UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
10-QSB
Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the
quarterly period ended September 30, 2007
Commission file number: 001-15069
InPlay Technologies, Inc.
(Exact name of small business issuer as specified in its charter)
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Nevada
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88-0308867
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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13845 N. Northsight Blvd.
Scottsdale, Arizona 85260
(Address of principal executive offices)
(480) 586-3300
(Issuers telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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
þ
No
o
As of November 9, 2007 there were 11,595,138 shares of the small business issuers common stock
outstanding.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
þ
Transitional Small Business Disclosure Format (check one): Yes
o
No
þ
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
INPLAY TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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September 30, 2007
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December 31, 2006
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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6,874,540
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$
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1,591,312
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Accounts receivable
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207,360
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379,369
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Inventory net
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160,441
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1,159,629
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Prepaid expenses and other current assets
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78,050
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190,847
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Total current assets
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7,320,391
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3,321,157
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PROPERTY AND EQUIPMENT net
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479,348
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510,167
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GOODWILL
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1,321,240
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1,321,240
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PATENTS net
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1,238,100
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1,303,474
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OTHER ASSETS
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23,422
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12,258
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TOTAL ASSETS
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$
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10,382,501
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$
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6,468,296
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LIABILITIES AND STOCKHOLDERS EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$
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530,183
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$
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698,600
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Accrued salaries and benefits
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606,603
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498,090
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Accrued purchase commitments
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456,000
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456,000
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Other accrued expenses and other current liabilities
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306,600
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192,974
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Deferred revenue
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25,526
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25,526
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Total current liabilities
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1,924,912
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1,871,190
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LONG-TERM LIABILITIES:
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Other non-current liabilities
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250,644
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851
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Total liabilities
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2,175,556
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1,872,041
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY:
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Preferred stock, no par value, 10,000,000 shares authorized,
no shares issued and outstanding in 2007 and 2006
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Common stock, $.001 par value, 40,000,000 shares authorized in
2007 and 2006, 11,535,138 and 11,502,315 shares issued and
outstanding in 2007 and 2006, respectively
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11,535
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11,502
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Additional paid-in capital
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31,524,113
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31,424,436
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Accumulated deficit
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(23,328,703
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)
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(26,839,683
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)
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Total stockholders equity
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8,206,945
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4,596,255
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
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$
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10,382,501
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$
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6,468,296
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See notes to consolidated financial statements.
1
INPLAY TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2007
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2006
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2007
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2006
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NET REVENUE:
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FinePoint
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$
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1,019,423
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$
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2,885,685
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$
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2,591,440
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$
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6,821,748
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Duraswitch:
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Related party Delphi
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7,631,250
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Non-related parties
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203,780
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203,631
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711,733
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536,713
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Total net revenue
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1,223,203
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3,089,316
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10,934,423
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7,358,461
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COST OF GOODS SOLD:
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FinePoint
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1,031,169
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2,212,391
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2,165,138
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5,512,698
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Duraswitch
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65,596
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71,758
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287,757
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207,606
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Total cost of goods sold
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1,096,765
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2,284,149
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2,452,895
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5,720,304
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Gross profit
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126,438
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805,167
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8,481,528
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1,638,157
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OPERATING EXPENSES:
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Selling, general and administrative
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834,401
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745,038
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3,898,332
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2,205,306
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Research, development and commercial
application engineering
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551,874
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340,878
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1,294,596
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978,056
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Total operating expenses
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1,386,275
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1,085,916
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5,192,928
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3,183,362
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INCOME (LOSS) FROM OPERATIONS
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(1,259,837
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)
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(280,749
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)
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3,288,600
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(1,545,205
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)
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OTHER INCOME Net
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95,416
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23,417
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222,382
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71,836
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INCOME (LOSS) BEFORE INCOME TAXES
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$
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(1,164,421
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)
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$
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(257,332
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)
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$
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3,510,982
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$
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(1,473,369
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)
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PROVISION FOR (BENEFIT FROM) INCOME TAXES
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(93,508
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)
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NET INCOME (LOSS)
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$
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(1,070,913
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)
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$
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(257,332
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)
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$
|
3,510,982
|
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$
|
(1,473,369
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)
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EARNINGS (LOSS) PER SHARE BASIC
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$
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(0.09
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)
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$
|
(0.02
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)
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$
|
0.30
|
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|
$
|
(0.13
|
)
|
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EARNINGS (LOSS) PER SHARE DILUTED
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$
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(0.09
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)
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$
|
(0.02
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)
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$
|
0.30
|
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|
$
|
(0.13
|
)
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WEIGHTED AVERAGE SHARES OUTSTANDING,
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BASIC
|
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11,533,236
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11,498,496
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11,513,776
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11,490,697
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DILUTED
|
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11,533,236
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11,498,496
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11,574,242
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11,490,697
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See notes to consolidated financial statements.
2
INPLAY TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended September 30,
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2007
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2006
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income (loss)
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$
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3,510,982
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$
|
(1,473,369
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
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Depreciation and amortization
|
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250,892
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252,715
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Stock compensation
|
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|
56,860
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|
|
48,107
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Loss on disposal of equipment
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6,175
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|
|
124
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Changes in operating assets and liabilities:
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Accounts receivable
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|
172,009
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|
|
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461,367
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Inventory
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|
999,188
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(883,975
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)
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Prepaid expenses and other current assets
|
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101,633
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|
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(23,620
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)
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Accounts payable
|
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|
(168,413
|
)
|
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|
(116,444
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)
|
Accrued salaries and benefits
|
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|
108,513
|
|
|
|
(183,839
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)
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Other accrued expenses and other current liabilities
|
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|
113,626
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|
|
|
132,955
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Other non-current liabilities
|
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|
249,793
|
|
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|
(6,966
|
)
|
Deferred revenue
|
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|
|
|
|
|
(57,353
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)
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Net cash provided by (used in) operating activities
|
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|
5,401,258
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(1,850,298
|
)
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CASH FLOWS FROM INVESTING ACTIVITIES:
|
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|
|
|
|
|
|
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Increase in patents
|
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|
(38,246
|
)
|
|
|
(48,244
|
)
|
Proceeds from sales of equipment
|
|
|
6,819
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(129,453
|
)
|
|
|
(187,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(160,880
|
)
|
|
|
(235,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments in connection with the registration of stock previously issued
|
|
|
|
|
|
|
(56,189
|
)
|
Net proceeds from exercise of stock options
|
|
|
42,850
|
|
|
|
26,280
|
|
Principal payments on capital leases and notes payable
|
|
|
|
|
|
|
(163,314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
42,850
|
|
|
|
(193,223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
5,283,228
|
|
|
|
(2,278,977
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
1,591,312
|
|
|
|
4,022,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
6,874,540
|
|
|
$
|
1,743,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
|
|
|
$
|
2,726
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
3
INPLAY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM FINANCIAL INFORMATION
The consolidated balance sheet as of September 30, 2007, the consolidated statements of
operations for the three and nine months ended September 30, 2007 and September 30, 2006, and the
consolidated statements of cash flows for the nine months ended September 30, 2007 and September
30, 2006 have been prepared by the Company and are unaudited. The consolidated balance sheet as of
December 31, 2006 was derived from the audited consolidated financial statements included in the
Companys Annual Report on Form 10-KSB for the year ended December 31, 2006.
