apogee10qa.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A
Amendment
No. 2
(Mark
One)
ý QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended September 30, 2009
o TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period
from to
Commission
file number 001-10456
APOGEE
TECHNOLOGY, INC.
(Exact
name of registrant as specified in its charter)
DELAWARE
|
|
04-3005815
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
|
|
|
129
MORGAN DRIVE, NORWOOD, MASSACHUSETTS 02062
|
(Address
of principal executive offices)
|
|
|
|
(781)
551-9450
|
(Registrant’s
telephone number, including area code)
|
|
|
|
NOT
APPLICABLE
|
(Former
name, former address and former fiscal year,
|
if
changed since last report)
|
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.Yes o
No
ý
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
proceeding 12 months (or such shorter periods that the registrant was required
to submit and post such files). Yes o
No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
|
Large
accelerated filer o
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
(
Do not check if a smaller
reporting
company)
|
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). o
Yes ý
No
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: As of January 8, 2010, there
were 12,132,332 shares of Common Stock, $0.01 par value per share
outstanding. See Note 13 Subsequent Events, SEC Administrative
Proceedings for cessation of trading in our common stock on April 16,
2010.
APOGEE
TECHNOLOGY, INC.
(A
Development Stage Company)
Table of Contents
PART I - FINANCIAL
INFORMATION
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|
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|
Item 1 - Financial
Statements
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3
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4
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5
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6
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25
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36
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36
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PART II - OTHER
INFORMATION
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36
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38
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40
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40
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41
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41
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41
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42
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PART I
FINANCIAL INFORMATION
Item 1.
Financial
Statements
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
CONSOLIDATED BALANCE
SHEETS
|
|
SEPTMBER
30,
|
|
|
DECEMBER 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
— |
|
|
$ |
— |
|
Accounts
receivable, net of allowance for doubtful accounts of $9,377 in 2009 and
2008
|
|
|
— |
|
|
|
— |
|
Prepaid
expenses and other current assets
|
|
|
20,544 |
|
|
|
8,335 |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
20,544 |
|
|
|
8,335 |
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
63,035 |
|
|
|
111,152 |
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
|
|
|
|
|
|
Patents,
net
|
|
|
112,641 |
|
|
|
148,889 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
196,220 |
|
|
$ |
268,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
$ |
2,321 |
|
|
$ |
49,236 |
|
Accounts payable and accrued expenses
|
|
|
2,966,934 |
|
|
|
2,267,273 |
|
Officer loans and notes payable
|
|
|
948,308 |
|
|
|
783,524 |
|
Shareholder loans and notes payable
|
|
|
1,105,960 |
|
|
|
882,431 |
|
Other loans and notes payable
|
|
|
751,455 |
|
|
|
259,622 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
5,774,978 |
|
|
|
4,242,086 |
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficiency
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.0001 per share; 5,000,000 shares authorized, none
issued and outstanding
|
|
|
— |
|
|
|
— |
|
Common
stock, $0.01 par value; 40,000,000 shares authorized, 12,132,332 issued
and outstanding at September 30, 2009 and December 31,
2008
|
|
|
121,323 |
|
|
|
121,323 |
|
Additional
paid-in capital
|
|
|
18,912,559 |
|
|
|
18,786,046 |
|
Accumulated
deficit
|
|
|
(21,891,704
|
) |
|
|
(21,891,704 |
) |
Accumulated
deficit during development stage
|
|
|
(2,720,936
|
) |
|
|
(989,375 |
) |
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficiency
|
|
|
(5,578,758
|
) |
|
|
(3,973,710
|
) |
|
|
$ |
196,220 |
|
|
$ |
268,376 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
|
|
Three
Months Ended Sept. 30,
|
|
|
Nine
Months Ended Sept. 30,
|
|
|
Cumulative
from Re-entering Development Stage on October 1, 2008 to Sept. 30,
2009
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
21,951 |
|
|
$ |
— |
|
Royalties
|
|
|
— |
|
|
|
37,893 |
|
|
|
— |
|
|
|
63,499 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
37,893 |
|
|
|
— |
|
|
|
85,450 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
696 |
|
|
|
— |
|
Research
and development
|
|
|
145,575 |
|
|
|
299,764 |
|
|
|
579,317 |
|
|
|
1,078,962 |
|
|
|
1,058,397 |
|
Selling,
general and administrative
|
|
|
269,911 |
|
|
|
454,190 |
|
|
|
874,277 |
|
|
|
1,942,580 |
|
|
|
1,312,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
415,486 |
|
|
|
753,954 |
|
|
|
1,453,594 |
|
|
|
3,022,238 |
|
|
|
2,371,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(415,486
|
) |
|
|
(716,061
|
) |
|
|
(1,453,594
|
) |
|
|
(2,936,788
|
) |
|
|
(2,371,275
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and other expense
|
|
|
(96,532
|
) |
|
|
(55,612
|
) |
|
|
(279,573
|
) |
|
|
(102,552
|
) |
|
|
(351,951
|
) |
Interest
and other income
|
|
|
500 |
|
|
|
558 |
|
|
|
1,606 |
|
|
|
8,202 |
|
|
|
2,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(96,032
|
) |
|
|
(55,054
|
) |
|
|
(277,967
|
) |
|
|
(94,350
|
) |
|
|
(349,661
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(511,518
|
) |
|
$ |
(771,115
|
) |
|
$ |
(1,731,561
|
) |
|
$ |
(3,031,138
|
) |
|
$ |
(2,720,936
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit - beginning
|
|
$ |
(24,101,122
|
) |
|
$ |
(21,120,591
|
) |
|
$ |
(22,881,079
|
) |
|
$ |
(18,860,568
|
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit - ending
|
|
$ |
(24,612,640
|
) |
|
$ |
(21,891,706
|
) |
|
$ |
(24,612,640
|
) |
|
$ |
(21,891,706
|
) |
|
$ |
(2,720,936
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per common share
|
|
$ |
(0.04
|
) |
|
$ |
(0.06
|
) |
|
$ |
(0.14
|
) |
|
$ |
(0.25
|
) |
|
$ |
(0.22
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding - basic and diluted
|
|
|
12,132,332 |
|
|
|
12,132,332 |
|
|
|
12,132,332 |
|
|
|
12,070,704 |
|
|
|
12,132,332 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
APOGEE TECHNOLOGY, INC. AND
SUBSIDIARY
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
NINE
MONTHS ENDED
SEPTEMBER
30,
|
|
|
Cumulative
from Re-entering Development Stage on
OCTOBER
1, 2008
through
|
|
|
|
2009
|
|
|
2008
|
|
|
SEPTEMBER
30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operations
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,731,561 |
) |
|
$ |
(3,031,138 |
) |
|
$ |
(2,720,936 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for doubtful accounts
|
|
|
— |
|
|
|
(1,193 |
) |
|
|
— |
|
Depreciation
and amortization
|
|
|
77,305 |
|
|
|
64,068 |
|
|
|
134,756 |
|
Stock
compensation expense for employees and directors
|
|
|
64,217 |
|
|
|
46,723 |
|
|
|
92,595 |
|
Original
issue discount
|
|
|
70,543 |
|
|
|
32,849 |
|
|
|
93,028 |
|
Termination
of license
|
|
|
— |
|
|
|
22,329 |
|
|
|
— |
|
Patent
impairment
|
|
|
17,267 |
|
|
|
— |
|
|
|
205,674 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
— |
|
|
|
11,729 |
|
|
|
— |
|
Prepaid
expenses and other current assets
|
|
|
(12,210 |
) |
|
|
51,651 |
|
|
|
14,569 |
|
Accounts
payable and accrued expenses
|
|
|
699,661 |
|
|
|
1,126,687 |
|
|
|
1,094,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(814,778 |
) |
|
|
(1,676,295 |
) |
|
|
(1,085,614 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
— |
|
|
|
(8,322 |
) |
|
|
— |
|
Patent
costs
|
|
|
(10,207 |
) |
|
|
(82,710 |
) |
|
|
(32,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(10,207 |
) |
|
|
(91,032 |
) |
|
|
(32,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
overdraft
|
|
|
(46,915 |
) |
|
|
4,284 |
|
|
|
(19,637 |
) |
Proceeds
for shareholder loans and notes payable
|
|
|
223,000 |
|
|
|
620,000 |
|
|
|
338,000 |
|
Proceeds
from officer loans and notes payable
|
|
|
163,900 |
|
|
|
510,000 |
|
|
|
188,900 |
|
Proceeds
from other loans and notes payable
|
|
|
485,000 |
|
|
|
160,000 |
|
|
|
593,000 |
|
Proceeds
from sale of equity securities
|
|
|
— |
|
|
|
152,519 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
824,985 |
|
|
|
1,446,803 |
|
|
|
1,117,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
in cash and cash equivalents
|
|
|
- |
|
|
|
(320,524 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents — beginning
|
|
|
- |
|
|
|
320,524 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents — ending
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
— |
|
|
$ |
5,933 |
|
|
$ |
— |
|
Warrants
issued in connection with notes payable – non-cash
|
|
$ |
62,296 |
|
|
$ |
57,810 |
|
|
$ |
73,138 |
|
Income
taxes
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
The
accompanying notes are an integral part of these consolidated financial
statements
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited
Consolidated Financial Statements
September
30, 2009 and September 30, 2008
1.
The Company and Basis of
Presentation
The Company
The
accompanying unaudited interim financial statements of Apogee Technology, inc.,
a Delaware corporation, have been prepared in accordance with accounting
principles generally accepted in the United States of American and the rules of
the Securities and Exchange Commission and should be read in conjunction with
the audited financial statements and notes thereto contained in our last Annual
Report filed with the SEC on Form 10-K. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of financial position and the results of operations for the
interim periods presented have been reflected therein. The results of
operations for the interim periods are not necessarily indicative of the results
to be expected for the full year.
Apogee
Technology, Inc., (“Apogee”, “we”, “us” or “our”) is developing PyraDerm™, a proprietary
intradermal drug delivery system for vaccines and other pharmaceuticals that we
intend to market to pharmaceutical and medical device
companies. Until March 31, 2009, we were also engaged in the
development of IntellaPAL™, a proprietary
sensor-based health monitoring systems for the elderly care and other markets
that we intended to manufacture and market to individuals and health
organizations. Our two major business activities were organized under our Life
Science Group and our Health Monitoring Products Group. Apogee is
currently considered to be a development stage company.
Apogee is
developing PyraDerm, an
advanced intradermal drug delivery system, to meet the needs of patients, health
insurers and companies developing pharmaceuticals, as well as governments and
international health organizations. We believe PyraDerm™ has advantages over
competitive approaches for the delivery of vaccines, high potency therapeutic
protein drugs and other pharmaceuticals. We have evaluated the feasibility of
PyraDerm by performing
in vitro tests with model drugs and demonstrated its potential for intradermal
immunization in vivo. We are working to establish pharmaceutical industry
compliant manufacturing methods and to define regulatory strategies to support
its commercialization. Upon the completion of in vitro and in vivo evaluation of
PyraDerm™, if successful, we intend
to pursue licensing/development or partnership agreements with pharmaceutical
companies interested in our technologies.
We have
operated as a technology research and development stage company since October 1,
2008. We have not yet generated revenue from our principal
operations. During the fiscal year ended December 31, 2008, due to our limited
resources, we invested these resources predominately in the development of our
Life Science Group. As of March 31, 2009, we closed down operations
of our Health Monitoring Products Group. Costs associated with the
closing of this group, as well as the termination of related employees are not
material. Our sole focus is and will remain on the development and
growth of our Life Science Group.
Basis
of Presentation
Going
Concern
The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has recurring
operating losses, negative cash flows from operations, negative working capital
of approximately $5.8 million and stockholder’s deficiency of approximately $5.6
million, is in arrears with substantially all of its vendors, and is in default
on a majority of its Promissory Notes. This raises substantial doubt
about our ability to continue as a going concern. Net losses were approximately
$1.7 million and negative cash flows from operations were approximately $815,000
for the nine months ended September 30, 2009. Given our current cash
position, net losses and negative cash flows from operations and our outstanding
current obligations, we will not be able to continue as a going concern without
raising additional capital which is not assured.
We had an
overdraft of approximately $2,300 at September 30, 2009. As of August
11, 2010, we had cash of approximately $100,000. See Note 13 -
Subsequent Events – Additional Financings.
The
long-term success of Apogee is dependent upon our ability to raise additional
funds to continue our operations, pay our outstanding liabilities and to
successfully develop and market our technologies and products and to attain
profitable operations. Although we have modified our business strategy to
improve near-term financial performance, there can be no assurance that we will
be able to obtain funds, to generate sufficient revenue, if any, or become
profitable or that additional funds will be available to us on acceptable terms,
if at all. Accordingly, we may be unable to implement current
plans. In addition, if sufficient capital cannot be obtained, Apogee
may be forced to cease operations. In the event that any future
financing is affected, to the extent it includes equity securities; the holders
of the common stock may experience additional dilution. In the event
of a cessation of operations, there may not be sufficient assets to fully
satisfy all creditors, in which case, the holders of securities may be unable to
recoup any of their investment.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
We are in
the process of attempting to secure sufficient financing to meet our current
obligations and to continue development of our technology. We have
been working to obtain financing from outside investors for more than 24 months,
but have not yet been successful. In the interim, short-term debt
financing has been provided by Apogee’s significant shareholders, including our
President, Chief Executive Officer and Chairman of the Board of Directors, an
individual investor and others, and has been utilized to keep product
development moving forward. Additionally, cost cutting measures,
including salary reduction for non-PyraDerm employees,
diminished sensor development, deferral of capital expenditures, and reduced
general spending, have been instituted until such time as financing is secured,
if ever.
Due to
the early stages of development of our products, we cannot estimate at this time
the amounts of cash or the length of time that will be required to bring our
products under development to market. It is expected that such costs
will be funded not only by external funding, if available, but also through
partnership activities. Without additional financing, we will be
unable to continue operations.
On
October 28, 2009, the Company received a “Wells Notice” from the staff of the
Securities and Exchange Commission, which states the staff’s intent to recommend
that the Commission institute a public administrative proceeding against the
Company, alleging that it violated Section 13(a) of the Securities Exchange Act
of 1934. In connection with the contemplated proceedings, the staff
may seek a suspension or revocation of registration of each class of the
Company’s registered securities. Also, the staff may consider whether contempt
proceedings in a federal district court are appropriate. The Company
submitted a response to this letter on November 16, 2009. Should
suspension or revocation of our stock occur, the Company’s ability to raise
additional funding may be severely impacted.
See Note
13 – Subsequent Events for additional information.
Accounting
Principles
The
accompanying consolidated financial statements have been prepared using
accounting principles generally accepted in the United States of
America.
Consolidated
Financial Statements
The
financial statements include the accounts of Apogee Technology, Inc., and
its wholly owned inactive subsidiary, DUBLA, Inc. All significant
intercompany transactions and accounts have been eliminated.
Use of
Estimates in Financial Statements
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates, and such
differences could affect the results of operations reported in future periods
and such differences could be material.
2.
Summary
of Significant Accounting Policies
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
Accounting Standards: On
July 1, 2009, the Financial Accounting Standards Board (“FASB”) issued the
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB Accounting Standards Codification
(“ASC”) 105-10, General Accepted Accounting Principles (“ASC 105-10”). ASC
105-10 established the FASB Accounting Standards Codification (“Codification”)
as the single source of authoritative U.S. GAAP recognized by the FASB to be
applied by nongovernmental entities. Rules and interpretive releases
of the Securities and Exchange Commission (“SEC”) under authority of federal
securities laws are also sources of authoritative GAAP for SEC
registrants. The Codification supersedes all existing non-SEC accounting
and reporting standards. All other non -grandfathered, non-SEC accounting
literature not included in the Codification will become non-authoritative.
Following the Codification, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.
Instead, it will issue Accounting Standards Updates, which will serve to update
the Codification, provide background information about the guidance and provide
the basis for conclusions on the changes to the Codification. GAAP was not
intended to be changed as a result of the FASB’s Codification project, but it
will change the way the guidance is organized and presented. As a result,
these changes will have a significant impact on how companies reference GAAP in
their financial statements and in their accounting policies for financial
statements issued for interim and annual periods ending after September 15,
2009. Apogee has implemented the Codification in this quarterly report by
providing references to the Codification topics, as appropriate.
Revenue
Recognition
Revenue
is recognized when the following revenue recognition criteria are met:
(1) persuasive evidence of an arrangement exists; (2) the product has
been shipped and the customer takes ownership and assumes the risk of loss;
(3) the selling price is fixed or determinable; and (4) collection of
the resulting receivable is reasonably assured. The following policies apply to
Apogee’s two sales categories for revenue recognition. Sales to end users
(“OEM”): revenue is recognized under our standard terms and conditions of
sale, title and risk of loss transfer to the customer at the time products are
shipped from our warehouse or delivered to the customer’s representative/freight
forwarder. We accrue the estimated cost of post-sale obligations including
product warranty returns, based on historical experience. To date we have
experienced minimal warranty returns.
