RISK FACTORS
You
should carefully consider the following risks relating to our business, our
common stock, warrants and units, together with the other information described
elsewhere in this prospectus before making an investment decision. If any
of the following risks actually occur, our business could be harmed, the
trading price of our common stock could decline, and you might lose all or part
of your investment. Additional risks not
presently known to us or that we currently believe are immaterial also may harm
our business.
We have
a long history of operating losses.
As of September
30, 2006, we had an accumulated deficit of $102.3 million. We incurred net
losses of $15.4 million, $11.0 million and $1.7 million for the years ended
December 31, 2005, 2004 and 2003, respectively and $12.9 million for the
first nine months of 2006. There can be no assurance that we will ever become
profitable. Additionally, our independent registered public accounting firm has
included an explanatory paragraph in its report on our consolidated financial
statements for the year ended December 31, 2005 with respect to substantial
doubt about our ability to continue as a going concern. The consolidated
financial statements incorporated by reference herein do not include any
adjustments that might result from the outcome of that uncertainty.
We will likely
need to raise additional capital.
Historically, we
have met our short- and long-term cash needs through debt issuances and the
sale of common stock in private placements, because cash flow from operations
has been insufficient to fund our operations. Set forth below is information
regarding net proceeds received through private placements of our common stock
and exercise of stock options and warrants in 2005, 2004 and 2003:
(In thousands)
|
|
Private Placements
of Common Stock
|
|
Exercise of Stock
Options and Warrants
|
|
|
|
|
|
|
|
2005
|
|
$
|
4,531
|
|
$
|
152
|
|
2004
|
|
$
|
10,741
|
|
$
|
192
|
|
2003
|
|
$
|
1,920
|
|
$
|
3,437
|
|
We received gross
proceeds of $10,000,000 from the issuance of senior secured convertible notes
to a group of private investors in January 2006. While we believe that
these funds, along with the cash flow generated by our expanding Systems
business, should be adequate to enable us to complete our UWB engineering
development and launch commercialization of UWB products, depending upon the
results and timing of our UWB initiative and the profitability of our Systems
business, we will likely need to raise further capital in 2007. Future capital
requirements will depend on many factors, including cash flow from operations,
continued progress in research and development programs, competing
technological and market developments, and our ability to market our products
successfully. There can be no assurance
that additional equity or debt financing, if required, will be available on
acceptable terms or at all. Moreover, any equity financing or convertible debt
3
financing would result in
dilution to our existing stockholders and could have a negative effect on the
market price of our common stock.
From
November 2005 to early May 2006 and late May 2006 to mid July 2006, our common
stock did not meet the minimum bid price requirement to remain listed on the
NASDAQ Capital Market. If we were to be delisted, it could make trading in our
stock more difficult and our $10.4 million outstanding principal amount of
convertible notes would be deemed payable at the option of the holders
Our voting common
stock is traded on the NASDAQ Capital Market. There are various quantitative
listing requirements for a company to remain listed on the NASDAQ Capital
Market, including maintaining a minimum bid price of $1.00 per share of common
stock and maintaining stockholders equity of $2.5 million. On June 27, 2006,
the NASDAQ Stock Market notified us that for the previous 30 consecutive
business days, the bid price of our common stock had closed below the minimum
$1.00 per share price requirement for continued inclusion under NASDAQ
Marketplace Rules. We were given until December 26, 2006 to regain compliance
with the NASDAQ Capital Market $1.00 minimum bid price rule. On July 28, 2006,
we received notification from the NASDAQ Stock Market that we had regained
compliance and the matter was closed.
At September 30,
2006, we had total stockholders equity of $5.9 million. To the extent we incur
net losses and do not raise additional capital, our stockholders equity will
be reduced. If the minimum bid price of
our common stock were to close below $1.00 for 30 consecutive days, we would
likely again receive notification from the NASDAQ Capital Market that we were
not in compliance with the $1.00 minimum bid price rule. If we do not regain
compliance within the allotted compliance period, including any extensions that
may be granted by the NASDAQ Capital Market, the NASDAQ Capital Market would
notify us that our common stock would be delisted from the NASDAQ Capital
Market, eliminating the only established trading market for our shares. We
would then be entitled to appeal this determination to a NASDAQ Listing
Qualifications Panel and request a hearing.