Certain information and footnote disclosures normally included in consolidated financial
statements have been condensed or omitted. It is the opinion of management that all adjustments
(which include normal recurring adjustments) necessary for a fair statement of financial results
are reflected in the interim periods presented. Accordingly, these consolidated financial
statements should be read in conjunction with the consolidated financial statements and notes
thereto included in the Companys Annual Report on Form 10-KSB for the year ended December 31,
2006. The results of operations for the three and nine months ended September 30, 2007 are not
indicative of the operating results for the full year.
The preparation of financial statements in accordance 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, as well as net sales and expenses reported for
the period presented. The Company regularly assesses these estimates and, while actual results may
differ, management believes that the estimates are reasonable.
2. EARNINGS PER SHARE
Statement of Financial Accounting Standards (SFAS) No. 128 requires the presentation of
basic and diluted earnings per share (EPS). Basic EPS is computed by dividing income available
to common shareholders by the weighted average number of common shares outstanding for the period.
Diluted EPS is computed giving effect to all potential dilutive common shares that were outstanding
during the period unless they are antidilutive. Potential dilutive common shares consist of the
incremental common shares that would be issued upon exercise of stock options and warrants.
For the three month periods ended September 30, 2007 and September 30, 2006 the effect of
potential dilutive common shares was antidilutive and no diluted calculation was required.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
|
September 30, 2007
|
|
September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
(Loss)
|
|
Shares
|
|
Amount
|
|
(Loss)
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to
common shareholders
|
|
$
|
(1,070,913
|
)
|
|
|
11,533,236
|
|
|
$
|
(0.09
|
)
|
|
$
|
(257,332
|
)
|
|
|
11,498,496
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to
common shareholders
|
|
$
|
(1,070,913
|
)
|
|
|
11,533,236
|
|
|
$
|
(0.09
|
)
|
|
$
|
(257,332
|
)
|
|
|
11,498,496
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
Options and warrants excluded from the calculation of diluted earnings per share were
1,868,064 for the three months ended September 30, 2007 because they were antidilutive. For the
three months ended September 30, 2006, 1,848,447 options and warrants were excluded from the
calculation because they were antidilutive.
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
Nine Months Ended
|
|
|
September 30, 2007
|
|
September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
(Loss)
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to
common shareholders
|
|
$
|
3,510,982
|
|
|
|
11,513,776
|
|
|
$
|
0.30
|
|
|
$
|
(1,473,369
|
)
|
|
|
11,490,697
|
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options
|
|
|
|
|
|
|
60,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to
common shareholders
|
|
$
|
3,510,982
|
|
|
|
11,574,242
|
|
|
$
|
0.30
|
|
|
$
|
(1,473,369
|
)
|
|
|
11,490,697
|
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
Options and warrants excluded from the calculation of diluted earnings per share were
1,572,764 for the nine months ended September 30, 2007, as the exercise price was greater than the
average share price for the period. For the nine months ended September 30, 2006, 1,848,447
options and warrants were excluded from the calculation because they were antidilutive.
3. STOCK-BASED COMPENSATION
As of September 30, 2007, the Company had four stock-based employee compensation plans. The
plans provide for the granting of awards in the form of incentive and nonqualified stock options,
stock appreciation rights, shares of restricted common stock, bonus stock in lieu of obligations,
or other stock-based awards to employees, directors and independent contractors who provide
valuable service to the Company. Options are granted at the market price of our common stock on
the date the grant, are approved by the Compensation Committee, and have ten-year terms. The stock
options for directors typically vest within 30 days of grant. The stock options for officers and
employees typically vest over a 30 month period from the date of grant.
At the Companys annual stockholder meeting held on May 31, 2007, stockholders approved the
First Amendment to the Companys 2005 Stock Award Plan which increased the number of shares
authorized under the Plan from 500,000 to 1,000,000. As of September 30, 2007, 313,144 shares of
the Companys common stock were available for grant under the plans.
The Company accounts for its options in accordance with SFAS No. 123(R),
Share-Based
Payment
, which requires the measurement and recognition of compensation expense in the financial
statements for all share based payment awards made to employees and directors based on estimated
fair values. Under this method, in addition to reflecting compensation expense for new share-based
awards, expense is also recognized to reflect the remaining service period of awards that had been
granted in prior periods.
Stock-based compensation cost recognized in the three months ended September 30, 2007 was
$19,353, which consisted of $10,808 of expense relating to stock options issued in 2006 which will
be recognized quarterly through December 2008 and $8,545 of expense related to options issued in
August 2007. Stock based compensation expense for the three months ended September 30, 2006
totaled $5,843. This compensation expense is included in the selling, general and administrative
expenses on the consolidated statements of operations.
Stock-based compensation cost recognized in the nine months ended September 30, 2007 was
$56,860, which consisted of $32,425 of expense relating to stock options issued in 2006, $19,435 of
expenses related to options issued in 2007, and $5,000 of restricted stock. Stock-based
compensation expense for the nine months ended September 30, 2006 totaled $48,107. This
compensation expense is included in the selling, general and administrative expenses on the
consolidated statements of operations.
5
Option activity under the Companys stock option plans during the nine months ended September
30, 2007 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Option
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
Outstanding, December 31, 2006
|
|
|
1,468,473
|
|
|
$
|
6.62
|
|
Granted
|
|
|
272,000
|
|
|
$
|
1.55
|
|
Exercised
|
|
|
(30,000
|
)
|
|
$
|
1.43
|
|
Expired or terminated
|
|
|
(24,500
|
)
|
|
$
|
3.13
|
|
|
|
|
|
|
|
|
|
Outstanding, September 30, 2007
|
|
|
1,685,973
|
|
|
$
|
5.95
|
|
|
|
|
|
|
|
|
Exercisable, September 30, 2007
|
|
|
1,358,973
|
|
|
$
|
6.99
|
|
|
|
|
|
|
|
|
The weighted average remaining contractual term and aggregate intrinsic value for options
outstanding at September 30, 2007 was 5.53 years and $125,617 and for options exercisable at
September 30, 2007 was 6.86 years and $103,327.
As of September 30, 2007, $284,738 of compensation cost related to unvested stock options is
expected to be recognized through fiscal 2009.
The fair value of each option granted during the period was estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average assumptions:
|
|
|
|
|
|
|
Three Months ended
|
|
|
September 30, 2007
|
|
September 30, 2006
|
|
|
|
|
|
|
|
|
Weighted average expected stock price volatility
|
|
90%
|
|
76% 78%
|
Weighted average expected option life (years)
|
|
3.0
|
|
3.0
|
Risk-free interest rate
|
|
4.34%
|
|
4.69% 4.85%
|
Expected dividends
|
|
0%
|
|
0%
|
|
|
|
|
|
|
|
Nine Months ended
|
|
|
September 30, 2007
|
|
September 30, 2006
|
|
|
|
|
|
|
|
|
Weighted average expected stock price volatility
|
|
83% 90%
|
|
76% 87%
|
Weighted average expected option life (years)
|
|
3.0
|
|
3.0
|
Risk-free interest rate
|
|
4.34% 4.69%
|
|
4.69% 4.85%
|
Expected dividends
|
|
0%
|
|
0%
|
4. REVENUE CONCENTRATIONS
In April 2000, the Company entered into a license agreement with Delphi Corporation
(Delphi), that gave Delphi the exclusive right to utilize and manufacture the Companys patented
switch technologies for the automotive industry. In exchange, Delphi paid the Company a
non-refundable payment of $4 million and agreed to pay a royalty fee for each switch sold by
Delphi. The term of the exclusive license agreement was seven years. The agreement also required
Delphi to make minimum royalty payments totaling $12 million during the initial term ending June
30, 2007. The first payment of $1 million was recognized as revenue on June 30, 2004 and was
received in July 2004. The second payment of $2 million was recognized as revenue on June 30, 2005
and was received in July 2005.
