**UNITED STATES**SECURITIES AND EXCHANGE COMMISSION

**Washington,D.C.  20549**

 

**FORM 10-QSB**

 

**(Mark One)**

 

| **ý**                                                                                                                                                                                                                                                                                              | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF**   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                                                              | **THE SECURITIES EXCHANGE ACT OF 1934**                              |
| ** **                                                                                                                                                                                                                                                                                              | **FOR THE QUARTERLY PERIOD ENDED  MARCH 31, 2005**              |
|                                                                                                                                                                                                                                                                                                    |                                                                 |
| **OR**                                                                                                                                                                                                                                                                                                  |
| ** **                                                                                                                                                                                                                                                                                              | ** **                                                           |
| **o**                                                                                                                                                                                                                                                                                                   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15 (d) OF** |
| ** **                                                                                                                                                                                                                                                                                              | **THE SECURITIES EXCHANGE ACT OF 1934**                              |
| **For the  transition period from                         to                       ** |
| ** **                                                                                                                                                                                                                                                                                              |
| **COMMISSION  FILE NUMBER 0-22743**                                                                                                                                                                                                                                                                     |

 

**iVOW, INC.**

(Exact name of registrant asspecified in its charter)  

 
| **DELAWARE**                                                     | ** ** | **94-3184035**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State or  other jurisdiction of  incorporation or organization) |       | (I.R.S.  Employer  Identification No.) |
|                                                             |       |                                   |
| **2101  FARADAY AVENUE**                                         |
| **CARLSBAD,  CA 92008**                                          |
| (Address of  principal executive offices)                        |
|                                                             |
| **(760) 603-9120**                                               |
| (Registrant’s  telephone number, including area code)       |
|                                                             |
| **IVOW, Inc.**                                              |
| (Registrant’s  former name)                                 |

 

**Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports) and (2) has been subject to such filing requirements for thepast 90 days: **

** **

| ** ** | **(1) ** | **Yes****ý** | ** ** | **No****o** | ** ** |
|------------|---------------|-------------------|------------|-------------|------------|
| ** ** | ** **    | ** **        | ** ** | ** **  | ** ** |
| ** ** | **(2) ** | **Yes****ý** | ** ** | **No****o** | ** ** |

 

As of May 10, 2005 there were 11,062,346 shares of $.01 par valuecommon stock outstanding.

 

Transitional SmallBusiness Disclosure Format   Yes  o   No  ý

 

 

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iVOW,INC.

FORM 10-QSB

TABLEOF CONTENTS

 
| PART 1.   FINANCIAL INFORMATION | ** **                                                                            |
|------------------------------------------------|---------------------------------------------------------------------------------------|
|                                           |                                                                                  |   |
| Item 1.                                        | Financial Statements (unaudited)                                                      |   |
|                                           |                                                                                  |   |
|                                           | Condensed Balance Sheets as of March 31, 2005 and December 31,  2004        |   |
|                                           | Condensed Statements of Operations and  Comprehensive Loss for the three months ended |   |
|                                           | March 31, 2005 and 2004                                                          |   |
|                                           | Condensed Statements of Cash Flows for the  three months ended                        |   |
|                                           | March 31, 2005 and 2004                                                          |   |
|                                           | Notes to Condensed Financial Statements                                               |   |
|                                           |                                                                                  |   |
| Item 2.                                        | Management’s Discussion and Analysis or  Plan of Operation                       |   |
|                                           |                                                                                  |   |
| Item 3.                                        | Controls and Procedures                                                               |   |
|                                           |                                                                                  |   |
| PART II. OTHER INFORMATION                |                                                                                  |
|                                           |                                                                                  |   |
| Item 1.                                        | Legal Proceedings                                                                     |   |
|                                           |                                                                                  |   |
| Item 2.                                        | Unregistered Sales of Equity Securities and  Use of Proceeds                          |   |
|                                           |                                                                                  |   |
| Item 3.                                        | Defaults Upon Senior Securities                                                       |   |
|                                           |                                                                                  |   |
| Item 4.                                        | Submission of Matters to a Vote of Security  Holders                                  |   |
|                                           |                                                                                  |   |
| Item 5.                                        | Other Information                                                                     |   |
|                                           |                                                                                  |   |
| Item 6.                                        | Exhibits                                                                              |   |
|                                           |                                                                                  |   |
| SIGNATURES                                     |                                                                                  |

 

2

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PART 1.FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

iVOW, Inc.

Condensed BalanceSheets

 
| ** **                                                                                                                                                                                                             | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                             | ** ** | **2005**           | ** ** | **2004**              | ** ** |
| ** **                                                                                                                                                                                                             | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
| ASSETS                                                                                                                                                                                                                 |       |               |       |                  |       |
| Current  assets:                                                                                                                                                                                                       |       |               |       |                  |       |
| Cash and  cash equivalents                                                                                                                                                                                             |       | $                  | 1,189,052  |                  | $          | 1,969,561 |   |
| Accounts  receivable                                                                                                                                                                                                   |       | 84,696             |       | 176,291               |       |
| Due from  Viking Systems, Inc                                                                                                                                                                                     |       | —             |       | 188,797               |       |
| Inventories                                                                                                                                                                                                            |       | 106,815            |       | 62,094                |       |
| Prepaid  insurance                                                                                                                                                                                                     |       | 125,244            |       | 197,551               |       |
| Other  current assets                                                                                                                                                                                                  |       | 26,057             |       | 51,812                |       |
| Total  current assets                                                                                                                                                                                                  |       | 1,531,864          |       | 2,646,106             |       |
| Equipment,  net of accumulated depreciation                                                                                                                                                                            |       | 26,714             |       | 31,743                |       |
| Investment  in marketable equity securities of Viking Systems, Inc. avalable for  sale                                                                                                                            |       | 1,157,800          |       | 1,306,660             |       |
| Total assets                                                                                                                                                                                                           |       | $                  | 2,716,378  |                  | $          | 3,984,509 |   |
|                                                                                                                                                                                                                   |       |               |       |                  |       |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                                                                                                             |       |               |       |                  |       |
| Current  liabilities:                                                                                                                                                                                                  |       |               |       |                  |       |
| Accounts  payable                                                                                                                                                                                                      |       | $                  | 238,179    |                  | $          | 288,083 |   |
| Current  portion of capital leases obligations                                                                                                                                                                         |       | 18,441             |       | 16,969                |       |
| Short-term  notes                                                                                                                                                                                                      |       | 57,580             |       | 128,219               |       |
| Accrued  compensation                                                                                                                                                                                                  |       | 85,726             |       | 164,937               |       |
| Related  party liabilities                                                                                                                                                                                             |       | 39,718             |       | 35,659                |       |
| Deferred  revenue                                                                                                                                                                                                      |       | 37,500             |       | 31,250                |       |
| Accrued  liabilities                                                                                                                                                                                                   |       | 97,030             |       | 85,896                |       |
| Total  current liabilities                                                                                                                                                                                             |       | 574,174            |       | 751,013               |       |
| Long term  portion of capital leases                                                                                                                                                                                   |       | 860                |       | 10,516                |       |
| Total  liabilities                                                                                                                                                                                                     |       | 575,034            |       | 761,529               |       |
|                                                                                                                                                                                                                   |       |               |       |                  |       |
| Stockholders’  equity:                                                                                                                                                                                            |       |               |       |                  |       |
| Preferred  stock, $.01 par value:                                                                                                                                                                                      |       |               |       |                  |       |
| Authorized  shares - 5,000,000 Issued and outstanding shares - 826,447 at March 31,  2005 (Liquidation  value of $3,140,500)  and 915,000 at December 31, 2004  (Liquidation  value of $3,477,000) |       | 1,030,342          |       | 1,108,592             |       |
| Common  stock, $.01 par value:                                                                                                                                                                                         |       |               |       |                  |       |
| Authorized  shares - 35,000,000 Issued and outstanding shares - 11,062,346 at  March 31, 2005 and 10,946,264 at December 31,  2004                                                                      |       | 110,623            |       | 109,462               |       |
| Additional  paid-in capital                                                                                                                                                                                            |       | 72,808,246         |       | 72,702,851            |       |
| Accumulated  other comprehensive income                                                                                                                                                                                |       | 1,124,720          |       | 1,273,580             |       |
| Deferred  compensation                                                                                                                                                                                                 |       | (5,022             | )          | (7,896                | )          |
| Accumulated  deficit                                                                                                                                                                                                   |       | (72,927,565        | )          | (71,963,609           | )          |
| Total  stockholders’ equity                                                                                                                                                                                       |       | 2,141,344          |       | 3,222,980             |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                                       |       | $                  | 2,716,378  |                  | $          | 3,984,509 |   |

 

Note:  The balance sheet at December 31, 2004has been derived from the audited financial statements at that date but doesnot include all of the information and footnotes required by accountingprinciples generally accepted in the United States of America for completefinancial statements.