In the event we
are delisted from the NASDAQ Capital Market, we would be forced to list our
shares on the OTC Electronic Bulletin Board or some other quotation medium,
such as the pink sheets, depending on our ability to meet the specific listing
requirements of those quotation systems. As a result, an investor might find it
more difficult to trade, or to obtain accurate price quotations for, such
shares. Delisting might also reduce the visibility, liquidity, and price of our
voting common stock. In the event our common stock was not listed on the NASDAQ
Capital Market or another established automated over-the-counter trading market
in the United States, all amounts outstanding under our $10.4 million senior
secured convertible notes would become due and payable at the option of the
holders.
We are
dependent upon a significant stockholder to meet our financing needs and there
can be no assurance that this stockholder will continue to provide financing.
We have relied
upon the ability of Carl Berg, a director and significant owner of our common
stock, for interim financing needs. Mr. Berg has provided a personal
guarantee to Samsung Semiconductor Inc., our contracted ASIC manufacturer, to
secure our working capital requirements for ASIC purchase order fulfillment and
a personal guarantee to Greater Bay Bank, N.A. in connection with our $4.0
million accounts receivable-based line of credit facility and $2.5 million term
loan. In connection with these guarantees, Mr. Berg maintains a security
interest in all the Companys assets, subject to the banks lien on our
accounts receivable, and subordinating that security interest in accounts
receivable to holders of our convertible debt as described below. There can be
no assurances that Mr. Berg will continue to provide such interim
financing or personal guarantees, should we need additional funds or increased
credit facilities with our vendors.
We have
a significant amount of convertible securities and equity instruments that will
dilute existing stockholders upon conversion or exercise.
At November 30, 2006, we had 3,161 shares of preferred shares issued and
outstanding, 4,645,395 warrants and 5,535,577 options outstanding, and $10.4
million of convertible notes outstanding, which are all exercisable into shares
of common stock. The 3,161 shares of preferred stock are convertible into
3,161,000 shares of our voting common stock and the convertible notes are
convertible into 10,425,000 shares of common stock. Furthermore, at November
30, 2006, 2,956,326 additional shares of common stock were available for grant
to our employees, officers, directors and consultants under our current stock
option and incentive plans. We also may issue additional shares in acquisitions
and additional convertible notes as interest payments on our outstanding
convertible notes.
4
Any
additional grant of options under existing or future plans or issuance of
shares in connection with an acquisition
or issuance of additional
convertible notes will further dilute existing stockholders.
Delays
in product development could adversely affect our market position or customer
relationships.
We have
experienced delays in product development in the past and may experience
similar delays in the future. Given the short product life cycles in the
markets for certain products, any delay or unanticipated difficulty associated
with new product introductions or product enhancements could cause us to lose
customers and damage our competitive position. Prior delays have resulted
from numerous factors, such as:
·
changing
product specifications;
·
the
discontinuation of certain third party components;
·
difficulties
in hiring and retaining necessary personnel;
·
difficulties
in reallocating engineering resources and other resource limitations;
·
difficulties
with independent contractors;
·
changing
market or competitive product requirements;
·
unanticipated
engineering complexity;
·
undetected
errors or failures in software and hardware; and
·
delays
in the acceptance or shipment of products by customers.
The development of
new, technologically advanced products, including our significant investment in
UWB, is a complex and uncertain process requiring high levels of innovation and
highly skilled engineering and development personnel, as well as the accurate
anticipation of technological and market trends. In order to compete, we must
be able to deliver products to customers that are highly reliable, operate with
the customers existing equipment, lower the customers costs of acquisition,
installation and maintenance, and provide an overall cost-effective solution.