On October 8, 2005, Delphi filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. On October 27, 2005, the bankruptcy court accepted a revised order agreeing to the
cancellation of the license agreement effective October 17, 2005. In the fourth quarter of 2005,
$648,083 of deferred revenue related to the Delphi license agreement was recognized as revenue as
the license agreement was terminated.
6
The Company subsequently filed a proof of claim for $9 million which was equivalent to the
unpaid minimum royalty commitment of the exclusive license agreement. In January 2007, the Company
reached a settlement agreement with Delphi, subject to court approval, in which Delphi agreed to
allow a pre-petition general unsecured claim against Delphi Automotive Systems LLC in the amount of
$7.5 million. The agreement was approved by the bankruptcy court in February 2007.
In March 2007, the Company sold its rights to this claim and received a cash payment of
approximately $7.6 million which was recognized as Duraswitch segment revenue in the first quarter
of 2007. As a result of this settlement and the resulting revenue, the Company incurred commission
and fee expenses of approximately $650,000 based on its existing commission and fee agreements.
Commissions and fees of approximately $190,000 were paid in the first quarter, and an additional
amount of approximately $460,000 was paid in the second quarter of 2007.
The $7.6 million of Delphi revenue represents 70% of total Company revenue for the nine months
ended September 30, 2007 and 91% of Duraswitch segment revenue for the nine months ended September
30, 2007.
For the three months ended September 30, 2007 and 2006, the Company recognized $1.0 million
and $2.9 million of revenue, respectively, for sales to Gateway, Inc. and Quanta, who serves as a
supplier to Gateway, as part of its FinePoint segment. In fiscal 2007 the $1.0 million represented
81% of total Company revenue and 98% of the FinePoint segment revenue. In fiscal 2006, the $2.9
million represented 93% of total Company revenue and 99% of FinePoint segment revenue.
For the nine months ended September 30, 2007 and 2006, the Company recognized $2.5 million and
$6.6 million of revenue, respectively for sales to Gateway and Quanta. In fiscal 2007, the $2.5
million represented 22% of total Company revenue and 95% of the FinePoint segment revenue. In
fiscal 2006, the $6.6 million represented 90% of total Company revenue and 97% of FinePoint segment
revenue.
5. INVENTORY
The Companys inventory is primarily comprised of certain raw materials that are used in the
manufacture of digital pens and digitizers and licensed switch components and finished goods.
Inventory consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2007
|
|
|
December 31, 2006
|
|
Raw materials
|
|
$
|
126,555
|
|
|
$
|
701,953
|
|
Finished goods
|
|
|
33,886
|
|
|
|
457,676
|
|
|
|
|
|
|
|
|
Inventories net
|
|
|
160,441
|
|
|
|
1,159,629
|
|
|
|
|
|
|
|
|
6. PATENTS
Amortization expense for patents was $35,910 and $33,894 for the three months ended September
30, 2007 and 2006, respectively. Amortization expense for patents was $103,619 and $99,552 for the
nine months ended September 30, 2007 and 2006, respectively. The estimated amortization expense for
existing patents is $145,000 for each of the next five years.
The gross carrying amount and accumulated amortization of patents are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2007
|
|
|
December 31, 2006
|
|
Patents
|
|
$
|
1,785,965
|
|
|
$
|
1,747,719
|
|
Accumulated amortization
|
|
|
(547,865
|
)
|
|
|
(444,245
|
)
|
|
|
|
|
|
|
|
Patents net
|
|
$
|
1,238,100
|
|
|
$
|
1,303,474
|
|
|
|
|
|
|
|
|
7
7. ACCRUED SALARIES AND BENEFITS
Accrued salaries and benefits consisted of the following amounts:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2007
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
Termination and severance expenses
|
|
$
|
435,353
|
|
|
$
|
161,500
|
|
Accrued
salaries, benefits and payroll taxes
|
|
|
97,830
|
|
|
|
136,102
|
|
Vacation salary accruals
|
|
|
73,420
|
|
|
|
200,488
|
|
|
|
|
|
|
|
|
Total accrued salaries and benefits
|
|
$
|
606,603
|
|
|
$
|
498,090
|
|
|
|
|
|
|
|
|
8. OTHER ACCRUED EXPENSES
Other accrued expenses consisted of the following amounts:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2007
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
Accrued tooling costs
|
|
$
|
90,000
|
|
|
$
|
|
|
Accrued accounting and legal expenses
|
|
|
55,346
|
|
|
|
70,019
|
|
Warranty reserve
|
|
|
90,928
|
|
|
|
26,700
|
|
Accrued commissions
|
|
|
6,386
|
|
|
|
12,273
|
|
Other operating expense accruals
|
|
|
63,940
|
|
|
|
83,982
|
|
|
|
|
|
|
|
|
Total other accrued expenses
|
|
$
|
306,600
|
|
|
$
|
192,974
|
|
|
|
|
|
|
|
|
The warranty reserve was increased by approximately $75,000 during the three months ended
September 30, 2007 based on shipments made during the period and an estimate of potential product
returns over the next twelve months. The $90,000 accrued tooling costs represent a one time cost
recorded in the second quarter relating to development of a new product, and is expected to be paid
in April 2008.
9. INCOME TAXES
As of September 30, 2007, the Company had net operating loss carryforwards for federal income
tax purposes of approximately $20.2 million, which expire in 2011 through 2026, and net operating
loss carryforwards for state income tax purposes of approximately $5.4 million, which expire in
2007 through 2011. Normally, a company is subject to an alternative minimum tax for 10% of the net
operating loss carryforwards utilized. The alternative minimum tax rate of 20% is applied to the
amount of the 10% of the net operating carryforward utilized. The company calculated an income tax
expense of $93,508 through June 30, 2007 based on this assumption. However, in the quarter ended
September 30, 2007, the Company identified that it qualifies for a small corporation exemption that
would eliminate the alternative minimum tax in 2007. Therefore, the Company will not be taxed on
net operating loss carryforwards utilized, and will not incur a tax payable liability in 2007.
Accordingly, the previous amount accrued of $93,508 through June was reversed in the September
quarter. The Company has reviewed its deferred tax asset based on these carryforwards and has
provided a full valuation allowance against the asset. The decision to provide a full valuation
allowance was based on the fact that net income for the nine month period was the result of the
monetization of the Companys general unsecured claim against Delphi Automotive Systems, LLC and
that there can be no assurances of future operating profits.
8
Net deferred tax assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Operating loss carryforwards
|
|
$
|
7,213,763
|
|
|
$
|
8,455,384
|
|
Capitalized research and development
|
|
|
1,966,662
|
|
|
|
1,559,329
|
|
Research and development credits
|
|
|
1,398,235
|
|
|
|
1,398,235
|
|
Deferred licensing revenue
|
|
|
8,880
|
|
|
|
11,013
|
|
Inventory reserve
|
|
|
79,523
|
|
|
|
247,194
|
|
Accruals
|
|
|
31,869
|
|
|
|
322,566
|
|
Other
|
|
|
304,436
|
|
|
|
28,733
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,003,368
|
|
|
|
12,022,454
|
|
Less valuation allowance
|
|
|
(10,480,994
|
)
|
|
|
(11,436,074
|
)
|
|
|
|
|
|
|
|
Total
|
|
|
522,374
|
|
|
|
586,380
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Patents
|
|
|
(490,462
|
)
|
|
|
(526,641
|
)
|
Other
|
|
|
(31,912
|
)
|
|
|
(59,739
|
)
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
During the nine months ended September 30, 2007, the Company decreased the valuation allowance
by $955,080 against deferred tax assets based on the expected use of $3.2 million of the Companys
net operating loss carryforwards and the corresponding reduction in the operating loss carryforward
tax asset. The valuation allowance reduces deferred tax assets to an amount that represents
managements best estimate of the amount of such deferred tax assets that, more likely than not,
will be realized. Realization of the deferred tax assets is dependent upon generating sufficient
future taxable income in the period that temporary differences and carryforwards are expected to be
available to reduce taxable income.
