,018
|
Years
Ended December 31,
|
|||||||
2007
|
2006
|
||||||
Revenues:
|
|||||||
Product
sales
|
$
|
589
|
$
|
547
|
|||
Operating
costs and expenses:
|
|||||||
Cost
of product sales
|
559
|
395
|
|||||
Research
and development expenses
|
1,260
|
1,700
|
|||||
Selling,
general and administrative expenses (non-cash of $1,500 and $606
in 2007
and 2006, respectively
|
6,409
|
4,322
|
|||||
Impairment
of assets
|
1,528
|
-
|
|||||
Total
operating expenses
|
9,756
|
6,417
|
|||||
Loss
from operations
|
(9,167
|
)
|
(5,870
|
)
|
|||
Interest
expense, net (non-cash income of $59 in 2007 and non-cash expense
of
$(8,219) in 2006)
|
(235
|
)
|
(8,500
|
)
|
|||
Minority
interest in losses of consolidated joint ventures
|
1,206
|
517
|
|||||
Other
income (expense), net
|
(72
|
)
|
105
|
||||
Loss
before income taxes
|
(8,268
|
)
|
(13,748
|
)
|
|||
Income
taxes
|
(2
|
)
|
(2
|
)
|
|||
Net
loss
|
$
|
(8,270
|
)
|
$
|
(13,750
|
)
|
|
Net
loss per share (basic and diluted)
|
$
|
(0.03
|
)
|
$
|
(0.07
|
)
|
|
Weighted
average shares used to compute net loss per share (basic and diluted)
|
314,928
|
202,783
|
Number
of
Common Shares
|
|
Common Stock
|
|
Common Stock
Subscribed
|
|
Additional Paid-in
Capital
|
|
Accumulated
Other Comprehensive Income
|
|
Accumulated
Deficit
|
|
Total
Stockholders' Deficit
|
||||||||||
Balances
at December 31, 2005
|
181,060,394
|
$
|
5,432
|
$
|
-
|
$
|
141,310
|
$
|
-
|
$
|
(153,893
|
)
|
$
|
(7,151
|
)
|
|||||||
Shares
issued upon exercise of employee options
|
141,112
|
4
|
-
|
14
|
-
|
-
|
18
|
|||||||||||||||
Stock-based
employee compensation
|
-
|
-
|
-
|
149
|
-
|
-
|
149
|
|||||||||||||||
Shares
issued in June 2006 PIPE
|
2,750,000
|
83
|
-
|
412
|
-
|
-
|
495
|
|||||||||||||||
Shares
issued upon cash exercise of re-priced warrants
|
1,719,583
|
52
|
-
|
206
|
-
|
-
|
258
|
|||||||||||||||
Shares
issued upon voluntary conversion of 8% convertible notes
|
9,848,048
|
295
|
-
|
2,659
|
-
|
-
|
2,954
|
|||||||||||||||
Shares
issued upon induced conversion of 8% convertible notes
|
6,396,306
|
192
|
-
|
767
|
-
|
-
|
959
|
|||||||||||||||
Write-off
of proportional share of note derivative liability upon conversion
of 8%
convertible notes and upon derivative expiration
|
-
|
-
|
-
|
1,994
|
-
|
-
|
1,994
|
|||||||||||||||
Shares
issued upon extinguishment of 7% promissory notes and related accrued
interest
|
16,964,583
|
509
|
-
|
2,036
|
-
|
-
|
2,545
|
|||||||||||||||
Charge
for induced conversion of 8% convertible notes and extinguishment
of 7%
promissory notes
|
-
|
-
|
-
|
1,549
|
-
|
-
|
1,549
|
|||||||||||||||
Shares
issued as compensation to consultants and service providers
|
2,265,630
|
67
|
-
|
386
|
-
|
-
|
453
|
|||||||||||||||
Fair
value of warrants issued to consultants and mark to market adjustments
|
-
|
-
|
-
|
29
|
-
|
-
|
29
|
|||||||||||||||
Common
stock subscribed
|
-
|
-
|
100
|
-
|
-
|
-
|
100
|
|||||||||||||||
Net
loss and comprehensive loss Balances at December 31, 2006
|
-
|
-
|
-
|
-
|
-
|
(13,750
|
)
|
(13,750
|
)
|
|||||||||||||
221,145,656
|
$
|
6,634
|
$ |
100
|
$ |
151,511
|
$
|
-
|
|
$ |
(167,643
|
) | $ |
(9,398
|
) |
Number
of
Common Shares
|
|
Common Stock
|
|
Common Stock
Subscribed
|
|
Additional Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total
Stockholders' Deficit
|
||||||||||
Balances
at December 31, 2006
|
221,145,656
