##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM
10-KSB/A
Amendment No. 1.
 
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 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: 000-11284
 
 SILICON MOUNTAIN HOLDINGS, INC.
  Colorado
(State or Other Jurisdiction of incorporation or 
Organization)
    
    84-0910490
(I.R.S. Employer Identification No.)4755 Walnut Street
    
    80301Boulder, Colorado
    
    (Zip Code)(Address of Principal Executive Offices)
 
  Title of each class 
None
    
    Name of each exchange on which registered
None
 
 o
 þ o
 o
 o þ
    DOCUMENTS INCORPORATED BY REFERENCE
 o þ




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EXPLANITORY NOTE
 
 
  
 FORWARD LOOKING STATEMENTS
 
 This
Amendment No. 1 to our Annual Report on Form 10-KSB contains forward-looking statements that may be affected by
matters outside our control that could cause materially different results.
 
 
  
 
    
    financial position;
    
    business strategy;
    
    budgets;
    
    amount, nature and timing of capital expenditures;
    
    acquisition risks;
    
    operating costs and other expenses; and
    
    cash flow and anticipated liquidity.
  
    
    our ability to generate sufficient cash flows to operate;
    
    availability of capital;
    
    general economic conditions;
    
    currency exchange volatility;
    
    the risks associated with acquiring and integrating new businesses;
    
    demand for our products;
    
    labor and other costs of producing and selling our products;
    
    the strength and financial resources of our competitors;
    
    regulatory risks and developments;
    
    our ability to find and retain skilled personnel; and
    
    the lack of liquidity of our common stock.




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##### 



TABLE OF CONTENTS
 PART I
    
    
    1Item 1. Business
    
    
    1Item 2. Properties
    
    
    17Item 3. Legal Proceedings
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18PART II
    
    
    18Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
    
    
    18Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 7. Financial Statements and Supplementary Data
    
    
    30Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    51Item 8A(T). Controls and Procedures
    
    
    51PART III
    
    
    52Item 9. Directors and Executive Officers of the Registrant
    
    
    52Item 10. Executive Compensation
    
    
    55Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    62Item 12. Certain Relationships and Related Transaction
    
    
    64Item 13. Exhibits and Financial Statement Schedules
    
    
    66Item 14. Principal Accountant Fees and Services
    
    
    67SIGNATURES
    
    
    68Settlement and Release AgreementForm of Common Stock Purchase WarrantAmended and Restated Overadvance Side Letter AgreementForm of Common Stock Purchase WarrantTag-Along Rights Side Letter AgreementCode of Business Conduct and EthicsSubsidiariesCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certifications of CEO and CFO Pursuant to Section 906




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PART I
 
 Item 1. Business
 Overview
    Formation of the Company
    Acquisitions
 Digital Memory
  SuperPC
  1




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VCI Vision Computers
      Widow PC
  SMM Acquisition
  2




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Name Change To Silicon Mountain Holdings, Inc.
  Industry Background
  Products
  3




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Computer Memory Products
 Flash Memory Products
  CompactFlash memory cards.
 Secure Digital and MultiMediaCard Flash memory cards. ,
 USB
Flash drives.
 ATA Flash PC cards.
 DRAM Products
  Computer
System Products
  Servers
  
    
    Rackmounts (1u,2u,3u,4u)
    
    Towers (Mid & Full Size)
 4




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Workstations
  
    
    Mainly Tower Systems
    
    Designed for heavy task desktop applications
 Parts & Peripherals
  
    
    RAID controllers and Storage  We provide a portfolio of storage solutions for growth,
backup and compliance, as well as direct attached storage, network attached storage, and
storage area networks
    
    Optical drives, Video Cards, Graphic Cards and other Peripherals
 Product Warranty and Service
   Silicon Mountain Holdings Competition
       5




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Silicon Mountain Holdings Sales, Marketing and Strategic Alliances
 ® ® ® ® ®
 E-commerce/Websites
  Customer Service and Support
  Major Customers
  Suppliers
 
  
 6




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Research and Development
  Employees
 
  
 Available Information
  
  Risk Factors
 
 In evaluating our business, you should carefully consider the risks and uncertainties discussed in
this section, in addition to the other information presented in this Amendment No. 1 to our Annual Report on Form 10-KSB.
The risks and uncertainties described below may not be the only risks we face. If any of these
risks and uncertainties actually occurs, our business, operating results or financial condition
could be materially adversely affected and the market price of our common stock may decline.
 