On January 1, 2007 the Company adopted FASB Interpretation No. 48 (FIN 48).
Accounting for
Uncertainty in Income Taxes
. In accordance with FIN 48, the Company identified, evaluated, and
measured the amount of income tax benefits to be recognized for all of the Companys income tax
positions. Based on the Companys evaluation, we have concluded that there are no significant
uncertain tax positions requiring recognition in our financial statements or adjustments to our
deferred tax assets and related valuation allowance. Except for changes to the net operating loss
carryforward, the Company does not expect any significant changes in unrecognized tax benefits
during the next twelve months.
The Company recognizes interest and penalties related to uncertain tax positions as part of
income tax expense. For the nine months ended September 30, 2007, the Company did not accrue any
interest or penalties into income tax expense.
The tax years 2003 through 2006 remain open to examination by the major federal and state
taxing jurisdictions to which the Company is subject.
10. LINES OF BUSINESS
As of September 30, 2007, the Company had two reportable segments: Duraswitch
®
and FinePoint.
These segments are strategic business units that have different products and services. The
segments are managed separately because each is a distinct and different business venture. The
Duraswitch segment licenses its patented electronic switch technologies to switch manufacturers and
original equipment manufacturers. The FinePoint segment manufactures and markets its FinePoint
digital computing pen technology to computer manufacturers.
During the three months ended September 30, 2007, sales to Gateway, Inc. accounted for 81% of
total Company revenue. During the three months ended September 30, 2006, sales to Quanta, who
serves a supplier to Gateway Inc., accounted for 93% of total Company revenue. See Note 4 for
additional segment revenue information.
9
A summary of results of operations by business segment follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
Sept. 30, 2007
|
|
|
Sept. 30, 2006
|
|
|
Sept. 30, 2007
|
|
|
Sept. 30, 2006
|
|
Net Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
$
|
1,019,423
|
|
|
$
|
2,885,685
|
|
|
$
|
2,591,440
|
|
|
$
|
6,821,748
|
|
Duraswitch
|
|
|
203,780
|
|
|
|
203,631
|
|
|
|
8,342,983
|
|
|
|
536,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Revenue
|
|
|
1,223,203
|
|
|
|
3,089,316
|
|
|
|
10,934,423
|
|
|
|
7,358,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
|
1,031,169
|
|
|
|
2,212,391
|
|
|
|
2,165,138
|
|
|
|
5,512,698
|
|
Duraswitch
|
|
|
65,596
|
|
|
|
71,758
|
|
|
|
287,757
|
|
|
|
207,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cost of Goods Sold
|
|
|
1,096,765
|
|
|
|
2,284,149
|
|
|
|
2,452,895
|
|
|
|
5,720,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
|
(11,746
|
)
|
|
|
673,294
|
|
|
|
426,302
|
|
|
|
1,309,050
|
|
Duraswitch
|
|
|
138,184
|
|
|
|
131,873
|
|
|
|
8,055,226
|
|
|
|
329,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Profit
|
|
|
126,438
|
|
|
|
805,167
|
|
|
|
8,481,528
|
|
|
|
1,638,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
|
672,735
|
|
|
|
495,667
|
|
|
|
1,690,275
|
|
|
|
1,384,444
|
|
Duraswitch
|
|
|
177,657
|
|
|
|
163,333
|
|
|
|
1,147,380
|
|
|
|
490,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
850,392
|
|
|
|
659,000
|
|
|
|
2,837,655
|
|
|
|
1,874,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
|
(684,481
|
)
|
|
|
177,627
|
|
|
|
(1,263,973
|
)
|
|
|
(75,394
|
)
|
Duraswitch
|
|
|
(39,473
|
)
|
|
|
(31,460
|
)
|
|
|
6,907,846
|
|
|
|
(161,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Profit (Loss)
|
|
|
(723,954
|
)
|
|
|
146,167
|
|
|
|
5,643,873
|
|
|
|
(236,573
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Expenses
|
|
|
535,883
|
|
|
|
426,916
|
|
|
|
2,355,273
|
|
|
|
1,308,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InPlay Income (Loss) from Operations
|
|
$
|
(1,259,837
|
)
|
|
$
|
(280,749
|
)
|
|
$
|
3,288,600
|
|
|
$
|
(1,545,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2007
|
|
|
December 31, 2006
|
|
Assets by Segment
|
|
|
|
|
|
|
|
|
FinePoint Goodwill
|
|
$
|
877,366
|
|
|
$
|
877,366
|
|
FinePoint Patents net
|
|
|
517,511
|
|
|
|
565,436
|
|
Other FinePoint Assets
|
|
|
482,391
|
|
|
|
1,811,780
|
|
|
|
|
|
|
|
|
Total FinePoint Assets
|
|
|
1,877,268
|
|
|
|
3,254,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duraswitch Goodwill
|
|
|
443,874
|
|
|
|
443,874
|
|
Duraswitch Patents net
|
|
|
720,589
|
|
|
|
738,038
|
|
Other Duraswitch assets
|
|
|
277,529
|
|
|
|
366,221
|
|
|
|
|
|
|
|
|
Total Duraswitch Assets
|
|
|
1,441,992
|
|
|
|
1,548,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Assets
|
|
|
7,063,241
|
|
|
|
1,665,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
10,382,501
|
|
|
$
|
6,468,296
|
|
|
|
|
|
|
|
|
10
11. COMMITMENTS AND CONTINGENCIES
Purchase Commitments.
During the fourth quarter of 2006, the Company recognized a potential
loss on purchase commitments of approximately $456,000 relating to purchase orders placed with raw
material vendors in which it is probable that the Company will not be able to realize the value of
the raw material in those commitments because of obsolescence factors. There were not any changes
to these commitments during the first nine months of fiscal 2007.
Lease Commitment
. In May 2007 the Company entered into a five year lease for new corporate
headquarters located in Scottsdale, Arizona and transferred operations there in June 2007. Annual
rental payments over the life of the lease will be approximately $200,000 per year. The Company
will continue to lease its current facility through December 2007 and will incur rental payments of
approximately $15,000 for the period October through December 2007.
Litigation.
The Company is involved in various claims and legal actions arising from the
ordinary course of business.
The Company does not believe that the ultimate disposition of these matters will have a
material adverse effect on the Companys financial position, results of operations, or liquidity.
12. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159,
The
Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB
Statement No. 115
(SFAS No. 159.) This Statement permits entities to choose to measure many
financial instruments and certain other items at fair value. This Statement is expected to expand
the use of fair value measurement for accounting for financial instruments. SFAS No. 159 will be
effective for the Companys fiscal year beginning January 1, 2008. SFAS No. 159 is currently being
evaluated by the Company and it is not expected to have a material impact on the Companys
financial condition or results of operations.
11
Item 2. Managements Discussion and Analysis or Plan of Operation.