|
6,634
$
|
$
|
100
|
$
|
151,511
|
$ |
-
|
$
|
(167,643
|
)
|
(9,398
|
)
|
|||||||||
Shares
issued upon exercise of employee options
|
16,827
|
1
|
-
|
-
|
-
|
-
|
1
|
|||||||||||||||
Stock-based
employee and director compensation
|
-
|
-
|
-
|
999
|
-
|
-
|
999
|
|||||||||||||||
Shares
issued in February 2007 Private Placement (including anti-dilution
shares)
|
4,326,924
|
130
|
-
|
138
|
-
|
-
|
268
|
|||||||||||||||
Shares
issued in March 2007 Private Placement, net of expenses
|
112,118,024
|
3,364
|
(100
|
)
|
2,446
|
-
|
-
|
5,710
|
||||||||||||||
Shares
issued upon exercise of warrants
|
14,482,292
|
434
|
657
|
-
|
-
|
1,091
|
||||||||||||||||
Shares
issued as compensation to employees, consultants and service providers
|
5,152,079
|
154
|
-
|
275
|
-
|
-
|
429
|
|||||||||||||||
Fair
value of options and warrants issued as severance and to consultants
and
mark to market adjustments
|
56
|
56
|
||||||||||||||||||||
Fair
value of modification of 2006 Additional Warrants in conjunction
with
March 2007 private placement
|
-
|
-
|
-
|
29
|
-
|
-
|
29
|
|||||||||||||||
Fair
value of anti-dilution rights associated with February 2007 and
March 2007
Private Placements
|
-
|
-
|
-
|
(2,357
|
)
|
-
|
-
|
(2,357
|
)
|
|||||||||||||
Fair
value of modification of 8% Convertible Notes and 7% Credit Facility
Notes
in conjunction with March 2007 Private Placement
|
-
|
-
|
-
|
1,161
|
-
|
-
|
1,161
|
|||||||||||||||
Fair
value of modification of 8% Convertible Notes and gain on extinguishment
of 7% Marr Credit Facility Notes in conjunction with December 2007
debt
restructuring with Marr
|
-
|
-
|
-
|
1,287
|
-
|
-
|
1,287
|
|||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
103
|
-
|
103
|
|||||||||||||||
Net
loss
|
(8,270
|
)
|
(8,270
|
)
|
||||||||||||||||||
Net
comprehensive loss
|
(8,167
|
)
|
||||||||||||||||||||
Balances
at December 31, 2007
|
357,241,802
|
$
|
10,717
|
$
|
-
|
$
|
156,202
|
$
|
103
|
$
|
(175,913
|
)
|
$
|
(8,891
|
)
|
Years
ended December 31,
|
|
||||||
|
|
2007
|
|
2006
|
|||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(8,270
|
)
|
$
|
(13,750
|
)
|
|
Adjustments
to reconcile net loss to operating activities:
|
|||||||
Depreciation
and amortization
|
492
|
363
|
|||||
Non-cash
interest expense attributable to:
|
|||||||
Amortization
and proportional write-off upon conversion of note discounts and
deferred
debt issuance costs
|
1,657
|
5,694
|
|||||
Extinguishment
of 7% Promissory Notes and induced conversion of 8% Convertible
Notes
resulting from warrant re-pricing and exercise, and debt cancellation
|
-
|
1,549
|
|||||
Dividends
on mandatorily redeemable Series A preferred stock
|
120
|
120
|
|||||
Anti-dilution
obligation and note derivative liability
|
(2,281
|
)
|
375
|
||||
Extension
of maturity of August 2006 Additional Warrants
|
29
|
-
|
|||||
Stock-based
employee and director compensation expense
|
999
|
149
|
|||||
Fair
market value of common stock, warrants and options granted for
services
|
544
|
457
|
|||||
Loss
on disposition of equipment
|
22
|
-
|
|||||
Impairment
loss on intangible assets acquired with China manufacturing facility
|
1,528
|
-
|
|||||
Minority
interest in joint venture losses
|
(1,206
|
)
|
(517
|
)
|
|||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
16
|
37
|
|||||
Inventory
|
(256
|
)
|
(117
|
)
|
|||
Prepaid
