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þ
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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Delaware
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33-0325826
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(State
or other jurisdiction of incorporation
or
organization)
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(I.R.S.
Employer Identification Number)
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Page
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PART
I
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FINANCIAL
INFORMATION
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Item 1.
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Financial
Statements (Condensed)
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||
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Condensed
Consolidated Balance Sheets at June 29, 2007 (unaudited) and March
31,
2007.
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3
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||
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Condensed
Consolidated Statements of Operations for the three-month periods
ended
June 29, 2007 and June 30, 2006 (unaudited).
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4
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Condensed
Consolidated Statements of Cash Flows for the three-month periods
ended
June 29, 2007 and June 30, 2006 (unaudited).
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5
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||
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Notes
to Condensed Consolidated Financial Statements
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6
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Item 2.
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Management’s
Discussion and Analysis of
Financial Condition and Results of Operations
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15
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Item 3.
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Quantitative
and Qualitative Disclosures About Market Risk
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20
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Item 4.
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Controls
and Procedures
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20
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PART
II
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OTHER
INFORMATION
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Item
1
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Legal
Proceedings
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21
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||
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|
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Item
1A
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Risk
Factors
|
21
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||
Item
2
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Unregistered
Sales of Equity Securities and Use of Proceeds
|
21
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||
Item
3
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Defaults
Upon Senior Securities
|
21
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||
Item
4
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Submission
of Matters to a Vote of Security Holders
|
21
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Item
5
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Other
Information
|
21
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||
Item 6.
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Exhibits
|
21
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|
Exh.
31.1 Section 302 Certification of Chief Executive Officer
|
||||
Exh.
31.2 Section 302 Certification of Chief Financial Officer
|
||||
Exh.
32.1 Section 906 Certification of Chief Executive Officer
|
||||
Exh.
32.2 Section 906 Certification of Chief Financial Officer
|
||||
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Signatures
|
26
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June
29,
2007 |
March
31,
2007 |
||||||
(Unaudited) | |||||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
1,931,000
|
$
|
3,274,000
|
|||
Accounts
receivable, net
|
3,945,000
|
3,587,000
|
|||||
Inventories,
net
|
4,272
000
|
4,439,000
|
|||||
Prepaid
expenses and other current assets
|
441,000
|
377,000
|
|||||
Total
current assets
|
10,589,000
|
11,677,000
|
|||||
Equipment
and leasehold improvements, net
|
4,985,000
|
4,736,000
|
|||||
Goodwill
|
4,579,000
|
4,579,000
|
|||||
Intangibles
and patents, net
|
12,187,000
|
12,640,000
|
|||||
Deferred
tax asset
|
1,225,000
|
1,225,000
|
|||||
Other
assets
|
390,000
|
385,000
|
|||||
Total
assets
|
$
|
33,955,000
|
$
|
35,242,000
|
|||
Liabilities
and shareholders' equity
|
|||||||
Current
liabilities
|
|||||||
Line
of credit
|
$
|
900,000
|
$
|
741,000
|
|||
Accounts
payable
|
1,055,000
|
1,401,000
|
|||||
Compensation
and related withholdings
|
1,134,000
|
1,091,000
|
|||||
Interest
payable
|
353,000
|
325,000
|
|||||
Other
accrued expenses
|
539,000
|
610,000
|
|||||
Current
portion of long-term debt, related parties
|
900,000
|
550,000
|
|||||
Current
portion of long-term debt
|
5,189,000
|
4,535,000
|
|||||
Total
current liabilities
|
10,070,000
|
9,253,000
|
|||||
Long-term
debt, less current portion
|
3,632,000
|
3,015,000
|
|||||
Long-term
debt, less current portion - related parties
|
951,000
|
1,851,000
|
|||||
Total
liabilities
|
14,653,000
|
14,119,000
|
|||||
Commitments
and contingencies
|
|||||||
Class
A
redeemable convertible preferred stock, $.001 par value; 780,000
shares
authorized; 40,000 shares issued and outstanding; liquidation preference
$32,000
|
32,000
|
32,000
|
|||||
Shareholders'
equity:
|
|||||||
Class
A common
stock,
$.001 par value, 50,000,000 authorized; June 29, 2007 and, March
31, 2007
- 19,226,006 shares issued and outstanding.