Note Regarding Forward-Looking Statements and Associated Risks
This Quarterly Report on Form 10-QSB, including the Managements Discussion and Analysis or
Plan of Operation, and documents incorporated herein by reference, contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The Private Securities Litigation
Reform Act of 1995, as amended, provides a safe harbor for such forward-looking statements. The
words believe, expect, estimate, anticipate, intend, may, might, will, would,
could, project, and predict, or similar words and phrases regarding expectations, generally
identify forward-looking statements.
We intend to qualify both our written or oral forward-looking statements made from time to
time in connection with filings with the Securities and Exchange Commission or in public news
releases for protection under the safe harbors discussed above. Forward-looking statements are
based largely on our expectations and because they are estimates, such statements are inherently
subject to risks and uncertainties, some of which cannot be predicted or quantified and are beyond
our control. Future events and actual results could differ materially from those set forth in,
contemplated by, or underlying the forward-looking statements, each of which speaks only as of the
date the statement is made. Statements in this Form 10-QSB, including those set forth in the Notes
to the Consolidated Financial Statements, the section entitled Managements Discussion and
Analysis or Plan of Operation and the section entitled Risk Factors in our most recent Annual
Report on Form 10-KSB describe factors that could contribute to or cause actual results to differ
materially from our expectations. Some factors that could cause actual results to differ
materially from those expressed in such forward-looking statements include the following:
|
|
|
any material delay, cancellation or reduction of orders from one or more significant
customers;
|
|
|
|
|
the ability to obtain sufficient raw materials at favorable prices;
|
|
|
|
|
the ability to manage risks associated with our contract manufacturing resources,
including quality control, warranty coverage, compliance requirements and other risks
associated with outsourcing, particularly with international manufacturers;
|
|
|
|
|
the failure to develop, introduce and sell new products using our patented
technologies; and
|
|
|
|
|
the inability to protect our intellectual property or development of products by our
competitors that offer significant advantages over our products.
|
In addition, new factors, other than those identified in this Form 10-QSB or our most recent
Annual Report on Form 10-KSB, may emerge from time to time and it is not possible for us to predict
all of such factors, nor can we assess the impact of each factor on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ materially from
forward-looking statements. We do not undertake, and we specifically disclaim, any obligation to
publicly update or review any forward-looking statement contained in this Form 10-QSB or in any
document incorporated herein by reference, whether as a result of new information, future events or
otherwise, except as required by applicable law.
Overview of Business
Through our two business segments, FinePoint and Duraswitch, we design, develop and market
innovative human interface devices (HID) for electronic products. Our FinePoint digital computing
pen technology offers significant advancement in performance and feature enhancement over current
analog products. Our target markets include tablet PCs and other mobile computing devices. Our
Duraswitch electronic switch technologies include PushGate
®
pushbutton, thiNcoder
®
rotary and
MagnaMouse
TM
multidirectional switch options for medical devices, industrial controls
and other electronic equipment.
Executive Summary
In July 2007, we announced management changes including the resignation of our previous CEO
and CFO, the appointments of our chairman, Steven Hanson, as CEO and William Rodes as interim CFO.
Subsequently, we also announced the promotion of our COO, Ramesh Ramchandani, to President and COO
and the appointment of Mark Sokolowski as CFO. Along with these changes, we put in place a 90-day
plan to assess our current position, to formulate and create the strategic plan and the
implementation of that plan. During the assessment phase, we identified five critical areas that
we needed to address:
12
1) Strengthen our market expertise in order to serve our customers well.
Update: We have developed a growing database of market knowledge, sourced from over thirty
potential customers, touch screen display manufacturers, and several leading independent market
research firms. By using this market intelligence, we are setting strategic priorities for product
requirements as well as competitive focal points for sales.
2) Augment critical skills to fill under-resourced areas critical to our business.
Update: We have strengthened the team with several critical hires since our last report.
These hires have been added to the areas of software and hardware engineering and intellectual
property management to develop our proprietary knowledge into products. We will continue to add
resources in research and development, sales and marketing, and supply chain management. We are
also using specialized consultants to design products and help us market them to customers.
3) Instill a customer driven culture as a core value.
Update: Since implementing our 90-day plan, we have made customer service a priority. We
continue to cultivate a renewed work ethic focused on timely response to requests from current and
potential customers. Our goal is to deliver our commitments on time with the high level of quality
expected by our customers.
4) Formulate a structure for business processes to provide direction, accountability and
allocation of resources.
Update: We restructured our company along functional lines rather than product lines. We
believe this will improve productivity and communication. We have put in place new project
planning tools and management, and will continue to improve this practice across our business. We
have completed an analysis of our intellectual property (IP) portfolio. Through this analysis, we
feel confident in the value and position of our current IP portfolio, and believe that we have the
procedures in place to identify and protect future innovations.
We have also tightened our supplier certification processes to improve product quality and
leadtimes. Our financial processes are being revamped and simplified in order to augment
accountability and oversight across all areas in our organization. Additionally, we have focused
our product roadmaps on the products that we deem to have the highest potential and instilled a
discipline that we believe will lay the groundwork for crisp execution of our strategies.
5) Improve design-for-manufacturing, supply chain and strategic partners.
Update: We have launched a three phase process of Design for Manufacturability (DFM) and
Design for Test (DFT) with our tier 1 manufacturing partner in their facility. Through this
process and prototype builds we have gained additional insight into making our designs more robust
and cost effective. We have partnered with Japan Entry Corp. in Japan and Rich Power Electronic
Devices, a company of WPG Holdings, in Asia and India, to expand business development efforts and
provide local support in these regions.
During the second phase of the 90-day plan, we formulated a strategic plan. Our objectives for
the plan include profitable growth, cash management, and sustainability of that growth as well as a
focus on retention and acquisition of customers. During the final phase of the 90-day plan, we
have focused on implementation and execution. These activities will be part of our ongoing efforts
for the remainder of 2007 and into 2008.
Application of Critical Accounting Policies
We have identified the policies below as critical to our business operations and the
understanding of our results of operations. The impact and any associated risks related to these
policies on our business operations are discussed throughout Managements Discussion and Analysis
or Plan of Operation when such policies affect our reported or expected financial results.
In the ordinary course of business, we have made a number of estimates and assumptions
relating to the reporting of results of operations and financial condition in the preparation of
our financial statements in conformity with accounting principles generally accepted in the United
States. We base our estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances. The results form the
basis for making judgments about the carrying values of assets
13
and liabilities that are not readily
apparent from other sources. Actual results could differ significantly from those estimates under
different assumptions and conditions. We believe that the following discussion addresses our most
critical accounting policies, which are those that are most important to the portrayal of our
financial condition and results of operations and require our most difficult, subjective, and
complex judgments, often as a result of the need to make estimates about the effect of matters that
are inherently uncertain.
Revenue Recognition.
Our FinePoint segment manufactures digital pens and digitizers for the
tablet PC and mobile computing markets. Revenue is recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed and determinable and collection is
probable. Generally, all of these conditions are met at the time we deliver products to our
customers.
Our Duraswitch segment enters into licensing agreements with our customers. Our licensing
agreements require the licensee to pay per-switch royalties and in some cases to purchase licensed
components from us. The purchase price of the licensed components includes the royalty fee. When
the components are shipped, we recognize revenue and cost of goods sold. In cases where no
licensed components are supplied, we are paid a royalty per switch manufactured by the licensee and
we recognize revenue in the period the switch is manufactured. In the nine months ended September
30, 2007, we recognized the $7.6 million Delphi settlement as revenue because it related to minimum
license fees due under the agreement with Delphi.