expenses and other current assets
|
90
|
(20
|
)
|
||||
Deferred
debt issuance costs and other assets
|
73
|
52
|
|||||
Accounts
payable, accrued expenses and other current liabilities
|
327
|
2
|
|||||
Other
non-current liabilities
|
27
|
100
|
|||||
Net
cash used in operating activities
|
(6,089
|
)
|
(5,506
|
)
|
|||
Cash flows from investing activities: | |||||||
Consolidated
joint venture, net cash acquired
|
-
|
799
|
|||||
Deposit
on China manufacturing facility and related assets
|
-
|
(1,554
|
)
|
||||
Purchases
of equipment and other fixed assets
|
(436
|
)
|
(884
|
)
|
|||
Net
cash used in investing activities
|
(436
|
)
|
(1,639
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from sale of stock, net of expenses
|
6,496
|
771
|
|||||
Proceeds
from common stock subscriptions
|
-
|
100
|
|||||
Proceeds
from notes issued to related parties
|
508
|
5,046
|
|||||
Repayment
of notes issued to related parties
|
(321
|
)
|
-
|
||||
Investment
in joint ventures by minority interest owner
|
510
|
1,282
|
|||||
Principal
payment on capital lease obligations
|
(131
|
)
|
(174
|
)
|
|||
Net
cash provided by financing activities
|
7,062
|
7,025
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
537
|
(120
|
)
|
||||
Effect
of foreign currency exchange rates on cash
|
(133
|
)
|
-
|
||||
Cash
and cash equivalents at beginning of period
|
372
|
492
|
|||||
Cash
and cash equivalents at end of period
|
$
|
776
|
$
|
372
|
Years
ended December 31,
|
|||||||
2007
|
2006
|
||||||
Supplemental
disclosure of cash flow activities:
|
|||||||
Cash
paid for interest
|
$
|
315
|
$
|
284
|
|||
Cash
paid for income taxes
|
2
|
2
|
|||||
Supplemental
disclosure of noncash activities:
|
|||||||
Conversion
of notes payable and accrued interest to common stock
and proportional share of note derivative liability
|
92
|
6,477
|
|||||
Conversion
of accrued interest into notes payable
|
407
|
544
|
|||||
Transfer
of note derivative liability to equity
|
-
|
1,874
|
|||||
Common
stock issued in payment of accrued compensation
|
438
|
-
|
|||||
Accrued
liability for acquisition of Chinese manufacturing facility and related
assets
|
327
|
-
|
Computer
equipment
|
3
years
|
Machinery
and equipment
|
5
years
|
Furniture
and fixtures
|
5
years
|
Buildings
|
20-40
years
|
Land
use rights
|
Life
of use rights, 43 years
|
Leasehold
improvements
|
3-7 years
|
|
·
|
We
have received a binding purchase order or similar commitment from
the
customer or distributor authorized by a representative empowered
to commit
the purchaser (evidence of a sale).
|
|
·
|
The
purchase price has been fixed, based on the terms of the purchase
order.
|
|
·
|
We
have delivered the product from our contract manufacturing plant
to a
common carrier acceptable to the purchaser. Our customary shipping
terms
are FOB shipping point. Because of the need for controlled conditions
during shipment, we suggest, but leave to the purchaser’s discretion,
acquiring insurance for the value of the shipment. If the purchaser
elects
to insure the shipment, the insurance is at the purchaser’s expense.
|
|
·
|
We
deem the collection of the amount invoiced probable. To eliminate
the
credit risk associated with international distributors with whom
we have
had little or no experience, we require prepayment of the order or
a
letter of credit before shipment.