 The Company may not be able to access sufficient capital to survive if the current down markets
continue for many of its products.
 Debt
Financing
 The Company incurred losses from operations in 2007 and could incur losses in the future, which
may impact our ability to implement our business strategy and adversely affect our financial
condition.
 
  
 7




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Our dependence on a small number of suppliers for computer components, systems and peripherals and
inability to obtain a sufficient supply of these components on a timely basis could harm our
ability to fulfill orders.
  Shortages in supplies of computer components and peripheral and insufficient cash flow to procure
those supplies could cause us to lose sales, experience lower margins and affect our reputation,
as a result of which our operating results may suffer and our market share may decline.
  8




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If we are unable to compete successfully, we could lose market share and sales, and the value of
shares of our common stock may decline.
     9




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Advances in technologies can lead to obsolescence of computer components and peripherals in our
inventory, which may cause us to take inventory write-downs and reduce selling prices, which would
negatively impact our operating results and financial condition.
  If we do not manage our inventories effectively and in a manner that results in our timely meeting
our customers needs, we could lose sales, experience order cancellations, incur excess shipping
charges or end up with excess inventory, any of which could cause our operating results to suffer.
    Declines in our average sales prices of memory or computer components may result in declines in
our revenues and gross profit.
  10




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If we fail to maintain and strengthen our Visionman and Silicon Mountain Memory brands in existing
branded computer and peripherals markets or to establish these brands in other markets we enter,
sales of our branded personal desktop computers, rackmount servers and other peripherals may
decrease.
 ® ®
 We are subject to the cyclical nature of the semiconductor industry and any future downturn could
continue to adversely affect our business.
  We may be less competitive if we fail to develop or obtain rights to market new and enhanced
products and introduce them in a timely manner.
   11




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We will be exposed to risks relating to the evaluations of internal control over financial
reporting required by Section 404 of the Sarbanes-Oxley Act of 2002 and our failure to maintain
effective internal control over financial reporting could result in a negative market reaction.
      12




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According
to a recent letter from our independent auditors, there is a reasonable possibility that a
material misstatement of the companys annual or interim financial
statements will not be prevented or detected on a timely basis
because of material weaknesses in our internal control over financial
reporting.
  As a result of being a public company, we will incur increased costs that may place a strain on
our resources or divert our managements attention.
  We may make acquisitions that are dilutive to existing shareholders, resulting in unanticipated
accounting charges or otherwise adversely affect our results of operations.
   We may require significant capital to pursue our growth strategy, but we may not be able to obtain
additional financing.
  Our limited experience in acquiring other businesses, product lines and technologies may make it
difficult for us to overcome problems encountered in connection with any acquisitions we may
undertake.
  13




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
    
    problems and delays in successfully assimilating and integrating the purchased
operations, personnel, technologies, products and information systems;
    
    unanticipated costs and expenditures associated with the acquisition, including any
need to infuse significant capital into the acquired operations;
    
    adverse effects on existing business relationships with suppliers, customers and
strategic partners;
    
    risks associated with entering markets and foreign countries in which we have no or
limited prior experience;
    
    contractual, intellectual property or employment issues;
    
    potential loss of key employees of purchased organizations; and
    
    potential litigation arising from the acquired companys operations before the
acquisition.
  We acquired Visionman Computers, Inc. by issuing debt securities. Our post-exchange operating
results have declined due to increased interest expense and our liquidity has been adversely
affected by an acceleration of our indebtedness.
  