Some of our licensees have prepaid royalties to us pursuant to their license agreements.
These prepayments are recorded as deferred licensing revenue. This deferred revenue is recognized
as revenue when earned under the licensing agreement. If a licensee purchases a licensed component
from us, the royalty is earned when the licensed component is shipped. If the licensee directly
manufactures our switches without purchasing licensed components from us, we consider the royalty
earned when the switch is manufactured.
Inventory Valuation.
Our inventory is primarily comprised of certain raw materials that are
used in the manufacture of digital pens and digitizers; Duraswitch licensed components and finished
goods. We record inventories at the lower of cost or market value, determined using the first-in,
first-out method. Our policy is to write down our inventory for estimated obsolescence or
unmarketable inventory to the extent the cost exceeds the estimated market value. We base the
estimate on our assumptions about future demand and market conditions. If actual market conditions
are less favorable than those assumed in our estimates, additional inventory write-downs might be
required. We reflect any write-down of inventory in the period in which the facts giving rise to
the inventory write-down become known to us.
Impairment or Disposal of Long-Lived Assets.
We review our long-lived assets and identifiable
intangibles for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. Additionally, goodwill is reviewed on an annual basis.
Our intangible assets are primarily our patents and the goodwill associated with the 2005
acquisition of FinePoint Innovations and the 1998 acquisition of Aztec Industries. If such assets
were considered to be impaired, the impairment to be recognized would be measured by the amount by
which the carrying amount of the assets exceeds the fair market value of the assets.
We evaluate the recoverability of property and equipment and intangibles (excluding goodwill)
not held for sale by comparing the carrying amount of the asset or group of assets against the
estimated undiscounted future net cash flows expected to result from the use of the asset or group
of assets. If the undiscounted estimated cash flows are less than the carrying value of the asset
or group of assets being reviewed, an impairment loss would be recorded. The loss would be
measured based on the estimated fair value of the asset or group of assets compared to its carrying
value. The estimated fair value would be based on the best information available under the
circumstances, including prices for similar assets and the results of valuation techniques,
including the present value of expected future cash flows using a discount rate commensurate with
the risks involved.
We evaluate goodwill and other intangible assets for impairment at least annually, in
accordance with Statement of Financial Accounting Standard No. 142,
Goodwill and Other Intangible
Assets
. (SFAS No. 142.) For goodwill, we first compare the fair value of a reporting unit with
its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds the
fair value of a reporting unit, additional tests would be used to measure the amount of impairment
loss, if any. We use present value and market value techniques to measure reporting unit fair
value. If the carrying amount of any other intangible asset exceeds its fair value, we would
recognize an impairment loss for the difference between fair value and the carrying amount. If
other events occur and circumstances change, causing the fair value of a reporting unit to fall
below its carrying amount, impairment losses may be recognized in the future. In accordance with
SFAS No. 142, we performed our annual impairment test in December 2006 and found no impairment in
our existing goodwill balances.
14
Income Taxes.
Deferred taxes are provided on temporary differences between the tax basis of
assets and liabilities for financial reporting purposes and income tax purposes. A valuation
allowance reduces deferred tax assets to an amount that represents our best estimate, as of
September 30, 2007, of the amount of such deferred tax assets that, more likely than not, will be
realized. We regularly review our deferred tax assets for recoverability and, if necessary,
establish a valuation allowance. Based on our review of the deferred tax assets at September 30,
2007, we have determined that a valuation allowance in the amount of $10.5 million was required and
has been reserved against all of our deferred tax assets.
In June 2006, the FASB issued Interpretation 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), which became effective for years beginning on January 1, 2007. FIN 48 addressed the
determination of how tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, we must recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by taxing authorities, based on the technical merits of the position. Our
assessments of our tax positions in accordance with FIN 48 did not result in changes that had a
material impact on results of operations, financial condition or liquidity.
Results of Operations
Net Revenue.
The following tables summarize our net revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
FinePoint
|
|
$
|
1,019,423
|
|
|
$
|
2,885,685
|
|
|
$
|
(1,866,262
|
)
|
|
|
(65
|
%)
|
Duraswitch Delphi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duraswitch Other
|
|
|
203,780
|
|
|
|
203,631
|
|
|
|
149
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
1,223,203
|
|
|
$
|
3,089,316
|
|
|
$
|
(1,866,113
|
)
|
|
|
(60
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
FinePoint
|
|
$
|
2,591,440
|
|
|
$
|
6,821,748
|
|
|
$
|
(4,230,308
|
)
|
|
|
(62
|
%)
|
Duraswitch Delphi
|
|
|
7,631,250
|
|
|
|
|
|
|
|
7,631,250
|
|
|
|
|
|
Duraswitch Other
|
|
|
711,733
|
|
|
|
536,713
|
|
|
|
175,020
|
|
|
|
33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
10,934,423
|
|
|
$
|
7,358,461
|
|
|
$
|
3,575,962
|
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net FinePoint Revenue
. Revenue related to one customer (see Note 4 to the Financial
Statements) was $1.0 million for the three-month period ended September 30, 2007, or 98% of net
FinePoint revenue, as compared to $2.9 million, or 99% of net FinePoint revenue in the prior year.
For the nine-month period ended September 30, 2007, revenue related to one customer was $2.5
million or 95% of net FinePoint revenue, as compared to $6.6 million or 97% of net FinePoint
revenue in the same period during 2006. The decrease was due to lower shipments than the previous
year as the customer moved to the end of life for their product. We do not expect revenue from
this customer in the 4
th
quarter of 2007 as we have fulfilled all purchase order
requirements to them. We are continuing our efforts to secure business from this customer and
obtain new customers for our products. Significant revenue from these efforts will not occur until
2008.
Net Duraswitch Revenue.
For the three months ended September 30, 2007 and 2006, we did not
generate any revenue from the Delphi license agreement. For the nine months ended September 30,
2007 and 2006, we generated approximately $7.6 million and $0, respectively, of Delphi licensing
revenue representing 91% and 0% of Duraswitch licensing revenue, respectively. The 2007 Delphi
revenue represents a cash payment received in the first quarter of 2007 from the sale of the rights
to our general unsecured claim for licensing fees against Delphi Automotive Systems, LLC. We do
not expect any additional revenue from Delphi in the future. Revenue from other customers for the
three-month period was flat primarily due to timing of sales of thiNcoder rotary switch licensed
components and royalties. Revenue from our thiNcoder product should continue at its current rate
through 2007.
Revenue may fluctuate from period to period because of the timing of purchase orders from our
customers, as well as market acceptance of products that incorporate our technologies. The amount
of revenue for any period is not necessarily indicative of results for any future period.
15
Cost of Goods Sold and Gross Profit.