|
2007
|
2006
|
||||||
BED
Incidence tests
|
$
|
388
|
$
|
241
|
|||
Aware
TM
Rapid HIV diagnostic tests
|
201
|
306
|
|||||
Revenue
from product sales
|
$
|
589
|
$
|
547
|
December 31,
|
|||||||
2007
|
2006
|
||||||
Raw
materials
|
$
|
398
|
$
|
189
|
|||
Work-in-process
|
91
|
12
|
|||||
Finished
goods
|
31
|
63
|
|||||
Total
inventory
|
$
|
520
|
$
|
264
|
December 31,
|
|||||||
2007
|
2006
|
||||||
Computer
equipment
|
$
|
379
|
$
|
407
|
|||
Machinery
and equipment
|
738
|
596
|
|||||
Furniture
and fixtures
|
79
|
13
|
|||||
Leasehold
improvements
|
63
|
17
|
|||||
Buildings
|
773
|
575
|
|||||
Land
use rights
|
1,710
|
-
|
|||||
Construction
in process
|
114
|
284
|
|||||
3,856
|
1,892
|
||||||
Accumulated
depreciation
|
(761
|
)
|
(533
|
)
|
|||
$
|
3,095
|
$
|
1,359
|
December 31,
|
|||||||
2007
|
2006
|
||||||
Trade
accounts payable
|
$
|
1,530
|
$
|
1,519
|
|||
Accrued
royalties
|
65
|
60
|
|||||
Accrued
salary, severance and vacation pay
|
50
|
349
|
|||||
Customer
prepayments on purchases
|
90
|
162
|
|||||
Accrued
interest
|
125
|
115
|
|||||
Accrued
audit, legal and consulting expenses
|
276
|
630
|
|||||
Accrued
liabilities under intellectual property license agreements
|
40
|
40
|
|||||
Accounts
payable and accrued expenses of consolidated joint
ventures
|
145
|
251
|
|||||
Accrued
liabilities of legacy business
|
190
|
190
|
|||||
Accrued
liability for acquisition of Chinese manufacturing
operation
|
327
|
-
|
|||||
Other
|
138
|
229
|
|||||
Total
accounts payable and accrued expenses
|
$
|
2,976
|
$
|
3,545
|
Balance
12/31/05
|
Additions
|
Conversion
to Equity
|
Cancellations
|
Balance
12/31/06
|
Discount at
12/31/06
|
Net
Balance at
12/31/06
|
||||||||||||||||
Current
Notes and Debentures
|
||||||||||||||||||||||
8%
Promissory Notes to related party -
|
||||||||||||||||||||||
Chief
Executive Officer
|
$
|
-
|
$
|
46
|
$
|
-
|
$
|
-
|
$
|
46
|
$
|
-
|
$
|
46
|
||||||||
12%
Convertible Debentures –
|
||||||||||||||||||||||
Mercator
assignees - Logisticorp and Southwest Resources Preservation
|
$
|
60
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
60
|
$
|
-
|
$
|
60
|
||||||||
Non-current
Notes Payable
|
||||||||||||||||||||||
8%
Secured Convertible Notes –
|
||||||||||||||||||||||
April
4, 2005
|
$
|
7,921
|
$
|
-
|
$
|
(2,573
|
)
|
$
|
(949
|
)
|
$
|
4,399
|
$ |
$
|
|
|||||||
July
4, 2005 Interest
|
164
|
-
|
(96
|
)
|
(2
|
)
|
66
|
|||||||||||||||
October
4, 2005 Interest
|
168
|
-
|
(98
|
)
|
(2
|
)
|
68
|
|||||||||||||||
January
4, 2006 Interest
|
-
|
170
|
(99
|
)
|
(2
|
)
|
69
|
|||||||||||||||
April
4, 2006 Interest
|
-
|
159
|
(89
|
)
|
(2
|
)
|
68
|
|||||||||||||||
July
4 and 21, 2006 Interest
|
-
|
124
|
-
|
(2
|
)
|
122
|
||||||||||||||||
October
4, 2006 Interest
|
-
|
91
|
-
|
-
|
91
|
|||||||||||||||||
Total
8% Secured Convertible Notes
|
$
|
8,253
|
$
|
544
|
$
|
(2,955
|
)
|
$
|
(959
|
)
|
$
|
4,883
|
$
|
(1,144
|
)
|
$
|
3,739
|
|||||
7%
Promissory Notes to related party-
|
||||||||||||||||||||||
2005
Credit Facility with Marr