    
    default and foreclosure on our assets if our operating cash flow after a business
combination were insufficient to pay our debt obligations;
    
    acceleration, even if we are then current in our debt service obligations, if the debt
securities have covenants that require us to meet certain financial ratios or maintain
designated reserves, and such covenants are breached without waiver or renegotiation;
    
    a required immediate payment of all principal and accrued interest, if any, if the debt
security was payable on demand; and
    
    our inability to obtain additional financing, if necessary, if the debt securities
contain covenants restricting our ability to obtain additional financing.
  The terms of our existing debt financing impose significant operational and financial restrictions
on us, which may prevent us from capitalizing on business opportunities and pursuing other
financing options
  
    
    make investments and other restricted payments, including the payment of dividends;
 14




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
    
    incur additional indebtedness;
    
    issue shares of preferred stock;
    
    create liens;
    
    create new subsidiaries;
    
    make strategic acquisitions, introduce new products or services or undertake certain
business opportunities;
    
    sell our assets or consolidate or merge with or into or acquire other companies;
    
    engage in transactions with affiliates;
    
    make certain capital expenditures;
    
    divest ourselves of product lines or brands; and
    
    utilize cash inflow up to the limit established by the terms of the revolving line of
credit.
  Our debt amortization obligations, including the payment of interest on our debt, reduce the
amount of cash we have available to fund our working capital needs and capital expenditures.
  We have no available or committed source of funds to pay our indebtedness, and failure to pay our
indebtedness in a timely manner could substantially reduce the value of your investment in the
Company.
  Our intellectual property may not be adequately protected, which could harm our competitive
position.
  
    
    provide adequate protection for our intellectual property rights;
    
    prevent disputes with third parties regarding ownership of our intellectual property
rights; or
    
    prevent disclosure of our trade secrets and know-how to third parties or into the
public domain.
 15




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If we are found to have violated the intellectual property rights of others, we could be required
to indemnify our customers, resellers or suppliers, redesign our products, pay significant
royalties and enter into license agreements with third parties.
  The execution of our growth strategy depends on our ability to retain key personnel, including our
executive officers, and to attract qualified personnel.
  Our common stock is currently subject to the SECs penny stock rules, which may cause
broker-dealers executing trades in our stock to experience difficulty in completing customer
transactions and which may adversely affect the trading of our common stock after the SMM
Acquisition.
  
    
    make a special written suitability determination for the purchaser;
    
    receive the purchasers written agreement to a transaction prior to sale;
    
    provide the purchaser with risk disclosure documents identifying certain risks of
investing in penny stocks, a purchasers legal remedies, and information about the market
for penny stocks; and
    
    obtain a signed and dated acknowledgment from the purchaser that he, she or it actually
received the required risk disclosure documents before a transaction in a penny stock is
completed.
  16




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Our common stock is quoted on the OTC Bulletin Board, which limits the liquidity and price of our
common stock more than if it was quoted or listed on The Nasdaq Stock Market or a national
exchange.
  Our stock price is highly volatile, and you may not be able to resell your shares at or above
recent public sale prices.
  
    
    actual or anticipated fluctuations in operating results;
    
    the inability to obtain research coverage;
    
    changes in market valuations of other companies in the computer memory industry;
    
    announcements by us or our competitors of significant customer contracts, acquisitions,
strategic partnerships, joint ventures or capital infusions;
    
    introduction of technologies or product enhancements that reduce demand for computer
memory upgrades or related value-added services;
    
    the loss of one or more key customers; and
    
    departures of key personnel.
  