We may not be able to identify, develop, manufacture, market or support new or
enhanced products successfully, if at all, or on a timely basis. Further, our
new products may not gain market acceptance or we may not be able to respond
effectively to product announcements by competitors, technological changes or
emerging industry standards. Our failure to respond effectively to
technological changes would significantly harm our business. Finally, there can
be no assurances we will be successful in these efforts.
We rely
on certain vendors for a significant portion of our manufacturing. If these
vendors experience delays in the production and shipping of our products, this
would have an adverse effect on our results of operations.
At September 30,
2006, approximately 85% of the components for our products are manufactured on
a turnkey basis by four vendors: BTW Inc., Furthertech Company Ltd., Samsung
Semiconductor Inc. and Veris Manufacturing. If these vendors experience
production or shipping problems for any reason, we in turn could experience
delays in the production and shipping of our products, which would have an
adverse effect on our results of operations.
A
significant portion of our semiconductor revenue is from products that are
designed for consumer goods that have seasonal sales.
A significant
portion of our semiconductor revenue is subject to risks associated with the
sales of certain end products through retail outlets that are seasonal, with a
majority of such sales occurring October
through December. As a result, our annual operating results with respect to
sales of our semiconductor chips designed into newly introduced products
depend, in large part, on sales during the relatively brief holiday season.
5
We are
dependent on our suppliers. If our suppliers experience labor problems, supply
shortages or product discontinuations, this would have an adverse effect on our
results of operations.
We purchase all of
our parts from outside suppliers and from time-to-time experience delays in
obtaining some components or peripheral devices. Additionally, we are dependent
on sole source suppliers for certain components. There can be no
assurance that labor problems, supply shortages or product discontinuations
will not occur in the future, which could significantly increase the cost, or
delay shipment, of our products, which in turn could adversely affect our
results of operations.
If we
fail to meet certain covenants required by our credit facilities, we may not be
able to draw down on such facilities and our ability to finance our operations
could be adversely affected
.
We have access to
a $4.0 million credit line under which we can borrow up to 90% of our eligible
outstanding accounts receivable and a $2.5 million term loan with the same
bank. The various agreements in connection with such credit line and term loan
require us to maintain certain covenants. At September 30, 2006, we were not in
compliance with the net loss covenant. On November 8, 2006, we received a
waiver from Greater Bay Bank with respect to compliance with this covenant. In
the event we again violate this covenant, or we violate any other covenants and
are not able to obtain a waiver, we will not be able to draw down on the line
of credit or term loan, and any amounts outstanding under such line of credit
or term loan may become immediately due and payable, either of which could have
a material adverse impact on our financial condition and results of operation.
Furthermore, the
restrictions contained in the line of credit and term loan documents, as well
as the terms of other indebtedness we may incur from time-to-time, could limit
our ability to plan for or react to market conditions or meet capital needs or
otherwise restrict our activities or business plans. These restrictions could
also adversely affect our ability to finance our operations or other capital
needs, or to engage in other business activities that would be in our interest.
Certain events will result in our
senior secured convertible notes becoming due and payable prior to maturity or
will require us to repurchase our senior secured convertible notes prior to
maturity, either of which would adversely affect our ability to finance our
operations.
The provisions of
our senior secured convertible notes, due January 1, 2011, provide that if we,
among other things: (i) default on any principal or interest payment on our
senior secured convertible notes; (ii) fail to comply with any of our covenants
in the documents governing the issuance of our senior secured convertible
notes; (iii) do not pay at final maturity (either at stated maturity or upon
acceleration) any of our other indebtedness with an aggregate principal amount
of $1,000,000, the outstanding principal and accrued interest on such notes
will become due and payable. In addition, our senior secured convertible notes
provide, that, upon the occurrence of any of the following events, the holders of
the notes will have the right to require us to repurchase any or all of such
notes at a purchase price equal to 101% of the principal amount of notes to be
repurchased plus accrued and unpaid interest: (i) failure of our common stock
to be traded on a national securities exchange, NASDAQ Stock Market or another
established automated over-the-counter trading market in the United States or
(ii) acquisition of more than 50% of our outstanding voting stock or merger
with another company if our then shareholders do not continue to own a majority
of our outstanding voting stock. At September 30, 2006, we owed $10.4 million
under our senior secured convertible notes. Repayment of this amount prior to
stated maturity would adversely impact our ability to finance our operations or
other capital needs.