|
$
|
1,500
|
$
|
5,000
|
$
|
-
|
$
|
(2,443
|
)
|
$
|
4,057
|
$
|
-
|
$
|
4,057
|
Net
|
||||||||||||||||||||||
Balance
|
Conversion
|
Balance
|
Discount at
|
Balance at
|
||||||||||||||||||
12/31/06
|
Additions
|
to Equity
|
Repayments
|
12/31/07
|
12/31/07
|
12/31/07
|
||||||||||||||||
Current
Notes and Debentures
|
||||||||||||||||||||||
8%
Promissory Notes to related party -
|
||||||||||||||||||||||
Chief
Executive Officer
|
$
|
46
|
$
|
50
|
$
|
(90
|
)
|
$
|
(6
|
)
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
12%
Promissory Note to related party -
|
||||||||||||||||||||||
Employee
|
$
|
-
|
$
|
65
|
$
|
-
|
$
|
(65
|
)
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||
12%
Convertible Debentures –
|
||||||||||||||||||||||
Mercator
assignees - Logisticorp and Southwest Resources Preservation
|
$
|
60
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
60
|
$
|
-
|
$
|
60
|
||||||||
Non-current
Notes Payable
|
||||||||||||||||||||||
8%
Secured Convertible Notes –
|
||||||||||||||||||||||
April
4, 2005
|
$
|
4,399
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
4,399
|
||||||||||||
July
4, 2005 Interest
|
66
|
-
|
-
|
-
|
66
|
|||||||||||||||||
October
4, 2005 Interest
|
68
|
-
|
-
|
-
|
68
|
|||||||||||||||||
January
4, 2006 Interest
|
69
|
-
|
-
|
-
|
69
|
|||||||||||||||||
April
4, 2006 Interest
|
68
|
-
|
-
|
-
|
68
|
|||||||||||||||||
July
4 and 21, 2006 Interest
|
122
|
-
|
-
|
-
|
122
|
|||||||||||||||||
October
4, 2006 Interest
|
91
|
-
|
-
|
-
|
91
|
|||||||||||||||||
January
4, 2007 Interest
|
-
|
100
|
-
|
-
|
100
|
|||||||||||||||||
April
3, 2007 Interest
|
-
|
99
|
-
|
-
|
99
|
|||||||||||||||||
July
3, 2007 Interest
|
-
|
102
|
-
|
-
|
102
|
|||||||||||||||||
October
3, 2007 Interest
|
-
|
106
|
-
|
-
|
106
|
|||||||||||||||||
Total
8% Secured Convertible Notes
|
$
|
4,883
|
$
|
407
|
$
|
-
|
$
|
-
|
$
|
5,290
|
$
|
(1,283
|
)
|
$
|
4,007
|
|||||||
2005
Credit Facility with Marr
|
$
|
4,057
|
$
|
393
|
$
|
-
|
$
|
(250
|
)
|
$
|
4,200
|
$
|
(715
|
)
|
$
|
3,485
|
Pre-modification Assumptions
|
Post-modification Assumptions
|
||||||||||||||||||||||||
Number
of shares
|
408,333
|
19,333,333
|
11,319,792
|
408,333
|
8,596,666
|
10,736,667
|
3,827,917
|
7,491,875
|
|||||||||||||||||
Exercise
price
|
$
|
0.325
|
$
|
0.325
|
$
|
0.25
|
$
|
0.10
|
$
|
0.03
|
$
|
0.10
|
$
|
0.03
|
$
|
0.10
|
|||||||||
Term
(years)
|
2.17
|
3.02
|
0.35
|
2.17
|
3.02
|
3.02
|
2.02
|
2.02
|
|||||||||||||||||
Volatility
|
126.03
|
%
|
121.16
|
%
|
105.97
|
%
|
126.03
|
%
|
121.16
|
%
|
121.16
|
%
|
128.55
|
%
|
128.55
|
%
|
|||||||||
Interest
Rate
|
4.57
|
%
|
4.51
|
%
|
5.08
|
%
|
4.57
|
%
|
4.51
|
%
|
4.51
|
%
|
4.57
|
%
|
4.57
|
%
|
|||||||||
Expected
dividend rate
|
0
|
%
|
0
|
%
|
0
|
%
|
0
|
%
|
0
|
%
|
0
|
%
|
0
|
%
|
0
|
%
|
|||||||||
Option
value per share
|
$
|
0.0224
|
$
|
0.0289
|
$
|
0.0004
|
$
|
0.0366
|
$
|
0.0517
|
$
|
0.0414
|
$
|
0.0488
|
$
|
0.0359
|
Before
|
After
|
||||||
Modification
|
Modification
|
||||||
Market
price at 12/4/07