 Item 2. Properties
  2007Annual
    
    Square
    
    LeaseLocation
    
    Primary Function
    
    Rent
    
    Footage
    
    ExpirationBoulder, CO
    
    Executive and corporate offices
    
    $
    250,221

    
    
    20,538

    
    April 30, 2009Chandler, AZ
    
    Manufacturing
    
    
    116,500

    
    
    15,317

    
    October 19, 2016Menlo Park, CA
    
    Distribution
    
    
    37,480

    
    
    4,080

    
    Month to month
 17




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases
of Equity Securities
 Market for Common Equity and Related Stockholder Matters
  
 High
    
    Low2007Fourth Quarter
    
    
    2.30
    
    
    
    1.17Third Quarter
    
    
    1.40
    
    
    
    1.26Second Quarter
    
    
    1.26
    
    
    
    1.08First Quarter
    
    
    1.44
    
    
    
    1.172006Fourth Quarter
    
    
    1.53
    
    
    
    1.44Third Quarter
    
    
    2.70
    
    
    
    1.53Second Quarter
    
    
    2.88
    
    
    
    2.07First Quarter
    
    
    3.96
    
    
    
    3.15
 
   Recent Sales of Unregistered Securities
  Issuances as Part of Stock Exchange Agreement
  18




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Pre-Stock Exchange Issuances
  
 Number ofRecipient (Name,
    
    Post-Split,Grant Date
    
    Title)
    
    Post-Exchange Shares
    
    Exercise PriceOctober 1, 2004
    
    Stephanie Kelso
    
    
    4,167
    
    
    $
    0.33July 1, 2005
    
    Alan Treibitz
    
    
    556
    
    
    $
    0.54July 1, 2005
    
    Steven H. Cohen
    
    
    556
    
    
    $
    0.54July 1, 2005
    
    Stephanie Kelso
    
    
    556
    
    
    $
    0.49July 1, 2005
    
    Marilyn T. Heller
    
    
    556
    
    
    $
    0.49July 1, 2005
    
    Marvin A. Davis
    
    
    1,111
    
    
    $
    0.49July 1, 2005
    
    James E. Pacotti, Jr.
    
    
    1,111
    
    
    $
    0.49October 1, 2005
    
    Stephanie Kelso
    
    
    1,674
    
    
    $
    0.36June 6, 2006
    
    Alan Treibitz
    
    
    556
    
    
    $
    0.33June 6, 2006
    
    Steven H. Cohen
    
    
    556
    
    
    $
    0.33June 6, 2006
    
    Stephanie Kelso
    
    
    556
    
    
    $
    0.30June 6, 2006
    
    Marilyn T. Heller
    
    
    556
    
    
    $
    0.30June 6,2006
    
    Marvin A. Davis
    
    
    1,111
    
    
    $
    0.30June 6, 2006
    
    James E. Pacotti, Jr.
    
    
    1,111
    
    
    $
    0.30June 6, 2006
    
    Stephanie Kelso
    
    
    2,492
    
    
    $
    0.30June 6, 2006
    
    Stephanie Kelso
    
    
    4,167
    
    
    $
    0.30April 1, 2007
    
    Alan Treibitz
    
    
    556
    
    
    $
    0.143April 1, 2007
    
    Steven H. Cohen
    
    
    556
    
    
    $
    0.143April 1, 2007
    
    Stephanie Kelso
    
    
    556
    
    
    $
    0.13April 1, 2007
    
    Marilyn T. Heller
    
    
    556
    
    
    $
    0.13April 1, 2007
    
    Marvin A. Davis
    
    
    1,111
    
    
    $
    0.13April 1, 2007
    
    Stephanie Kelso
    
    
    4,167
    
    
    $
    0.13April 1, 2007
    
    James E. Pacotti, Jr.
    
    
    1,111
    
    
    $
    0.13
 
   19




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Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations
 
  
 Critical Accounting Policies and Estimates
  Revenue
  Share-Based Compensation
  20




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Reserves for inventory excess, obsolescence and lower of market values over costs
  Allowances for doubtful accounts and price protection
  Warranty Reserve
  Income taxes
  Litigation and other contingencies
  Valuation of long-lived assets
  New Accounting Pronouncements Affecting Silicon Mountain
  21




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Results of Operations
  
 2007(1)
    
    
    2006(1)% of RevenueSales
    
    
    100.0
    %
    
    
    100.0
    %Cost of Goods Sold
    
    
    79.6
    
    
    