We record
royalty revenue when earned in accordance with the underlying agreements.
Consulting and licensing revenue is recognized as services are
performed.
In April
of 2008, SigmaTel, Inc. agreed to pay Apogee a percentage of the royalties it
received from STMicroelectronics NV (“ST”) in exchange for supporting their
royalty negotiations with ST. As a result of this agreement, Apogee received
approximately $63,000 during the year ended December 31, 2008. On November 4,
2008 Apogee was notified by STMicroelectronics NV that they had reached an
agreement with Freescale (formerly SigmaTel, Inc.) reducing the quarterly
royalties due Freescale. The original agreement was a result of the
transaction with SigmaTel, Inc. (“SigmaTel”) whereby we sold certain assets of
our audio division, including the DDX technology and the associated royalties
from our license agreement with ST, for approximately $9.78
million. Upon acceptance by Freescale of the lower royalty payments,
the arrangement agreed to between Freescale and Apogee in April 2008 was
cancelled. No further revenue is expected under this
arrangement.
Loss
Per Share
Basic net
loss per share is computed by dividing the net loss attributable to common
stockholders for the period by the weighted average number of common stock
outstanding during the period. Diluted net loss per share is computed
based on the weighted average number of common stock and dilutive potential
common stock outstanding. Potential common stock consists of
incremental common stock issuable upon the exercise of stock options and common
stock issuable upon the exercise of common stock warrants. The
calculation of diluted net loss per share excludes potential common stock as the
effect is anti-dilutive.
Research
and Development
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
Costs for
research and development are expensed as incurred.
Legal
Fees
We record
legal costs (such as fees and expenses of outside legal counsel and other
service providers) when incurred or when it is probable that a liability has
been incurred on or before the balance sheet date and the amount can be
reasonably estimated if invoices have not been received. Legal fees
incurred pursuant to patent applications are part of the patent costs and
capitalized.
Contingencies
Apogee is
involved in and/or indemnifies others in various legal
proceedings. Management assesses the probability of loss for such
contingencies and recognizes a liability when a loss is probable and
estimable. See Note 10 – Legal and Related Indemnification with our
Executives and Others.
Inventories
Inventories,
including inventory held at distributors, are stated at the lower of cost on a
first-in, first-out basis or market. This
policy requires us to make estimates regarding the market value of our
inventory, including an assessment of excess or obsolete inventory.
On
January 15, 2008, we sold the remaining DDX inventory held in our Norwood office
to one of our customers and on January 24, 2008, we sold the remaining DDX
inventory housed in Hong Kong to one of our former DDX
distributors. Total proceeds received from the disposition of the DDX
inventory were $17,000.
Asset
Impairment Charges
Long-lived
assets to be held and used are reviewed to determine whether any events or
changes in circumstances indicate that the carrying value of the asset may not
be recoverable. The conditions considered include whether or not the asset
has become obsolete, or whether external market circumstances indicate that the
carrying amount may not be recoverable. Management performs analysis
for impairment on a regular basis.
Property
and Equipment
Major
replacements and betterments of equipment are capitalized. Cost of
normal maintenance and repairs is charged to expense as
incurred. Depreciation is provided over the estimated useful lives of
the assets using accelerated methods.
Leasehold
Improvements
Leasehold
improvements are amortized over either the term of lease or the estimated useful
life of the improvement.
Patents
Costs
incurred to register and obtain patents are capitalized and amortized on a
straight-line basis over five years, their estimated useful
lives. Management performs analysis for impairment on a regular
basis.
Exclusive
License Fee
We
capitalized license fees paid to third parties for costs associated with the
exclusive rights to their patents. We amortize these fees over a
period of four years. During 2008, Apogee terminated the 2006 license
agreement with the University of Akron Research Foundation and expensed the
remaining license fees. In addition, during 2008, we expensed an
additional $30,000, which represented the minimum royalty due under this
terminated license agreement.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
Cash
and Cash Equivalents
We
consider all highly liquid investments with an original maturity of three months
or less to be cash equivalents.
Accounts
Receivable
We carry
trade receivables from customers less an allowance for doubtful accounts to
ensure that trade receivables are carried at net realizable value. On
a periodic basis, we evaluate the collectibility of our accounts receivable
based on a variety of factors, including length of time receivables are past
due, indication of customer ability to pay, significant one-time events and
historical experience. Accounts receivable are generally
considered past due if any portion of the receivable balance is outstanding for
more than 90 days. If circumstances related to our customers change,
estimates of the recoverability of receivables would be further
adjusted.
Advertising
Advertising
costs are expenses when incurred and were not significant for the three and nine
months ended September 30, 2009 and 2008.
Fair
Value of Financial Instruments
Carrying
amounts of certain of our financial instruments, including cash and cash
equivalents, accounts receivable and notes and accounts payable, approximate
their fair values due to their relatively short maturities and based upon
comparable market information available at the respective balance sheet dates.
We do not hold or issue financial instruments for trading purposes.
Stock-Based
Compensation
We
account for our stock based compensation as permitted by Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards, “Accounting
for Stock-Based Compensation” (SFAS 123(R)).
Accounting for Stock
Compensation
Stock-based
compensation costs are generally based on the fair value calculated from the
Black-Scholes option-pricing model on the date of grant for stock
options. The fair values of option grants are amortized as
compensation expense over the option’s vesting period. Compensation expense
recognized is shown in the operating activities section of the consolidated
statements of cash flow.
We
continue to calculate the expected stock price volatility based solely on
historical volatility. We believe that historical volatility provides the best
estimate of future stock price volatility.
The
expected term of options was previously and is currently calculated based on an
analysis of vesting periods and contractual life. Apogee believes that this
analysis provides a better estimate of option term periods.
We
estimate the expected life of the option and determine a risk-free rate based on
U.S. Treasury issues with remaining terms similar to the expected life of the
option. We have never paid cash dividends and do not currently intend
to pay cash dividends.
We
estimate potential forfeitures of stock grants and adjust compensation cost
recorded accordingly. The estimate of forfeitures will be adjusted over the
requisite service period to the extent that actual forfeitures differ, or are
expected to differ, from such estimates. Changes in estimated forfeitures will
be recognized through a cumulative adjustment in the period of change and will
also impact the amount of stock compensation expense to be recognized in future
periods.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
Apogee’s
stock compensation activity with respect to the nine months ended September 30,
2009 is summarized below:
Stock Options
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Outstanding
at December 31, 2008
|
|
3,068,100
|
|
$
|
4.4048
|
|
|
|
Granted
|
|
—
|
|
|
|
|
|
Exercised
|
|
—
|
|
|
|
|
|
Cancelled
or expired
|
|
135,600
|
|
0.6933
|
|
|
|
Outstanding
at September 30, 2009
|
|
2,932,500
|
|
$
|
4.5344
|
|
4.3770
|
|
|
|
|
|
|
|
|
|
Vested
at September 30, 2009
|
|
2,637,900
|
|
$
|
4.9347
|
|
3.9893
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2009
|
|
2,637,900
|
|
$
|
4.9347
|
|
3.9893
|
|
The
following table summarizes information about options outstanding as of September
30, 2009:
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
Remaining
|
|
Average
|
|
|
|
Average
|
|
Range of Exercise
|
|
Number
|
|
Contractual
|
|
Exercise
|
|
Number
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
Term
|
|
Price
|
|
Exercisable
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.25
— 1.69
|
|
1,054,900
|
|
6.5368
|
|
$
|
1.0203
|
|
717,300
|
|
$
|
1.0474
|
|
$2.71
— 6.59
|
|
1,282,600
|
|
2.5122
|
|
$
|
5.4065
|
|
1,299,200
|
|
$
|
5.4065
|
|
$8.45
— 12.15
|
|
595,000
|
|
4.5674
|
|
$
|
8.8849
|
|
599,000
|
|
$
|
8.8849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
at September 30, 2009
|
|
2,932,500
|
|
4.3770
|
|
$
|
4.5344
|
|
2,615,500
|
|
$
|
4.9347
|
|
Apogee
did not grant options during the nine months ended September 30,
2009. No options were exercised during nine months ended September
30, 2009 and 2008. During the nine months ended September 30, 2008, Apogee
granted options to purchase 160,000 shares of its common stock at a weighted
average fair market value of $0.6933. During the nine months ended September 30,
2009, options to purchase 135,600 shares of Apogee common stock vested. The weighted average
fair value of these options was $0.8169. During the nine months ended
September 30, 2009, options to purchase 135,600 shares of Apogee common stock
were cancelled. Total stock-based compensation expense for the three
and nine months ended September 30, 2009, was approximately $19,000 and $64,000,
respectively, compared to approximately $14,000 and $47,000, respectively, for
the three and nine months ended September 30, 2008. As of September
30, 2009, approximately 294,600 options to purchase approximately 294,600 shares
of Apogee common stock with an approximate value of $89,998 are not yet
vested.
Recent
Accounting Pronouncements
Management
does not believe there are any recently issued but not yet effective accounting
pronouncements that will have a material effect on our financial statements and
results of operation.
3.
Accounts Receivable
Accounts
receivable at September 30, 2009 and December 31, 2008 are comprised of the
following:
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
Accounts
Receivable
|
|
September
30,
|
|
December
31,
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
(Audited)
|
|
Distributor
|
|
$
|
—
|
|
$
|
—
|
|
Direct
customers
|
|
9,377
|
|
9,377
|
|
|
|
$
|
9,377
|
|
$
|
9,377
|
|
|
|
|
|
|
|
Less
allowance for doubtful accounts
|
|
$
|
(9,377
|
)
|
(9,377
|
)
|
|
|
|
|
|
|
Net
accounts receivable
|
|
$
|
—
|
|
$
|
—
|
|
4.
Property and Equipment
Property
and equipment at September 30, 2009 and December 31, 2008 are comprised of
the following:
Property
and Equipment
|
|
September 30,
|
|
December 31,
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
(Audited)
|
|
Equipment
|
|
$
|
189,781
|
|
$
|
189,781
|
|
Software
|
|
32,943
|
|
32,943
|
|
Furniture
and fixtures
|
|
22,047
|
|
22,047
|
|
Leasehold
improvements
|
|
92,892
|
|
92,892
|
|
|
|
|
|
|
|
|
|
$
|
337,663
|
|
$
|
337,663
|
|
|
|
|
|
|
|
Less
accumulated depreciation
|
|
(274,628
|
)
|
(226,511
|
)
|
|
|
|
|
|
|
|
|
$
|
63,035
|
|
$
|
111,152
|
|
Depreciation
expense was $8,141 and $24,423 for the three and nine months ended September 30,
2009, respectively, compared to $12,487 and $37,165 for the three and nine
months ended September 30, 2008, respectively.
The
estimated useful lives of the classes of physical assets were as
follows:
Description
|
|
Depreciable Lives
|
|
|
|
|
|
Equipment
|
|
5
years
|
|
Software
|
|
3
years
|
|
Furniture
and fixtures
|
|
7
years
|
|
Leasehold
improvements
|
|
Term
of lease
|
|
5.
Asset Impairment
We
recorded a patent impairment charge of approximately $17,000 at March 31,
2009. These patent applications were related to our Health Monitoring
Group which was closed down as of March 31, 2009. In addition, for
the three and nine months ended September 30, 2009, we amortized approximately
$9,800 and $29,200, respectively, of patent application related
expenses.
The
values of patent costs are summarized in the table below:
|
Gross
Carrying
Value
|
|
Accumulated
Amortization
|
|
Accumulated
Impairment
|
|
Net
Book Value
|
|
|
|
|
|
|
|
|
December
31, 2008
|
$414,523
|
|
(37,227)
|
|
(228,407)
|
|
$148,889
|
March
31, 2009
|
$420,524
|
|
(46,833)
|
|
(245,674)
|
|
$128,017
|
June
30, 2009
|
$423,736
|
|
(56,599)
|
|
(245,674)
|
|
$121,463
|
September
30, 2009
|
$424,726
|
|
(66,411)
|
|
(245,674)
|
|
$112,641
|
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
Estimated
Amortization is as follows:
Year
ended December 31,
|
Three
months ended December 2009
|
|
6,715
|
2010
|
|
34,628
|
2011
|
|
34,628
|
2012
|
|
34,628
|
2013
|
|
2,041
|
6.
Accounts Payable and Accrued Expenses
Accrued
expenses are included in accounts payable on the Balance Sheet. Accounts payable
and accrued expenses are as follows:
|
|
September
30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Audited)
|
|
Legal
and accounting expenses
|
|
$ |
1,712,000 |
|
|
$ |
1,612,000 |
|
Consulting
expenses
|
|
|
65,000 |
|
|
|
137,000 |
|
Interest
owed to Promissory Note holders
|
|
|
324,000 |
|
|
|
113,000 |
|
Corporate
insurance expenses
|
|
|
— |
|
|
|
5,000 |
|
Director
and Advisory Committee fees
|
|
|
86,000 |
|
|
|
43,000 |
|
Rent
expenses
|
|
|
57,000 |
|
|
|
18,000 |
|
Other
expenses
|
|
|
362,000 |
|
|
|
184,000 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,606,000 |
|
|
$ |
2,112,000 |
|
|
|
September
30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Audited)
|
|
Accrued
audit expenses
|
|
$ |
127,000 |
|
|
$ |
60,000 |
|
Accrued
legal expenses
|
|
|
15,000 |
|
|
|
15,000 |
|
Accrued
consulting expenses
|
|
|
45,000 |
|
|
|
56,000 |
|
Accrued
payroll and payroll taxes
|
|
|
123,000 |
|
|
|
— |
|
Other
accrued expenses
|
|
|
50,000 |
|
|
|
24,000 |
|
|
|
$ |
360,000 |
|
|
$ |
155,000 |
|
7.
Promissory Notes, Loans and Warrants
During
the three and nine months ended September 30, 2009, Apogee received $135,000 and
$871,900, respectively, in proceeds from unsecured interest-bearing promissory
notes. During the nine months ended September 30, 2009 Apogee received $163,900
from Mr. Herbert M. Stein, President, Chief Executive Officer and Chairman of
the Board of Directors, $223,000 from Mr. David Spiegel, a major shareholder,
$63,000 from The Spiegel Family Limited Partnership, $345,000 from Mr. Robert
Schacter et al, $45,000 from Leo Spiegel, $30,000 from JAZFund LLC, and $2,000
from others. These promissory notes are payable upon demand,
not subject to premium or penalty for prepayment, bear simple
interest of 8% per annum, and are to be repaid in 180 days. An
additional 4% interest will be charged after maturity. As of
September 30, 2009, total unpaid interest of approximately $324,400 is due,
consisting of $132,900 to Mr. Stein, $137,400 to Mr. Spiegel, $42,700 to Mr.
Robert Schacter et al and $11,400 to others.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
Through
September 30, 2009, Apogee has received total proceeds from loans and promissory
notes of $2.8 million, consisting of $1.1 million, $948,900, $585,000 and
$168,000 from Mr. Spiegel, Mr. Stein, Mr. Schacter and others,
respectively.