|
$
|
0.125
|
$
|
0.125
|
|||
Exercise
Price
|
$
|
0.300
|
$
|
0.160
|
|||
Term
(Years)
|
1
|
1
|
|||||
Volatility
|
107.72
|
%
|
107.72
|
%
|
|||
Interest
Rate
|
3.11
|
%
|
3.11
|
%
|
|||
Expected
dividend rate
|
0.00
|
%
|
0.00
|
%
|
|||
Number
of shares (a)
|
11,407,058
|
21,388,234
|
|||||
Option
value per share
|
$ |
0.0233
|
$ |
0.0434
|
Year ended December 31,
|
|||||||
2007
|
2006
|
||||||
Interest
expense on debt instruments paid or payable in cash
|
$
|
(315
|
)
|
$
|
(284
|
)
|
|
Non-cash
expense composed of:
|
|||||||
Accrued
interest on 8% Convertible Notes (paid by issuing additional
|
|||||||
Notes)
|
(416
|
)
|
(481
|
)
|
|||
Amortization
and proportional write-off upon conversion of 8% convertible note
discounts and deferred offering costs through original maturity
date
|
(1,208
|
)
|
(5,694
|
)
|
|||
Amortization
of discounts associated with March 2007 extension and December 2007
restuctructuring of 8% convertible notes and Marr Credit Facility
notes
|
(449
|
)
|
-
|
||||
Mark
to market adjustment of and intrinsic value of shares issued under
anti-dilution obligations arising from the February and March 2007
financings
|
2,281
|
-
|
|||||
Expense
attributable to extension of maturity of August 2006 Additional
Warrants
|
(29
|
)
|
-
|
||||
Mark
to market adjustment of derivative and anti-dilution obligations
arising
from the April 2005 financing
|
-
|
(375
|
)
|
||||
Expense
attributable to extinguishment of 7% Promissory Notes and induced
conversion of 8% Convertible Notes resulting from warrant re-pricing
and
exercise, and debt cancellation
|
(1,549
|
)
|
|||||
Expense
attributable to dividends on mandatorily redeemable Series A preferred
stock
|
(120
|
)
|
(120
|
)
|
|||
Total
non-cash items
|
59
|
(8,219
|
)
|
||||
Total
interest expense
|
(256
|
)
|
(8,503
|
)
|
|||
Interest
income
|
21
|
3
|
|||||
Net
interest expense
|
$
|
(235
|
)
|
$
|
(8,500
|
)
|
Gross
Payments
|
Sublease
Payments
|
Net
Rental
Payments
|
||||||||
Year
ended December 31,
|
||||||||||
2008
|
$
|
783
|
$
|
(574
|
)
|
$
|
209
|
|||
2009
|
242
|
(96
|
)
|
146
|
||||||
2010
|
150
|
-
|
150
|
|||||||
2011
|
154
|
-
|
154
|
|||||||
2012
|
145
|
-
|
145
|
|||||||
Thereafter
|
-
|
-
|
-
|
|||||||
Total
|
$
|
1,474
|
$
|
(670
|
)
|
$
|
804
|
Pre-modification
|
Post-modification
|
||||||
Exercise
price
|
$ |
0.25
|
$ |
0.25
|
|||
Term
(years)
|
0.29
|
1.95
|
|||||
Volatility
|
117.21
|
%
|
129.47
|
%
|
|||
Interest
Rate
|
5.01
|
%
|
4.67
|
%
|
|||
Expected
dividend rate
|
0
|
%
|
0
|
%
|
|||
Option
value per share
|
$
|
0.0004
|
$
|
0.0242
|
Current
|
Historical
|
Risk-free
|
Expected
|
Probability
|
|||||||||||||||
share
|
stock price
|
interest
|
Term
|
dividend
|
of additional
|
||||||||||||||
price
|
volatility
|
rate
|
(years)
|
rate
|
financing
|
||||||||||||||
February
23, 2007
|
$
|
0.06
|
114.61
|
%
|
5.05
|
%
|
1.0
|
0
|
%
|
100
|
%
|
||||||||
March
23, 2007
|
$
|
0.06
|
112.63
|
%
|
4.67
|
%
|
1.0
|
0
|
%
|
100
|
%
|
||||||||
March
27, 2007
|
$
|
0.06
|
130.04
|
%
|