 

See accompanying notes to Condensed Financial Statements

 

3

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iVOW, Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

 
| ** **                                                            | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                            | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| ** **                                                            | ** ** | ** **                            | ** ** | **Restated** | ** ** |
|                                                                  |       |                                  |       |   |   |
| Revenues                                                              |       | $                                     | 239,681    |   | $ | 599,804 |   |
| Costs and  expenses:                                                  |       |                                  |       |   |   |
| Cost of  revenues                                                     |       | 285,597                               |       | 378,873 |   |
| Product  development                                                  |       | 77,448                                |       | 82,100 |   |
| Sales and  marketing                                                  |       | 272,718                               |       | 171,392 |   |
| General and  administrative                                           |       | 571,775                               |       | 369,515 |   |
| Total costs  and expenses                                             |       | 1,207,538                             |       | 1,001,880 |   |
| Loss from  operations                                                 |       | (967,857                              | )          | (402,076 | ) |
| Other income  (expense), net                                          |       | 5,720                                 |       | (805 | ) |
| Loss from  continuing operations                                      |       | (962,137                              | )          | (402,881 | ) |
| Gain (loss)  from discontinued operations                             |       | 4,056                                 |       | (499,304 | ) |
| Net loss                                                              |       | (958,081                              | )          | (902,185 | ) |
| Accretion of  dividends on preferred stock                            |       | (5,875                                | )          | (35,527 | ) |
|                                                                  |       |                                  |       |   |   |
| Net loss  applicable to common stockholders                           |       | $                                     | (963,956   | ) | $ | (937,712 | ) |
|                                                                  |       |                                  |       |   |   |
| Other  comprehensive loss:                                            |       |                                  |       |   |   |
| Net loss                                                              |       | $                                     | (958,081   | ) | $ | (902,185 | ) |
| Unrealized  loss on available-for-sale securities                     |       | (148,860                              | )          | — |   |
| Total  comprehensive loss                                             |       | $                                     | (1,106,941 | ) | $ | (902,185 | ) |
|                                                                  |       |                                  |       |   |   |
| Loss per  share basic and diluted:                                    |       |                                  |       |   |   |
| Continuing  operations                                                |       | $                                     | (0.09      | ) | $ | (0.08 | ) |
| Discontinued  operations                                              |       | —                                |       | $ | (0.09 | ) |
| Net loss per  common share applicable to common stockholders          |       | $                                     | (0.09      | ) | $ | (0.17 | ) |
|                                                                  |       |                                  |       |   |   |
| Shares used  in computing basic and diluted net loss per common share |       | 11,035,708                            |       | 5,259,462 |   |

 

See accompanying notes to Condensed Financial Statements

 

4

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iVOW, Inc.

Condensed Statementsof Cash Flows

(Unaudited)

 
| ** **                                                                   | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                   | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| ** **                                                                   | ** ** | ** **                            | ** ** | **Restated** | ** ** |
| OPERATING  ACTIVITIES                                                        |       |                                  |       |   |   |
| Net loss                                                                     |       | $                                     | (958,081   | ) | $ | (902,185 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |                                  |       |   |   |
| Depreciation  and amortization                                               |       | 14,295                                |       | 7,667 |   |
| Amortization  of deferred compensation                                       |       | 2,874                                 |       | (1,647 | ) |
| Changes in  operating assets and liabilities:                                |       |                                  |       |   |   |
| Accounts  receivable                                                         |       | 91,595                                |       | 272,097 |   |
| Inventories                                                                  |       | (44,721                               | )          | 6,029 |   |
| Other  current assets                                                        |       | 98,062                                |       | (38,940 | ) |
| Accounts  payable                                                            |       | (49,904                               | )          | (42,375 | ) |
| Accrued  compensation                                                        |       | (79,211                               | )          | 51,284 |   |
| Deferred  revenue                                                            |       | 6,250                                 |       | (40,000 | ) |
| Other  liabilities                                                           |       | 15,193                                |       | 166,687 |   |
| Changes in  assets and liabilities related to disc. operations               |       | —                                |       | 376,524 |   |
| Net cash flows  used in operating activities                                 |       | (903,648                              | )          | (144,859 | ) |
|                                                                         |       |                                  |       |   |   |
| INVESTING  ACTIVITIES                                                        |       |                                  |       |   |   |
| Maturities  of short-term investments                                        |       | —                                |       | (466 | ) |
| Purchases of  property and equipment                                         |       | (9,266                                | )          | (4,610 | ) |
| Proceeds  from the sale of business                                          |       | 188,797                               |       | — |   |
| Net cash  flows provided by (used in) investing activities                   |       | 179,531                               |       | (5,076 | ) |
|                                                                         |       |                                  |       |   |   |
| FINANCING  ACTIVITIES                                                        |       |                                  |       |   |   |
| Issuance of  common stock, net                                               |       | 22,431                                |       | 592,617 |   |
| Payment on  short-term notes                                                 |       | (70,639                               | )          | — |   |
| Short term  bank repayments                                                  |       | —                                |       | (200,000 | ) |
| Payments on  capital leases                                                  |       | (8,184                                | )          | 1,159 |   |
| Net cash  flows provided by (used in) financing activities                   |       | (56,392                               | )          | 393,776 |   |
|                                                                         |       |                                  |       |   |   |
| Net increase  (decrease) in cash and cash equivalents                        |       | (780,509                              | )          | 243,841 |   |
| Cash and  cash equivalents at beginning of year                              |       | 1,969,561                             |       | 448,943 |   |
| Cash and  cash equivalents at end of year                                    |       | $                                     | 1,189,052  |   | $ | 692,784 |   |
|                                                                         |       |                                  |       |   |   |
| Non-cash  transactions:                                                      |       |                                  |       |   |   |
| Accretion of  cumulative dividends on preferred stock                        |       | $                                     | 5,875      |   | $ | 35,527 |   |
| Conversion  of Series A preferred stock to common stock                 |       | 84,125                                |       | — |   |
|                                                                         |       |                                  |       |   |   |
| Supplementary  cash flow information:                                        |       |                                  |       |   |   |
| Interest  paid                                                               |       | $                                     | 2,255      |   | $ | 881 |   |

 

See accompanying notes to Condensed FinancialStatements

 

5

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iVOW, INC.

Notes to Condensed Financial Statements

March 31, 2005

(UNAUDITED)

 

### 1.                                       Basis of Presentation

###  

The audited financial statements of iVOW, Inc.(the “Company”) and the notes thereto for the year ended December 31, 2004included in our Annual Report on Form 10-K previously filed with theSecurities and Exchange Commission (“SEC”), contain additional informationabout us, our operations, and our financial statements and accountingpractices, and should be read in conjunction with this quarterly report on Form 10-QSB.  The accompanying unaudited condensedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America, pursuant to the rules andregulations of the SEC, and certain information and footnote disclosuresnormally contained in financial statements prepared in accordance withaccounting principles generally accepted in the United States of America havebeen condensed or omitted, unless significant changes have taken place sincethe end of the most recent fiscal year.

 

Our accompanying unaudited financialstatements reflect all adjustments of a normal recurring nature, which are, inthe opinion of management, necessary for a fair presentation of the financialposition, results of operations and cash flows for all periods presented.  The interim financial information containedherein is not necessarily indicative of results for any future interim periodsor for the full fiscal year ending December 31, 2005.

 

We incurred net losses and negative net cashflows from operating activities in 2004, 2003, 2002, and in the first quarterof 2005, and at March 31, 2005, had an accumulated deficit of $73.0million.  At March 31, 2005, we hadcash and cash equivalents of $1.2 million. We believe that our cash and cash equivalents, together with anticipated2005 product revenues and interest income, will be sufficient to meet ouranticipated capital requirements through at least June 2005.  These factors raise substantial doubt aboutour ability to continue as a going concern. We are pursuing several alternatives to address this situation,including raising additional funding, but cannot assure that we will besuccessful.  Should we be unable to raisesufficient funds, we may be required to curtail our operating plans andpossibly relinquish rights to portions of our intellectual property orproducts.  In addition, increases inexpenses and delays in signing new management and consulting contracts mayadversely impact our cash position and require further cost reductions.  No assurance can be given that we will beable to operate profitably on a consistent basis, or at all, in the future.

 

The accompanying condensed financial statements havebeen prepared on a going concern basis, which contemplates the realization ofassets and the satisfaction of liabilities in the normal course ofbusiness.  The condensed financialstatements do not include any adjustments relating to the recoverability andclassification of assets or the amounts and classification of liabilities thatmight be necessary should we be unable to continue as a going concern.

 

### 2.                                       Discontinued Operations

###  

On April 15, 2004 we sold ourVisualization Technology business unit to Viking Systems, Inc. (“Viking”)under an Asset Purchase Agreement (the “Asset Purchase Agreement”) signed on December 22,2003.  In accordance with Statement ofFinancial Accounting Standards (“SFAS”) No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets*, the financial results of this business have beenreported separately as discontinued operations and the financial statements forall prior periods have been restated accordingly.   Prior to the sale we conducted ouroperations through two separate business units. The Obesity Surgical and Medical Management Services business unit (operatedvia our wholly-owned subsidiary, VOW Solutions, Inc.), based in Carlsbad,CA, provides services to physicians and hospitals involved in the surgicaltreatment of morbid obesity.  Inaddition, our former Visualization Technology business unit, based inWestborough, Massachusetts, developed, manufactured and marketed products thatprovide information to physicians performing minimally invasive generalsurgical, cardiac surgical and other selected endoscopic and interventionalprocedures.

 

Under the Asset Purchase Agreement, we soldall the operating assets and related liabilities of the VisualizationTechnology business to Viking.  Inreturn, Viking agreed to (a) pay us $159,000 at closing, (b) issue tous 3,054,000 shares of Viking common stock, representing approximately 10% ofits common shares outstanding on 

 

6

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a fully diluted basis, and (c) remit to us the value of any formerVisualization Technology inventory sold by Viking before April 15,2005.  We also entered into a licenseagreement with Viking that will pay us royalties over the next five years basedon sales of the acquired products of the Visualization Technology business withminimum royalties during the five year period as follows: first year $150,000,years two through four $300,000 and year five $375,000 with a maximum aggregateroyalty of $4,500,000 over the five year period.  We will maintain ownership rights of allintellectual property and product rights under the license agreement withViking until at least the minimum royalty obligations have been satisfied, atwhich time we will transfer such ownership rights to Viking.