As of
September 30, 2009, promissory notes in the amount of $2,353,900 are in default
and accruing post-maturity interest.
|
|
|
|
Promissory
Notes and Loans Due To
David
Spiegel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
of
|
|
|
|
Maturity
|
|
Initial
|
|
|
Current
|
|
Promissory
Note
|
|
Amount
|
|
Date
|
|
Interest
Rate
|
|
|
Interest
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
December
11, 2007
|
|
$ |
150,000 |
|
March
10, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
February
21, 2008
|
|
|
100,000 |
|
August
19, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
March
20, 2008
|
|
|
100,000 |
|
September
16, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
April
1, 2008
|
|
|
50,000 |
|
September
28, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
May
15, 2008
|
|
|
50,000 |
|
November
11, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
June
16, 2008
|
|
|
65,000 |
|
December
13, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
June
18, 2008
|
|
|
50,000 |
|
December
15, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
July
15, 2008
|
|
|
50,000 |
|
January
11, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
July
28, 2008
|
|
|
50,000 |
|
January
24, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
August
12, 2008
|
|
|
35,000 |
|
February
8, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
August
27, 2008
|
|
|
35,000 |
|
February
23, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
September
5, 2008
|
|
|
35,000 |
|
March
4, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
October
27, 2008
|
|
|
35,000 |
|
April
25, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
January
6, 2009
|
|
|
80,000 |
|
July
5, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
March
19, 2009
|
|
|
64,000 |
|
September
15, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
May
19, 2009
|
|
|
35,000 |
|
November
15, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
June
10, 2009
|
|
|
25,000 |
|
December
7, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
July
1, 2009
|
|
|
32,000 |
|
December
28, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
November
5, 2009*
|
|
|
67,000 |
|
May
4, 2010
|
|
|
8.00 |
% |
|
|
8.00 |
% |
|
|
$ |
1,108,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory
Notes and Loans Due To
Herbert
M. Stein
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
of
|
|
|
|
Maturity
|
|
Initial
|
|
|
Current
|
|
Promissory
Note
|
|
Amount
|
|
Date
|
|
Interest
Rate
|
|
|
Interest
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
December
11, 2007
|
|
$ |
250,000 |
|
March
10, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
February
21, 2008
|
|
|
100,000 |
|
August
19, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
March
20, 2008
|
|
|
50,000 |
|
September
16, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
April
1, 2008
|
|
|
50,000 |
|
September
28, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
May
15, 2008
|
|
|
50,000 |
|
November
11, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
June
16, 2008
|
|
|
35,000 |
|
December
13, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
June
18, 2008
|
|
|
40,000 |
|
December
15, 2008
|
|
|
8.00 |
% |
|
|
12.00 |
% |
July
15, 2008
|
|
|
30,000 |
|
January
11, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
July
28, 2008
|
|
|
50,000 |
|
January
24, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
August
12, 2008
|
|
|
35,000 |
|
February
8, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
August
27, 2008
|
|
|
35,000 |
|
February
23, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
September
5, 2008
|
|
|
35,000 |
|
March
4, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
October
27, 2008
|
|
|
25,000 |
|
April
25, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
February
2, 2009
|
|
|
30,000 |
|
August
1, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
February
17, 2009
|
|
|
10,000 |
|
August
16, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
March
19, 2009
|
|
|
25,900 |
|
September
15, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
April
13, 2009
|
|
|
33,000 |
|
October
10, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
May
18, 2009
|
|
|
12,000 |
|
November
14, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
July
1, 2009
|
|
|
20,000 |
|
December
28, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
November
5, 2009**
|
|
|
33,000 |
|
May
4, 2010
|
|
|
8.00 |
% |
|
|
8.00 |
% |
|
|
$ |
948,900 |
|
|
|
|
|
|
|
|
|
|
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
|
|
|
|
Promissory
Notes and Loans Due To
Robert
Schacter et al
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
of
|
|
|
|
Maturity
|
|
Initial
|
|
|
Current
|
|
Promissory
Note
|
|
Amount
|
|
Date
|
|
Interest
Rate
|
|
|
Interest
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
September
5, 2008
|
|
$ |
140,000 |
|
March
4, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
October
27, 2008
|
|
|
100,000 |
|
April
25, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
January
8, 2009
|
|
|
100,000 |
|
July
7, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
February
2, 2009
|
|
|
50,000 |
|
August
1, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
February
17, 2009
|
|
|
50,000 |
|
August
16, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
March
19, 2009
|
|
|
50,000 |
|
September
15, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
April
13, 2009
|
|
|
20,000 |
|
October
10, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
June
10, 2009
|
|
|
25,000 |
|
December
7, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
November
5, 2009
|
|
|
50,000 |
|
May
4, 2010
|
|
|
8.00 |
% |
|
|
8.00 |
% |
|
|
$ |
585,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory
Notes and Loans Due To
Others
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
of
|
|
|
|
Maturity
|
|
Initial
|
|
|
Current
|
|
Promissory
Note
|
|
Amount
|
|
Date
|
|
Interest
Rate
|
|
|
Interest
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
July
28, 2008
|
|
$ |
20,000 |
|
March
4, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
October
27, 2008
|
|
|
6,000 |
|
April
25, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
January
6, 2009
|
|
|
500 |
|
July
5, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
February
17, 2009
|
|
|
37,000 |
|
August
16, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
March
19, 2009
|
|
|
500 |
|
September
15, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
April
13, 2009
|
|
|
61,500 |
|
October
12 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
May
18, 2009
|
|
|
32,500 |
|
November
14, 2009
|
|
|
8.00 |
% |
|
|
12.00 |
% |
November
5, 2009
|
|
|
10,000 |
|
May
4, 2010
|
|
|
8.00 |
% |
|
|
8.00 |
% |
|
|
$ |
168,000 |
|
|
|
|
|
|
|
|
|
|
* This
amount excludes funds received subsequent to September 30,
2009. Total received $103,000.
** This
amount excludes funds received subsequent to September 30,
2009. Total received $42,500.
The
promissory notes issued to Messrs. Stein and Spiegel from December 11, 2007
through March 19, 2009 for an aggregate of $1,799,900 are incurring a
post-maturity rate of interest of 12% compounded monthly. The
promissory notes originally were issued with simple interest of 8% per year and
were to be repaid in cash after 90 days for the December 11, 2007 and 180 days
for the remaining promissory notes. The effective interest rate is
approximately 19%.
The
following tables represent the net payable from promissory notes and loans as of
September 30, 2009:
|
|
Officer
Loans
Herbert
M. Stein
|
|
Shareholder
Loans
David
Spiegel
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Total
proceeds from Loans and Promissory Notes
|
|
$
|
948,900
|
|
$
|
1,108,000
|
|
$
|
2,056,900
|
|
Discount (Fair
Market Value of Warrants)
|
|
|
(592
|
)
|
|
(2,040
|
)
|
|
(2,632
|
)
|
|
|
$
|
948,308
|
|
$
|
1,105,960
|
|
$
|
2,054,268
|
|
|
|
Loans
Robert
Schacter et al
|
|
Loans
Others
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Total
proceeds from Loans and Promissory Notes
|
|
$
|
585,000
|
|
$
|
168,000
|
|
$
|
753,000
|
|
Discount
(Fair Market Value of Warrants)
|
|
|
(1,031
|
)
|
|
(514
|
)
|
|
(1,545
|
)
|
|
|
$
|
583,969
|
|
$
|
167,486
|
|
$
|
751,455
|
|
In
connection with the issuance of the promissory notes, we issued warrants to
purchase our common stock. Each warrant expires three years from
issue date with an exercise price of $1.00 per share. As of September
30, 2009, these warrants represent, in the aggregate, an underlying ninety-five
thousand eight hundred (95,800) shares of common stock for Mr. Spiegel, an
underlying seventy thousand eight hundred forty (70,840) shares of common stock
for Mr. Stein, an underlying one hundred thirty-two thousand seven hundred fifty
(132,750) shares of common stock for Mr. Schacter, and an underlying twenty-six
thousand five hundred fifty (26,550) shares of common stock for
others. These warrants were issued as added consideration for the
notes. These warrants include customary terms and include a cashless
or net exercise provision for exercise. The values of these warrants were
determined by using the Black Scholes valuation model.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
|
|
|
David
Spiegel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Price
|
|
|
Risk
Free
|
|
|
|
|
Number
of
|
At
Date of
|
Term
of
|
Strike
|
Interest
|
|
Value
Per
|
|
Date
of Warrant
|
Shares
|
Issuance
|
Warrant
|
Price
|
Rate
|
Volatility
|
Warrant
|
Total
Value
|
|
|
|
|
|
|
|
|
|
February
21, 2008
|
10,000
|
$0.65
|
3
Years
|
$1.00
|
2.23
|
98.45824%
|
$0.3462
|
$3,462.00
|
March
20, 2008
|
10,000
|
$0.70
|
3
Years
|
$1.00
|
1.71
|
99.87467%
|
$0.3867
|
3,867.00
|
April
1, 2008
|
5,000
|
$0.85
|
3
Years
|
$1.00
|
1.94
|
100.00925%
|
$0.5042
|
2,526.00
|
May
15, 2008
|
5,000
|
$0.83
|
3
Years
|
$1.00
|
2.70
|
102.78266%
|
$0.5036
|
2,518.00
|
June
16, 2008
|
6,500
|
$0.63
|
3
Years
|
$1.00
|
3.33
|
104.12541%
|
$0.3555
|
2,310.75
|
June
18, 2008
|
5,000
|
$0.61
|
3
Years
|
$1.00
|
3.19
|
104.07197%
|
$0.3397
|
1,698.50
|
July
15, 2008
|
5,000
|
$0.87
|
3
Years
|
$1.00
|
2.70
|
104.55357%
|
$0.5429
|
2,714.50
|
July
28, 2008
|
5,000
|
$0.75
|
3
Years
|
$1.00
|
2.90
|
104.54508%
|
$0.4481
|
2,240.60
|
August
12, 2008
|
3,500
|
$0.75
|
3
Years
|
$1.00
|
2.73
|
104.93498%
|
$0.4488
|
1,570.80
|
August
27, 2008
|
3,500
|
$0.85
|
3
Years
|
$1.00
|
2.58
|
106.26182%
|
$0.5331
|
1,865.85
|
September
5, 2008
|
3,500
|
$0.86
|
3
Years
|
$1.00
|
2.44
|
106.21122%
|
$0.5404
|
1,891.40
|
October
27, 2008
|
3,500
|
$0.60
|
3
Years
|
$1.00
|
1.83
|
108.82589%
|
$0.3431
|
1,200.85
|
January
6, 2009
|
8,000
|
$0.75
|
3
Years
|
$1.00
|
1.10
|
108.80131%
|
$0.4566
|
3,652.80
|
March
19, 2009
|
6,400
|
$0.68
|
3
Years
|
$1.00
|
1.21
|
109.80676%
|
$0.4057
|
2,596.48
|
May
19, 2009
|
3,500
|
$0.70
|
3
Years
|
$1.00
|
1.37
|
111.74849%
|
$0.4288
|
1,500.80
|
June
10, 2009
|
2,500
|
$0.60
|
3
Years
|
$1.00
|
2.00
|
126.10551%
|
$0.3959
|
989.75
|
July
1, 2009
|
3,200
|
$0.87
|
3
Years
|
$1.00
|
1.57
|
128.93341%
|
0.6295
|
2,014.40
|
November
5, 2009
|
6,700
|
$1.02
|
3
Years
|
$1.00
|
1.44
|
131.45892%
|
$0.7681
|
7,911.43
|
Total
|
95,800
|
|
|
|
|
|
|
$46,531.81
|
|
|
|
Herbert
M. Stein
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Price
|
|
|
Risk
Free
|
|
|
|
|
Number
of
|
At
Date of
|
Term
of
|
Strike
|
Interest
|
|
Value
Per
|
|
Date
of Warrant
|
Shares
|
Issuance
|
Warrant
|
Price
|
Rate
|
Volatility
|
Warrant
|
Total
Value
|
|
|
|
|
|
|
|
|
|
February
21, 2008
|
10,000
|
$0.65
|
3
Years
|
$1.00
|
2.23
|
98.45824%
|
$0.3462
|
$3,462.00
|
March
20, 2008
|
5,000
|
$0.70
|
3
Years
|
$1.00
|
1.71
|
99.87467%
|
$0.3867
|
1,933.50
|
April
1, 2008
|
5,000
|
$0.85
|
3
Years
|
$1.00
|
1.94
|
100.00925%
|
$0.5042
|
2,526.00
|
May
15, 2008
|
5,000
|
$0.83
|
3
Years
|
$1.00
|
2.70
|
102.78266%
|
$0.5036
|
2,518.00
|
June
16, 2008
|
3,500
|
$0.63
|
3
Years
|
$1.00
|
3.33
|
104.12541%
|
$0.3555
|
1,244.25
|
June
18, 2008
|
4,000
|
$0.61
|
3
Years
|
$1.00
|
3.19
|
104.07197%
|
$0.3397
|
1,358.80
|
July
15, 2008
|
3,000
|
$0.87
|
3
Years
|
$1.00
|
2.70
|
104.55357%
|
$0.5429
|
1,628.70
|
July
28, 2008
|
5,000
|
$0.75
|
3
Years
|
$1.00
|
2.90
|
104.545
08%
|
$0.4481
|
2,240.60
|
August
12, 2008
|
3,500
|
$0.75
|
3
Years
|
$1.00
|
2.73
|
104.93498%
|
$0.4488
|
1,570.80
|
August
27, 2008
|
3,500
|
$0.85
|
3
Years
|
$1.00
|
2.58
|
106.26182%
|
$0.5331
|
1,865.85
|
September
5, 2008
|
3,500
|
$0.86
|
3
Years
|
$1.00
|
2.44
|
106.21122%
|
$0.5404
|
1,891.40
|
October
27, 2008
|
2,500
|
$0.60
|
3
Years
|
$1.00
|
1.83
|
108.82589%
|
$0.3431
|
857.75
|
February
2, 2009
|
3,000
|
$0.70
|
3
Years
|
$1.00
|
1.27
|
109.04276%
|
$0.4188
|
1,256.40
|
February
17, 2009
|
1,000
|
$0.83
|
3
Years
|
$1.00
|
1.22
|
109.04322%
|
$0.5219
|
521.90
|
March
19, 2009
|
2,590
|
$0.68
|
3
Years
|
$1.00
|
1.21
|
109.80676%
|
$0.4057
|
1,050.76
|
April
13, 2009
|
3,300
|
$0.60
|
3
Years
|
$1.00
|
1.27
|
110.59204%
|
$0.3469
|
1,144.77
|
May
18, 2009
|
1,200
|
0.70
|
3
Years
|
$1.00
|
1.36
|
111.77410%
|
$0.4288
|
514.56
|
July
1, 2009
|
2,000
|
$0.87
|
3
Years
|
$1.00
|
1.57
|
128.93341%
|
0.6295
|
1,259.20
|
November
5, 2009
|
4,250
|
$1.02
|
3
Years
|
$1.00
|
1.44
|
131.45892%
|
$0.7681
|
3,264.43
|
Total
|
70,840
|
|
|
|
|
|
|
$32,109.67
|
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
|
|
|
Robert
Schacter et al*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Price
|
|
|
Risk
Free
|
|
|
|
|
|
Number
of
|
At
Date of
|
Term
of
|
Strike
|
Interest
|
|
Value
Per
|
|
|
Date
of Warrant
|
Shares
|
Issuance
|
Warrant
|
Price
|
Rate
|
Volatility
|
Warrant
|
|
Total
Value
|
|
|
|
|
|
|
|
|
|
|
September
5, 2008
|
14,000
|
$0.86
|
3
Years
|
$1.00
|
2.44
|
106.21122%
|
$0.5404
|
$ |
7,565.60
|
October
27, 2008
|
25,000
|
$0.60
|
3
Years
|
$1.00
|
1.83
|
108.82589%
|
$0.3431
|
|
8,577.50
|
January
8, 2009
|
25,000
|
$0.90
|
3
Years
|
$1.00
|
1.16
|
108.85621%
|
$0.5777
|
|
14,442.50
|
February
2, 2009
|
12,500
|
$0.70
|
3
Years
|
$1.00
|
1.27
|
109.04276%
|
$0.4188
|
|
5,235.00
|
February
17, 2009
|
12,500
|
$0.83
|
3
Years
|
$1.00
|
1.22
|
109.04322%
|
$0.5219
|
|
6,523.75
|
March
19, 2009
|
12,500
|
$0.68
|
3
Years
|
$1.00
|
1.21
|
109.80676%
|
$0.4057
|
|
5,071.25
|
April
13, 2009
|
5,000
|
$0.60
|
3
Years
|
$1.00
|
1.27
|
110.59204%
|
$0.3469
|
|
1,734.50
|
June
10, 2009
|
6,250
|
$0.60.
|
3
Years
|
$1.00
|
2.00
|
126.10551%
|
$0.3959
|
|
2,474.38
|
November
5, 2009
|
20,000
|
$1.02
|
3
Years
|
$1.00
|
1.44
|
131.45892%
|
$0.7681
|
|
15,362.00
|
Total
|
132,750
|
|
|
|
|
|
|
$ |
66,986.48
|
*128,750
warrants issued in the name of TYJO Corporation Money Purchase Pension Plan,
2,000 warrants issued in the name of Mr. Robert Schacter, as Custodian for Tyler
Schacter UTMA/CA and 2,000 warrants issued in the name of Mr. Robert Schacter,
as Custodian for Joseph Schacter UTMA/CA.
|
|
|
Others
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Price
|
|
|
Risk
Free
|
|
|
|
|
|
Number
of
|
At
Date of
|
Term
of
|
Strike
|
Interest
|
|
Value
Per
|
|
|
Date
of Warrant
|
Shares
|
Issuance
|
Warrant
|
Price
|
Rate
|
Volatility
|
Warrant
|
|
Total
Value
|
July
28, 2008
|
2,000
|
$0.75
|
3
Years
|
$1.00
|
2.90
|
104.545
08%
|
$0.4460
|
$ |
892.00
|
October
27, 2008
|
600
|
$0.60
|
3
Years
|
$1.00
|
1.83
|
108.82589%
|
$0.3431
|
|
205.86
|
January
6, 2009
|
50
|
$0.75
|
3
Years
|
$1.00
|
1.10
|
108.80131%
|
$0.4566
|
|
22.83
|
February
17, 2009
|
8,950
|
$0.83
|
3
Years
|
$1.00
|
1.22
|
109.04322%
|
$0.5219
|
|
4,671.01
|
March
19, 2009
|
50
|
$0.68
|
3
Years
|
$1.00
|
1.21
|
109.80676%
|
$0.4057
|
|
20.29
|
April
13, 2009
|
10,650
|
$0.60
|
3
Years
|
$1.00
|
1.27
|
110.59204%
|
$0.3469
|
|
3,694.49
|
May
18, 2009
|
3,200
|
0.70
|
3
Years
|
$1.00
|
1.36
|
111.77410%
|
$0.4288
|
|
1,372.15
|
May
19 2009
|
50
|
$0.70
|
3
Years
|
$1.00
|
1.37
|
111.74849%
|
$0.4288
|
|
21.44
|
November
5, 2009
|
1,000
|
$1.02
|
3
Years
|
$1.00
|
1.44
|
131.45892%
|
$0.7681
|
|
768.10
|
Total
|
26,550
|
|
|
|
|
|
|
$ |
11,668.17
|
The
carrying value of the notes and loans payable approximate fair value due to
their short-term maturity.
