.67 loss per share reported, proforma:
STOCK BASED COMPENSATION
As permitted under SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure," which amended SFAS No. 123 ("SFAS
123"), "Accounting for Stock Based Compensation," the Company has elected to
continue to follow the intrinsic value method in accounting for its stock-based
employee compensation arrangements, as defined by Accounting Principles Board
Opinion("APB") No. 25, Accounting for Stock Issued to Employees," and related
interpretations including Financial Accounting Standards Board Interpretations
No. 44, "Accounting for Certain Transactions Involving Stock Compensation," an
interpretation of APB No. 25.
Accordingly, the Company records deferred compensation for share options granted
to employees at the date of grant based on the difference between the exercise
price of the options and the market value of the underlying shares at that date.
Deferred compensation is amortized to compensation expense over the vesting
period of the underlying options. No compensation expense is recorded for fixed
stock options that are granted to employees and directors at an exercise price
equal to the fair market value of the common stock, par value $0.001 (the
"Common Stock") at the time of the grant. Stock options and warrants granted to
non-employees are recorded at their fair value.
The following table illustrates the effect on net loss and net loss per share if
the Company had applied the fair value recognition provisions of SFAS No. 123 to
stock-based employee compensation for the years ended December 31, 2005 and
2004:
Year Ended Year Ended
December 31, December 31,
2005 2004
-------------- --------------
Net loss applicable to common
stockholders, as reported $ (12,941,282) $ (8,322,211)
Add: Stock-based employee compensation
expense included in reported
net loss, net of related tax effects 14,000 7,000
Deduct: Total stock-based employee
compensation expense determined
under fair value based method
for all awards, net of related
tax effects (715,511) (868,925)
-------------- --------------
Pro forma net loss $ (13,642,793) $ (9,184,136)
============== ==============
Net loss per share applicable to
common stockholders, basic and diluted,
as reported $ (0.64) $ (0.51)
============== ==============
Pro forma net loss per share,
basic and diluted $ (0.67) $ (0.56)
============== ==============
*******Scary language about not having a new source of capital lined up -- this is something different. I've been reading their filings for 4 years, so trust me when I say this is something different. and reduced the warrants from $2.00 a share to $1.50
AMENDMENT TO EQUITY LINE AGREEMENT
On April 12, 2006, the Company and the equity investor entered in to an
amendment of the $6 million equity line commitment the Company obtained in
August 2004. Under the amendment, the price at which Company has the right to
sell Common Stock to the investor under the equity line was reduced to 89% of
the then-current market price but in no event at less than $1.50 per share. In
addition, under the terms of the amendment the Company agreed to file such
registration statement between 90 and 120 days after the effective date of any
resale registration statement that the Company files subsequent to the date of
the amendment in connection with a private placement of the Company's long-term
debt or equity securities resulting in aggregate proceeds to the Company of at
least $6.0 million. The amendment also provides that the exercise price of
common stock purchase warrant issued to the equity line investor in August 2004
will be reduced to $1.50, subject to further adjustment as therein provided. The
equity line investor also agreed to waive the requirement under the equity line
that the Company reserve at all times a sufficient number of shares of its
Common Stock to satisfy its obligations under the equity line and the warrant,
pending the amendment of the Company's certificate of incorporation to increase
the number of shares of Common Stock authorized for issuance.
And the note is due April 21st:
The Company's future operations are dependent upon management's ability to find
sources of additional equity capital. The Company needs to raise additional
funds on an immediate basis to continue to meet its liquidity needs, repay
short-term loans that mature on April 21, 2006, realize its current business
plan and maintain operations. Management of the Company is continuing its
efforts to secure funds through equity and/or debt instruments for its
operations. In December 2005, the Company engaged an investment bank to assist
the Company, on a best efforts basis, in raising funds. The period during which
the investment bank was entitled to provide such services to the Company on an
exclusive basis expired in
March 2006. To date, the Company has not received a financing proposal from any
investor introduced to it by the investment bank. The Company has received a
non-binding financing proposal from a party not introduced to it by the
investment bank which is subject to, among other things, the negotiation and
execution of legally binding agreements. Presently, the Company does not have
any financing commitment from any person and there can be no assurance that
additional capital will be available to the Company on commercially acceptable
terms or at all. The inability to obtain such financing will have a material
adverse effect on the Company, its condition and prospects. Furthermore, it is
anticipated that any successful financing will have a significant dilutive
effect on existing stockholders. As more fully described in Note 5 below, the
Company funded its operations during fiscal year 2005 from the private placement
of its convertible preferred stock and short-term notes resulting in approximate
net proceeds to the Company of $7.09 million and $887,000, respectively. In
addition, from January 1 to April 7 2006, the Company raised net proceeds of
$2,234,880 from short term loans. See Note 13.