 

The net operating assets sold to Viking andthe total consideration paid or contractually due from Viking, exclusive of anyproceeds from the subsequent sale of Visualization Technology inventory byViking, are as follows:

 
| Net assets  sold      | ** ** | ** ** | ** ** |
|-----------------------|------------|------------|------------|
| Accounts  receivable  |       | $          | 372,027    |   |
| Inventories           |       | 787,657    |       |
| Accounts  payable     |       | (351,934   | )          |
| Other  liabilities    |       | (61,136    | )          |
|                  |       | $          | 746,614    |   |
| Viking  consideration |       |       |       |
| Cash                  |       | $          | 158,718    |   |
| Viking  common shares |       | 61,080     |       |
| Minimum  royalties    |       | 1,425,000  |       |
|                  |       | $          | 1,644,798  |   |

 

Under accounting principles generallyaccepted in the United States of America, the transaction is principally theexchange of non-monetary assets between Viking and us.  As a result, the carrying value of the netassets sold, $746,614, is considered to be equal to the value of the net assetsreceived and a gain is not recognized at the time of the transaction.  The Viking consideration, exclusive of cash,is considered non-monetary because Viking is a relatively new company that hasnot raised substantial funds and may be unable to raise sufficient funds tosustain its operations or fund its growth plan. Additionally, there can be no assurance that Viking’s business willsucceed; accordingly, all contractual amounts due us are at risk.  All proceeds received, including paymentsderived by the sale of inventory, from Viking will be first credited againstthe Due from Viking Systems, Inc. account. Proceeds of $4,056 in excess of the carrying value of the net assetssold have been recorded as a gain from the sale of our discontinued operationsand any additional proceeds from Viking will also be recorded as a gain fromdiscontinued operations when received. During the quarter ended March 31, 2005 we received $192,853 fromViking.  As of March 31, 2005, thebalance Due from Viking Systems, Inc. is $0.  

 

Our financial results for the three monthsended March 31, 2004 have been restated to show the results of operationsfor the Visualization Technology business as a discontinued operation.  The operating results of the discontinuedoperations were as follows:

 
| ** **                         | ** ** | **Three Months  Ended  March 31,** | ** ** |
|------------------------------------|------------|-----------------------------------------|------------|
| ** **                         | ** ** | **2004**                                | ** ** |
| Sales                              |       | $                                       | 1,111,627  |   |
| Costs and expenses                 |       |                                    |       |
| Cost of  sales                     |       | 930,220                                 |       |
| Research and  development          |       | 259,458                                 |       |
| Sales and  marketing               |       | 63,818                                  |       |
| General and  administrative        |       | 357,435                                 |       |
| Total cost  and expenses           |       | 1,610,931                               |       |
| Loss from  discontinued operations |       | $                                       | (499,304   | ) |
|                                    |            |                                         |            |  |  |

 

7

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The equipment financing costs associated withthe equipment sold to Viking has been included in discontinued operations.

 

The Company had a severance agreement with aformer employee who became an employee of Viking upon the sale of theVisualization Technology business.  Underthe agreement, the Company may be required to pay the employee one year’scompensation (approximately $200,000) if the employee is terminated undercertain circumstances within 18 months following the sale of the business orprior to October 2005.  No provisionfor such payment has been included in the results of discontinued operationsand will not be provided for until such payment is probable.

 

3.                                       Investment inequity securities of Viking Systems, Inc.

 

As part of the sale of our VisualizationTechnology business in April 2004, we were issued 3,054,000 shares ofViking common stock (see Note 2) valued at $0.02 per share or $61,080, whichreflected the fair value of the shares at the time the shares wereacquired.  In June 2004, 1,400,000of these shares valued at $0.02 per share, or $28,000, were used to obtaincertain rights from our Series A holders (see Note 7) with the remaining1,654,000 shares valued at $33,080.   In October 2004,the Viking common shares began trading on the Over The Counter Bulletin Boardand, accordingly, the carrying value of the available for sale marketableequity securities has been adjusted to fair value and the unrealized gain hasbeen offset against stockholders’ equity at March 31, 2005.  There is a significant risk of adjustment tothe carrying value due to possible market fluctuations in their stock price.

 

The cost and fair value of the equity securities at March 31, 2005are as follows:

 
| **Corporate Equity Securities:** | ** ** | **Cost** | ** ** | **Unrealized  Gain** | ** ** | **Fair Value** | ** ** |
|----------------------------------|------------|----------|------------|----------------------|------------|----------------|------------|
| Viking  Systems, Inc.       |       | $        | 33,080     |                 | $          | 1,124,720      |       | $ | 1,157,800 |   |
|                                  |            |          |            |                      |            |                |            |  |  |  |

###  

### Thedecrease in the fair value of the shares during the three months ended March 31,2005 of $148,860 has been included in other comprehensive loss.

###  

### 4.                                       Inventories

###  

Inventories are stated at lower of cost(determined on a first-in, first-out basis) or market and include only finishedgoods related to our disease state management of morbid obesity business.

 

### 5.                                       Loss Per Share

###  

Basic net loss per share is calculated basedon the weighted average number of common shares outstanding during the period.Diluted net loss per share incorporates the dilutive effect of potentiallydilutive shares of common stock, including shares attributable to stockoptions, warrants and other convertible securities.  Potentially dilutive shares of common stockhave been excluded from the calculation of weighted average number of dilutedcommon shares, as their effect would be antidilutive for all periodspresented.  For the purpose of determiningbasic and diluted net loss per share, dividends accreted on preferred stock andthe deemed dividend with respect to the preferred stock redemption (see Note 7)have been deducted from the net loss to arrive at net loss applicable to commonstockholders.  For the three month periodended March 31, 2005,potentially dilutive shares of common stock that have been excluded from thecalculation of the weighted average number of dilutive common shares were5,987,111 shares, comprised of 3,751,748 warrant shares, 826,447 convertiblepreferred shares and options to purchase up to 1,408,916 shares of commonstock.  For the three month period ended March 31, 2004, potentiallydilutive shares of common stock that have been excluded from the calculation ofthe weighted average number of dilutive common shares were 1,846,092 shares,comprised of 219,500 warrant shares, 1,000,000 convertible preferred shares andoptions to purchase up to 626,592 shares of common stock.

 

8

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### 6.                                       Stock-Based Compensation

###  

SFAS No. 123, “*Accountingfor Stock-Based Compensation*,” establishes a fair value basedapproach for valuing stock options.  Wefollow the disclosure-only alternative afforded by SFAS 123.  However, we account for stock-basedcompensation to non-employees using the fair value method prescribed by SFAS123.  

 

We apply the principles of AccountingPrinciples Board Opinion No. 25, “*Accounting for StockIssued to Employees*,” (“APB No. 25”) and relatedinterpretations in accounting for its employee stock option compensation plans.Under APB No. 25, compensation expense is measured using the intrinsicvalue method as the difference, if any, between the option exercise price andthe fair value of our common stock at the date of grant.  We have historically granted options toemployees and directors at exercise prices equal to the fair value of theCompany’s common stock. Accordingly, no compensation expense has beenrecognized for our employee stock-based compensation plans. 

 

Had compensation costs for stock optionsissued to employees and directors been determined based on the estimated fairvalue at the grant dates as calculated in accordance with SFAS 123 using theBlack-Scholes option pricing model and amortized over the vesting period, ourreported net loss and basic and diluted net loss per common share for the threemonth periods ended March 31,2005 and 2004 would have been adjusted to the pro forma amounts indicatedbelow:

 
| ** **                                              | ** ** | **For three months ended March 31,** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                              | ** ** | **2005**                                  | ** ** | **2004** | ** ** |
| Net loss  applicable to common stockholders:            |       |                                      |       |   |   |
| As reported                                             |       | $                                         | (963,956   | ) | $ | (937,712 | ) |
| Pro forma  compensation expense using fair value method |       | (85,354                                   | )          | (61,905 | ) |
| Pro forma  net loss                                     |       | $                                         | (1,049,310 | ) | $ | (999,617 | ) |
|                                                    |       |                                      |       |   |   |
| Basic and  diluted net loss per share:                  |       |                                      |       |   |   |
| As reported                                             |       | $                                         | (0.09      | ) | $ | (0.17 | ) |
| Pro forma                                               |       | $                                         | (0.10      | ) | $ | (0.19 | ) |

 

As a result of amendments to SFAS 123, theCompany will be required to expense the fair value of employee stock optionsover the service period beginning with the quarter ending March 31, 2006.