8.
Stockholders’ Deficiency
Preferred
Stock
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
At our
Annual Meeting held on August 28, 2007, our shareholders approved an Amendment
to the Amended and Restated Certificate of Incorporation authorizing five
million shares of undesignated preferred stock. These shares will
have future rights and preferences to be determined at the sole discretion of
our Board of Directors. No preferred stock has been
issued.
Common
Stock
On April
9, 2008, Apogee sold 164,000 shares of our common stock to accredited investors
at a price of $1.00 per share. The net proceeds to Apogee were
$152,519, which we have used for general working capital and corporate
purposes. The shares of Apogee’s common stock were issued and
sold in a private placement in reliance on an exemption from registration
provided by Section 4(2) of Securities Act of 133, as amended, and Rule 506 of
Regulation D promulgated thereunder. The shares of
common stock issued in this private placement were not registered under the
Securities Act of 1933 and may not be subsequently offered or sold by the
investors in the United States absent registration or an applicable exemption
from the registration requirements.
Stock
Options
During
the nine months ended September 30, 2009 no stock options were
awarded. During the three months ended September 30, 2008, we awarded
each of our outside directors’ options to purchase 40,000 shares, at an exercise
price of $1.00 per share. These options were granted under the 2007
Plan. The options granted to these employees vest over five years beginning at
the first anniversary of the date of grant.
9.
Related Party Transactions
Apogee
rents its facility from an entity controlled by a stockholder for $4,400 per
month pursuant to a lease that expired December 31, 2005. Currently, we are
renting the facility on a month-to-month basis. Rent expense was
$52,800 for the fiscal years ended December 31, 2008. Rent has been
accrued and remains unpaid since September 2008. See also Note 7 –
Promissory Notes, Loans and Warrants from Officers and Significant
Stockholders.
10. Legal
and Related Indemnification
Arrangements with our Executives and Others
Apogee
has assumed and will continue to assume the final legal costs and related
expenses of Herbert M. Stein, in connection with the civil action styled Joseph Shamy vs. Herbert M. Stein,
Case No.: 50 2005 CA 007719 XXXXMB. In this action instituted
in the 15th Judicial Circuit in and for Palm Beach County, Florida (the
"Court), Joseph Shamy sued Herbert M. Stein, President, Chief Executive Officer
and Chairman of the Board of Apogee in connection with Shamy’s purchase of
Apogee shares in 2003 and 2004. In February 2009, in connection with
a settlement, the Court entered a Final Judgment against Mr.
Stein. In early January 2010, a filing was made with the Court
to memorialize the Total and Complete Satisfaction of Judgment, which states
that all sums due under the civil action were fully paid and that the Final
Judgment was satisfied and canceled. Further, the Clerk of the Court
was directed to note satisfaction of the Final Judgment and cancellation of all
judgments of record in this action. Apogee was not a party to the aforementioned
settlement or the satisfaction of the Final Judgment. Through January
1, 2010, we have incurred approximately $887,000 toward this
indemnification. For the three and nine months ended September 30,
2009, we have incurred approximately $9,000 and $81,000, respectively, compared
to approximately $14,000 and $89,000, respectively for the three and nine months
ended September 30, 2008.
The
Company first became aware of an investigation by the SEC in May 2005. The
subject matter of this investigation was the Company's prior revenue recognition
practices that were addressed in the Company's restatement of its financial
statements for the fiscal year ended December 31, 2004. As previously disclosed
in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004,
as amended, Apogee’s Audit Committee, with the assistance of independent
counsel, conducted an investigation into Apogee’s historical accounting
practices that resulted in the implementation of remedial actions. See our
Annual Report on Form 10-KSB for the year ended December 31, 2004, as amended,
for detail regarding the restatement.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
In July
2008, Apogee, it’s Chief Executive Officer and other employees
received notifications from the Staff of the SEC relating to the Staff's 2005
investigation. These notifications, known as “Wells Notices,” stated that the
Staff is considering recommending that the Commission bring enforcement actions
against the Company and certain employees, based on alleged violations of
certain provisions of the federal securities laws, including Section 17(a) of
the Securities Act of 1933, as amended, Section 10(b) of the Securities Exchange
Act of 1934, as amended, and Rule 10b-5 thereunder, Sections 13(a), 13(b)(2)(A)
and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13
thereunder. The Wells Notice sent to the Company indicates that in any action
actually brought against the Company, the Staff would seek an injunction against
future violations of the federal securities laws as relief.
On May
19, 2009, the Securities and Exchange Commission (“commission”) filed a settled
enforcement action against the Company, one employee, and one former employee
(“Others”) in connection with Apogee’s prior revenue recognition
practices. Each of the defendants has agreed to settle this matter,
without admitting or denying the allegations of the Commission’s
complaint. Apogee and others agreed to the entry of a final judgment
permanently enjoining them from variously violating or aiding and abetting
violations of Sections of the Securities Act of 1933, and Sections of the
Securities Exchange Act of 1934, and various Rules. The others also
agreed to financial and other sanctions. Through January 1, 2010, we
have incurred approximately $554,000 toward this indemnification. We
did not incur any expense toward this indemnification for the three months ended
September 30, 2009. For the nine months ended September 30, 2009, we
have incurred approximately $1,600, compared to approximately $118,000 and
$533,000 for the same periods in 2008. See Note 13 - Subsequent
Events – Notification from the Securities and Exchange Commission.
As of
March 31, 2009, Apogee’s Directors and Officers Liability Insurance was
cancelled due to non-payment. Apogee may be required to pay any
uninsured claims and related costs.
On
October 28, 2009, the Company received a “Wells Notice” from the staff of the
Securities and Exchange Commission – See Note 13 – Subsequent Events – SEC
Administrative Proceeding.
11.
Tax
Loss Carryforwards
The
following approximates the net loss carryforwards we have available in the
future for federal and state tax purposes as of December 31, 2008
(audited):
|
|
December 31,
|
|
December
31,
|
|
|
|
2008
|
|
2007
|
|
Net operating loss
carryforwards
|
|
|
|
|
|
Federal
|
|
$
|
19,000,000
|
|
$
|
15,000,000
|
|
State
|
|
$
|
12,000,000
|
|
$
|
9,200,000
|
|
Business
credits available in the future:
|
|
December 31,
|
|
December
31,
|
|
|
|
2008
|
|
2007
|
|
Business credits
available in the future
|
|
|
|
|
|
Federal
|
|
$
|
940,000
|
|
$
|
980,000
|
|
State
|
|
$
|
330,000
|
|
$
|
300,000
|
|
The
Company does not record a net tax benefit asset due to the uncertainty of its
realization.
The net
operating loss carryforwards will begin to expire in 2018 for federal tax
purposes and in 2009 for state tax purposes. The federal and state
credits will begin to expire in 2017.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
|
Significant
changes in our ownership may substantially reduce the available
carryforwards and related tax
benefits.
|
12. Supplemental
Cash Flow Information
As of
September 30, 2009, we recorded cumulatively approximately $456,000 in interest
expense of which approximately $7,700 was paid. We recorded interest expense of
approximately $97,000 and $280,000 for the three and nine months ended September
30, 2009, respectively, compared to approximately $56,000 and $103,000 for the
same periods in 2008.
13. Subsequent
Events
Additional
Financings
The
following table details all financings subsequent to September 30,
2009:
|
Amount
|
|
|
|
Risk
|
|
|
Total
|
Date
of
|
of
|
|
|
Number
|
Free
|
|
Value
|
Value
|
Loan
or Promissory
|
Loan
or
|
Maturity
|
|
of
|
Interest
|
|
Per
|
of
|
Note
and Warrant
|
Note
|
Date
|
Interest
|
Warrants
|
Rate
|
Volatility
|
Warrant
|
Warrants
|
David
Spiegel
|
|
|
|
|
|
|
|
|
November
5, 2009*
|
$36,000
|
May
4, 2010
|
8.00%
|
3,600
|
1.44
|
131.4589%
|
$0.7681
|
$2,765.16
|
December
21, 2009
|
68,000
|
June
19, 2010
|
8.00%
|
6,800
|
1.42
|
133.8376%
|
$0.8029
|
5,459.72
|
January
25, 2010
|
4,665
|
July
24, 2010
|
8.00%
|
466
|
1.40
|
134.8047%
|
$0.7268
|
338.69
|
April
16, 2010
|
16,000
|
October
13, 2010
|
8.00%
|
1,600
|
1.56
|
136.4302%
|
$0.6800
|
1,088.00
|
June
4, 2010
|
14,000
|
December
1, 2010
|
8.00%
|
1,400
|
1.17
|
153.1282%
|
$0.3740
|
523.60
|
August
11, 2010
|
100,000
|
February
7, 2011
|
8.00%
|
10,000
|
0.81
|
157.1615%
|
$0.2115
|
2,115.00
|
|
$238,665
|
|
|
23,866
|
|
|
|
$12,290.17
|
*This
amount excludes funds received prior to September 30, 2009. Total
received $103,000.
|
Amount
|
|
|
|
Risk
|
|
|
Total
|
Date
of
|
of
|
|
|
Number
|
Free
|
|
Value
|
Value
|
Loan
or Promissory
|
Loan
or
|
Maturity
|
|
of
|
Interest
|
|
Per
|
of
|
Note
and Warrant
|
Note
|
Date
|
Interest
|
Warrants
|
Rate
|
Volatility
|
Warrant
|
Warrants
|
Herbert
M. Stein
|
|
|
|
|
|
|
|
|
November
5, 2009*
|
$9,500
|
May
4, 2010
|
8.00%
|
950
|
1.44
|
131.4589%
|
$0.7681
|
$ 729.70
|
December
21, 2009
|
83,500
|
June
19, 2010
|
8.00%
|
8,350
|
1.42
|
133.8376%
|
$0.8029
|
6,704.22
|
January
25, 2010
|
79,000
|
July
24, 2010
|
8.00%
|
7,900
|
1.40
|
134.8047%
|
$0.7268
|
5,741.72
|
February
22, 2010
|
66,000
|
August
21, 2010
|
8.00%
|
6,600
|
1.48
|
134.4382%
|
$0.5011
|
3,307.26
|
April
16, 2010
|
86,500
|
October
13, 2010
|
8.00%
|
8,650
|
1.56
|
136.4302%
|
$0.6800
|
5,882.00
|
June
4, 2010
|
116,000
|
December
1, 2010
|
8.00%
|
11,600
|
1.17
|
153.1282%
|
$0.3740
|
4,338.40
|
August
11, 2010
|
45,700
|
February
7, 2011
|
8.00%
|
4,570
|
0.81
|
157.1615%
|
$0.2115
|
1,002.51
|
|
$486,200
|
|
|
48,620
|
|
|
|
$27,705.81
|
*This
amount excludes funds received prior to September 30, 2009. Total
received $42,500.
|
Amount
|
|
|
|
Risk
|
|
|
Total
|
Date
of
|
of
|
|
|
Number
|
Free
|
|
Value
|
Value
|
Loan
or Promissory
|
Loan
or
|
Maturity
|
|
of
|
Interest
|
|
Per
|
of
|
Note
and Warrant
|
Note
|
Date
|
Interest
|
Warrants
|
Rate
|
Volatility
|
Warrant
|
Warrants
|
Robert
Schacter et al
|
|
|
|
|
|
|
|
|
July
9, 2010*
|
25,000
|
|
|
|
|
|
|
|
* It has
not yet been determined whether these funds are to be considered a loan or
equity.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
|
Amount
|
|
|
|
Risk
|
|
|
Total
|
Date
of
|
of
|
|
|
Number
|
Free
|
|
Value
|
Value
|
Loan
or Promissory
|
Loan
or
|
Maturity
|
|
of
|
Interest
|
|
Per
|
of
|
Note
and Warrant
|
Note
|
Date
|
Interest
|
Warrants
|
Rate
|
Volatility
|
Warrant
|
Warrants
|
Other
|
|
|
|
|
|
|
|
|
November
5, 2009
|
$60,000
|
May
4, 2010
|
8.00%
|
15,000
|
1.44
|
131.4589%
|
$0.7681
|
$11,521.50
|
December
21, 2009
|
2,563
|
June
19, 2010
|
8.00%
|
256
|
1.42
|
133.8376%
|
$0.8029
|
205.54
|
January
25, 2010
|
30,000
|
July
24, 2010
|
8.00%
|
7,500
|
1.40
|
134.8047%
|
$0.7268
|
5,451.00
|
June
4, 2010
|
20,000
|
December
1, 2010
|
12.00%
|
27,500
|
1.17
|
153.1282%
|
$0.3740
|
10,285.00
|
|
$122,563
|
|
|
50,256
|
|
|
|
$27,193.04
|
All
warrants have been issued.
All
warrants have been issued at an exercise price of $1.00, had a three-year term
and were issued as additional consideration for the promissory
notes. Upon reaching maturity, interest on these loans is compounded
monthly and increased by 4 percentage points. See below for details
related to the conversion of accrued interest by two note holders in June
2010.
Sale
of Common Stock
On May
24, 2010 and June 4, 2010 Apogee received $50,000 and $25,000, respectively,
from TYJO Corporation Money Purchase Pension Plan for the purchase of 75,000
shares of Apogee common stock and warrants to purchase 37,500 shares of Apogee
common stock. These warrants are exercisable immediately upon
issuance, for a term of three years at an exercise price of $1.00 per
share.
Interest
Conversion
On June
26, 2010 the Company completed an offer to its Note holders whereby Note holders
could convert all interest amounts accrued and unpaid as of April 15,
2010 into the Company’s Common Stock at a price of $1 per share. Two Note
holders accepted this offer:
|
|
Interest
|
|
Note
Holder
|
|
Converted
|
|
Herbert
M. Stein
|
|
$
|
204,098
|
|
Robert
Schacter, et al
|
|
|
82,024
|
|
Total
interest converted
|
|
$
|
286,122
|
|
This
transaction resulted in a gain on extinguishment of debt of $32,810 as a result
of the interest conversion by Mr. Schacter. This transaction was
recorded as of June 30, 2010. The interest conversion by Mr. Stein
was recorded as a capital transaction and recorded in Additional Paid-In
capital.
Promissory
Notes Conversion
Mr.
Robert Schacter requested that the $545,000 in Promissory Notes outstanding at
December 31, 2009 in the name of Robert Schacter (TYJO Corp. Money Purchase
Pension Plan), and $20,000 each issued in the names of Mr. Robert Schacter, as
Custodian for Tyler Schacter UTMA/CA and Mr. Robert Schacter, as Custodian for
Joseph Schacter UTMA/CA be converted to shares of Apogee Common
Stock. On June 4, 2010 the Board of Directors approved this
transaction and authorized the issuance of 585,000 shares of Apogee Technology,
Inc. Common Stock price of $1.00 per share. The closing price on June
4, 2010 was $0.50; accordingly, the Company recorded a $292,500 gain on
extinguishment of this debt at June 30, 2010.
APOGEE
TECHNOLOGY, INC. AND SUBSIDIARY
(A
Development Stage Company)
Notes to Unaudited Consolidated
Financial Statements
September
30, 2009 and September 30, 2008
Additional
Warrants
In
consideration of his continued financial support, the Board of Directors, on
June 4, 2010, approved the issuance of warrants to purchase 151,750 shares of
Apogee common stock to Mr. Robert Schacter et al. The Company
used the Black Scholes method to value these warrants. As a result of
this transaction, the Company recorded a $56,754 expense during the second
quarter ended June 30, 2010. These warrants are exercisable
immediately upon issuance, for a term of three years at an exercise price of
$1.00 per share.
Private
Placement
Apogee
has received $45,000 as part of an on-going Private Placement for 45,000 shares
of Apogee common stock and warrants to purchase 22,500 shares of Apogee common
stock. Proceeds as of July 28, 2010 were $41,850 net of $3,150 in
expenses. These warrants are exercisable immediately upon issuance,
for a term of three years at an exercise price of $1.00 per share.