If we
are unable to renew or extend our existing line of credit or term loan when
each expires on its own terms, our ability to finance our operations could be
adversely affected
.
We have access to
a $2.5 million term loan and a $4.0 million credit line facility with the same
bank. Both these credit facilities expire on December 24, 2006. If we are
unable to renew the term loan or credit line on favorable terms upon the
expiration, we would be required to immediately pay all outstanding obligations
under such term loan and credit line. Repayment of the principal amounts and
interest due under these facilities could adversely affect our other capital
requirements, as well as our ability to finance our operations on an ongoing
basis.
6
We
depend on a few customers for a high percentage of our revenues, and the loss
or failure to pay of any one of these customers could result in a substantial
decline in our revenues and profits.
For the year ended
December 31, 2005, our five largest customers in the aggregate provided
26% of our total revenues and as of December 31, 2005, comprised 45% of
our accounts receivable balance. For the nine months ended September 30, 2006,
our five largest customers in the aggregate provided 54% of our total revenues,
and as of September 30, 2006, comprised 46% of our accounts receivable balance.
Sales to one customer accounted for 48% and 26% of our revenue in the three and
nine month periods ended September 30, 2006, respectively. We do not have
long-term contracts requiring any customer to purchase any minimum amount of
products. There can be no assurance that we will continue to receive orders of
the same magnitude as in the past from existing customers or will be able to
market our current or proposed products to new customers. The loss of any major
customer, the failure of any such identified customer to pay us, or to
discontinue issuance of additional purchase orders, would have a material
adverse effect on our revenues, results of operation, and business as a whole,
absent the timely replacement of the associated revenues and profit margins
associated with such business. Furthermore, many of our products are dependent
upon the overall success of our customers products, over which we often have
no control.
Our
quarterly financial results are subject to significant fluctuations, and if
actual revenues are less than projected revenues, we may be unable to reduce
expenses proportionately, and our operating results, cash flows and liquidity
would likely be adversely affected.
We have been
unable in the past to forecast accurately our operating expenses or revenues.
Revenues currently depend heavily on volatile customer purchasing patterns. If
actual revenues are less than projected revenues, we may be unable to reduce
expenses proportionately, and our operating results, cash flows and liquidity
would likely be adversely affected.
Our
markets are subject to rapid technological change, and to compete effectively,
we must continually introduce new products, requiring significant influx of
additional capital until our overall operations generate sufficient profit to
fund such products internally.
Many of our
markets are characterized by extensive research and development and rapid
technological change resulting in short product life cycles. Development by
others of new or improved products, processes or technologies may make our
products or proposed products obsolete or less competitive. We must devote
substantial efforts and financial resources to enhance our existing products
and to develop new products, including our significant investment in UWB
technology. To fund such ongoing research and development, we will require a
significant influx of additional capital. There can be no assurance that we will
succeed with these efforts. Failure to effectively develop such products,
notably our UWB technology, could have a material adverse effect on our
financial condition and results of operations.
We may
not be able to protect our proprietary technology or information.
As of September
30, 2006, we held five patents and four pending patent applications in the
United States. Certain of these patents have also been filed and issued in
countries outside the United States. We treat our technical data as
confidential and rely on internal non-disclosure safeguards, including
confidentiality agreements with employees, and on laws protecting trade
secrets, to protect our proprietary information. There can be no assurance that
these measures will adequately protect the confidentiality of our proprietary
information or prove valuable in light of future technological developments.
There can be no
assurance that third parties will not assert infringement claims against us or
that such assertions will not result in costly litigation or require us to
license intellectual proprietary rights from third parties. In addition, there
can be no assurance that any such licenses would be available on terms
acceptable to us, if at all.
If we
are unable to respond to rapid technological change in a timely manner, then we
may lose customers to our competitors.