    76.8Gross Margin
    
    
    20.4
    
    
    
    23.2Operating Costs:Selling Expenses
    
    
    9.5
    
    
    
    13.8General & Administrative
    
    
    13.8
    
    
    
    9.8Depreciation & Amortization
    
    
    2.9
    
    
    
    2.1Income (Loss) from Operations
    
    
    (5.9
    )
    
    
    (2.5
    )Other Expense, Net
    
    
    (3.9
    )
    
    
    (1.7
    )Pre-Tax Income (Loss)
    
    
    (9.7
    )
    
    
    (4.3
    )Income Tax (Expense) Benefit
    
    
    (0.9
    )
    
    
    1.3Net Income (Loss)
    
    
    (10.6
    )%
    
    
    (3.0
    )%
 
 (1)
    
    Columns may not add due to rounding 
 22




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Twelve Months Ended December 31, 2007 compared with Twelve Months Ended December 31, 2006
  
  
 
  
   Liquidity and Capital Resources
  Going Concern
 
  
   Debt Financing
   23




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Revolving Note
 The
Wall Street Journal
  
  
 Convertible Note
 The
Wall Street Journal
 ,
 24




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Term Note
 The Wall
Street Journal
  General Terms of the Loan
  25




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Interest payments through December 31, 2007
    
    $
    711,059Interest payments from January 1, 2008 through September 25, 2009
    
    
    350,000Loan fees  Laurus
    
    
    337,500Loan fees  Stanford Investment Group
    
    
    174,000Possible Maximum Liquidated damages(A)
    
    
    250,000Possible Maximum Loan default penalties(B)
    
    
    2,645,000$
    4,467,559
 
 (A)
    
    The maximum amount of liquidated damages for failure of the
registration statement to become effective in the prescribed time
period is 10% of the initial principal amount of the Convertible Note.(B)
    
    The maximum penalty for default under the Convertible Note is 115% of
the outstanding principal of the Convertible Note.    
    
    Under the Loan documents, we (and SMM and VCI Systems in some cases) agreed to:
 Ø
    
    List the shares underlying the Convertible Note and warrants issued to the
Holders following the SMM Acquisition on the principal trading exchange or market
for Silicon Mountains common stock;Ø
    
    Consummate the SMM Acquisition within 180 days of the closing of the Loan ( which
subsequently was extended to August 31, 2007); andØ
    
    Obtain the approval of the Lender of certain corporate actions including, but not
limited to, incurring and canceling certain debt, assuming certain contingent
liabilities, declaring and paying dividends, acquiring any stock of another
entity, making certain loans to certain persons, prepaying certain indebtedness,
entering into a merger, consolidation, acquisition or other reorganization with
another company, materially changing the Companies nature of their businesses,
changing the Companies fiscal years, selling or disposing of any of its assets
with certain exceptions, and during the period prior to the closing of the SMM
Acquisition, issue or sell shares of common stock (other than shares issued under
a stock option plan or certain plans approved by the board), change the
jurisdiction of incorporation of SMM, change SMMs fiscal year or amend SMMs
articles of incorporation or bylaws in a manner that adversely affects the
Lender.
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
    
    In addition to certain customary events of default, the Security and Purchase Agreement contains the following events of
default:
 Ø
    
    The occurrence of any default on other indebtedness or obligation of the
Companies which exceeds $50,000 in the aggregate, relating to any indebtedness or
contingent obligation of the Companies beyond the grace period (if any) that
results in the acceleration of the indebtedness or obligation;Ø
    
    Attachments or levies or judgments against either of the
Companies in excess of $200,000;Ø
    
    Any person or group becomes a beneficial owner, directly or indirectly, of 40% of
more of the voting equity interest of SMM on a fully diluted basis; andØ
    
    The board of directors of SMM ceases to consist of a majority of the board in
office on the closing of the Loan (or directors appointed by a majority of the
board in effect immediately prior to such appointment).
    Issuance of Securities as Part of Debt Facility
   27