Total
Warrants issued through August 11, 2010 is 659,482 as detailed
below:
|
|
Number
of Interest
|
|
Stock/Note
Holder
|
|
Warrants
Issued
|
|
Herbert
M. Stein
|
|
|
118,510
|
|
David
Spiegel
|
|
|
119,666
|
|
Robert
Schacter et al
|
|
|
322,000
|
|
Others
|
|
|
99,306
|
|
Total
Warrants issued through August 11, 2010
|
|
|
659,482
|
|
Notification
from the Securities and Exchange Commission
On May
19, 2009, the Securities and Exchange Commission (“commission”) filed a settled
enforcement action against the Company, one employee, and one former
employee (“Others”) in connection with a with the revenue recognition
practices. Each of the defendants has agreed to settle this matter,
without admitting or denying the allegations of the Commission’s
complaint. Apogee and others agreed to the entry of a final judgment
permanently enjoining them from variously violating or aiding and abetting
violations of Sections of the Securities Act of 1933, and Sections of the
Securities Exchange Act of 1934, and various Rules. The others also
agreed to financial and other sanctions.
SEC
Administrative Proceedings
Due to
its financial condition, the Company had been unable to fund payments to its
auditors. Accordingly, the Company did not timely file its 2008 Annual Report on
10-K, as well as quarterly reports on Form 10-Q for the quarters ended March 31,
2009, June 30, 2009, and September 30, 2009. Additionally, it had not timely
filed Form 8-K and related Form 4s.
On
October 28, 2009, the Company received a “Wells Notice” from the staff of the
Securities and Exchange Commission, which states the staff’s intent to recommend
that the Commission institute a public administrative proceeding against the
Company, alleging that it violated Section 13(a) of the Securities Exchange Act
of 1934.
In
connection with the contemplated proceedings, the staff may seek a suspension or
revocation of each class of the Company’s registered securities. Also, the staff
may consider whether contempt proceedings in a federal district court are
appropriate. The Company submitted a response to this letter as of
November 16, 2009. Suspension or revocation may substantially impact
the Company’s ability to obtain funding.
Subsequently,
on December 18, 2009 we filed our 2008 Annual Report on Form 10-K and filed our
2009 Quarterly Reports on Form 10-Q for the periods ended June 30, 2009 and
September 30, 2009 in January 2010.
As noted
above, the Company, on December 18, 2009, filed its delinquent financial report
on Form 10-K for the year ended December 31, 2008. This report contained a
Disclaimer of Opinion by its Independent Accountants due to significant
uncertainty as to the Company’s ability to be a going concern. On April 16, 2010
the SEC issued an Order for an Administrative Hearing based on a claim that the
filing as well as Form 10-Q’s for the first three quarters of 2009, which had
been filed on January 15, 2010, were materially deficient due to the Disclaimer
of Opinion and thus the filings remained delinquent. The Disclaimer
of Opinion was removed on a subsequent filing. The Company was also
delinquent on its Form 10-K for the Year ended December 31, 2009. An Order of
Suspension of trading in the Company’s securities was enacted at that
time. The Company also did not file its Form 10-Q for the quarter
ended March 31, 2010.
In June
2010 the SEC and the Company entered into a Settlement agreement without the
above mentioned Hearing, under which the Company would file all its delinquent
filings without a material deficiency by a mutually agreed date. Failure to do
so would activate an Order to revoke the ability for the Company’s securities to
trade on an exchange.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The
following Management’s Discussion and Analysis of the Company’s Financial
Condition and Results of Operations for the three and nine-month periods ended
September 30, 2009 and September 30, 2008, should be read in conjunction with
the Company’s Financial Statements and related footnotes included elsewhere in
this Quarterly Report on Form 10-Q. This discussion contains, in addition to
historical statements, forward-looking statements that involve risks and
uncertainties. Our actual results could differ significantly from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include the factors discussed in the
section titled ITEM 1A – RISK FACTORS, as well as other factors described
in our Annual Report on Form 10-K for the year ended December 31,
2008.
OVERVIEW
We are
developing proprietary intradermal drug delivery systems for vaccines and other
pharmaceuticals that we intend to market to pharmaceutical and medical device
companies, government and world health organizations. Our Life
Science Group is developing PyraDerm™, an advanced intradermal drug delivery
system to meet the needs of patients, health insurers and companies developing
pharmaceuticals, as well as, governments and international health organizations.
We believe that PyraDerm has advantages over
competitive approaches for the delivery of vaccines, high potency therapeutic
protein drugs and other pharmaceuticals. We have evaluated the feasibility of
PyraDerm by performing
in vitro tests with model drugs and conducted successful in vivo testing of
PyraDerm in the
intradermal immunization experiments. We are working to establish pharmaceutical
industry compliant manufacturing methods and to define regulatory strategies to
support its commercialization.
Our sole
focus remains on developing and growing the Life Science Group, subject to our
ability to secure additional financing to support our operations and repay our
existing indebtness. We expect that future revenue, if any, will
initially be the result of potential licensing and development revenues
resulting from the grant of rights to our intellectual property.
During
the three and nine months ended September 30, 2008, virtually all of our revenue
was derived from the sale of the remaining DDX audio IC inventory and of royalty
revenue. In April 2008, SigmaTel, Inc. agreed to pay Apogee a
percentage of the royalties it received from STMicroelectronics NV (“ST”) in
exchange for supporting their royalty negotiations with ST. As a result of this
agreement, Apogee received approximately $38,000 and $63,000 for the three and
nine months ended September 30, 2008. With the acquisition of
SigmaTel by Freescale, Inc. in April 2008, there can be no assurance of future
payments under this arrangement.
At
September 30, 2009, we had an accumulated deficit of approximately $24.6
million, as compared to a deficit of approximately $22.9 million as of
December 31, 2008. Since re-entering development stage on
October 1, 2008, we have an accumulated deficit of approximately $2.7 million,
as compared to a deficit of approximately $989,000 as of December 31,
2008. Our historical net losses and accumulated deficit (since
1995) result primarily from the costs associated with our efforts to design,
develop and market our DDX technology as well as costs associated with our
efforts to develop PyraDerm™.
Through
September 30, 2009, we have received approximately $2.8 million in
loans. Since September 30, 2009, we have received approximately $1.0
million in funding, which has been inadequate to meet the current needs of the
Company resulting in non-payment of loan principal and interest, vendors,
payroll, payroll withholding, and payroll taxes for the third and fourth
quarters of 2009. The proceeds from these loans were used to pay
unpaid payroll and payroll taxes up through and including payroll for the period
ended December 15, 2009 and to pay payroll and related costs to
date. These amounts exclude payroll and payroll taxes for Mr. Herbert
M. Stein, who has not drawn cash compensation from Apogee since June 30,
2009. See Note 13 to the consolidated financial statements -
Subsequent Events – Additional Financings.
As of September 30, 2009, we had 8
employees, compared to 13 employees at September 30, 2008. Effective
as of June 9, 2008 through October 31, 2009, 5 of the remaining employees
transitioned to part-time status in an effort to reduce human resource costs.
As of November 1, 2009 the majority of employees have returned to full
time.
SELECTED
CONSOLIDATED FINANCIAL DATA
The
following selected financial data for the three- and nine-month periods ended
September 30, 2009 and 2008 have been derived from our unaudited financial
statements. Any trends reflected by the following table may not be
indicative of future results.
|
|
For the Three-Month Period
Ended
September 30,
|
|
|
For the Nine-Month Period
Ended
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
— |
|
|
$ |
37,893 |
|
|
$ |
— |
|
|
$ |
85,450 |
|
Costs
and expenses
|
|
|
(415,486
|
) |
|
|
(753,954
|
) |
|
|
(1,453,594
|
) |
|
|
(3,022,238
|
) |
Other
Income (expenses)
|
|
|
(96,032
|
) |
|
|
(55,054
|
) |
|
|
(277,967
|
) |
|
|
(94,350
|
) |
Net
Loss
|
|
$ |
(511,518
|
) |
|
$ |
(771,115
|
) |
|
$ |
(1,731,561
|
) |
|
$ |
(3,031,138
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Outstanding
|
|
|
12,132,332 |
|
|
|
12,132,332 |
|
|
|
12,132,332 |
|
|
|
12,070,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
196,220 |
|
|
$ |
518,896 |
|
|
$ |
196,220 |
|
|
$ |
518,896 |
|
Stockholders’
deficiency
|
|
$ |
(5,578,758
|
) |
|
$ |
(3,023,556
|
) |
|
$ |
(5,578,758
|
) |
|
$ |
(3,023,556
|
) |
Loss
per share (basic and fully diluted)
|
|
$ |
(0.04
|
) |
|
$ |
(0.06
|
) |
|
$ |
(0.14.
|
) |
|
$ |
(0.25
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
from Re-entering Development Stage on
October
1, 2008
through
September
30, 2009
|
|
|
|
|
Statement
of Operations Data:
|
|
|
|
Revenue
|
|
$ |
— |
|
Costs
and expenses
|
|
|
(2,371,275 |
) |
Other
Income (expenses)
|
|
|
(349,661 |
|
Net
Loss
|
|
$ |
(2,720,936 |
) |
|
|
|
|
|
Shares
Outstanding
|
|
|
12,132,332 |
|
|
|
|
|
|
Total
Assets
|
|
$ |
196,220 |
|
Stockholders’
deficiency
|
|
$ |
(2,720,936 |
) |
Loss
per share (basic and fully diluted)
|
|
$ |
(0.22 |
) |
RESULTS OF OPERATIONS OF THE
COMPANY
Revenue
We have
historically derived our revenue from three sources:
● Product
sales, which formerly consisted of merchandise sales made either directly to
original equipment manufacturers or sell through point of sale (“POS”) by
distributors. All remaining merchandise was sold in January
2008. All such shipments were fulfilled from our contracted warehouse
in Hong Kong or from our Norwood, Massachusetts office and were reported net of
returns.
● Royalties
received as a result of an agreement between Apogee and SigmaTel, Inc. whereby
SigmaTel, Inc. agreed to pay Apogee a percentage of the royalties it received
from STMicroelectronics NV (“ST”) in exchange for supporting their royalty
negotiations with ST, as well as revenue from the sale of the remaining DDX
inventory.
● Consulting
income related to contractual services or development activities for third
parties.
We
anticipate that future revenue streams, if any, will come from our Life Science
Group, generally in the form of strategic alliances or arrangements with
development or marketing partners, as well as, from licensing and
development-related revenues resulting from the grant of rights to our
intellectual property. We envision the future of our medical devices as
(i) licensing or selling our technologies to pharmaceutical or medical device
companies; (ii) establishing partnerships with pharmaceutical and medical device
companies to commercialize our products; and (iii) developing, producing and
marketing our own products. In order to develop and market any
products, we will need to secure additional funding.
No
revenue was recognized for the three and nine months ended September 30,
2009. We recognized revenue for the three and nine months ended
September 30, 2008 of approximately $38,000 and $85,000,
respectively. On January 15, 2008, we sold the remaining DDX
inventory held in our Norwood office to one of our customers, and on January 24,
2008, we sold the remaining DDX inventory housed in Hong Kong to one of our
former DDX distributors. Total proceeds received from the disposition
of the DDX inventory were $17,000.
We
anticipate that we will not generate any material future revenue until such
time, if ever, that we are able to generate revenue from our PyraDerm™
technology.
In April
2008, SigmaTel, Inc. agreed to pay Apogee a percentage of the royalties it
received from STMicroelectronics NV (“ST”) in exchange for supporting their
royalty negotiations with ST. As a result of this agreement, Apogee received
approximately $37,900 and $63,500 for the three and nine months ended September
30, 2008, respectively.
Cost
of Revenue
Since
substantially all of the revenue recorded was from products related to our
former audio IC business, it had previously been fully reserved at
100%.. All of the revenue recorded for the three months ended
September 30, 2008 was for royalties received as a result of the
above-referenced arrangement with SigmaTel. Therefore, we did not
record any cost of revenue for the three months ended September 30,
2008. For the nine months ended September 30, 2008, we recorded cost
of revenue associated with the sale of sensor products of $696.
Research
and Development Costs
Our
research and development, or R&D, expenses consist primarily of salaries,
development material costs, and external consulting and service costs related to
the development and design of new products. Research and development
expenses decreased by approximately $154,000, or 51%, to approximately $146,000
for the three months ended September 30, 2009, compared to approximately
$300,000 for the three months ended September 30, 2008. During the nine months
ended September 30, 2009, R&D expenses decreased by approximately $500,000,
or 46%, to approximately $579,000, compared to approximately $1.079 million for
the nine months ended September 30, 2008.
The
decrease in the three and nine month comparisons was the result of a reduction
in expenses for our Life Science Group as well as the discontinuation of
activities related to both our sensor products and our Health Monitoring
Group. During the three months ended September 30, 2009, the cost of
utilization of third-party consultants decreased by approximately $40,000, or
91%, to approximately $4,000, compared to approximately $44,000 for the three
months ended September 30, 2008. During the nine months ended
September 30, 2009, the cost of utilization of third-party consultants decreased
by $151,000, or 92%, to approximately $14,000, compared to approximately
$165,000 for the nine months ended September 30, 2008. This decrease
was the result of our discontinuing activities on both sensor products and our
Health Monitoring Group as well as decreased utilization of third-party
consultants related to our Life Science Group.
For the
three and nine months ended September 30, 2009, human resource costs decreased
by approximately $114,000, or 50%, and $259,000, or 36%, to approximately
$113,000 and $463,000, respectively, compared to approximately $227,000 and
$722,000 for the same periods in 2008. For the three and nine months
ended September 30, 2009, approximately $5,000 and $16,000, respectively,
compared to approximately $12,000 and $43,000 for the same periods in 2008, in
human resource expense. Effective as of June 9, 2008, human resource
expense was reduced by 20% for most R&D employees as a result of
transitioning from full time to part time in order to reduce
expenses. In addition to the transition to part-time status of some
of our employees, we discontinued operations of our Health Monitoring Group
effective as of March 31, 2009, thereby reducing our overall headcount by three
employees. Expenses related to the Health Monitoring Group are
insignificant.
For the
nine months ended September 30, 2009, we recorded a patent impairment charge of
approximately $17,000 to reflect the write-off of patent costs associated with
the discontinuation of our Health Monitoring Group.
Depreciation
and amortization expense increased by approximately $5,000, or 29%, to
approximately $25,000 for the three months ended September 30, 2009, compared to
approximately $20,000 for the three months ended September 30,
2008. This increase was the result of our amortizing approximately
$10,000 of patent related costs for the three months ended September 30,
2009. For the nine months ended September 30, 2009, depreciation and
amortization expense decrease by approximately $39,000, or 34%, to approximately
$76,000, compared to approximately $115,000 for the nine months ended September
30, 2008. This decrease was partially offset by the amortization of
approximately $29,000 of patent related expenses for the nine months ended
September 30, 2009. We had been capitalizing license fees paid to
third parties for costs associated with the exclusive rights to their
patents. We were amortizing these fees over a period of four
years. During the quarter ended June 30, 2008, we elected
to terminate our 2006 license agreement with the University of Akron Research
Foundation, as we had developed technology in-house and licensed a more
compatible technology. As a result, we expensed the remaining $22,000
of unamortized license fees under this license agreement. In
addition, during the quarter ended June 30, 2008, we expensed an additional
$30,000, which represented the minimum royalty due under this terminated license
agreement.
While we
continue to conduct in-house experimentation and testing, purchases of supplies
and consumables for the medical laboratory were reduced by approximately $3,500,
or 82%, and $40,000, or 95%, to approximately $800 and $2,300 for the three and
nine months ended September 30, 2009, compared to approximately $4,300 and
$42,300 for the three and nine months ended September 30, 2008.
For the
three and nine months ended September 30, 2009, travel and entertainment
expenses decreased by approximately $1,500, or 61% and $24,800, or 99%, to
approximately $1,000 and $200 for the three and nine months ended September 30,
2009, respectively, compared to approximately $2,500 and $25,000 for the same
periods in 2008.
If we are
able to secure additional financing, we anticipate that we will continue to
commit resources to research and development activities as our financial
position allows, and as a result, R&D costs are expected to increase
substantially in the future.
Selling,
General and Administrative Costs
General
and Administrative costs consist primarily of executive and administrative
salaries, professional fees and other associated corporate expenses. Selling,
General and Administrative, or SG&A, expenses were approximately $270,000
and $874,000 for the three and nine months ended September 30, 2009,
respectively, compared to approximately $454,000 and $1.943 million, for the
same periods in 2008. The decrease of approximately $184,000, or 41%,
and $1.068 million, or 55%, respectively, was primarily attributed to a
reduction in professional fees, human resources costs, and an overall reduction
in operating expenses. Legal fees were reduced with the settlement of
the SEC investigation. We are, however, continuing to incur legal
expenses in connection with the indemnification of our President, Chief
Executive Officer and Chairman of the Board of Directors (as described
below).
Human
resources costs increased by approximately $9,700, or 7% for the three months
ended September 30, 2009 to approximately $151,400, compared to approximately
$141,700 for the three months ended September 30, 2008. This increase
was the result of an increase in the stock-compensation expense. For
the nine months ended September 30, 2009 human resource costs decreased by
approximately $73,000, or 14%, to approximately $465,000, compared to
approximately $538,000 for the nine months ended September 30,
2008. This decrease in the nine months ended September 30, 2009 was
the result of a 20% reduction in SG&A employee salaries effective as of June
9, 2008, partially offset by an increase in stock-based compensation
expenses. For the three and nine months ended September 30, 2009,
stock compensation expense increased by approximately $12,400 and $44,600,
respectively, to approximately $14,200 and $48,300 for the three and nine months
ended September 30, 2009, compared to approximately $1,800 and $3,700 for the
three and nine months ended September 30, 2008.