To remain
competitive, we must continue to enhance and improve the responsiveness,
functionality and features of our products. Our industry is characterized by
rapid technological change, changes in user and customer requirements and
preferences and frequent new product and service introductions. If competitors
introduce products and services embodying new technologies, or if new industry
standards and practices emerge, then our existing
7
proprietary technology
and systems may become obsolete. Our future success will depend on our
ability to do the following:
·
both
license and internally develop leading technologies useful in our business;
·
enhance
our existing technologies;
·
develop
new services and technology that address the increasingly sophisticated and
varied needs of our prospective customers; and
·
respond
to technological advances and emerging industry standards and practices on a
cost-effective and timely basis.
To develop our
proprietary technology entails significant technical and business risks. We may
use new technologies ineffectively, or we may fail to adapt our proprietary
technology and transaction processing systems to customer requirements or
emerging industry standards. If we face material delays in introducing new
services, products and enhancements, then our customers may forego the use of
our services and use those of our competitors.
We
typically operate without a significant amount of backlog, which could have an
adverse impact on our operating results
.
We typically
operate with a small amount of backlog. Accordingly, we generally do not have a
material backlog of unfilled orders, and revenues in any quarter are
substantially dependent on orders booked in that quarter. Any significant
weakening in current customer demand would therefore have, and has had in the
past, an almost immediate adverse impact on our operating results.
Our
common stock price is volatile.
The market price
for our voting common stock is volatile and has fluctuated significantly to
date. For example, between June 1, 2006 and November 30, 2006, the per share
price has fluctuated between $0.83 and $1.85 per share, closing at $1.41 on
December 4, 2006. The trading price of our voting common stock is likely to
continue to be highly volatile and subject to wide fluctuations in response to
factors including the following:
·
actual
or anticipated variations in our quarterly operating results;
·
announcements
of technological innovations or failures, new sales formats or new products or
services by us or our competitors;
·
cyclical
nature of consumer products using our technology;
·
changes
in financial estimates by us or securities analysts;
·
changes
in the economic performance and/or market valuations of other multi-media,
video scan companies;
·
announcements
by us of significant acquisitions, strategic partnerships, joint ventures or
capital commitments;
·
additions
or departures of key personnel;
·
additions
or losses of significant customers; and
·
sales
of common stock or dilutive issuance of other securities.
In addition, the
securities markets have experienced extreme price and volume fluctuations in
recent times, and the market prices of the securities of technology companies
have been especially volatile. These broad market and industry factors may
adversely affect the market price of common stock, regardless of actual
operating performance. In the past, following periods of volatility in the
market price of stock, many companies have been the object of
8
securities class action
litigation, including us. If we are sued in a securities class action, then it
could result in additional substantial costs and a diversion of managements
attention and resources.
We are
subject to various environmental laws and regulations that could impose
substantial costs upon us and may adversely affect our business.
Some of our
operations are subject to state, federal, and international laws governing
protection of the environment, human health and safety, and regulating the use
of certain chemical substances. We endeavor to comply with these environmental
laws, yet compliance with such laws could increase our operations and product
costs. Any violation of these laws can subject us to significant liability,
including fines and penalties, and prohibit sales of our products in one or
more states or countries, and result in a material adverse effect on our
financial condition.
Recent
environmental legislation within the European Union (EU) may increase our cost
of doing business internationally and impact our revenues from EU countries as
we comply with and implement these new requirements. The European Parliament
has enacted the Restriction on Use of Hazardous Substances Directive, or RoHS
Directive, which restricts the use of certain hazardous substances in
electrical and electronic equipment. We need to redesign products containing
hazardous substances regulated under the RoHS Directive to reduce or eliminate
regulated hazardous substances contained in our products. As an example,
certain of our products include lead, which is included in the list of
restricted substances.
As of November 30,
2006, our semiconductor products and many of our system products now comply
with the RoHS Directive. However, due to the level of effort and cost in
redesigning products, certain system products will not be redesigned to become
RoHS compliant. Such decisions have been made based on the products estimated
remaining life and the products primary sales regions being located outside the
EU. For certain of our mixer and digital signage products, we continue working
towards compliance but do not expect to meet the requirements of the RoHS
Directive until March 31, 2007 and June 30, 2007, respectively. As a result, we
will be unable to sell these products into the EU market until such compliance
is achieved. These delays may have an adverse effect on our sales and results
of operations.