 

7.                                       STOCKHOLDERS’ EQUITY

 

PREFERRED STOCK

 

In March 2003, we authorized and issued 1,000,000shares of Series A Convertible Preferred Stock (the “Series A Shares”),which were created pursuant to the terms of a Certificate of Designations, foran aggregate of $950,000 in cash.  Each Series AShare is convertible into one share of common stock.  In connection with this financing, thepurchasers of Series A Shares were granted several significant rightssenior to the rights of holders of our common stock. Among other rights, in theevent of a liquidation, dissolution or winding up of our Company (includingconsolidations, mergers or other sales), holders of Series A Shares willbe entitled to receive $3.80 per share, in preference to any distribution tothe holders of common stock.  Also,pursuant to the Certificate of Designations, we must obtain the consent of theholders of at least two-thirds of the outstanding Series A Shares in orderto undertake certain actions, including significant capital expenditures andthe issuance of equity securities. Additionally, for as long as Series A Shares remain outstandingbeyond April 2004, the holders of Series A Shares

 

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will be entitled to elect the greater of (i) two members of ourBoard of Directors or (ii) 25% of the total members of our Board ofDirectors.

 

In June 2004,we amended the Series A Certificate of Designations to allow us the rightto issue equity securities for less than $2.00 per share.  For that right, the Series A holdersreceived 1,400,000 shares of Viking common stock valued at $28,000, and weredeemed 85,000 Series A Shares for $200,000.  In addition, we have obtained the right toredeem an additional 300,000 Series A Shares at any time on or before January 15,2006 for $500,000. The fair value of the Viking shares distributed of $28,000and the $103,985 excess of the $200,000 payment over the prior contractualredemption value of the Series A shares have been accounted for as adeemed dividend of $131,985.

 

In January 2005, 88,553 Series AShares, with a carrying value of $107,669 including accrued dividends, wereconverted by one holder for an equal number of shares of our common stock.

 

The holders of the outstanding Series AShares have the right to one vote for each share of common stock into whichsuch Series A Shares could then be converted, and with respect to suchvote, such holder shall have full voting rights and powers equal to the votingrights and powers of the holders of common stock.

 

The holders of Series A Shares areentitled to receive dividends, out of any assets legally available therefore,prior and in preference to any declaration or payment of any cash dividend onthe common stock, at the rate of $0.1425 per share per annum.

 

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**Item 2.   Management’s Discussion and Analysis or Planof Operation**

** **

THIS QUARTERLY REPORT MAY CONTAINPREDICTIONS, ESTIMATES AND OTHER FORWARD-LOOKING STATEMENTS THAT INVOLVE ANUMBER OF RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED BELOW AT “RISKSAND UNCERTAINTIES.”  WHILE THIS OUTLOOKREPRESENTS OUR CURRENT JUDGMENT ON THE FUTURE DIRECTION OF OUR BUSINESS, SUCHRISKS AND UNCERTAINTIES COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROMANY FUTURE PERFORMANCE SUGGESTED BELOW. WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY THE RESULTS OF ANYREVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS ORCIRCUMSTANCES ARISING AFTER THE DATE OF THIS QUARTERLY REPORT.  THE FOLLOWING DISCUSSION SHOULD BE READ INCONJUNCTION WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETOINCLUDED IN ITEM 1 OF THIS QUARTERLY REPORT ON FORM 10-QSB AND OUR 2004ANNUAL REPORT ON FORM 10-K/A, FILED WITH THE SECURITIES AND EXCHANGECOMMISSION.  

 

# **Overview of our business**

# ** **

Our company, iVOW, Inc., formerly VistaMedical Technologies, Inc., was founded in 1993 primarily to developadvanced visualization technologies for complex minimally invasive surgicalprocedures. It was through the application of this technology in laparoscopicgastric bypass surgery that we subsequently developed a suite of consultingproducts and services for the initiation, operation and management of obesitysurgery programs. Starting in early 2003, our Visualization Technologybusiness, located in Westborough, Massachusetts, and our Obesity SurgeryManagement Services business unit, located in Carlsbad, California, functionedas individual business units.  In April 2004,we sold the Visualization Technology business to concentrate on the obesitysurgery services market.  We changed ourname to iVOW, Inc. in February 2005, after merging our wholly ownedsubsidiary VOW Solutions, Inc., to align our corporate name with the brandname of our chronic and morbid obesity disease management business, which isnow our exclusive focus.

 

We originally began offering training andconsulting services to the obesity surgery market in 2001.   As a result of the disposition of ourVisualization Technology business, we are now a pure play company in thebariatric market. We develop and market products and services for the bariatricsurgery market. Bariatrics is the medical science of weight reduction andnutrition; bariatric surgery, a specialized area of general surgery, is focusedon surgical weight reduction solutions for the very severely or morbidlyobese.  We are exclusively focused onimplementing disease management strategies for the control of chronic andsevere obesity.  Our vision is to enablehealthcare providers and organizations in the ongoing evolution of the higheststandards of treatment and services to optimize the quality of life for chronicand morbidly obese patients. Our mission is to deliver the leading managementportfolio of services and products for the clinical and business development ofcontinually successful medical and surgical programs for the treatment ofchronic and morbid obesity.

 

Our goal is to become the leading diseasemanagement and consulting company focused on chronic and morbid obesity.  Our initial focus on the severely obesepatient and gastric bypass surgery as the solution is the platform upon whichwe will expand service to new obesity therapies as they are developed. We alsoplan to integrate a bariatric medical model into our surgical protocols, bothto facilitate the long term care of post-surgical patients, and in due course,to treat obese patients who are not qualified for surgery.

 

**Critical Accounting Policies**

 

The preparation of financial statements andrelated disclosures in conformity with accounting principles generally acceptedin the United States of America requires management to make judgments,assumptions and estimates that affect the amounts reported in our condensedfinancial statements and the accompanying notes.  The amounts of assets and liabilitiesreported in our balance sheets and the amounts of revenues and expensesreported for each of our fiscal periods are affected by estimates andassumptions which are used for, but not limited to, accounting for product returns,allowance for doubtful accounts, inventories and income taxes.  Actual results could differ from theseestimates.  The following criticalaccounting policies are significantly affected by judgments, assumptions andestimates used in the preparation of the condensed financial statements.

 

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**Revenue Recognition**

 

Revenue generated from our disease statemanagement of morbid obesity business is recognized (i) with regard tomanagement services, upon completion of the service period and (ii) withregard to training services or other consulting services, upon completion ofthe related training or consulting component, provided that a contract exists,there are no uncertainties regarding customer acceptance, the sales price isfixed or determinable and collectibility is reasonably assured.  Any payments received in advance ofcompletion of the service are recorded as deferred revenue.  Sales of vitamins are similarly recognizedupon shipment provided that a purchase order has been received, there are nouncertainties regarding customer acceptance, the sales price is fixed ordeterminable and collectibility is reasonably assured.

 

Sales returns are estimated based on thehistorical experience and management’s expectations and are recorded at thetime product revenue is recognized.

 

We received semi-annual payments as a result offulfilling certain obligations related to our strategic alliance agreement withEthicon Endo-Surgery, Inc. (EES). These payments were recognized as revenue on a straight-line basis overthe related contract term.  The strategicalliance agreement ended in December 2004.

 

**Results ofoperations for the three months ended March 31, 2005 compared to the threemonths ended March 31, 2004**

 

Revenues. Management and consulting services, product sales and contract revenuefor the three months ended March 31, 2005 were $240,000 compared to$600,000 for the same period ended March 31, 2004.    The decrease in revenue for period wasassociated with lower training and consulting services and contract revenue.While revenues for the three-month period decreased, our most importantbusiness indicator, iVOW program management fees, increased as a result ofsigning up our first full-fledged iVOW center in the second half of 2004.  We also saw an increase in vitamin sales forboth periods.  We anticipate thatrevenues in the second quarter will increase slightly over current levels withgreater quarterly growth expected in later quarters. The decrease associatedwith lower training and consulting fees was the result of a change in themarket as demand shifted from the requirement to be surgically trained to moreof a focus on the operational aspects of bariatric programs.  Also playing a part in the reduction waspayor uncertainty.  Contract revenuedecreased as a result of our strategic alliance agreement with EES, which endedin December 2004.

 
| **Increase/(decrease) over prior year** | ** ** | **Three Months  ended  March 31, 2005** | ** ** |
|-----------------------------------------|------------|----------------------------------------------|------------|
| Management  fees                        |       | $                                            | 46,000     |   |
| Training and  consulting fees           |       | (302,000                                     | )          |
| Vitamins  sales                         |       | 21,000                                       |       |
| Contract  revenue                       |       | (125,000                                     | )          |
|                                    |       | $                                            | (360,000   | ) |

 

Cost of revenues.  Our cost of revenues includes direct costsassociated with generating management and consulting services revenues alongwith the fully burdened cost of our vitamin sales.  Costs of revenues for the three-months ended March 31,2005 were $286,000 compared to $379,000 for the three-months ended March 31,2004.  Of the $93,000 decrease in costsof revenue for 2005, $88,000 was associated with the reduction in training andconsulting revenues over the prior year and $5,000 was associated with vitamincosts.  Increased revenues in futurequarters will most likely bring an increase in cost of revenues.  The level of increase is difficult to projectdue to varying costs associated with each revenue type.

 

Product development.  Product development expense was down $5,000to $77,000 from $82,000 for the three-months ended March 31, 2004.  This decrease was related to staff time beingspent in sales and marketing.

 

Sales and marketing expenses.  Sales and marketing expenses were $273,000for the three-months ended March 31, 2005, and $171,000 for the sameperiod end March 31, 2004.  The$102,000 increase was primarily due to an increase in staffing related expensesof approximately $52,000 and advertising and promotion of approximately$59,000, offset by a reduction in facility expense allocation of $9,000.  We expect to see an increase in our sales andmarketing expenses during the next quarter of 2005 as we complete some of ouradvertising and promotion work that we began in the first quarter.