Professional
expenses decreased by approximately $191,000, or 78%, and $928,000, or 80%,
respectively, to approximately $53,000 and $239,000 for the three and nine
months ended September 30, 2009, respectively, compared to approximately
$244,000 and $1.167 million for the same periods in 2008. For the
three and nine months ended September 30, 2009, legal expenses decreased by
$185,000, or 92%, and $874,000, or 87%, to approximately $16,000 and $126,000,
respectively, compared to approximately $201,000 and $1 million for the three
and nine months ended September 30, 2008. Legal fees decreased
primarily as a result of the settlement of the SEC investigation as well as a
decrease in legal fees associated with the continued indemnification of our
President, Chief Executive Officer and Chairman of the Board of Directors in
connection with the Shamy matter.
An
investigation by the SEC since settled on May 19, 2009, which the Company first
became aware of in May 2005, was ongoing through early 2009. The subject matter
of this investigation was the Company's prior revenue recognition practices that
were addressed in the Company's restatement of its financial statements for
the fiscal year ended December 31, 2004. As previously disclosed in
our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as
amended, Apogee’s Audit Committee, with the assistance of independent counsel,
conducted an investigation into Apogee’s historical accounting practices that
resulted in the implementation of remedial actions. See our Annual Report on
Form 10-KSB for the year ended December 31, 2004, as amended, for detail
regarding the restatement. In July 2008, Apogee, it’s Chief
Executive Officer and other employees received notifications from the Staff
of the SEC relating to the Staff's 2005 investigation. These notifications,
known as “Wells Notices,” stated that the Staff considered recommending that the
Commission bring enforcement actions against the Company and certain
employees, based on alleged violations of certain provisions of the federal
securities laws, including Section 17(a) of the Securities Act of 1933, as
amended, Section 10(b) of the Securities Exchange Act of 1934, as amended, and
Rule 10b-5 thereunder, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the
Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 thereunder. The Wells Notice
sent to the Company indicated that in any action actually brought against the
Company, the Staff would seek an injunction against future violations of the
federal securities laws as relief.
On May
19, 2009, the Securities and Exchange Commission (“commission”) settled this
enforcement action. See Note 13 to the consolidated financial
statements – Subsequent Events – Notification from the Securities and Exchange
Commission. In light of the settlement we do not anticipate any
additional significant legal fees associated with this matter.
We have
agreed to indemnify certain employees, directors and a former employee in
connection with the SEC investigation. As of September 30, 2009, we have
incurred approximately $554,000 to date in legal expenses to indemnify these
individuals in association with this matter. We did not incur any
legal expenses associated with this indemnification for the three months ended
September 30, 2009, compared to approximately $118,000 for the three months
ended September 30, 2008. During the nine months ended September 30,
2009, we incurred expenses associated with this indemnification of approximately
$1,600, compared to approximately $533,000 for the nine months ended September
30, 2008.
In
addition, we incurred legal fees associated with the indemnification costs in
connection with the civil action styled Joseph Shamy vs. Herbert M. Stein
Case No.: 50 2005 CA 007719 XXXXMB. In this action instituted
in the 15th Judicial Circuit in and for Palm Beach County, Florida (the
"Court), Joseph Shamy sued Herbert M. Stein, President, Chief Executive Officer
and Chairman of the Board of Apogee in connection with Shamy’s purchase of
Apogee shares in 2003 and 2004. In February 2009, in connection with
a settlement, the Court entered a Final Judgment against Mr.
Stein. In early January 2010, a filing was made with the Court
to memorialize the Total and Complete Satisfaction of Judgment, which states
that all sums due under the civil action were fully paid and that the Final
Judgment was satisfied and canceled. Further, the Clerk of the Court
was directed to note satisfaction of the Final Judgment and cancellation of all
judgments of record in this action. Apogee was not a party to the aforementioned
settlement or the satisfaction of the Final Judgment. Through January 1, 2010,
we have incurred approximately $887,000 toward this
indemnification. For the three and nine months ended September 30,
2009, we have incurred approximately $10,000 and $82,000, respectively, toward
this indemnification, compared to approximately $14,000 and $89,000 for the same
periods in 2008. See Note 10 to the consolidated financial statements
- Legal and Related Indemnification Arrangements with our
Executives.
On
October 28, 2009, the Company received a “Wells Notice” from the staff of the
Commission related to Apogee’s failure to timely file its reports under the
Exchange Act in 2009 – See Note 13 – Subsequent Events – SEC Administrative
Proceeding.
We were
not receiving reimbursement under our Director and Officer insurance policy for
either the indemnification of Mr. Stein or the ongoing investigation by the
SEC. As of March 31, 2009, Apogee’s Directors and Officers Liability
Insurance was cancelled due to non-payment.
Investor
relations expense decreased by approximately $3,400, or 43%, and $50,400, or
79%, to approximately $4,500 and $13,500, respectively, for the three and nine
months ended September 30, 2009, compared to approximately $7,900 and $63,900,
respectively, for the three and nine months ended September 30,
2008. As part of our cost reduction, we have been forced to
limit our investor relations activities. If additional funding is
secured, we will be in a position to resume focusing on increasing awareness of
our scientific and corporate developments.
Travel
and Entertainment costs decreased by approximately $400, or 85%, and $30,200, or
98%, for the three and nine months ended September 30, 2009. For the
three months ended September 30, 2009, we did not incur any travel related
expenses, compared to approximately $400 for the three months ended September
30, 2008. For the nine months ended September 30, 2009 we incurred
approximately $600 in travel related expenses, compared to approximately $30,800
for the nine months ended September 30, 2008. Corporate insurance
decreased by approximately $14,300, or 78%, and $23,900, or 46%, to
approximately $4,200 and $28,700, respectively for the three and nine months
ended September 30, 2009, compared to approximately $18,500 and $52,600 for the
same periods in 2008. This decrease was the result of the Directors
and Officers Liability Insurance being cancelled effective as of March 31, 2009
due to non-payment. In addition, we had reductions to various other
overhead expenses, including: communication, marketing and
maintenance. Operating expenses are expected to increase when our
financial position allows.
Interest Income (Expense)
Interest
income includes income from Apogee’s cash and cash equivalents and from
investments and expenses related to its financing activities. During the three
and nine months ended September 30, 2009, we did not generate interest
income. During the three and nine months ended September 30, 2008, we
generated interest income of approximately $58 and $842,
respectively. This decrease in interest income was due to reduced
cash balances.
Interest
expense resulting from the issuance of promissory notes to Mr. Herbert M. Stein,
Mr. David Spiegel, Mr. Robert Schacter et al and others was approximately
$97,000 and $280,000 for the three and nine months ended September 30, 2009,
compared to approximately $56,000 and $103,000 for the three and nine months
ended September 30, 2008, respectively. See below for a detail of
these expenses.
|
|
Interest
Incurred
|
|
Name
on
|
|
3
Months ended September 30,
|
|
|
9
Months ended September 30,
|
|
Promissory
Note
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Spiegel
|
|
$ |
37,489 |
|
|
$ |
26,995 |
|
|
$ |
101,483 |
|
|
$ |
48,879 |
|
Herbert
Stein
|
|
|
29,857 |
|
|
|
26,134 |
|
|
|
83,936 |
|
|
|
51,189 |
|
Robert
Schacter et al
|
|
|
23,765 |
|
|
|
1,860 |
|
|
|
80,160 |
|
|
|
1,860 |
|
Others
|
|
|
5,420 |
|
|
|
624 |
|
|
|
13,994 |
|
|
|
624 |
|
|
|
$ |
96,531 |
|
|
$ |
55,613 |
|
|
$ |
279,573 |
|
|
$ |
102,552 |
|
Net
Loss
Apogee’s
net loss for the three months ended September 30, 2009 was approximately
$512,000, or $0.04 per basic and diluted common share, compared to a net loss of
approximately $771,000, or $0.06 per basic and diluted common share, for the
three months ended September 30, 2008. For the nine months ended
September 30, 2009, we reported a loss of approximately $1.7 million, or
$0.14 per basic and diluted common share, compared to a net loss of
approximately $3.0 million, or $0.25 per basic and diluted common share, for the
nine months ended September 30, 2008. This decrease in our net
loss was the result of a decrease in legal fees and a reduction in human
resource expenses as well as an overall decrease in operating expenditures due
to our current cash restraints.
LIQUIDITY
AND CAPITAL RESOURCES
The
tables below summarize our outstanding unsecured interest-bearing promissory
notes and common stock purchases (including amounts subsequent to September
30,2009) totaling approximately $3.8 million:
|
|
|
Herbert
M. Stein
|
|
|
|
|
|
|
|
|
Date
of
|
|
|
Maturity
|
Initial
|
Current
|
Promissory
Note
|
|
Amount
|
Date
|
Interest
Rate
|
Interest
Rate
|
|
|
|
|
|
|
December
11, 2007
|
$ |
250,000
|
March
10, 2008
|
8.00%
|
12.00%
|
February
21, 2008
|
|
100,000
|
August
19, 2008
|
8.00%
|
12.00%
|
March
20, 2008
|
|
50,000
|
September
16, 2008
|
8.00%
|
12.00%
|
April
1, 2008
|
|
50,000
|
September
28, 2008
|
8.00%
|
12.00%
|
May
15, 2008
|
|
50,000
|
November
11, 2008
|
8.00%
|
12.00%
|
June
16, 2008
|
|
35,000
|
December
13, 2008
|
8.00%
|
12.00%
|
June
18, 2008
|
|
40,000
|
December
15, 2008
|
8.00%
|
12.00%
|
July
15, 2008
|
|
30,000
|
January
11, 2009
|
8.00%
|
12.00%
|
July
28, 2008
|
|
50,000
|
January
24, 2009
|
8.00%
|
12.00%
|
August
12, 2008
|
|
35,000
|
February 8,
2009
|
8.00%
|
12.00%
|
August
27, 2008
|
|
35,000
|
February
23, 3009
|
8.00%
|
12.00%
|
September
5, 2008
|
|
35,000
|
March
4, 2009
|
8.00%
|
12.00%
|
October
27, 2008
|
|
25,000
|
April
25, 2009
|
8.00%
|
12.00%
|
February
2, 2009
|
|
30,000
|
August
1, 2009
|
8.00%
|
12.00%
|
February
17, 2009
|
|
10,000
|
August
16 2009
|
8.00%
|
12.00%
|
March
19, 2009
|
|
25,900
|
September
15, 2009
|
8.00%
|
12.00%
|
April
13, 2009
|
|
33,000
|
October
10, 2009
|
8.00%
|
12.00%
|
May
18, 2009
|
|
12,000
|
November
14, 2009
|
8.00%
|
12.00%
|
July
1, 2009
|
|
20,000
|
December
28, 2009
|
8.00%
|
12.00%
|
November
5, 2009
|
|
42,500
|
May
4, 2010
|
8.00%
|
12.00%
|
December
21, 2009
|
|
83,500
|
June
19, 2010
|
8.00%
|
12.00%
|
December
30, 2009
|
|
27,000
|
January
25, 2010
|
8.00%
|
12.00%
|
January
7, 2010
|
|
15,000
|
January
25, 2010
|
8.00%
|
12.00%
|
January
8, 2010
|
|
10,000
|
January
25, 2010
|
8.00%
|
12.00%
|
January
14, 2010
|
|
27,000
|
January
25, 2010
|
8.00%
|
12.00%
|
February
12, 2010
|
|
66,000
|
August
21, 2010
|
8.00%
|
8.00%
|
April
16, 2010
|
|
86,500
|
October
13, 2010
|
8.00%
|
8.00%
|
June
4, 2010
|
|
116,000
|
December
1, 2010
|
8.00%
|
8.00%
|
August
11, 2010
|
|
45,700
|
February
7, 2011
|
8.00%
|
8.00%
|
|
$ |
1,435,100
|
|
|
|
|
|
|
David
Spiegel
|
|
|
|
|
|
|
|
|
Date
of
|
|
|
Maturity
|
Initial
|
Current
|
Promissory
Note
|
|
Amount
|
Date
|
Interest
Rate
|
Interest
Rate
|
|
|
|
|
|
|
December
11, 2007
|
$ |
150,000
|
March
10, 2008
|
8.00%
|
12.00%
|
February
21, 2008
|
|
100,000
|
August
19, 2008
|
8.00%
|
12.00%
|
March
20, 2008
|
|
100,000
|
September
16, 2008
|
8.00%
|
12.00%
|
April
1, 2008
|
|
50,000
|
September
28, 2008
|
8.00%
|
12.00%
|
May
15, 2008
|
|
50,000
|
November
11, 2008
|
8.00%
|
12.00%
|
June
16, 2008
|
|
65,000
|
December
13, 2008
|
8.00%
|
12.00%
|
June
18, 2008
|
|
50,000
|
December
15, 2008
|
8.00%
|
12.00%
|
July
15, 2008
|
|
50,000
|
January
11, 2009
|
8.00%
|
12.00%
|
July
28, 2008
|
|
50,000
|
January
24, 2009
|
8.00%
|
12.00%
|
August
12, 2008
|
|
35,000
|
February
8, 2009
|
8.00%
|
12.00%
|
August
27, 2008
|
|
35,000
|
February
23, 3009
|
8.00%
|
12.00%
|
September
5, 2008
|
|
35,000
|
March
4, 2009
|
8.00%
|
12.00%
|
October
27, 2008
|
|
35,000
|
April
25, 2009
|
8.00%
|
12.00%
|
January
6, 2009
|
|
80,000
|
July
5, 2009
|
8.00%
|
12.00%
|
March
19, 2009
|
|
64,000
|
September
15, 2009
|
8.00%
|
12.00%
|
May
19, 2009
|
|
35,000
|
November
15, 2009
|
8.00%
|
12.00%
|
June
10, 2009
|
|
25,000
|
December
7, 2009
|
8.00%
|
12.00%
|
July
1, 2009
|
|
32,000
|
December
28, 2009
|
8.00%
|
12.00%
|
November
5, 2009
|
|
103,000
|
May
4, 2010
|
8.00%
|
12.00%
|
December
21, 2009
|
|
68,000
|
June
19, 2010
|
8.00%
|
12.00%
|
January
25, 2010
|
|
4,665
|
July
24, 2010
|
8.00%
|
12.00%
|
April
16, 2010
|
|
16,000
|
October
13, 2010
|
8.00%
|
8.00%
|
June
4, 2010
|
|
14,000
|
December
1, 2010
|
8.00%
|
8.00%
|
August
11, 2010
|
|
100,000
|
February
7, 2011
|
8.00%
|
8.00%
|
|
$ |
1,346,665
|
|
|
|
|
Robert
Schacter et al
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
of
|
Name
on
|
|
|
Maturity
|
Initial
|
Current
|
Promissory
Notes
|
Promissory
Note
|
|
Amount
|
Date
|
Interest
Rate
|
Interest
Rate
|
|
|
|
|
|
|
|
September
5, 2008
|
TYJO
Corporation Money Purchase Pension Plan
|
$ |
100,000
|
March
4, 2009
|
8.00%
|
12.00%
|
September
5 2008
|
Mr.
Robert Schacter, as Custodian for Tyler Schacter
UTMA/CA
|
|
20,000
|
March
4, 2009
|
8.00%
|
12.00%
|
September
5 2008
|
Mr.
Robert Schacter, as Custodian for Joseph Schacter UTMA/CA
|
|
20,000
|
March
4, 2009
|
8.00%
|
12.00%
|
October
27, 2008
|
TYJO
Corporation Money Purchase Pension Plan
|
|
100,000
|
April
25, 2009
|
8.00%
|
12.00%
|
January
8, 2009
|
TYJO
Corporation Money Purchase Pension Plan
|
|
100,000
|
July
7, 2009
|
8.00%
|
12.00%
|
February
2, 2009
|
TYJO
Corporation Money Purchase Pension Plan
|
|
50,000
|
August
1, 2009
|
8.00%
|
12.00%
|
February
17, 2009
|
TYJO
Corporation Money Purchase Pension Plan
|
|
50,000
|
August
16 ,2009
|
8.00%
|
12.00%
|
March
19, 2009
|
TYJO
Corporation Money Purchase Pension Plan
|
|
50,000
|
September
15, 2009
|
8.00%
|
12.00%
|
April
13, 2009
|
TYJO
Corporation Money Purchase Pension Plan
|
|
20,000
|
October
10, 2009
|
8.00%
|
12.00%
|
June
10, 2009
|
TYJO
Corporation Money Purchase Pension Plan
|
|
25,000
|
December
7, 2009
|
8.00%
|
12.00%
|
November
5, 2009
|
TYJO
Corporation Money Purchase Pension Plan
|
|
50,000
|
May
10, 2010
|
8.00%
|
12.00%
|
May
24, 2010*
|
TYJO
Corporation Money Purchase Pension Plan
|
|
50,000
|
|
|
|
June
4, 2010*
|
TYJO
Corporation Money Purchase Pension Plan
|
|
25,000
|
|
|
|
July
9, 2010**
|
TYJO
Corporation Money Purchase Pension Plan
|
|
25,000
|
|
|
|
|
|
$ |
685,000
|
|
|
|
* Funds
received were for purchase of Apogee Technology, Inc. common stock at a price of
$1.00 per share.