4.93
|
%
|
1.0
|
0
|
%
|
100
|
%
|
·
|
1,000,000
shares awarded to our Chairman under the terms of a letter agreement
approved by the Compensation Committee of our Board of Directors
on
January 4, 2006 pursuant to which the Chairman served as our interim
Chief
Executive Officer from October 2005 through September 2006;
|
·
|
311,736
shares awarded to the Chairman in February 2006 in lieu of cash
compensation to which he was entitled under the terms of the letter
agreement for the period of October 2005 through January 2006; and
|
·
|
953,894
shares awarded to consultants and service providers for
services.
|
·
|
2,000,000
shares awarded to our President and Chief Executive Officer from
our 2004
Incentive Plan under the terms of an employment agreement approved
by the
Compensation Committee of the Board of Directors on January 11, 2007;
|
·
|
2,340,279
shares awarded to consultants and service providers from our 2004
Incentive Plan and our 2000 Equity Incentive Plan for services;
|
·
|
562,000
unregistered shares granted under the terms of an agreement for investor
relations services; and
|
·
|
250,000
shares issued to a potential investor for reimbursement of due diligence
expenses (see Note 19, Subsequent Events).
|
Number of
Shares |
|
Weighted
Average Exercise price per share |
|
Expiration Date
|
||||||
Series
A warrants issued in connection with March 2007 Private Placement
|
106,118,024
|
$
|
0.080
|
June
28, 2008
|
||||||
Series
B warrants issued in connection with March 2007 Private Placement
|
56,059,012
|
$
|
0.110
|
September
28, 2008
|
||||||
Warrants
issued in connection with February 2007 Private Placement
|
3,958,336
|
$
|
0.104
|
February
23, 2012 to March 27, 2012
|
||||||
Warrants
issued to placement agents in connection with the February 2007
Private Placement
|
125,000
|
$ |
0.062
|
February
23, 2012 to March 27, 2012
|
||||||
Series
A and Series B warrants issued in connection with April 2005 Placement,
including warrants to placement agents
|
24,041,610
|
$
|
0.119
|
April
3, 2010
|
||||||
Warrants
issued to investors in connection with the 2004 PIPEs, including
warrants
issued to placement agents
|
4,270,300
|
$
|
0.452
|
May
28, 2009 or July 9, 2009
|
||||||
Anti-dilution
warrants issued to investors in the 2004 PIPEs
|
885,677
|
$
|
0.221
|
May
28, 2009 or July 9, 2009
|
||||||
Additional
Warrants issued to investors exercising previously issued warrants
in
connection with July 2006 Warrant Re-pricing
|
4,057,946
|
$ |
0.138
|
April
3, 2009
|
||||||
Warrants
issued for investment banking services
|
500,000
|
$
|
0.085
|
October
31, 2011
|
||||||
All
other
|
250,283
|
$
|
0.363
|
February
11, 2009 to November 15, 2009
|
||||||
200,266,188
|
$
|
0.104
|
Shares
issuable pursuant to options outstanding under benefit plans
|
31,863,354
|
|||
Shares
reserved for future issuance under benefit plans
|
31,514,743
|
|||
Shares
issuable pursuant to warrants outstanding
|
200,266,188
|
|||
Shares
issuable upon conversion of debt securities, including accrued interest