 

General and administrative expenses.  General and administrative expenses were$572,000 for the

 

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three-months ended March 31, 2005 and $370,000 for thethree-months ended March 31, 2004. The $202,000 increase in 2005 was a result of higher staffing relatedexpenses of approximately $39,000 and public company expenses; specificallyaudit fees of $50,000, legal fees of $57,000 and other related public companyexpenses of $56,000. ** **We expect our general andadministrative expenses to increase during the coming quarters as we continueto implement procedures to comply with the Sarbanes-Oxley Act of 2002.

 

Other income and expense.  For the three-months ended March 31,2005 we had other income, net of expense, of $6,000 compared to $1,000 ofexpense, net of income, for the same period last year.  This change was related to higher interestincome of $7,000 for the three-months ended March 31, 2005. 

 

Discontinued operations.  For the three-months ended March 31,2005 we recognized $4,000 in income from the gain on the sale of our technologybusiness.  The gain on the sale is theresult of having recognized and collected payments from the buyer, VikingSystems, Inc., greater than the value of the assets sold in April 2004.We expect to recognize additional gains over the coming periods as VikingSystems, Inc. makes additional payments under the asset sale agreement.The loss from discontinued operations for the quarter ended March 31, 2004was $499,000.  

 

**Liquidity and capital resources**

 

Net cash used for operating activities forthe three-months ended March 31, 2005 was $904,000 compared to net cashused of $145,000 for the corresponding three-month period in 2004.  The $759,000 increase in net cash used inoperating activities during the 2005 period is primarily attributable toreduced revenues of $360,000 in 2005, higher operating expenses of $206,000 in2005, with the remaining $193,000 in 2005 related balance sheet accountactivities.

 

Net cash provided by investing activities was$179,000 for the three-months ended March 31, 2005 compared to net cashused in investing activities of $5,000 in the same period in 2004.  The $184,000 increase in net cash provided byinvesting activities during 2005 over 2004 was primarily attributable toproceeds from the sale of the Visualization Technology business of $189,000.

 

Net cash used in financing activities was$56,000 for the three-months ended March 31, 2005, compared to net cashprovided by financing activities of $394,000 for the same period in 2004.  The $450,000 decrease in net cash provided byfinancing activities in 2005 from 2004 period was primarily attributable to theprivate placement of shares of our common stock and the sale of common stockthrough our employee stock purchase plan for aggregate net proceeds of $593,000in February 2004 compared to $22,000 raised in the sale of common stockthrough our employee stock purchase plan in the first three months of2005.  Also during 2004, we repaid$130,000 more in short-term borrowings than we did during the three-monthperiod ended March 31, 2005.

 

Since our formation in July 1993, and asof March 31, 2005, we have incurred cumulative net losses of $73.0million.  At March 31, 2005, we hadcash and cash equivalents of $1.2 million. We believe that these cash resources, including revenues fromoperations, will be sufficient to meet our anticipated capital requirementsthrough at least June 2005.  Thesefactors raise substantial doubt about our ability to continue as a goingconcern.  We are pursuing severalalternatives to address this situation, including raising additional funding,but cannot assure that we will be successful. Should we be unable to raise sufficient funds, we may be required tocurtail our operating plans and possibly relinquish rights to portions of ourintellectual property or products.  Inaddition, increases in expenses and delays in signing new management andconsulting contracts may adversely impact our cash position and require furthercost reductions.  No assurance can begiven that we will be able to operate profitably on a consistent basis, or atall, in the future. 

 

## **Item 3**                                                              **Quantitative andQualitative Disclosures About Market Risk**

##  

At March 31, 2005, our investmentportfolio included no fixed-income securities.

 

At March 31, 2005, our investment in equitysecurities of Viking Systems, Inc. is held as available for salesecurities. Accordingly, there is a significant risk of adjustment to thecarrying value due to possible market fluctuations in their stock price.

 

**RISKSAND UNCERTAINTIES**

 

*You should carefullyconsider the following risks and uncertainties before you invest in our commonstock.  Investing in our common stockinvolves risk.  If any of the followingrisks or uncertainties actually occurs, our business, financial condition orresults of operations could be materially adversely affected.  Additional risks and*

 

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*uncertainties of which we are unaware orwhich we currently believe are immaterial could also materially adverselyaffect our business, financial condition or results of operations.  In any case, the trading price of our common stockcould decline, and you could lose all or part of your investment.*

 

**RisksRelated to our Financial Results and Need for Financing**

 

**We need toraise funds immediately to support our operations.  These funds may not be available onacceptable terms, if at all, and we may be forced to cease our operations.**

** **

At March 31, 2005, we had cash and cashequivalents of $1,189,000.  We believethat our cash and cash equivalents, together with anticipated 2005 productrevenues and interest income, will only be sufficient to meet our anticipatedcapital requirements through June 2005. ** **As a result, we have an immediateneed to raise additional funds to continue our operations.  Any funding transaction may require us torelinquish rights to some of our technologies, and will be dilutive to ourexisting stockholders.  We cannotguarantee that we will be able to complete any such transaction or secureadditional funds on a timely basis, or at all, and we cannot assure that suchtransaction will be on reasonable terms. If we are unable to secure additional capital, we may be unable tosustain operations beyond June 2005, and you may lose your entireinvestment in our company.

 

We expect that the cash flows produced by our iVOWbusiness will be unpredictable in the near term, and we expect to continue toexperience operating losses for the foreseeable future, which increases ourneed for significant additional funding. The amount of additional capital which we need to raise will depend onmany factors, including:

 

•                  the extent to which the iVOW Centers andother services gain market acceptance;

 

•                  the speed with which we can execute ourbusiness plan, including our sales and marketing activities and the costs toestablish iVOW Centers;

 

•                  the levels of reimbursement for proceduresperformed; and

 

•                  the extent of competition.

 

In addition, our current shortage of funds has forcedus to curtail activities designed to grow our business, such as sales andmarketing. These cutbacks may negatively affect our ability to grow our business.

 

**We have ahistory of losses and may not become profitable.**

** **

Since our formation in July 1993, and as of March 31,2005, we have incurred cumulative net losses of $73.0 million. ** **Specifically,we incurred net losses of $1.1 million in 2002, $2.2 million in 2003, $3.9million in 2004 and $1.0 million in the first quarter of 2005.  We expect to incur losses for the foreseeablefuture.  We may never achieve or sustainprofitability in the future.  Even if weachieve profitability, we may not be able to sustain it on an ongoing basis.

 

**Our futurefinancial results will fluctuate significantly.**

** **

As a result of our limited operating history and theshort period of time during which we have focused on the provision of obesitysurgery management services, we cannot predict our future revenues or operatingresults.  We expect our future revenuesand operating results to fluctuate unpredictably due to a combination offactors, including the potential costs of establishing additional iVOW Centers.

 

Our future operating expenses are expected to increasein future periods as we intend to establish iVOW Centers, expand our sales andmarketing operations, expand our service capabilities, improve our internaloperating and financial systems, and continue to comply with the stringentrequirements of the Sarbanes-Oxley Act of 2002 (including Section 404thereof).  In addition, our operatingexpenses are based on our expectations of future 

 

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revenues, and are relatively fixed in the shortterm.  We may be unable to adjustspending quickly enough to offset any unexpected revenue shortfall.  If we have a shortfall in revenues inrelation to our expenses, or if our expenses increase before our revenues do,then our business for a particular period would be materially adverselyaffected.

 

Because of all of these factors and the other risksdiscussed in this section, we believe that our quarterly and annual revenues,expenses and operating results likely will vary significantly in thefuture.  If this occurs, any or all ofthe following may result:

 

•                  the market trading price of our common stockmay fluctuate, negatively impacting the ability of stockholders to buy and sellour shares at consistent prices;

 

•                  we may have difficulty raising funds in thefuture at prices that are acceptable to us; and

 

•                  investors may be less willing to purchase ourshares for lack of consistent operating results.

 

**Collectionof amounts due to us from and realization of carrying amount of investment inViking Systems is uncertain.**

** **

We cannot be sure that the amounts potentially due tous from Viking Systems, Inc., which may be owed as a result of the sale ofour Visualization Technology business, will be paid to us.  Viking is a relatively new company that hasnot raised substantial funds to date. There is a significant risk that Viking may be unable to raisesufficient funds to sustain its operations or fund its growth plan.  Additionally, there can be no assurance thatViking’s business will succeed.  As aresult, all contractual amounts due us are at risk.

 

In addition, we received 1,654,000 shares of commonstock of Viking Systems in connection with the sale of our VisualizationTechnology business. We currently value those shares at a total of $1,158,000,which represents the trading price of Viking common stock at March 31,2005. Viking’s common stock is thinly traded and sales of even small numbers ofshares can significantly affect the trading price. Because of this, the tradingprice of Viking’s common stock is likely to fluctuate substantially over time,and this will affect the value we ascribe to our shares.  A significant drop in the trading price ofViking’s common stock would negatively affect our financial position and,specifically, our stockholders’ equity balance. As discussed elsewhere, we haverepeatedly been the subject of delisting proceedings from the Nasdaq SmallCapMarket because of our failure to maintain sufficient stockholders’ equity. Anyreduction in our stockholders’ equity associated with a drop in the tradingprice of Viking common stock would subject us to delisting proceedings byNasdaq.