** It has not yet been determined
whether these funds are to be considered a loan or equity.
On June
4, 2010 $545,000 in Promissory Notes outstanding at December 31, 2009 in the
name of Robert Schacter (TYJO Corp. Money Purchase Pension Plan), and $20,000
each issued in the names of Mr. Robert Schacter, as Custodian for Tyler Schacter
UTMA/CA and Mr. Robert Schacter, as Custodian for Joseph Schacter UTMA/CA were
converted into 585,000 shares of Apogee Common Stock at $1.00 per
share. See Note 13 – Subsequent Events – Promissory Notes
Conversion.
|
|
|
Others
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
of
|
|
|
Maturity
|
Initial
|
Current
|
Promissory
Note
|
|
Amount
|
Date
|
Interest
Rate
|
Interest
Rate
|
|
|
|
|
|
|
July
28, 2008
|
$ |
20,000
|
January
24, 2009
|
8.00%
|
12.00%
|
October
27, 2008
|
|
6,000
|
April
25, 2009
|
8.00%
|
12.00%
|
January
6, 2009
|
|
500
|
July
6, 2009
|
8.00%
|
12.00%
|
February
3, 2009
|
|
35,000
|
August
16, 2009
|
8.00%
|
12.00%
|
February
17, 2009
|
|
2,000
|
August
16, 2009
|
8.00%
|
12.00%
|
March
19, 2009
|
|
500
|
September
15, 2009
|
8.00%
|
12.00%
|
April
13, 2009
|
|
500
|
October
10, 2009
|
8.00%
|
12.00%
|
April
13, 2009
|
|
31,000
|
October
10, 2009
|
8.00%
|
12.00%
|
April
13, 2009
|
|
30,000
|
October
10, 2009
|
12.00%
|
16.00%
|
May
18, 2009
|
|
32,000
|
November
14, 2009
|
8.00%
|
12.00%
|
May
19, 2009
|
|
500
|
November
15, 2009
|
8.00%
|
12.00%
|
November
5, 2009
|
|
70,000
|
May
4, 2010
|
8.00%
|
12.00%
|
December
21, 2009
|
|
2,563
|
June
19, 2010
|
8.00%
|
12.00%
|
January
25 2010
|
|
30,000
|
July
24, 2010
|
8.00%
|
12.00%
|
April
16, 2010
|
|
20,000
|
October
13, 2010
|
12.00%
|
12.00%
|
July
13, 2010*
|
|
20,000
|
|
|
|
July
16, 2010*
|
|
25,000
|
|
|
|
|
$ |
325,563
|
|
|
|
* Funds
received were for purchase of Apogee Technology, Inc. common stock at a price of
$1.00 per share.
As of
September 30, 2009, we had an overdraft of approximately $2,300 and a working
capital deficit of approximately $5.8 million. This compares to an
overdraft of approximately $49,000 as of December 31, 2008 and a working capital
deficit of approximately $4.2 million. During the three and nine
months ended September 30, 2009, we received proceeds from loans and unsecured
interest-bearing promissory notes totaling $135,000 and $871,900, respectively,
compared to approximately $470,000 and $1.290 million for the same periods in
2008, detailed as follows:
|
|
Combined
Loan Amounts
|
|
Name
on
|
|
3
Months ended September 30,
|
|
|
9
Months ended September 30,
|
|
Promissory
Note
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Spiegel
|
|
$ |
67,000 |
|
|
$ |
155,000 |
|
|
$ |
223,000 |
|
|
$ |
620,000 |
|
Herbert
Stein
|
|
|
33,000 |
|
|
|
155,000 |
|
|
|
163,900 |
|
|
|
510,000 |
|
Robert
Schacter et al
|
|
|
25,000 |
|
|
|
140,000 |
|
|
|
345,000 |
|
|
|
140,000 |
|
Leo
Spiegel
|
|
|
10,000 |
|
|
|
— |
|
|
|
45,000 |
|
|
|
— |
|
Others
|
|
|
— |
|
|
|
20,000 |
|
|
|
95,000 |
|
|
|
20,000 |
|
|
|
$ |
135,000 |
|
|
$ |
470,000 |
|
|
$ |
871,900 |
|
|
$ |
1,290,000 |
|
These
promissory notes are payable upon demand and were not subject to any premium or
penalty for prepayment. The loan interest rate is 8% per annum, payable monthly
in arrears on the outstanding balance. An additional 4% interest is
charged on any notes exceeding maturity. In addition, post maturity
notes are compounded monthly.
On April
9, 2008, Apogee sold 164,000 shares of our common stock to accredited investors
at a price of $1.00 per share. The aggregate net proceeds to Apogee,
after fees and expenses, were $152,519, which we will use for general working
capital and corporate purposes. The shares of Apogee’s common
stock were issued and sold in a private placement in reliance on an exemption
from registration provided by Section 4(2) of Securities Act of 133, as amended,
and Rule 506 of Regulation D promulgated thereunder. The shares of the
common stock issued in this private placement have not been registered under the
Securities Act of 1933 and may not be subsequently offered or sold by the
investors in the United States absent registration or an applicable exemption
from the registration requirements.
Net cash
used in operating activities for the nine-month period ended September 30, 2009
decreased to approximately $815,000 compared to approximately $1.7 million in
the nine-month period ended September 30, 2008. As of March 31, 2008, we sold
the remaining DDX inventory for a total of $17,000 and offset the remaining
reserves for slow moving, excess and obsolete inventory. As of
September 30, 2009, our accounts payable and accrued expenses were approximately
$3.0 million, of which a majority is composed of professional
fees. We are currently in arrears with loan and interest
payments, a majority of our vendors, payroll, payroll withholding and payroll
taxes. On December 11, 15, 16, and 18, 2009, Apogee received an
additional $133,000 from Herbert M. Stein, and David Spiegel. The
proceeds from these loans were used to pay unpaid payroll and payroll taxes up
through and including payroll for the period ended December 15,
2009. These amounts exclude payroll and payroll taxes for Mr. Herbert
M. Stein, who has not drawn cash compensation from Apogee since June 30,
2009. See Note 13
to the consolidated financial statements – Subsequent Events - Wages, Payroll
Withholding and Payroll Taxes.
Net cash
used in investing activities for the nine months ended September 30, 2009 was
approximately $10,200, compared to approximately $91,000 for the nine months
ended September 30, 2008. We continued to support the existing patent
applications related to our Life Science Group.
Net cash
provided by financing activities was approximately $825,000 for the nine months
ended September 30, 2009. This compares $1.4 million for the nine
months ended September 30 2008. During the nine-month period ended
September 30, 2009, we received the proceeds from unsecured interest bearing
promissory notes totaling $871,900 comprised of $223,000 from David Spiegel, a
major shareholder, $163,900 from Herbert M. Stein, President, Chief Executive
Officer and Chairman of the Board of Directors, $345,000 from Mr. Robert
Schacter, $45,000 from Leo Spiegel, $63,000 from the Spiegel Family Limited
Partnership, $30,000 from JAZFund LLC and $2,000 from
others. These loans are payable upon demand and are not
subject to any premium or penalty for prepayment. The loan interest rate is
8% per annum, payable monthly in arrears on the outstanding
balance. An additional 4% interest will be charged on any notes
exceeding maturity. In addition, post maturity notes are compounded
monthly. See Footnote 7 of the consolidated financials statements -
Promissory Notes, Loans and Warrants. We are currently in default on
substantially all of the promissory notes. We must raise additional
capital to continue operations.
Apogee is
in the process of attempting to secure sufficient financing, to pay its
indebtedness and to continue operations. We have been working to
obtain financing from outside investors for more than 24 months, but have not
yet been successful. As of January 1, 2010 approximately $2.7 million
in promissory notes are in default. In the interim, short-term debt
financing provided primarily by two of Apogee’s significant shareholders,
including our President, Chief Executive Officer and Chairman of the Board of
Directors as well as Mr. Robert Schacter, et al and others, is being utilized to
keep product development moving forward. Due to the early stages of
development of our products technology, we cannot estimate at this time the
amounts of cash and length of time that will be required to bring our products
under development to market. It is expected that such costs will be
funded not only by external financing, but also through partnership
activities. Additionally, cost cutting measures, including salary
reduction for non-PyraDerm employees,
discontinuation of sensor development, deferral of capital expenditures, and
reduced general spending have been instituted until such time as financing is
secured. We do not expect any significant changes in the number of
employees until funding has been secured, if ever. If we are unable
to generate or obtain financing, we will be required to further curtail our
operations, including a reduction in the number of employees, or cease
conducting business.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Apogee
prepares its consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires us to make estimates, judgments and
assumptions that we believe are reasonable based upon the information currently
available. These estimates and assumptions affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the periods presented. Any future changes to
these estimates and assumptions could have a significant impact on the reported
amounts of revenue, expenses, assets and liabilities in our financial
statements. The significant accounting policies which we believe are the most
critical to aid in fully understanding and evaluating our reported financial
results include the following:
Revenue
Recognition
Revenue
will be recognized when the following revenue recognition criteria are
met: (1) persuasive evidence of an arrangement exists; (2) the
product has been shipped and the customer takes ownership and assumes the risk
of loss; (3) the selling price is fixed or determinable; and
(4) collection of the resulting receivable is reasonably
assured. We had no product sales since the first quarter ended March
31, 2008. The following policies applied to Apogee’s two major
product sales categories for revenue recognition. Sales to end users, OEM:
revenue is recognized under our standard terms and conditions of sale, title and
risk of loss transfer to the customer at the time products are shipped from our
warehouse or delivered to the customer’s representative/freight
forwarder. We accrue the estimated cost of post-sale obligations
including product warranty returns, based on historical experience. To date, we
have experienced minimal warranty returns.
In
addition, we record royalty revenue when earned in accordance with the
underlying agreements. Consulting and licensing revenue is recognized as
services are performed.
Accounts
Receivable
Apogee
performs credit evaluations of customers and determines credit limits based upon
payment history, customers’ creditworthiness and other factors, as determined by
our review of their current credit information. For a majority of our larger
sales, we can require the issuance of a Letter of Credit. Smaller accounts must
either pay via credit card or in advance of shipment. We continuously monitor
collections and payments from our customers, and we maintain a provision for
estimated credit losses based upon our historical experience and any specific
customer collection issues that we have identified. While we have not had any
significant credit losses to date, we cannot guarantee that we will continue to
avoid credit losses in the future. If the financial condition of our customers
were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required. Since our accounts
receivable are highly concentrated in a small number of customers, a significant
change in the liquidity or financial position of any one of these customers
could have a material adverse impact on our ability to collect our accounts
receivable, our liquidity or our future results of operations.
Inventory
Inventories
are stated at the lower of cost on a first-in, first-out basis or market. This
policy requires Apogee to make estimates regarding the market value of our
inventory, including an assessment of excess or obsolete
inventory. On January 15, 2008, we sold the remaining DDX
inventory held in our Norwood office to one of our customers, and on January 24,
2008, we also sold the remaining DDX inventory housed in Hong Kong to one of our
former DDX distributors. Total proceeds received from the disposition
of the DDX inventory were $17,000.
Valuation
and Impairment of Long-Lived Assets
Property,
plant and equipment, patents and trademarks are amortized over their estimated
useful lives. Useful lives are based on management’s estimates over the period
that such assets will generate revenue. In accordance with SFAS No. 144
“Accounting for the Impairment or Disposal of Long-Lived Assets” long lived
assets we hold and use are reviewed to determine whether any events or changes
in circumstances indicate that the carrying value of the assets may not be
recoverable. Future adverse changes in market conditions or poor
operating results of underlying capital investments or certain assets could
result in losses or an inability to recover the carrying value of such assets,
thereby possibly requiring an impairment charge in the future. At
March 31, 2009, we recorded a patent impairment charge of approximately $17,000
to reflect the write-off of patent costs associated with the discontinuation of
our Health Monitoring Group. Additionally, we amortize the balance of
our patent applications over five years, which resulted in a $29,200 charge for
the nine months ended September 30, 2009.
Stock-Based
Compensation
Apogee
had a stock-based compensation plan, the 1997 Employee, Director and Consultant
Stock Option Plan, also referred to as the 1997 Plan. The 1997 Plan
expired as of May 14, 2007. At our Annual Meeting held on August 28,
2007, our stockholders approved the adoption of a new stock-based compensation
plan, the 2007 Employee, Director and Consultant Stock Plan, also referred to as
the 2007 Plan. Prior to fiscal 2006, we accounted for the stock-based
compensation under the recognition and measurement provisions of Accounting
Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to
Employees”, and related Interpretations, as permitted by Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards, “Accounting
for Stock-Based Compensation” (SFAS 123(R)).
Effective
January 1, 2006, we adopted the modified-prospective-transition
method. Under this transition method, stock compensation costs recognized
beginning January 1, 2006 include (a) compensation cost for all
stock-based compensation payments granted prior to, but not yet vested as of
January 1, 2006, based on the grant date fair value estimated in accordance
with the original provisions of SFAS 123(R), and (b) compensation cost for
all stock-based payments granted on or subsequent to January 1, 2006,
based on the grant date fair value estimated in accordance with the provisions
of SFAS 123(R). Included in our net loss for the three and nine
months ended September 30, 2009 were stock-based compensation charges of
approximately $18,700 and $64,200, respectively. This compares to
stock-based compensation charges of approximately $14,000 and $46,700 for the
three and nine months ended September 30, 2008.
We record
legal costs (such as fees and expenses of outside legal counsel and other
service providers) when incurred or when it is probable that a liability has
been incurred on or before the balance sheet date and the amount can be
reasonably estimated if invoices have not been
received. Significantly lower legal fees were incurred during the
three and nine months ended September 30, 2009, compared to the same periods in
2008 as a result of a decrease in legal fees in connection with the SEC
investigation as well as decreased legal fees associated with the
indemnification of our President, Chief Executive Officer and Chairman of the
Board of Directors for the Shamy matter.
Contingencies
Apogee is
involved in and/or indemnifies others in various legal
proceedings. Management assesses the probability of loss for such
contingencies and recognizes a liability when a loss is probable and
estimable. See Note 10 to the consolidated financial statements -
Legal and Related Indemnification Arrangements with our Executives and
Others
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements nor do we have any special purpose
entities.
ITEM 3 – QUANTITIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Apogee’s
financial instruments include: cash, cash equivalents, accounts receivable and
accounts payable. At September 30, 2009, the carrying value of our
cash, cash equivalents, accounts receivable, loans and notes payable, and
accounts payable approximate fair values given the short maturity of these
instruments.
We
believe that our financial instruments do not carry a material foreign currency
exchange rate risk since any international sales will be paid in U.S. dollars
and material purchases from foreign suppliers are typically also denominated in
U.S. dollars.
It is our
policy not to enter into derivative financial instruments for speculative
purposes.
ITEM 4T – CONTROLS AND
PROCEDURES
(a) Evaluation of
Disclosure Controls and Procedures. The Company’s management, with the
participation of the Company’s Chief Executive Officer and Chief Financial
Officer, has reviewed and evaluated the effectiveness of the design
and operation of Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, or the Exchange Act) as of the end of the period covered by this
report. Based on this evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer concluded that, as of the end of such
period, the disclosure controls and procedures were effective to ensure that the
information required to be disclosed in our Securities and Exchange Commission
reports (i) is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms, and
(ii) is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosures.
(b) Changes in
Internal Controls. There have not been any changes in the Company’s internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) identified in connection with the evaluation
of such internal control that occurred during the fiscal quarter to which this
report relates that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
PART II
- OTHER INFORMATION
ITEM
1 – LEGAL PROCEEDINGS
From time
to time, we may be a party to various legal proceedings arising in the ordinary
course of our business. If and when these proceedings arise, we are
committed to vigorously defending ourselves in any such legal
actions.
An
investigation by the Security and Exchange Commission (“SEC”), which the Company
first became aware of in May 2005, was ongoing in 2008. The subject matter of
this investigation is the Company's prior revenue recognition practices that
were addressed in the Company's restatement of its financial statements for
the fiscal year ended December 31, 2004. As previously disclosed in our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2004, as amended,
Apogee’s Audit Committee, with the assistance of independent counsel, conducted
an investigation into Apogee’s historical accounting practices that resulted in
the implementation of remedial actions. See our Annual Report on Form 10-KSB for
the year ended December 31, 2004, as amended, for detail regarding the
restatement.