Any
acquisitions of companies or technologies by us may result in distraction of
our management and disruptions to our business.
We may acquire or
make investments in complementary businesses, technologies, services or
products if appropriate opportunities arise, as was the case in
February 2004 when we acquired the stock of COMO Computer and Motion GmbH
and in May 2004 when we acquired substantially all the assets of Visual
Circuits Corporation. From time-to-time, we may engage in discussions and
negotiations with companies regarding the possibility of acquiring or investing
in their businesses, products, services or technologies. We may not be able to
identify suitable acquisition or investment candidates in the future, or if we
do identify suitable candidates, we may not be able to make such acquisitions
or investments on commercially acceptable terms, if at all. If we acquire or
invest in another company, we could have difficulty assimilating that companys
personnel, operations, technology or products and service offerings. In
addition, the key personnel of the acquired company may decide not to work for
us. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect the
results of operations. Furthermore, we may incur indebtedness or issue equity
securities to pay for any future acquisitions and/or pay for the legal,
accounting or finders fees typically associated with an acquisition. The
issuance of equity securities could be dilutive to our existing stockholders.
In addition, the accounting treatment for any acquisition transaction may
result in significant goodwill and intangible assets, which, if impaired, will
negatively affect our consolidated results of operations. The accounting
treatment for any potential acquisition may also result in a charge for
in-process research and development expense, as was the case with the
acquisition of Visual Circuits Corporation, which will negatively affect our
consolidated results of operations.
We are
exposed to potential risks from legislation requiring companies to evaluate
financial controls under Section 404 of the Sarbanes-Oxley Act of 2002.
Section 404
of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our
system of internal controls. We will be required to meet the requirements of
Section 404 of the Sarbanes-Oxley Act by December 31, 2007. Compliance with the
requirements of Section 404 is expected to be expensive and
time-consuming. We estimate that we will spend approximately $650,000 to
comply. If we fail to complete this evaluation in a timely manner, or if our
9
independent registered
public accounting firm cannot timely attest to our evaluation, we could be
subject to regulatory scrutiny and a loss of public confidence in our internal
controls. In addition, any failure to implement required new or improved
controls, or difficulties encountered in their implementation, could harm our
operating results or cause us to fail to meet our reporting obligations.
Risks
Related to Our Industry
International
sales are subject to significant risk.
Our revenues from
outside the United States are subject to inherent risks related thereto,
including currency rate fluctuations, the general economic and political
conditions in each country. There can be no assurance that an economic or
currency crisis experienced in certain parts of the world will not reduce
demand for our products and therefore have a material adverse effect on our
revenue or operating results.
Our
businesses are very competitive.
The computer
peripheral and semiconductor markets are extremely competitive and are
characterized by significant price erosion over the life of a product. We
currently compete with other developers of video conversion products and with
video-graphic integrated circuit developers. Many of our competitors have
greater market recognition and greater financial, technical, marketing and
human resources. There can be no assurance that we will be able to compete
successfully against existing companies or new entrants to the marketplace.
The video
production equipment and semiconductor markets are highly competitive and
characterized by rapid technological change, new product development and
obsolescence, evolving industry standards and significant price erosion over
the life of a product. Competition is fragmented with several hundred
manufacturers supplying a variety of products to this market. We anticipate
increased competition from both existing manufacturers and new market entrants.
Increased competition could result in price reductions, reduced margins and
loss of market share, any of which could materially and adversely affect our
business, financial condition and results of operations. There can be no
assurance that we will be able to compete successfully against current and
future competitors in these markets.
Often our competitors
have greater financial, technical, marketing, sales and customer support
resources, greater name recognition and larger installed customer bases than we
possess. In addition, some of our competitors also offer a wide variety of
product offerings which may confer a competitive advantage based upon their
ability either to bundle their equipment in certain large system sales or
combine products more cost effectively than we can offer.