|
19,000
|
19,000
|
|||||
Class
B common
stock,
$.001 par value; 4,420,113 shares authorized; June 29, 2007 and
March 31,
2007 - 31,691 issued and outstanding.
|
—
|
—
|
|||||
Additional
paid-in capital
|
43,972,000
|
43,887,000
|
|||||
Accumulated
deficit
|
(24,721,000
|
)
|
(22,815,000
|
)
|
|||
Total
shareholders' equity
|
19,270,000
|
21,091,000
|
|||||
Total
liabilities and shareholders' equity
|
$
|
33,955,000
|
$
|
35,242,000
|
Three
Months Ended
|
|
||||||
|
|
June
29, 2007
|
|
June
30, 2006
|
|||
Sales,
net
|
$
|
6,145,000
|
$
|
5,668,000
|
|||
Cost
of products sold
|
3,675,000
|
3,200,000
|
|||||
Gross
profit
|
2,470,000
|
2,468,000
|
|||||
Operating
expenses:
|
|||||||
Research,
development and engineering
|
896,000
|
1,020,000
|
|||||
Sales
and marketing
|
646,000
|
537,000
|
|||||
General
and administrative
|
1,171,000
|
1,200,000
|
|||||
Amortization
Expense
|
490,000
|
381,000
|
|||||
Wafer
fabrication relocation expenses
|
343,000
|
33,000
|
|||||
Total
operating expenses
|
3,546,000
|
3,171,000
|
|||||
Loss
from operations
|
(1,076,000
|
)
|
(703,000
|
)
|
|||
Other
income (expense):
|
|||||||
Interest
income
|
21,000
|
58,000
|
|||||
Interest
expense
|
(233,000
|
)
|
(236,000
|
)
|
|||
Interest
expense, related party
|
(57,000
|
)
|
(57,000
|
)
|
|||
Interest
expense, debt discount
|
(567,000
|
)
|
(295,000
|
)
|
|||
Other
income (expense)
|
6,000
|
(1,000
|
)
|
||||
Net
loss
|
$
|
(1,906,000
|
)
|
$
|
(1,234,000
|
)
|
|
Basic
and diluted loss per share
|
$
|
(0.10
|
)
|
$
|
(0.07
|
)
|
|
Weighted
average common shares outstanding
|
|||||||
Basic
and diluted
|
19,258,000
|
18,980,000
|
For
the three months ended:
|
June
29, 2007
|
June
30, 2006
|
|||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(1,906,000
|
)
|
$
|
(1,234,000
|
)
|
|
Adjustment
to reconcile net loss to net cash (used in) provided by operating
activities
|
|||||||
Depreciation
|
240,000
|
236,000
|
|||||
Amortization
|
490,000
|
381,000
|
|||||
Stock
compensation expense
|
85,000
|
117,000
|
|||||
Amortization
of discount on convertible notes payable
|
567,000
|
295,000
|
|||||
Amortization
of debt issue costs
|
30,000
|
33,000
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(358,000
|
)
|
865,000
|
||||
Inventories
|
167,000
|
49,000
|
|||||
Prepaid
expenses and other assets
|
(99,000
|
)
|
38,000
|
||||
Accounts
payable and other liabilities
|
(346,000
|
)
|
(51,000
|
)
|
|||
Net
cash (used in) provided by operating activities
|
(1,130,000
|
)
|
729,000
|
||||
Cash
flows from investing activities:
|
|||||||
Capital
expenditures
|
(489,000
|
)
|
(126,000
|
)
|
|||
Patent
expenditures
|
(37,000
|
)
|
(33,000
|
)
|
|||
Net
cash used in investing activities
|
(526,000
|
)