In July
2008, Apogee, it’s Chief Executive Officer and other employees
received notifications from the Staff of the SEC relating to the Staff's 2005
investigation. These notifications, known as “Wells Notices,” stated that the
Staff is considering recommending that the Commission bring enforcement actions
against the Company and certain employees, based on alleged violations of
certain provisions of the federal securities laws, including Section 17(a) of
the Securities Act of 1933, as amended, Section 10(b) of the Securities Exchange
Act of 1934, as amended, and Rule 10b-5 thereunder, Sections 13(a), 13(b)(2)(A)
and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13
thereunder. The Wells Notice sent to the Company indicated that in any action
actually brought against the Company, the Staff would seek an injunction against
future violations of the federal securities laws as relief.
On May
19, 2009, the SEC settled the enforcement action with the Company, one employee,
and one former employee (“Others”). Each of the Defendants has
agreed to settle this matter, without admitting or denying the allegations of
the SEC’s complaint. Apogee and Others agreed to the entry of a final
judgment permanently enjoining them from violating or aiding and abetting
violations of Sections of the Securities Act of 1933, as amended, and Sections
of the Securities Exchange Act of 1934, as amended, and various Rules
thereunder. Others also agreed to financial and other
sanctions.
In
addition, we incurred legal fees associated with the indemnification costs in
connection with the civil action styled Joseph Shamy vs. Herbert M. Stein
Case No.: 50 2005 CA 007719 XXXXMB. In this action instituted
in the 15th Judicial Circuit in and for Palm Beach County, Florida (the
"Court), Joseph Shamy sued Herbert M. Stein, President, Chief Executive Officer
and Chairman of the Board of Apogee in connection with Shamy’s purchase of
Apogee shares in 2003 and 2004. In February 2009, in connection with
a settlement, the Court entered a Final Judgment against Mr.
Stein. In early January 2010, a filing was made with the Court
to memorialize the Total and Complete Satisfaction of Judgment, which states
that all sums due under the civil action were fully paid and that the Final
Judgment was satisfied and canceled. Further, the Clerk of the Court
was directed to note satisfaction of the Final Judgment and cancellation of all
judgments of record in this action. Apogee was not a party to the aforementioned
settlement or the satisfaction of the Final Judgment. See Note 9 to the
consolidated financial statements beginning on page F-1 of this Annual Report on
Form 10K.
Due to
its financial condition, the Company had been unable to fund payments to its
independent auditors as well as its financial printer. Accordingly, it did not
timely file its 2008 Annual Report on Form 10-K, as well as quarterly reports on
Form 10-Q for the quarters ended March 31, 2009, June 30, 2009, and September
30, 2009. Additionally, we did not file timely Current Reports on a Form 8-K and
reports under Section 16 of the Securities Exchange Act of 1934, as
amended. Subsequently, during the fourth quarter of 2009, we paid the
outstanding balance to our auditors and filed our Annual Report on 10-K for the
fiscal year ended December 31, 2008 on December 18, 2009.
On
October 28, 2009, the Company received a “Wells Notice” from the Staff of the
SEC, which stated the Staff’s intent to recommend that the SEC institute a
public administrative proceeding against the Company, alleging that it violated
Section 13(a) of the Securities Exchange Act of 1934, as amended for failing to
file its 2008 Form 10-K and other periodic reports.
In
connection with the contemplated proceedings, the Staff may seek a suspension or
revocation of each class of the Company’s registered securities. Also, the Staff
may consider whether contempt proceedings in a federal district court are
appropriate. The Company submitted a response to this letter on
November 16, 2009. Should suspension or revocation of registration of
our stock occur, the Company’s ability to raise additional funding may be
severely impacted. On December 18, 2009 we filed our 2008 Annual
Report on Form 10-K and our 2009 Quarterly Reports on Form 10-Q for the periods
ended March 31, 2009, June 30, 2009 and September 30, 2009 in January
2010.
As noted
above, the Company, on December 18, 2009, filed its delinquent financial report
on Form 10-K for the year ended December 31, 2008. This report contained a
Disclaimer of Opinion by its Independent Accountants due to significant
uncertainty as to the Company’s ability to be a going concern. On April 16, 2010
the SEC issued an Order for an Administrative Hearing based on a claim that the
filing as well as Form 10-Q’s for the first three quarters of 2009, which had
been filed on January 15, 2010, were materially deficient due to the Disclaimer
of Opinion and thus the filings remained delinquent. The Disclaimer
of Opinion was removed on a subsequent filing. The Company was also
delinquent on its Form 10-K for the Year ended December 31, 2009. An Order of
Suspension of trading in the Company’s securities was enacted at that
time. The Company also did not file its Form 10-Q for the quarter
ended March 31, 2010.
The SEC
and the Company subsequently entered into a Settlement agreement
without the above mentioned Hearing, under which the Company would file all its
delinquent filings with out a material deficiency by a mutually agreed date.
Failure to do so would activate an Order to revoke the ability for the Company’s
securities to trade on an exchange.
ITEM
1A – RISK FACTORS
There are
a number of important factors that could cause our actual results to differ
materially from those indicated or implied by forward-looking statements. We
disclaim any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
except as may be required by law.
Aside
from those risks discussed below, there have been no material changes to the
risk factors included in our Annual Report on Form-10K for the fiscal year ended
December 31, 2008.
RISKS
RELATED TO OUR BUSINESS
WE REQUIRE ADDITONAL CAPITAL TO
CONTINUE OPERATIONS AND HAVE A HISTORY OF LOSSES AND EXPECT FUTURE
LOSSES.
As of
September 30, 2009, we had no cash, a stockholders’ deficiency of approximately
$5.6 million, an accumulated deficit of approximately $24.6 million and a
working capital deficit of approximately $5.8 million. We had a net
loss of approximately $512,000 and $1.7 million for the three and nine months
ended September 30, 2009, respectively, compared to a net loss of approximately
$771,000 and $3.0 million for the same periods in 2008. In the fiscal
year ended December 31, 2008, we recorded a net loss of approximately $4.0
million.
We have
substantial debt and interest obligations and expect to incur additional debt to
the extent available, to maintain our operations. As of January 15,
2010, we had approximately $3.2 million in promissory notes outstanding to a
significant shareholder, our President, Chief Executive Officer and Chairman of
the Board of Directors, an individual investor and others. These
promissory notes are payable upon demand, not subject to any premium
or penalty for prepayment, bear simple interest of 8% per annum until
maturity. An additional 4% interest compounded monthly is charged on
all post-maturity notes. We are currently in default on substantially
all of the promissory notes.
We have
large unpaid balances with professional. We are currently in arrears
with loan and interest payments and a majority of our vendors.
As of
March 31, 2009, Apogee’s Directors and Officers Liability Insurance was
cancelled due to non-payment and the Company may be required to pay uninsured
losses. See Note 10 - to the consolidated financial statements -
Legal and Related Indemnification Arrangements with our Executives and
Others.
On
October 28, 2009, the Company received a “Wells Notice” from the staff of the
Securities and Exchange Commission, which states the staff’s intent to recommend
that the Commission institute a public administrative proceeding against the
Company, alleging that it violated Section 13(a) of the Securities Exchange Act
of 1934 due to failure to timely file periodic reports in 2009. In
connection with the contemplated proceedings, the staff may seek a suspension or
revocation of each class of the Company’s registered securities. Also, the staff
may consider whether contempt proceedings in a federal district court are
appropriate. The Company submitted a response to this letter on
November 16, 2009. Should suspension or revocation of registration of
our stock occur, the Company’s ability to raise additional funding may be
severely impacted.
Our
requirements for additional capital and our ability to generate future revenue
depend on a number of factors, many of which are described in the Risk Factors
Section, of our Annual Report on Form 10-K for the fiscal year ended December
31, 2008, including our ability to develop and generate revenues from the sales
of our sensor and medical device products, which are at a very early stage of
development. We cannot assure you when, if ever, we will generate meaningful
revenues from the sales of these products under development.
IF
OUR ATTEMPTS TO SECURE ADDITIONAL FINANCING ARE NOT SUCCESSFUL, WE WILL BE
REQUIRED TO CEASE OR CURTAIL OUR OPERATIONS, OR OBTAIN FUNDS ON UNFAVORABLE
TERMS. THESE FACTORS CREATE A SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
Our
available resources are not sufficient to fund our operations, without
additional sources of financing we would not be able to continue our business,
and we expect to incur operating losses for the foreseeable
future. Consequently, in order to maintain our operations, which we
have already curtailed substantially, we will need to access additional equity
or debt capital. Securing financing is proving even more difficult
than anticipated in light of the current global economic crisis and the turmoil
impacting global financial markets. These factors create a
substantial doubt about our ability to continue as a going
concern. In light of our negative stockholders’ equity, there can be
no assurance that we will be able to obtain the necessary additional capital on
a timely basis or on acceptable terms, if at all, to continue our operations
and, to the extent available, to fund the development of our business. In any of
such events, the continuation of our operations would be materially and
adversely affected and we may have to cease conducting
business.
As noted
above, Apogee is in the process of attempting to secure sufficient financing to
continue operations. We have been working to obtain financing from
outside investors for more than 24 months, but have not yet been
successful. In the interim, short-term debt financing provided by
Apogee’s significant shareholders, including our President, Chief Executive
Officer and Chairman of the Board of Directors, and two other employees are
being used to continue our operations and, to the extent possible, continue
product development efforts. Additionally, cost cutting measures,
including salary reduction for non-PyraDerm employees,
diminished pace of sensor development, deferral of capital expenditures,
non-payment of professional and other services providers and reduced general
spending have been instituted until such time as financing is secured, if
ever. If we are unable to obtain financing, we will be required to
further curtail our operations or cease conducting business. Given
our current level of debt, we do not expect that our stockholders would receive
any proceeds if we declare bankruptcy or seek to liquidate the
Company. As of March 31, 2009, we closed down operations of the
Health Monitoring Product Group. Costs associated with this cessation
of operations as well as the termination of employees associated with this Group
were not material.
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING
STATEMENTS
|
This
document and the documents incorporated by reference herein contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Also, Apogee’s management may make
forward-looking statements orally or in writing to investors, analysts, the
media and others. Forward-looking statements express our expectations or
predictions of future events or results. They are not guarantees and are subject
to many risks and uncertainties. There are a number of factors that could cause
actual events or results to be significantly different from those described in
the forward-looking statements. Forward-looking statements might include
statements regarding one or more of the following:
· anticipated
financing activities;
· anticipated
strategic alliances or arrangements with development or marketing
partners;
· anticipated
research and product development results;
· projected
development and commercialization timelines;
· descriptions
of plans or objectives of management for future operations, products or
services;
· forecasts
of future economic performance; and
· descriptions
or assumptions underlying or relating to any of the above items.
Forward-looking
statements can be identified by the fact that they do not relate strictly to
historical or current facts or events. They use words such as “anticipate”,
“estimate”, “expect”, “project”, “intend”, “opportunity”, “plan”, “potential”,
“believe” or words of similar meaning. They may also use words such as “will”,
“would”, “should”, “could” or “may”.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Moreover, we do not assume responsibility for the accuracy and
completeness of such statements. We do not intend to update any of the
forward-looking statements after the date of this report to conform such
statements to actual results except as required by law. Given these
uncertainties, you should not place undue reliance on these forward-looking
statements, which speak only as of the date of this report. You should carefully
consider that information before you make an investment decision. You should
review carefully the risks and uncertainties identified in this report and in
the Company’s Annual Report on Form 10-K for the year ended December 31,
2008.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During
the period ended September 30, 2009, our unregistered sales of equity securities
were reported on Current Reports on Form 8-K.
ITEM
3 – DEFAULTS UPON SENIOR SECURITIES
As of
September 30, 2009, $2,353,900 was in default and accruing post-maturity
interest. The promissory notes listed below now bear interest at 12%, the
interest after maturity, are payable on demand, and are compounded monthly as a
result of non-payment at maturity date.
|
David
Spiegel
|
|
|
|
Amount
|
|
|
Accruing
Post
|
Date
of
|
Maturity
|
Maturity
Interest
|
Promissory
Note
|
Date
|
Interest
at 12%
|
|
|
|
December
12, 2007
|
March
10, 2008
|
$150,000
|
February
21, 2008
|
August
19, 2008
|
100,000
|
March
20, 2008
|
September
16, 2008
|
100,000
|
April
1, 2008
|
September
28, 2008
|
50,000
|
May
15, 2008
|
November
11, 2008
|
50,000
|
June
16, 2008
|
December
13, 2008
|
65,000
|
June
18, 2008
|
December
15, 2008
|
50,000
|
July
15, 2008
|
January
11, 2009
|
50,000
|
July
28, 2008
|
January
24, 2009
|
50,000
|
August
12, 2008
|
February
8, 2009
|
35,000
|
August
27, 2008
|
February
23, 2009
|
35,000
|
September
5, 2008
|
March
4, 2009
|
35,000
|
October
27,2008
|
April
25 ,2009
|
35,000
|
January
9, 2009
|
July
5, 2009
|
80,000
|
March
19, 2009
|
September
15, 2009
|
64,000
|
Total
|
|
$949,000
|
|
Herbert
M. Stein
|
|
|
|
Amount
|
|
|
Accruing
Post
|
Date
of
|
Maturity
|
Maturity
Interest
|
Promissory
Note
|
Date
|
Interest
at 12%
|
|
|
|
December
12, 2007
|
March
10, 2008
|
$250,000
|
February
21, 2008
|
August
19, 2008
|
100,000
|
March
20, 2008
|
September
16, 2008
|
50,000
|
April
1, 2008
|
September
28, 2008
|
50,000
|
May
15, 2008
|
November
11, 2008
|
50,000
|
June
16, 2008
|
December
13, 2008
|
35,000
|
June
18, 2008
|
December
15, 2008
|
40,000
|
July
15, 2008
|
January
11, 2009
|
30,000
|
July
28, 2008
|
January
24, 2009
|
50,000
|
August
12, 2008
|
February
8, 2009
|
35,000
|
August
27, 2008
|
February
23, 2009
|
35,000
|
September
5, 2008
|
March
4, 2009
|
35,000
|
October
27, 2008
|
April
25, 2009
|
25,000
|
February
2, 2009
|
August
1, 2009
|
30,000
|
February
17, 2009
|
August
16, 2009
|
10,000
|
March
19, 2009
|
September
15, 2009
|
25,900
|
Total
|
|
$850,900
|
Robert
Schacter et al
|
|
|
Amount
|
|
|
Accruing
Post
|
Date
of
|
Maturity
|
Maturity
Interest
|
Promissory
Note
|
Date
|
Interest
at 12%
|
|
|
|
September
5, 2008
|
March
4, 2009
|
$140,000
|
October
27, 2008
|
April
25, 2009
|
100,000
|
January
8, 2009
|
July
7, 2009
|
100,000
|
February
2, 2009
|
August
1, 2009
|
50,000
|
February
17, 2009
|
August
16, 2009
|
50,000
|
March
19, 2009
|
September
15, 2009
|
50,000
|
|
|
$490,000
|
Others
|
|
|
Amount
|
|
|
Accruing
Post
|
Date
of
|
Maturity
|
Maturity
Interest
|
Promissory
Note
|
Date
|
Interest
at 12%
|
|
|
|
July
28, 2008
|
January
24, 2009
|
$20,000
|
October
27, 2008
|
April
25, 2009
|
6,000
|
January
6, 2009
|
July
5, 2009
|
500
|
February
17, 2009
|
August
16, 2009
|
37,000
|
March
19, 2009
|
September
15, 2009
|
500
|
|
|
$64,000
|
ITEM
4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
ITEM
5 – OTHER INFORMATION
None.
ITEM
6 – EXHIBITS
Exhibit
|
|
|
Number
|
|
Description
|
10.1+
|
|
Promissory
Note dated as of July 1, 2009 and between Apogee Technology, Inc. and
Herbert M. Stein. (Previously filed on a Current Report on Form
8-K, July 2, 2009.)
|
10.2+
|
|
Promissory
Note dated as of July 1, 2009 by and between Apogee Technology, Inc. and
David Spiegel. (Previously filed on a Current Report on Form
8-K, July 2, 2009.)
|
10.3+
|
|
Form
of Warrant. (Previously filed on a Current Report on Form 8-K, July 2,
2009.)
|
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief
Executive Officer.
|
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief
Financial Officer.
|
|
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief
Executive Officer and Chief Financial
Officer.
|
+
Previously filed as indicated.
In
accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
APOGEE
TECHNOLOGY, INC.
|
|
|
Date: August
18, 2010
|
By:
|
/s/
|
Herbert
M. Stein
|
|
|
Name:
Herbert M. Stein
|
|
Title:
Chairman of the Board,
|
|
President,
Chief Executive Officer
|
|
(principal
executive officer)
|
|
|
|
|
|
APOGEE
TECHNOLOGY, INC.
|
|
|
Date: August
18, 2010
|
By:
|
/s/
|
Paul
J. Murphy
|
|
|
Name:
Paul J. Murphy
|
|
Title:
Chief Financial Officer and Vice President of Finance
|
|
(principal
financial officer and principal accounting
officer)
|
42