 

**Ourliquidity and capital requirements will be difficult to predict.**

** **

Our liquidity and capital requirements will dependupon other numerous factors, including the following:

 

•                  The extent to which our products and servicesgain market acceptance;

 

•                  Costs associated with establishing marketing,and operating our obesity related programs and disease state managementbusiness, including the iVOW Center;

 

•                  The timing and costs of product and servicesintroductions;

 

•                  The extent of our ongoing product and servicedevelopment programs;

 

•                  The costs of sponsorship training of thephysicians to become proficient in the use of our products and procedures; and

 

•                  The costs of developing marketing anddistribution capabilities for our consumer products.

 

Evenif we are successful in raising additional funds, circumstances, including slowrate of market acceptance of our services or our inability to efficientlymanage our operations, would accelerate our use of proceeds from any offeringwe might do and require us to seek additional funds to support our operatingrequirements.

 

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**Risks Related to our Business and Industry**

 

**As acompany, we do not have direct experience in the management of health careservice businesses.**

** **

As a company we do not have direct experience in themanagement of bariatric surgical programs. Although we have been involved in the development of bariatric surgicalprograms since 2000, we have never directly managed these programs.  As such, we have only a limited and indirectoperating history upon which an evaluation of our prospects can be based.  In addition, the bariatric surgical market isrelatively new and is expanding rapidly, which can cause changes in the wayclients react to the services offered. We have yet to prove that our management model is appropriate for themarket we are addressing.  To besuccessful, it is crucial that we develop strong affiliations with hospitalsand surgical centers, and we have not yet proven our ability to do so.  We have established only two****significant operating agreements withhospitals to date.  To successfullyimplement our business plan, we must establish many more such relationships.

 

Also, we must respond to competitive developments andattract, retain and motivate experienced staff. There can be no assurance that we will be successful in addressing thosemarket conditions or in implementing our business strategy.  There can be no assurance that we will beable to achieve or sustain revenue growth or profitability.

 

**Ourrevenue model relies solely on the provision of services and we have noownership stake in surgical centers.**

** **

Our business model is to provide management servicesto owners of surgical programs.  As aresult, we will not have an ownership interest in those programs, which willmake it more difficult to sustain revenues. We will not enjoy directly increased revenue based on the profitabilityor increased value of particular surgical centers.  Likewise, without an ownership interest insurgical centers, we are subject to all the risks of any service provider; ourservices could be terminated at the end of any contract period.

 

**Roll-outof our iVOW Centers depends on our entering into agreements with hospitals andsurgeons; the time to conclude these agreements may be extended and therebydelay or prevent the implementation of our strategy.**

** **

We plan to set up our iVOW Centers in conjunction withhospitals and surgeons.  There can be noassurance that we will be able to negotiate the establishment of these Centersin a timely manner or on terms satisfactory to us, if at all.  Our experience to date is limited to one existingmanagement contract in place since February 2004, one contract enteredinto in August 2004 and an additional contract entered into March 2005.  We are in active negotiation for others;however, we cannot accurately predict the time and expense involved in thesenegotiations, and any unexpected delays could negatively impact the executionof our strategic plan.  Any inability totimely establish additional iVOW Centers will harm our cash position andincrease our need to raise additional capital.

 

**We need toincrease market awareness and acceptance of our new business model.**

** **

To our company’s knowledge, the comprehensive servicesoffered by our new iVOW business model have not been available to date on anational level.  While we have previouslysupplied clinical training and consulting services to various clients, we haveonly begun to promote our program management services.  As a result, providers of bariatric surgeryare not yet generally aware of the services we offer.  In order to accomplish our strategic andbusiness plans, we will have to quickly and effectively increase marketawareness of our management model and the iVOW brand name, and convincedoctors, hospitals and patients of the benefits of these services.  Among other things, this will require thatwe:

 

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•                  increase awareness of our complete serviceoffering;

 

•                  strengthen our brand name to increasevisibility;

 

•                  continue to upgrade and expand our services;and

 

•                  increase awareness of the availability ofsurgery as a means of treating severe obesity.

 

We cannot assure you that wewill be able to accomplish these objectives with the limited operating capitalwe currently have available, if at all.

 

**Afterestablishing iVOW Centers, we must continue to prove our value proposition.**

** **

In order to successfully negotiate and completeagreements with doctors and hospitals to establish iVOW Centers, we will needto present them with our projected revenues and operational metrics.  We cannot assure you that our projectionswill prove accurate or that we will be able to provide the anticipatedmetrics.  Our projections are based onlimited input and operational history and failure to meet such projections willnegatively impact our relationships with surgical centers and our ability toattract business from additional centers.

 

**Theprovision of health care services is subject to considerable regulation bystate and federal agencies, including regulations under HIPAA and Stark.**

** **

The Centers we intend to establish in cooperation withsurgery providers, which we refer to as centers, will need to comply with manylaws and regulations, both state and federal, which govern the provision ofhealth care services.  If they fail tocomply with any such laws and regulations, then the penalties involved could beserious, time-consuming for management and expensive.  Inexperience in health care services couldcontribute to an inadvertent breach of laws or regulations.

 

There are numerous federal and state regulations addressingpatient information privacy and security concerns.  In particular, the federal regulations issuedunder the Health Insurance Portability and Accountability Act of 1996, orHIPAA, contain provisions that:

 

•                  protect individual privacy by limiting the uses and disclosures of patientinformation;

 

•                  require the implementation ofsecurity safeguards to ensure the confidentiality,integrity and availability of individually identifiable health information inelectronic form; and

 

•                  prescribe specific transaction formats and data code sets for certainelectronic transactions.

 

Compliance with these regulations is costly andrequires our management to spend substantial time and resources when workingwith our clients.  We are unable toestimate the total financial impact of our continuing compliance with HIPAArequirements or of any future changes in these requirements.

 

In addition, the federal Stark Law restricts referralsby physicians of Medicare, Medicaid and other government-program patients toproviders of a broad range of designated health services with which they haveownership or certain other financial arrangements.  Many states have adopted or are consideringsimilar legislative proposals to prohibit the payment or receipt ofremuneration for the referral of patients and physician self-referrals,regardless of the source of the payment for the care.  These laws and regulations are extremelycomplex, and little judicial or regulatory interpretation exists.  If the activities of a client of ours or otherentity with which we have a business relationship were found to constitute aviolation of anti-referral laws, and we were found to have knowinglyparticipated in such activities, we could be subject to sanction or liabilityunder such law.

 

**We operatein a competitive market; new technologies, procedures, or pharmaceuticals couldradically change the modality of treatment of morbid obesity and negativelyimpact the economics of our obesity surgery business.**

 

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The market for products and services that addressmorbid obesity is attractive and therefore competitive and new offerings andtechnologies are in development by several companies.  For example, we are aware of developments,primarily involving stimulation or balloon technology, which may come to themarket in the next few years.  Thesedevices would be implanted in a relatively simple endoscopic procedure.  These alternatives may prove to be moreeffective, less risky and/or cheaper than gastric bypass.  If this turns out to be the case, our abilityto generate revenues will be negatively affected. Also, many pharmaceuticalcompanies are researching drug therapies for combating obesity.  If they prove successful in finding a moreeffective solution for morbid obesity, then demand for a surgical option islikely to decline substantially.  Wecannot guarantee that we will compete successfully against our current orpotential competitors, especially those with significantly greater financialresources or brand name recognition.

 

**We expectto compete with several companies that have the same objectives as us.**

** **

There are several companies which intend to provideservices to the morbid obesity market; while their business model is notidentical to ours, the end result is likely to be that we will compete witheach other in offering consulting and program management services.  Three of these companies, to our knowledge,include bariatric surgeons in their management or ownership.  This may prove to be an advantage over us ingaining access to potential clients because we do not have bariatric surgeonson our staff.  Other companies have onlya partial service offering, which may allow them, because of lower overhead, tooperate in their niche at a price advantage to full-service companies such asours.  In any case, we expect that themarket will continue to be attractive and that new entrants are likely.

 

**If we failto retain our key personnel and hire, train and retain additional qualified andexperienced employees, we may not be able to compete effectively, or expand ourconsulting business and the number of Centers as planned, both of which couldresult in reduced revenues.**

** **

Our future success will depend to a large extent onretaining our core operating management team and recruiting sufficientqualified employees to manage and staff our Centers.  There is likely to be a competitive labormarket for such staff and there is no assurance that we will be able to attractand retain an adequate number of suitable employees.  If we are unable to do this, then we may notbe able to operate and expand our Centers as planned, which may reduce ourrevenues.

 

To be successful, we must strengthen awareness of ourservices through our marketing efforts and through establishment of additionaliVOW Centers.  We have a limitedmarketing and business development force through which the efforts will beconducted, and we will rely heavily on each of these individuals.  We cannot assure you that we will be able toattract and retain sufficient qualified personnel.

 

Our current key employees are; Michael H. Owens, M.D.,Chief Executive Officer, President and Chief Medical Officer; Howard Sampson,Chief Financial Officer; Stephen F. Sedlock, Vice President of Marketing; MaryLou Walen, Associate Vice President, Customer Relations; and Aimee Johnston,Associate Vice President, Sales and Bariatric Management Services.  We do not maintain key personnel lifeinsurance policies on any of these individuals.

 

**If we arenot able to attract and retain key doctors to participate in our advisoryboard, it may adversely affect our ability to develop our products and servicesand expand our business.**

** **

Members of our clinical advisory board consult with usexclusively but are free to consult with other non-competing companies and areemployed elsewhere on a full-time basis. As a result, they only spend a limited amount of time on ourbusiness.  Although we have entered intoconsulting agreements, including confidentiality provisions with each of themembers of our clinical advisory board, the consulting and confidentialityagreements between us and each of the members of our clinical advisory board may be terminated or breached.