|
(159,000
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from capital lease
|
433,000
|
—
|
|||||
Proceeds
from bank line of credit
|
159,000
|
—
|
|||||
Payments
on bank term loan
|
—
|
(225,000
|
)
|
||||
Payments
on long-term debt - related parties
|
(550,000
|
)
|
(500,000
|
)
|
|||
Proceeds
from MEDC term loan
|
271,000
|
—
|
|||||
Proceeds
from exercise of stock options
|
—
|
148,000
|
|||||
Net
cash provided by (used in) financing activities
|
313,000
|
(577,000
|
)
|
||||
Net
decrease in cash and cash equivalents
|
(1,343,000
|
)
|
(7,000
|
)
|
|||
Cash
and cash equivalents at beginning of year
|
3,274,000
|
5,933,000
|
|||||
Cash
and cash equivalents at end of quarter
|
$
|
1,931,000
|
$
|
5,926,000
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
paid for income taxes
|
$
|
3,000
|
$
|
—
|
|||
Cash
paid for interest
|
$
|
180,000
|
$
|
96,000
|
Three
months ended
|
|||||||
|
June
29, 2007
|
June
30, 2006
|
|||||
Expected
term (in years)
|
10
|
10
|
|||||
Volatility
|
61.0
|
%
|
54.9
|
%
|
|||
Risk-free
interest rate
|
5.0
|
%
|
4.7
|
%
|
|||
Dividend
yield
|
0.00
|
0.00
|
Number
of
Options
Outstanding
|
|
Weighted
Average Exercise Price per Share
|
|
Number
of
Shares
Exercisable
|
|
Weighted
Average Exercise Price per Share
|
|||||||
Balance
of March 31, 2007
|
2,540,000
|
$
|
1.90
|
1,978,000
|
$
|
1.81
|
|||||||
Granted
|
115,000
|
$
|
1.80
|
||||||||||
Exercised
|
—
|
—
|
|||||||||||
Expired
|
—
|
—
|
|||||||||||
Balance
of June 29, 2007
|
2,655,000
|
$
|
1.88
|
2,192,000
|
$
|
1.82
|
June
29, 2007
|
|
March
31, 2007
|
|||||
Raw
material
|
$
|
3,386,000
|
$
|
3,348,000
|
|||
Work-in-process
|
1,345,000
|
1,503,000
|
|||||
Finished
products
|
480,000
|
512,000
|
|||||
Total
inventories
|
5,211,000
|
5,363,000
|
|||||
Less
reserve
|
(939,000
|
)
|
(924,000
|
)
|
|||
Inventories,
net
|
$
|
4,272,000
|
$
|
4,439,000
|
Weighted |
June
29, 2007
|
March
31, 2007
|
||||||||||||||||||||
Average
Lives
|
Carrying
Value
|
Accumulated
Amortization
|
Intangibles
Net
|
Carrying
Value
|
Accumulated
Amortization
|
Intangibles
Net
|
||||||||||||||||
Non-Compete
agreements
|
3
|
$
|
130
|
$
|
91
|
$
|
39
|
$
|
130
|
$
|
82
|
$
|
48
|
|||||||||
Customer
list-API
|
5
|
285
|
285
|
—
|
285
|
285
|
—
|
|||||||||||||||
Customer
list-Pico
|
15
|
190
|
27
|
163
|
190
|
24
|
166
|
|||||||||||||||
Trademarks
|
15
|
2,270
|
312
|
1,958
|
2,270
|
286
|
1,984
|
|||||||||||||||
Customer
relationships
|
5
|
1,380
|
243
|
1,137
|
1,380
|
174
|
1,206
|
|||||||||||||||
Patents
|
6
|
108
|
64
|
44
|
107
|
62
|
45
|
|||||||||||||||
Patents
pending
|
346
|
346
|
310
|
—
|
310
|
|||||||||||||||||
Technology
|
10
|
10,950
|
2,450
|
8,500
|
10,950
|
2,069
|
8,881
|
|||||||||||||||