The following tables summarize our cost of goods sold
(COGS) and gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
$
|
1,031,169
|
|
|
$
|
2,212,391
|
|
|
$
|
(1,181,222
|
)
|
|
|
(53
|
%)
|
Duraswitch
|
|
|
65,596
|
|
|
|
71,758
|
|
|
|
(6,162
|
)
|
|
|
(9
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total COGS
|
|
$
|
1,096,765
|
|
|
$
|
2,284,149
|
|
|
$
|
(1,187,384
|
)
|
|
|
(52
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
$
|
(11,746
|
)
|
|
$
|
673,294
|
|
|
$
|
(685,040
|
)
|
|
|
(102
|
%)
|
Duraswitch
|
|
|
138,184
|
|
|
|
131,873
|
|
|
|
6,311
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Profit
|
|
$
|
126,438
|
|
|
$
|
805,167
|
|
|
$
|
(678,729
|
)
|
|
|
(84
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
$
|
2,165,138
|
|
|
$
|
5,512,698
|
|
|
$
|
(3,347,560
|
)
|
|
|
(61
|
%)
|
Duraswitch
|
|
|
287,757
|
|
|
|
207,606
|
|
|
|
80,151
|
|
|
|
39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total COGS
|
|
$
|
2,452,895
|
|
|
$
|
5,720,304
|
|
|
$
|
(3,267,409
|
)
|
|
|
(57
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint
|
|
$
|
426,302
|
|
|
$
|
1,309,050
|
|
|
$
|
(882,748
|
)
|
|
|
(67
|
%)
|
Duraswitch
|
|
|
8,055,226
|
|
|
|
329,107
|
|
|
|
7,726,119
|
|
|
|
2348
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Profit
|
|
$
|
8,481,528
|
|
|
$
|
1,638,157
|
|
|
$
|
6,843,371
|
|
|
|
418
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FinePoint.
FinePoint gross profit during the quarter was negatively affected by approximately
$111,000 of inventory charges for excess digitizer inventory for which there are no orders.
FinePoint also incurred approximately $36,000 of excess shipping charges during the quarter to
expedite shipments to meet customer requirements. An increase of approximately $75,000 in the
warranty reserve was also expensed to allow for possible customer returns over the next twelve
months.
Gross profit over the nine month period was mainly affected by lower shipments during the
period as well as the extra costs incurred during the third quarter.
Duraswitch.
Duraswitch gross profit for the three month period was consistent with the prior
year. Duraswitch gross profit for the nine month period increased mainly because of the revenue
received from our claim for licensing fees from Delphi of $7.6 million which did not have any raw
material costs associated with it.
16
Selling, General and Administrative Expenses.
The following tables summarize our selling,
general and administrative expenses (SG&A):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
FinePoint
|
|
$
|
219,524
|
|
|
$
|
261,295
|
|
|
$
|
(41,771
|
)
|
|
|
(16
|
%)
|
Duraswitch
|
|
|
78,994
|
|
|
|
56,827
|
|
|
|
22,167
|
|
|
|
39
|
%
|
Corporate
|
|
|
535,883
|
|
|
|
426,916
|
|
|
|
108,967
|
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SG&A
|
|
$
|
834,401
|
|
|
$
|
745,038
|
|
|
$
|
89,363
|
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
FinePoint
|
|
$
|
665,923
|
|
|
$
|
728,426
|
|
|
$
|
(62,503
|
)
|
|
|
(9
|
%)
|
Duraswitch
|
|
|
877,136
|
|
|
|
168,248
|
|
|
|
708,888
|
|
|
|
421
|
%
|
Corporate
|
|
|
2,355,273
|
|
|
|
1,308,632
|
|
|
|
1,046,641
|
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SG&A
|
|
$
|
3,898,332
|
|
|
$
|
2,205,306
|
|
|
$
|
1,693,026
|
|
|
|
77
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses consist mainly of salaries, commissions, and
other compensation expense for sales and administrative personnel, sales commissions and fees for
external sales representatives, and corporate administrative expenses.
FinePoint SG&A.
The decrease in expenses for the three month period ended September 30, 2007
from the previous year is mainly due to lower salaries because of lower headcount in the
administrative area. The decrease for the nine month period ended September 30, 2007 from the
previous year is because of lower headcount in 2007 offset by higher legal costs.
Duraswitch SG&A.
The increase in expenses for the three month period ended September 30, 2007
from the previous year is primarily due to increased marketing expenses to develop new customers.
The increase in expenses for the nine month period ended September 30, 2007 is due to commissions
and fees of approximately $650,000, related to the Delphi Automotive Systems, LLC revenue.
Corporate SG&A.
The increase for both periods from the previous year is due to higher
compensation expense than the previous year relating to employment agreement severance expenses of
approximately $800,000, incentive based compensation, increased salary levels and additional
headcount. Additionally the Company incurred approximately $49,000 of higher rent during the third
quarter after the move to new corporate facilities in June 2007.
Research, Development and Commercial Application Engineering Expenses.
The following tables
summarize our research, development and commercial application engineering expenses (R&D):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
FinePoint
|
|
$
|
453,211
|
|
|
$
|
234,372
|
|
|
$
|
218,839
|
|
|
|
93
|
%
|
Duraswitch
|
|
|
98,663
|
|
|
|
106,506
|
|
|
|
(7,843
|
)
|
|
|
(7
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total R&D
|
|
$
|
551,874
|
|
|
$
|
340,878
|
|
|
$
|
210,996
|
|
|
|
62
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease) %
|
|
FinePoint
|
|
$
|
1,024,352
|
|
|
$
|
656,018
|
|
|
$
|
368,334
|
|
|
|
56
|
%
|
Duraswitch
|
|
|
270,244
|
|
|
|
322,038
|
|
|
|
(51,794
|
)
|
|
|
(16
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total R&D
|
|
$
|
1,294,596
|
|
|
$
|
978,056
|
|
|
$
|
316,540
|
|
|
|
32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Research and development expenses consist primarily of compensation for our engineering
personnel, consulting expenses, project materials and patent amortization expenses.
FinePoint R&D.
The increase in expenses for both periods from the previous year is due to
higher headcount and higher compensation expense, plus higher expenses for new product prototype
development.
Duraswitch R&D.
The decrease in expenses for both periods from the previous year was the
result of lower headcount and lower compensation expense.
Other Income net.
Other income, which is mainly interest income, was $95,416 for the three
months ended September 30, 2007, compared to $23,417 for the three months ended September 30, 2006.
Other income for the nine months ended September 30, 2007 was $222,382 compared to $71,836 for the
nine months ended September 30, 2006. The increase was due to higher cash balances than the
previous year.
Income Taxes.
During the quarter ended September 30, 2007, it was identified that we qualify
for a small corporation exemption that would eliminate the alternative minimum tax in 2007.
Therefore, we reversed the $93,508 previously accrued as an estimated tax liability.
Liquidity and Capital Resources
We had cash and cash equivalents of $6,874,540 on September 30, 2007. Cash increased $5.3
million from December 31, 2006 because of the receipt of $7.6 million of funds from our Delphi
Automotive Systems, LLC licensing fee claim settlement, offset by cash used for operations and
investing activities over the nine month period.
Net cash provided by operating activities was approximately $5.4 million for the nine months
ended September 30, 2007. The cash provided by operating activities consisted primarily of net
income, decreases in FinePoint inventories of $1.0 million, and increases in accruals for severance
expenses of approximately $550,000 which will be paid in future periods. We also paid commissions
and fees relating to the Delphi revenue of approximately $650,000 during the first nine months.
Net cash used in investing activities was $160,880 for the nine months ended September 30,
2007. The net cash used in investing activities was for patent costs, purchases of computer
equipment, and purchases of office furnishings for our new corporate offices.
As of September 30, 2007 we had net operating loss carryforwards for federal income tax
purposes of approximately $20.2 million which expire in 2011 through 2026 and net operating loss
carryforwards for state income tax purposes of approximately $5.4 million which expire in 2007
through 2011. We intend to use these loss carryforwards to offset most of the taxable income
earned in fiscal 2007. We have provided a full valuation allowance against our deferred tax asset.
(see Note 9 to the Consolidated Financial Statements)
We believe that our cash on hand will be sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least 12 months. We continually evaluate our
working capital needs and we may seek to obtain additional working capital through debt or equity
offerings. There can be no assurance that additional funds will be available on acceptable terms.