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
    
    of any sale or transfer of SMMs common stock or the common stock of
the Company, or any merger, consolidation, share exchange, or
combination of SMM or the Company with or into another entity, which
in each case results in the holders of the voting securities of SMM or
of the Company outstanding immediately prior thereto owning
immediately thereafter less than a majority of the voting securities
of SMM, the Company or the surviving entity, as the case may be,
outstanding immediately after such sale, transfer, merger,
consolidation, share exchange, or combination;
    
    of a sale of all or substantially all of the assets of SMM or the
Company, including, without limitation, equity in subsidiaries held by
SMM and/or the Company; or
    
    of either of the following, which respectively constitute an Event of
Default arising under Section 19(a) and 19(i) of the Security and
Purchase Agreement dated as of September 25, 2006 by and among the
Companies and Laurus, a copy of which was included as Exhibit 10.5 to
the Companys Current Report on Form 8-K filed on September 4, 2007:
 -
    
    any of the Companies fails to make payment of any
obligation owed to Laurus (or any corporation that
directly or indirectly controls or is controlled by or
is under common control with Laurus), and the failure
continues for a period of five (5) business days
following the date upon which any such payment is due;
or-
    
    any of the Companies (i) applies for, consents to or
suffers to exist the appointment of, or the taking of
possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part
of its property, (ii) makes a general assignment for
the benefit of creditors, (iii) commences a voluntary
case under the federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt
or
 28




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insolvent, (v) files a petition seeking to take
advantage of any other law providing for the relief of
debtors, (vi) acquiesces to, without challenge within
ten (10) days of the filing thereof, or fails to have
dismissed, within ninety (90) days, any petition filed
against it in any involuntary case under such
bankruptcy laws, or (vii) takes any action for the
purpose of effecting any of the foregoing.
 Agreement with MemoryTen, Inc.
 
  
 Cash Flows
 Cash
Flows from Operating Activities.
 Cash Flows from Investing Activities.
 Cash Flows from Financing Activities.
 Capital Expenditures
   
    
    our relationships with suppliers and customers;
    
    the levels of promotion and advertising that will be required to sell new products and
achieve and maintain a competitive position in the marketplace;
    
    expansion of our business, including the opening of offices and facilities in other
locations;
 29




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
    
    price discounts on products to our customers;
    
    our pursuit of strategic transactions, including acquisitions, joint ventures and
capital investments;
    
    the levels of inventory and accounts receivable that we maintain; and
    
    our entrance into new markets.
 Assessment of Future Liquidity
  
 Item 7. Financial Statements and Supplementary Data
 Report of Independent Registered Public Accounting Firm
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     HEIN & ASSOCIATES LLP
 
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SILICON MOUNTAIN HOLDINGS, INC.
 CONSOLIDATED BALANCE SHEETS
 December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    21,993
    
    
    $
    356,311Accounts receivable, net of allowance of $74,591 and
$10,034, respectively
    
    
    1,898,324
    
    
    
    1,916,440Inventory, net of $136,000 and $10,000 obsolescence reserve
    
    
    837,086
    
    
    
    997,702Prepaids and other current assets
    
    
    161,623
    
    
    
    524,987Total current assets
    
    
    2,919,026
    
    
    
    3,795,440Property and equipment, net
    
    
    429,900
    
    
    
    550,065Note receivable
    
    
    155,050
    
    
    
    30,273Intangible assets, net
    
    
    3,237,953
    
    
    
    2,864,690Goodwill
    
    
    191,775
    
    
    
    858,834Other assets
    
    
    35,486
    
    
    
    163,286Total assets
    
    $
    6,969,190
    
    
    $
    8,262,588LIABILITIES AND STOCKHOLDERS EQUITY (Deficit)Current liabilities:Accounts payable
    
    $
    1,927,538
    
    
    $
    1,158,008Accrued expenses and other current liabilities
    
    
    961,767
    
    
    
    853,962Note payable and accrued interest to related parties
    
    
    181,557
    
    
    