WHERE YOU CAN FIND MORE INFORMATION
We file annual,
quarterly and current reports, proxy statements and other information with the
SEC. You may read and copy materials
that we have filed with the SEC at the SECs public reference room located at
100 F. Street N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our SEC filings
also are available to the public on the SECs website at http://www.sec.gov. In
addition, our SEC filings are available to the public on our website
http://www.Focusinfo.com.
The SEC allows us
to incorporate by reference in this prospectus information we file with it,
which means that we can disclose important information to you by referring you
those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the SEC and which is incorporated by
reference will automatically update and supersede information contained in this
prospectus or in documents filed earlier with the SEC. We incorporate by reference the documents
listed below and any future filings we make with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, after
the date of the filing of our registration statement on Form S-3, including
this prospectus, until our offering is complete. However, we are not incorporating, in each
case, any documents or information deemed to have been furnished and not filed
in accordance with SEC rules.
These documents are
incorporated herein by reference as of their respective dates of filing:
10
·
Our
Annual Report of Form 10-K for the year ended December 31, 2005, as filed with
the Commission on March 31, 2006;
·
Our
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006, as
filed with the Commission on May 15, 2006;
·
Our
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, as
filed with the Commission on August 14, 2006;
·
Our
Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2006, as filed with the Commission on November 14, 2006;
·
Our
Current Reports on Form 8-K, as filed with the Commission on January 30, 2006,
February 21, 2006, February 24, 2006, March 9, 2006, March 15, 2006, April 25,
2006, May 11, 2006, May 15, 2006, June 30, 2006, July 13, 2006, August 2, 2006,
August 10, 2006, August 15, 2006, September 28, 2006, October 5, 2006, November
9, 2006, and November 21, 2006; and
·
The
description of our common stock contained in our registration statement on Form
8-A, as filed with the Commission on April 5, 1993, including any amendments or
reports filed for the purpose of updating that description.
Our filings are
available on our website at http://www.Focusinfo.com. Information contained in
or linked to our website is not a part of this prospectus. You may also request a copy of these filings,
at no cost, by writing or telephoning us at:
Focus Enhancements, Inc.
1370 Dell Avenue
Campbell, California 95008
(408) 866-8300
FORWARD-LOOKING STATEMENTS
This document
contains forward looking information within the meaning of the Section 27A of
the Securities Act of 1933, as amended (the Securities Act), and Section 21E
of the Securities and Exchange Act of 1934, as amended (the Exchange Act),
and as such, may involve risks and uncertainties. Forward-looking statements,
which are based on certain assumptions and describe future plans, strategies,
and expectations, are generally identifiable by the use of words or phrases
such as believe, plan, expect, intend, anticipate, estimate, project,
forecast, may increase, may fluctuate, may improve and similar
expressions or future or conditional verbs such as should, would, and
could.
These
forward-looking statements relate to, among other things, expectations of the
business environment in which we operate, opportunities and expectations
regarding technologies, anticipated performance or contributions from new and
existing employees, proposed acquisitions, projections of future performance,
possible changes in laws and regulations, potential risks and benefits arising
from the implementation of our strategic and tactical plans, perceived
opportunities in the market, potential actions of significant stockholders and
statements regarding our mission and vision. Our actual results, performance,
and achievements may differ materially from the results, performance, and
achievements expressed or implied in such forward-looking statements due to a
wide range of factors. Factors that may cause such differences include, without
limitation, the availability of capital to fund our future cash needs, reliance
on major customers, history of operating losses, failure to integrate new
acquisitions, the actual amount of charges and transaction expenses associated
with the acquisitions, the ability to recognize expected synergies upon
acquisition and the related benefits envisioned by us, market acceptance of our
products, technological obsolescence, competition, component supply problems
and protection of proprietary information, as well as the accuracy of our
internal estimates of revenue and operating expense levels.
Each forward
looking statement should be read in conjunction with the Risk Factors
included in this prospectus and incorporated by reference herein, together with
the Managements Discussion and Analysis of
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