 

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**Ourfailure to effectively manage our growth could have a material adverse effecton our business.**

** **

Growth in our business will place a significant strainon our management systems and resources. We have only recently begun to focus on providing management services,and we have hired persons with appropriate skills.  However, these people have not previouslyworked together, and it will take time and effort to develop efficient workingprocesses and relationships.  We willneed to continue to improve our operational and financial systems andmanagerial controls and procedures, and we will need to continue to expand,train and manage our workforce.  We are asmall company with limited resources, so we lack the ability to increase our capacityto provide services prior to assurances that those services will be paid for bycustomers.  As a result, each newmanagement contract will require significant operational efforts as we hirepersonnel to staff the new project.  Wewill have to maintain close coordination among our technical, accounting,finance, marketing and sales departments.

 

**Now thatwe have disposed of our Visualization Technology business, our future successwill depend solely on our ability to establish and grow our obesity diseasestate management business.**

** **

The sale of our Visualization Technology businessclosed on April 15, 2004 so our future success as a company will depend onour ability to execute on the establishment and growth of our obesity diseasestate management business.  As a company,we have limited experience in the provision of surgical services.  We will also be required to build thisbusiness from a relatively small base, finding partners and surgeons willing toparticipate.  We cannot assure you thatwe will be able to build a successful services business in the long term.

 

**Risks Related to the Securities Markets andOwnership of our Common Stock**

 

**Our commonstock may be subject to delisting from the Nasdaq SmallCap Market because wefail to maintain compliance with continued listing criteria.**

** **

The quantitative standards for continued listing onthe Nasdaq SmallCap Market requires a company to maintain a bid price for itsstock of $1.00 per share and maintain a stockholders’ equity of at least$2,500,000 (or satisfy alternative requirements).  Failure to comply with these requirementssubjects a company to de-listing proceedings. We have twice over the past 3 years been subjected to delistingproceedings from Nasdaq for failure to meet the minimum stockholders’ equityrequirement.  Each time we eventuallyregained compliance by raising additional operating capital.  

 

On April 28, 2005, we received notification fromThe Nasdaq Stock Market indicating that for the last 30 consecutive businessdays, the bid price of our common stock closed below the minimum $1.00 pershare requirement for continued inclusion under Marketplace Rule 4310(c)(4).  The Nasdaq notice indicated that we will beprovided 180 calendar days, or until October 25, 2005, to regaincompliance by having the bid price of our common stock close at $1.00 per shareor above for a minimum of 10 consecutive trading days prior to October 25,2005.  

 

If we have not regained compliance by October 25,2005, the Staff of the Nasdaq will determine whether we meet the initiallisting criteria for The Nasdaq SmallCap Market set forth in Marketplace Rule 4310(c),except for the bid price requirement.  Ifwe meet the initial listing criteria, the Staff will provide us an additional180 calendar day compliance period.  Ifwe are not eligible for an additional compliance period, the Staff will providewritten notification that our securities will be delisted.  At that time, we may appeal the Staff’sdetermination to delist our common stock to a Listing Qualifications Panel.

 

As of March 31, 2005, our stockholders’ equitybalance is $2,141,000, which is below the $2,500,000 minimum required tomaintain our continued listing on the Nasdaq SmallCap Market.  We expect to receive a notice from Nasdaqinforming us that our common stock is subject to delisting from the NasdaqSmallCap Market for failing to maintain the minimum stockholders’ equity.****** If we choose to take steps to maintain ourlisting, we will be required to attend a hearing and develop a plan to regaincompliance.  These steps will be costly,both in terms of 

 

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direct expenses and diversion of management time andresources, and there is no guarantee that Nasdaq will accept any plan wepropose. 

 

If we are unable to maintain continued compliance, oursecurities will be delisted from the Nasdaq SmallCap Market. The delisting ofour common stock from the Nasdaq SmallCap Market may materially impair ourstockholders’ ability to buy and sell shares of our common stock and could havean adverse effect on the market price of, and the efficiency of the tradingmarket for, our common stock.  Inaddition, the delisting of our common stock could significantly impair ourability to raise capital should we desire to do so in the future.

 

**The termsof our March 2003, preferred stock financing confer senior rights on theholders of Series A Convertible Preferred Stock, and these rights mayimpair the interests of our common stockholders or impact our results ofoperations.**

** **

We issued 1,000,000 shares of our Series A ConvertiblePreferred Stock (the “Series A Shares”) in March 2003, which werecreated pursuant to the terms of a Certificate of Designations, for anaggregate of $950,000 in cash.  Inconnection with this financing, the purchasers of Series A Shares were grantedseveral significant rights senior to the rights of holders of our commonstock.  Among other rights, in the eventof a liquidation, dissolution or winding up of our company (includingconsolidations, mergers or other sales), holders of Series A Shares willbe entitled to receive up to $3.80 per share held by them, in preference to anydistribution to the holders of common stock. Also, pursuant to the Certificate of Designations, we must obtain theconsent of the holders of at least two-thirds of the outstanding Series AShares in order to undertake certain actions, including significant capitalexpenditures and the issuance of securities. Additionally, for so long as any Series A Shares remain outstandingafter three hundred ninety (390) days following the initial issuance of any Series AShares, the holders of Series A Shares will be entitled to elect thegreater of (i) two members of our Board of Directors or (ii) twenty-fivepercent (25%) of the total members of our Board of Directors.

 

We redeemed 85,000 Series A Shares in June 2004,and have the right to redeem an additional 300,000 at any time on or before January 15,2006 in exchange for $500,000.  If wechoose to redeem the additional 300,000 Series A Shares, we will use cashthat would otherwise fund our business operations.  Although we may believe that such redemptionis the best available business option, valuable cash would nonetheless beconsumed, which would impact our ability to fund operations or grow ourbusiness.

 

**There is alimited market for our common stock and therefore investors may not be able toliquidate their investment in the foreseeable future, if at all.**

** **

There is a limited market for our common stock eventhough it is publicly quoted, and the market is not expected to increasesignificantly in the foreseeable future. For example, we only have approximately 190 shareholders of record andthe average daily trading volume in our stock is approximately 22,000****shares. The limited trading market for our common stock may cause fluctuationsin the market value of our common stock to be exaggerated, leading to pricevolatility in excess of that which would occur in a more active tradingmarket.  The lack of an active tradingmarket in our stock may also cause investors to be unable to sell all of theirdesired shares of common stock on short notice and the sale of a large numberof shares at one time could temporarilydepress the market price. An investment in our company is highly speculative,and an investor should be able to withstand a total loss of the investment.

 

**Our stockprice could continue to be volatile and your investment in our common stockcould suffer a decline in value, adversely affecting our ability to raiseadditional capital.**

** **

The market prices and trading volumes for securitiesof emerging companies, like ours, have historically been highly volatile andhave experienced significant fluctuations unrelated to the operatingperformance.  The market price of ourcommon stock has historically been highly volatile.  For example, between July 2004 and April 

 

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2005, the trading price of our common stock rangedfrom $0.55 to $3.00.  The trading priceof our common stock may continue to be significantly affected by factors suchas:

 

•                  actual or anticipated fluctuations in ouroperating results,

 

•                  our ability to remain listed on Nasdaq,

 

•                  changes in financial estimates by securitiesanalysts,

 

•                  announcements of technological innovations,

 

•                  new products or new contracts by us or ourcompetitors,

 

•                  regulatory announcements,

 

•                  developments with respect to patents orproprietary rights,

 

•                  conditions and trends in the health services,medical device and other technology industries,

 

•                  adoption of new accounting standards affectingthe health services industry and the medical device industry, and

 

•                  general market conditions.

 

In addition, the stock market has from time to timeexperienced significant price and volume fluctuations that have particularlyaffected the market prices for shares of early stage companies.  These broad market fluctuations may adverselyaffect the market price of our common stock. In the past, following periods of volatility in the market price of aparticular company’s securities, securities class action litigation has oftenbeen brought against that company.  Suchlitigation, if brought against us, could result in substantial costs and adiversion of management’s attention and resources.

 

**Anti-takeoverprovisions in our organizational documents and Delaware law may discourage orprevent a change of control, even if an acquisition would be beneficial to ourstockholders, which could affect our stock price adversely and prevent attemptsby our stockholders to replace or remove our current management.**

** **

Our certificate of incorporation and bylaws containprovisions that could delay or prevent a change of control of our company orchanges in our board of directors that our stockholders might considerfavorable. Some of these provisions:

 

•                  authorize the issuance of preferred stockwhich can be created and issued by the board of directors without priorstockholder approval, with rights senior to those of the common stock;

 

•                  provide for a classified board of directors,with each director serving a staggered three-year term;

 

•                  prohibit our stockholders from filling boardvacancies, calling special stockholder meetings, or taking action by writtenconsent;

 

•                  prohibiting our stockholders from makingcertain changes to our restated certificate of incorporation or restated bylawsexcept with 66 2/3% stockholder approval; and

 

•                  require advance written notice of stockholderproposals and director nominations.