On the other hand, this sounds promising -- need MOT to be the source of capital (???)
MOTOROLA STRATEGIC ALLIANCE AGREEMENT
On April 5, 2006, the Company entered into a Strategic Alliance Agreement (the
"Strategic Alliance Agreement") with Motorola Wireline Networks, Inc.
("Motorola"), a subsidiary of Motorola, Inc., pursuant to which the Company and
Motorola will jointly develop a family of three IP Home gateways (the "Gateway
Products") that will provide expanded support for data, IPTV, High Definition
TV, and Digital Video Recorders using Motorola's existing Multi-Service Access
Platform for exclusive distribution by Motorola under the Motorola brand. Under
the Strategic Alliance Agreement, the Company has also granted Motorola certain
rights with respect to the resale of the Company's products as described below.
The Strategic Alliance Agreement provides that Motorola will pay to the Company
$1.9 million for engineering costs associated with the development of the
Gateway Products, approximately 32% of which is payable within 30 days of the
effective date of the agreement and the remainder of which is payable in
installments on the achievement of certain agreed upon project milestones.
Motorola is entitled to terminate the development program at any time prior to
the completion of the development of the Gateway Products and, in the event that
it does so, the Company will be entitled to retain any of the engineering costs
paid or due and owing by Motorola as of the date of termination. Upon successful
completion of all necessary testing, the Gateway Products will be manufactured
by the Company for exclusive sale to Motorola.
Under the Strategic Alliance Agreement, the Company has granted Motorola the
exclusive right to resell the Company's PG1000 and the HG-V100 gateway products,
and all derivative or substantially similar products (the "Exclusive Products")
to certain specified leading telecommunications carriers and their affiliates
(the "Exclusive Customers") for a period of 24 months from the effective date of
the agreement as part of Motorola's portfolio of broadband wireline solutions.
The exclusivity may be terminated by the Company unless, among other things, at
least one of the Exclusive Customers shall have accepted one of the Exclusive
Products for lab testing within one year of the effective date of the Strategic
Alliance Agreement and signed a contract to purchase Exclusive Products (which
is reasonably expected to result in revenue to the Company in a specified
minimum amount) within 18 months of the effective date of the agreement;
provided, however, that if these conditions are satisfied with respect to an
Exclusive Customer, then Motorola's exclusivity period for such Exclusive
Customer will be extended for an additional 24 months. At all times the Company
retains the right to sell the Exclusive Products to customers other than the
Exclusive Customers. In addition, the Company also granted Motorola the
non-exclusive right to resell all of the Company's other existing products
worldwide.
F-29
The Strategic Alliance Agreement also provides that the Company will not, during
the term of the agreement and for a period of two years thereafter, directly or
indirectly sell to or solicit or accept any order for any of its products from
any customer to which Motorola has resold a Company product during the term of
the agreement. These provisions will not apply to customers to whom the Company
made sales of products in the twelve months preceding the effective date of the
Strategic Alliance Agreement or in the event of termination of the agreement by
the Company for cause or by Motorola for convenience. Notwithstanding the
foregoing, if Motorola sources, manufactures or resells a gateway which has
substantially the same functionality as the Company's PG1000 or HG-V100
products, the exclusivity and the non-solicitation provisions contained in the
Strategic Alliance Agreement shall immediately terminate. The Company has also
agreed that the prices for its products that it charges Motorola will be no
higher than the prices that the Company charges any other reseller, customer or
entity.
The Strategic Alliance Agreement has an initial term of three years which will
automatically extend for successive additional one-year terms unless either
party gives notice of termination no less than 30 days prior to the expiration
date of the then-current term. The agreement may be terminated by Motorola at
any time on 30 days notice and by either party if the other ceases to do
business in the ordinary course or defaults on its material obligations,
representations or warranties under or otherwise materially breaches the
Agreement subject, except in the case of payment failures, to a 30-day cure
period.
Sorry to interrupt a good pump...I am seeing AANI pumped all over the place on Yahoo and elsewhere. Little Johnny has a lot of followers at the moment.
Might see 1.50 if the promoters really get after it, but I can't see 2.00 a share given the current state of affairs.
Good luck to all.