In the event that additional funds are not available on acceptable terms, we could be required to
reduce the scope of or cease operations.
Item 3. Controls and Procedures.
We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) to ensure that material information relating to our company,
including our consolidated subsidiaries, is made known to the officers who certify our financial
reports and to other members of senior management and our Board of Directors.
Based on their evaluation as of September 30, 2007, our principal executive officer and
principal financial officer have concluded that our disclosure controls and procedures are
effective to ensure that the information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms.
18
There was no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2007, that
has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
We have confidence in our disclosure controls and procedures and internal control over
financial reporting. Nevertheless, we, including our principal executive officer and principal
financial officer, do not expect that our disclosure controls and procedures and internal control
over financial reporting will prevent all errors, misstatements or fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must be considered
relative to the associated costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within our company have been detected.
19
PART II OTHER INFORMATION
Item 1. Legal Proceedings
During May 2007, Stephen Caldwell, the former president of FinePoint Innovations, Inc. filed a
Demand for Arbitration with the American Arbitration Association alleging various claims against
InPlay. He alleges that InPlay terminated his employment in violation of his employment agreement,
that InPlay breached a duty owed to him by settling a lawsuit for an amount less than what he
believes was appropriate, and by interfering with his earnout right under the terms of the Merger
Agreement between InPlay and FinePoint. He seeks compensatory damages for each of these
allegations. We believe InPlay has numerous defenses to his claims, and we are vigorously
defending, and intend to continue to vigorously defend, against his claims. We also have asserted
counterclaims against him for damages based on our belief that he breached certain representation
and warranties in the Merger Agreement between InPlay and FinePoint. The matter is currently in
the discovery phase, and a hearing is scheduled for July 2008.
Item 6. Exhibits.
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
|
|
|
2.2
|
|
Agreement and Plan of Merger, dated July 27, 2005, among InPlay Technologies, Inc., FPI
Acquisition, Inc., FinePoint Innovations, Inc., and Stephen Caldwell (incorporated herein by
reference to Exhibit 2.2 on Form 8-K filed on August 3, 2005).
|
|
|
|
2.3
|
|
Amendment No. 1 to Agreement and Plan of Merger, dated July 27, 2005, among InPlay
Technologies, Inc., FPI Acquisition, Inc., FinePoint Innovations, Inc., and Stephen Caldwell
(incorporated herein by reference to Exhibit 2.3 on Form 8-K filed on September 8, 2005).
|
|
|
|
3.1
|
|
Amended and Restated Articles of Incorporation (incorporated herein by reference to Exhibit
3.1 on Form 10-QSB filed on August 5, 2005).
|
|
|
|
3.2
|
|
Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 on Form 10-KSB
filed on April 2, 2007).
|
|
|
|
10.23
|
|
Settlement Agreement between InPlay Technologies and Delphi Automotive Systems, LLC
(incorporated herein by reference to Exhibit 10.23 on Form 8-K filed on February 27, 2007).
|
|
|
|
10.24
|
|
First Amendment to InPlay Technologies, Inc. 2005 Stock Award Plan (incorporated herein by
reference to Exhibit 10.24 on Form 8-K filed on June 1, 2007).
|
|
|
|
10.25
|
|
Lease Agreement between InPlay Technologies and The Reliable Life Insurance Company
(incorporated herein by reference to Exhibit 10.25 on Form 10-QSB filed on August 13, 2007).
|
|
|
|
10.26
|
|
InPlay Technologies, Inc. 2005 Stock Award Plan Stock Option Agreement (incorporated herein
by reference to Exhibit 10.26 on Form 10-QSB filed on August 13, 2007).
|
|
|
|
10.27
|
|
Employment Agreement dated May 25, 2007 between InPlay Technologies, Inc. and Timothy Kuhn
(incorporated herein by reference to Exhibit 10.27 on Form 10-QSB filed on August 13, 2007).
|
|
|
|
10.28
|
|
Severance Agreement and Release of Claims between InPlay Technologies, Inc. and Robert J.
Brilon (incorporated herein by reference to Exhibit 10.28 on Form 8-K filed on August 6,
2007).
|
|
|
|
10.29
|
|
Employment Agreement dated June 6, 2006 between InPlay Technologies, Inc. and Eric
Vandewater (filed herein).
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a),
promulgated under the Securities Exchange Act of 1934, as amended.
|
20
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a),
promulgated under the Securities Exchange Act of 1934, as amended.
|
|
|
|
32.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
InPlay Technologies, Inc.
|
|
|
(Registrant)
|
|
Date: November 13, 2007
|
By:
|
/s/ Steven P. Hanson
|
|
|
|
Steven P. Hanson
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
/s/ Mark R. Sokolowski
|
|
|
|
Mark R. Sokolowski
|
|
|
|
Chief Financial Officer
|
|
|
22
Exhibit Index
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
|
|
|
2.2
|
|
Agreement and Plan of Merger, dated July 27, 2005, among InPlay Technologies, Inc., FPI
Acquisition, Inc., FinePoint Innovations, Inc., and Stephen Caldwell (incorporated herein by
reference to Exhibit 2.2 on Form 8-K filed on August 3, 2005).
|
|
|
|
2.3
|
|
Amendment No. 1 to Agreement and Plan of Merger, dated July 27, 2005, among InPlay
Technologies, Inc., FPI Acquisition, Inc., FinePoint Innovations, Inc., and Stephen Caldwell
(incorporated herein by reference to Exhibit 2.3 on Form 8-K filed on September 8, 2005).
|
|
|
|
3.1
|
|
Amended and Restated Articles of Incorporation (incorporated herein by reference to Exhibit
3.1 on Form 10-QSB filed on August 5, 2005).
|
|
|
|
3.2
|
|
Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 on Form 10-KSB
filed on April 2, 2007).
|
|
|
|
10.23
|
|
Settlement Agreement between InPlay Technologies and Delphi Automotive Systems, LLC
(incorporated herein by reference to Exhibit 10.23 on Form 8-K filed on February 27, 2007).
|
|
|
|
10.24
|
|
First Amendment to InPlay Technologies Inc. 2005 Stock Award Plan (incorporated herein by
reference to Exhibit 10.24 on Form 8-K filed on June 1, 2007).
|
|
|
|
10.25
|
|
Lease Agreement between InPlay Technologies and The Reliable Life Insurance Company
(incorporated herein by reference to Exhibit 10.25 on Form 10-QSB filed on August 13, 2007).
|
|
|
|
10.26
|
|
InPlay Technologies, Inc. 2005 Stock Award Plan Stock Option Agreement (incorporated herein
by reference to Exhibit 10.26 on Form 10-QSB filed on August 13, 2007).
|
|
|
|
10.27
|
|
Employment Agreement dated May 25, 2007 between InPlay Technologies, Inc. and Timothy Kuhn
(incorporated herein by reference to Exhibit 10.27 on Form 10-QSB filed on August 13, 2007).
|
|
|
|
10.28
|
|
Severance Agreement and Release of Claims between InPlay Technologies, Inc. and Robert J.
Brilon (incorporated herein by reference to Exhibit 10.28 on Form 8-K filed on August 6,
2007).
|
|
|
|
10.29
|
|
Employment Agreement dated June 6, 2006 between InPlay Technologies, Inc. and Eric
Vandewater (filed herein).
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a),
promulgated under the Securities Exchange Act of 1934, as amended.
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a),
promulgated under the Securities Exchange Act of 1934, as amended.
|
|
|
|
32.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
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