Total
Intangibles
|
11.4
|
$
|
15,659
|
$
|
3,472
|
$
|
12,187
|
$
|
15,622
|
$
|
2,982
|
$
|
12,640
|
Intangible
Assets
|
Patents
|
|||||||||
2008
(9 months)
|
$
|
1,464,000
|
2008
(9 months)
|
|
$
|
5,000
|
||||
2009
|
2,090,000
|
2009
|
6,000
|
|||||||
2010
|
2,035,000
|
2010
|
5,000
|
|||||||
2011
|
1,584,000
|
2011
|
5,000
|
|||||||
2012
|
1,305,000
|
2012
|
5,000
|
|||||||
2013
& after
|
3,319,000
|
2013
& after
|
18,000
|
|||||||
Total
|
$
|
11,797,000
|
Total
|
$
|
44,000
|
As
of
|
|||||||
June
29,
2007 |
|
March
31,
2007 |
|||||
Bank
Term Loan - Fifth Third Bank
|
$
|
2,300
|
$
|
1,867
|
|||
Line
of credit - Fifth Third Bank
|
900
|
741
|
|||||
MEDC
- loan 1
|
1,024
|
922
|
|||||
MEDC
- loan 2
|
769
|
600
|
|||||
Convertible
Debt - 1st
Tranche
|
1,525
|
1,525
|
|||||
Discount
on Convertible Debt - 1st
Tranche
|
(47
|
)
|
(86
|
)
|
|||
Convertible
Debt - 2nd
Tranche
|
4,000
|
4,000
|
|||||
Discount
on Convertible Debt - 2nd
Tranche
|
(749
|
)
|
(1,278
|
)
|
|||
Debt
to Related Parties
|
1,850
|
2,401
|
|||||
Total
|
$
|
11,572
|
$
|
10,692
|
Three
months ended
|
|
||||||
BASIC
AND DILUTED
|
|
June
29, 2007
|
|
June
30, 2006
|
|||
Average
Shares Outstanding
|
19,258,000
|
18,980,000
|
|||||
Net
Loss
|
$
|
(1,906,000
|
)
|
$
|
(1,234,000
|
)
|
|
Basic
and Diluted Loss Per Share
|
$
|
(0.10
|
)
|
$
|
(0.07
|
)
|
Three
months ended
|
|
||||||||||||
Revenues
|
|
June
29, 2007
|
|
%
|
|
June
30, 2006
|
|
%
|
|||||
Telecommunications
|
$
|
1,258,000
|
21
|
%
|
$
|
743,000
|
13
|
%
|
|||||
Industrial
Sensing/NDT
|
2,916,000
|
47
|
%
|
2,412,000
|
43
|
%
|
|||||||
Military/Aerospace
|
871,000
|
14
|
%
|
1,868,000
|
33
|
%
|
|||||||
Medical
|
1,100,000
|
18
|
%
|
634,000
|
11
|
%
|
|||||||
Homeland
Security
|
—
|
—
|
11,000
|
—
|
%
|
||||||||
Total
Revenues
|
$
|
6,145,000
|
100
|
%
|
$
|
5,668,000
|
100
|
%
|
Operating
Leases
|
Non-Cancelable
Purchase
Orders
|
Total
|
||||||||
2008
(9 months)
|
$
|
861,000
|
$
|
1,656,000
|
$
|
2,517,000
|
||||
2009
|
1,045,000
|
219,000
|
1,264,000
|
|||||||
2010
|
705,000
|
—
|
705,000
|
|||||||
2011
|
176,000
|
—
|
176,000
|
|||||||
2012
|
—
|
—
|
—
|
|||||||
2013
and thereafter
|
—
|
—
|
—
|
|||||||
Total
|
$
|
2,787,000
|
$
|
1,875,000
|
$
|
4,662,000
|
Exhibit
No.
|
|
||
31.1
|
Certificate
of the Registrant’s Chairman, Chief Executive Officer, and Director
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
||
|
|
||
31.2
|
Certificate
of the Registrant’s Chief Financial Officer, and Secretary pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
|
||
32.1
|
Certificate
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes- Oxley Act of 2002
|
||
|
|
||
32.2
|
Certificate
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
|