 

In addition, we are subject to the provisions of Section 203of the Delaware General Corporation Law, which may prohibit certain businesscombinations with stockholders owning 15% or more of our outstanding votingstock. These and other provisions in our certificate of incorporation, bylawsand Delaware law could make it more difficult for stockholders or potentialacquirers to obtain control of our board of directors or initiate actions thatare opposed by our then-current board of directors, including delay or impede amerger, tender offer, or proxy contest involving our company. Any delay orprevention of a change of control transaction or changes in our board ofdirectors could cause the market price of our common stock to decline.

 

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**Risks Related to our Intellectual Propertyand Potential Litigation**

 

**We depend onour intellectual property for the establishment and operation of our iVOWCenters.**

 

We rely on a combination of trade secrets, know-howand confidentiality restrictions for the establishment and operation of ouriVOW Centers.  We have expended significantefforts devising the types of products and services we will offer and themanner in which these will be delivered. Our ability to maintain the secrecy and confidentiality of our tradesecrets and internal knowledge are crucial to the success of our business.  Any failure to do so may negatively impactour prospects.

 

**We may besubject to product liability claims and have limited insurance coverage.**

** **

We face an inherent and significant business risk ofexposure to product liability claims in the event that the use of our products,which were sold by us prior to the sale of the Visualization Technologybusiness, results in personal injury or death. Also, in the event that any of those products proves to be defective, wemay be required to recall or redesign such products.  Product liability insurance is expensive andin the future may not be available to us on acceptable terms, if at all.  A successful product liability claim orseries of claims brought against us in excess of our insurance coverage wouldnegatively impact our business.

 

**If we areunable to protect our intellectual property, we may be unable to prevent othercompanies from using our technology in competitive products.**

** **

We maintain ownership of the technology transferred toViking Systems, Inc. in connection with the sale of our VisualizationTechnology business in April 2004. In the event Viking Systems does not make the required royalty paymentsto us, their rights in the technology will be terminated.  In such case, we will be able to continue tocommercialize that technology.  To theextent we decide to incorporate that technology into our business, our futuresuccess will depend, in part, on our ability to continue developing patentableproducts, enforcing our patents and obtaining patent protection for ourproducts both in the United States and in other countries.  The patent positions of medical devicecompanies, however, are generally uncertain and involve complex legal andfactual questions.  Patents may neverissue from any patent applications owned by or licensed to us.  Even if patents do issue, the claims allowedmay not be sufficiently broad to protect our technology.  In addition, issued patents owned by orlicensed to us may be challenged, invalidated or circumvented, or the rightsgranted there under may not provide us with competitive advantages.  Further, the medical device industry has beencharacterized by extensive litigation regarding patents and other intellectualproperty rights.  Litigation, which wouldresult in substantial expense, may be necessary to enforce any patents issuedor licensed to us and/or to determine the scope and validity of proprietaryrights of third parties or whether our products, processes or proceduresinfringe any such third-party proprietary rights.

 

In addition to patents, we rely on unpatented tradesecrets to protect our business and our proprietary technology.  Others may independently develop or otherwiseacquire the same or substantially equivalent plans or technologies or otherwisegain access to our proprietary technology or disclose our plans ortechnology.  It is difficult to protectrights to unpatented ideas, plans or proprietary technology.  Third parties may obtain patent rights tothese unpatented trade secrets, which patent rights could be used to assertclaims against us.  We also rely onconfidentiality agreements with our collaborators, employees, advisors, vendorsand consultants to protect our proprietary technology.  These agreements may be breached, we may nothave adequate remedies for any breach and our trade secrets may otherwisebecome known or be independentlydeveloped by competitors.  In addition,our agreements with employees and consultants require disclosure of ideas,developments, discoveries or inventions conceived during employment orconsulting, as the case may be, and assignment to us of proprietary rights tosuch matters related to our business and technology.  The extent to which efforts by others willresult in patents and the effect on us of the issuance of such patents isunknown.

 

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Item 3.  Controls and Procedures

 

(a)            Evaluation ofdisclosure controls and procedures

 

As required by the Securities and ExchangeCommission Rule 13a-15(b), we carried out an evaluation, under thesupervision and with participation of our management, including our chiefexecutive officer and chief financial officer, of the effectiveness of ourdisclosure controls and procedures as of the period covered by thisreport.  Based on the foregoing, ourexecutive officer and chief financial officer concluded that as of March 31,2005, our disclosure controls and procedures were effective.

 

In connection with the audit of our 2004financial statements, management, together with J. H. Cohn LLP, our independentregistered public accounting firm, identified the existence of severalsignificant deficiencies related to the preparation of our financial statementsand notes thereto.  These significantdeficiencies collectively amount to a material weakness in our internal controlover financial reporting.

 

In response to the matters identified, wehave taken steps to strengthen our internal control over financial reporting toremediate the significant deficiencies. Specifically, we have taken, or intend to take, the following steps,among others:

 

•             During the firstquarter we have expanded and enhanced our accounting and reporting staff byadding a full time accountant and have begun training our financial analyst infinancial reporting;

 

•             During the secondquarter we intend to expand our financial disclosure and reporting knowledgethrough continuing education courses so as to minimize our financial reportingdeficiencies in the future.

 

(b)   Changesin internal controls of our financial reporting

 

Other than as set forth above, there has beenno change in our internal control over financial reporting during our mostrecent fiscal quarter that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.

 

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PART II.  OTHER INFORMATION 

 

Item 1.   Legal Proceedings

 

From time to time,we may be involved in litigation relating to claims arising out of ouroperations in the normal course of business. There are no material legal proceedings pending against us.  We have been notified that a party intends toinclude us as a party to a medical malpractice lawsuit in Florida, but we havenot yet been formally included or served, and we are contesting the issue.

 

Item 2.   Unregistered Sales ofEquity Securities and Use of Proceeds

 

None

 

Item 3.   Defaults upon SeniorSecurities

 

None.

 

Item 4.   Submission of Mattersto a Vote of Security Holders

 

There have been nomatters submitted to a vote of security holders during the quarterly periodended March 31, 2005 through the solicitation of proxies or otherwise. 

 

Item 5.   Other Information

 

None.

 

Item 6.   Exhibits 

 

A)      Exhibits   

 

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                              |
|----------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1  (1)             |       | Second Restated  Certificate of Incorporation.                                                                                                               |
|                 |       |                                                                                                                                                         |
| 3.2  (2)             |       | Certificate of  Amendment of Second Restated Certificate of Incorporation.                                                                                   |
|                 |       |                                                                                                                                                         |
| 3.3  (3)             |       | Certificate of  Designations of Series A Convertible Preferred Stock.                                                                                   |
|                 |       |                                                                                                                                                         |
| 3.4  (4)             |       | Amended Certificate  of Designations of Series A Convertible Preferred Stock, as filed with  the Delaware Secretary of State on May 26, 2004.      |
|                 |       |                                                                                                                                                         |
| 3.5  (1)             |       | Restated Bylaws.                                                                                                                                             |
|                 |       |                                                                                                                                                         |
| 4.1  (5)             |       | Form of  Certificate for Common Stock.                                                                                                                  |
|                 |       |                                                                                                                                                         |
| 10.60*               |       | Bariatric  Administrative Services Agreement, dated April 20, 2005, with Lenox Hill  Hospital and Manhattan Minimally Invasive & Bariatric Surgery, P.C. |
|                 |       |                                                                                                                                                         |
| 31.1                 |       | Certification of  Principal Executive Officer pursuant to Rules 13a-14 and 15d-14  promulgated under the Securities Exchange Act of 1934.               |
|                 |       |                                                                                                                                                         |
| 31.2                 |       | Certification of  Principal Financial Officer pursuant to Rules 13a-14 and 15d-14  promulgated under the Securities Exchange Act of 1934.               |
| 32.1                 |       | Certifications of  Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as                                                              |

 

 

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*Certain confidential portions of this exhibitwere omitted by means of redacting a portion of the text (the"Mark"). This exhibit has been filed separately with the Secretary ofthe Securities and Exchange Commission without the Mark pursuant to ourapplication requesting confidential treatment under Rule 406 under theSecurites Act.

 

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|   |   | adopted pursuant to Section 906  of the Sarbanes-Oxley Act of 2002.                                                                                                 |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                     |
| 32.2   |   | Certifications of  Principal Financial Officer 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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(1)                                  Incorporatedby reference to our Registration Statement on Form S-1, as amended, filed March 7,1997.

 

(2)                                  Incorporatedby reference to our Form 10-Q, filed November 14, 2001.

 

(3)                                  Incorporatedby reference to our Form 10-K, filed March 31, 2003.

 

(4)                                  Incorporatedby reference to our Form 8-K, filed May 28, 2004.

 

(5)                                  Incorporatedby reference to our Registration Statement on Form S-1, as amended, filed June 25,1997.

 

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SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
|   |               |   | iVOW, INC.                                          |
|--------|--------------------|--------|-----------------------------------------------------|
|   |               |   |                                                |
|   |               |   |                                                |
| Date:  | May 16, 2005  |   | /s/                                            | Michael H. Owens, M.D. |   |
|   |               |   |  Michael H. Owens, M.D.                        |
|   |               |   |  President, Chief Executive Officer  and       |
|   |               |   |  Director                                      |
|   |               |   |                                                |
| Date:  | May 16,  2005 |   | /s/                                            | Howard Sampson |   |
|   |               |   |  Howard Sampson                                |
|   |               |   |  Vice President of Finance, Chief Financial    |
|   |               |   |  Officer and Secretary                         |
|   |               |   |  (Principal financial and accounting  officer) |
|        |                    |        |                                                     |  |  |  |

 

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