through maturity
|
60,949,379
|
|||
324,593,664
|
Dividend
yield
|
0.00
|
%
|
||
Expected
volatility
|
192.59
|
%
|
||
Risk-free
interest rate
|
3.73
|
%
|
||
Expected
life (in years)
|
5.31
|
Weighted
|
Weighted
|
Aggregate
|
|||||||||||
Average
|
Average
|
Intrinsic
|
|||||||||||
Exercise
|
Remaining
|
Value
at
|
|||||||||||
Price
per
|
Contractual
|
Date
|
|||||||||||
Options
|
Share
|
Term
(years)
|
Indicated
|
||||||||||
Options
outstanding at December 31, 2005
|
27,390,879
|
$
|
0.551
|
7.34
|
$
|
12,500
|
|||||||
Options
granted
|
-
|
-
|
|||||||||||
Options
exercised
|
(141,112
|
)
|
$
|
0.126
|
|||||||||
Options
forfeited or expired
|
(4,840,997
|
)
|
$
|
0.444
|
|||||||||
Options
outstanding at December 31, 2006
|
22,408,770
|
$
|
0.576
|
7.36
|
$
|
2,534
|
|||||||
Options
granted - at less than market price
|
500,000
|
$
|
0.030
|
||||||||||
Options
granted - at market price
|
16,791,095
|
$
|
0.111
|
||||||||||
Options
exercised
|
(16,827
|
)
|
$
|
0.010
|
|||||||||
Options
forfeited
|
(110,554
|
)
|
$
|
0.234
|
|||||||||
Options
expired
|
(7,709,130
|
)
|
$
|
0.550
|
|||||||||
Options
outstanding at December 31, 2007
|
31,863,354
|
$
|
0.331
|
8.01
|
$
|
39,784
|
|||||||
Options
vested and exercisable at December 31, 2006
|
21,954,053
|
$
|
0.583
|
7.34
|
$
|
2,534
|
|||||||
Options
vested and exercisable at December 31, 2007
|
24,275,855
|
$
|
0.399
|
7.43
|
$
|
39,784
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Weighted
|
||||||||||||||||
Average
|
Weighted
|
Weighted
|
||||||||||||||
Range
of
|
Remaining
|
Average
|
Average
|
|||||||||||||
Exercise
|
Number
|
Years
to
|
Exercise
|
Number
|
Exercise
|
|||||||||||
Prices
|
Outstanding
|
Expiration
|
Price
|
Exercisable
|
Price
|
|||||||||||
$0.01
to $0.03
|
524,038
|
8.92
|
$
|
0.029
|
524,038
|
$
|
0.029
|
|||||||||
$0.11
|
15,808,402
|
9.91
|
$
|
0.110
|
8,308,402
|
$
|
0.110
|
|||||||||
$0.13
to $0.56
|
4,802,292
|
5.26
|
$
|
0.278
|
4,714,793
|
$
|
0.280
|
|||||||||
$0.585
|
10,100,000
|
6.45
|
$
|
0.585
|
10,100,000
|
$
|
0.585
|
|||||||||
$0.60
to $150.00
|
628,622
|
5.62
|
$
|
2.442
|
628,622
|
$
|
2.442
|
|||||||||
31,863,354
|
8.01
|
$
|
0.331
|
24,275,855
|
$
|
0.39
|
2007
|
2006
|
||||||
Loss
before income taxes:
|
|||||||
Domestic
|
$
|
(7,013
|
)
|
$
|
(13,210
|
)
|
|
International
|
(1,255
|
)
|
(538
|
)
|
|||
Total
loss before income taxes
|
$
|
(8,268
|
)
|
$
|
(13,748
|
)
|
2007
|
2006
|
||||||
Computed
expected tax expense
|
$
|
(2,384
|
)
|
$
|
(4,491
|
)
|
|
Losses
and credits for which no benefits have been recognized
|
2,376
|
4,488
|
|||||
Other
|
10
|
5
|
|||||
$
|
2
|
$
|
2
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Deferred
tax assets:
|
|||||||
Net
operating loss carryovers
|
$
|
31,197
|
$
|
28,392
|
|||
Research
and development credits
|
1,073
|
1,003
|
|||||
Other
|
2,789
|
1,090
|
|||||
Total
gross deferred tax assets
|
35,059
|
30,485
|
|||||
Valuation
allowance
|
(35,059
|
)
|
(30,485
|
)
|
|||
Net
deferred tax assets
|
$
|
-
|
$
|
-
|