    165,052Current portion of capital leases liability
    
    
    11,390
    
    
    
    26,950Current maturities of notes payable
    
    
    1,073,529
    
    
    
    300,000Total current liabilities
    
    
    4,155,781
    
    
    
    2,503,972Capital lease liability, net of current portion
    
    
    26,290
    
    
    
    37,680Revolving credit facility
    
    
    1,309,995
    
    
    
    697,396Long-term debt, net of current maturities
    
    
    3,460,486
    
    
    
    4,322,422Total liabilities
    
    
    8,952,552
    
    
    
    7,561,470Commitments
and Contingencies (Note 10)Stockholders Equity (Deficit):Preferred stock, $.001 par value, 3,000,000 shares
authorized; no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; 30,000,000 authorized and
5,461,263 and 5,037,124 shares issued and outstanding,
respectively
    
    
    5,461
    
    
    
    5,037Additional paid-in capital
    
    
    1,690,570
    
    
    
    1,466,000Accumulated deficit
    
    
    (3,679,393
    )
    
    
    (769,919
    )Total Stockholders Equity (Deficit)
    
    
    (1,983,362
    )
    
    
    701,118Total liabilities and Stockholders Equity (Deficit)
    
    $
    6,969,190
    
    
    $
    8,262,588
  31




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##### Table of Contents



SILICON MOUNTAIN HOLDINGS, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2007
    
    2006Net sales
    
    $
    27,431,600
    
    
    $
    21,791,433Cost of goods sold
    
    
    21,829,662
    
    
    
    16,738,626Gross margin
    
    
    5,601,938
    
    
    
    5,052,807Operating costs:Selling expenses
    
    
    2,615,089
    
    
    
    3,003,843General & administrative
    
    
    3,786,947
    
    
    
    2,135,324Depreciation & amortization
    
    
    808,794
    
    
    
    454,686Total operating costs
    
    
    7,210,830
    
    
    
    5,593,853Loss from operations
    
    
    (1,608,892
    )
    
    
    (541,046
    )Other expenseInterest expense, net
    
    
    (982,426
    )
    
    
    (338,853
    )Gain on forgiveness of debt
    
    
    
    
    
    
    49,202Financing related fees
    
    
    
    
    
    
    (95,014
    )Miscellaneous income
    
    
    (57,174
    )
    
    
    7,000Gain (loss) on disposal of fixed assets
    
    
    (17,071
    )
    
    
    616Total other expense
    
    
    (1,056,671
    )
    
    
    (377,049
    )Pre-tax loss
    
    
    (2,665,563
    )
    
    
    (918,095
    )Income Tax (expense) Benefit
    
    
    (243,911
    )
    
    
    267,000Net Loss
    
    $
    (2,909,474
    )
    
    $
    (651,095
    )Net loss per common share  basic
    
    $
    (0.56
    )
    
    $
    (0.14
    )Shares used in computing net loss per share  basic
    
    
    5,191,994
    
    
    
    4,509,513Net loss per common share  diluted
    
    $
    (0.56
    )
    
    $
    (0.14
    )Shares used in computing net loss per share  diluted
    
    
    5,191,994
    
    
    
    4,509,513
  32




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##### Table of Contents



SILICON MOUNTAIN HOLDINGS, INC.
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 AdditionalCommon Stock
    
    
    Paid-in
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance at December 31, 2005
    
    
    4,967,207
    
    
    $
    4,967
    
    
    $
    617,868
    
    
    $
    (118,824
    )
    
    $
    504,011Stock options issued
    
    
    
    
    
    
    
    
    
    
    54,250
    
    
    
    
    
    
    
    54,250Stock options exercised
    
    
    3,329
    
    
    
    3
    
    
    
    747
    
    
    
    
    
    
    
    750Stock issued
    
    
    66,588
    
    
    
    67
    
    
    
    79,933
    
    
    
    
    
    
    
    80,000Warrants issued
    
    
    
    
    
    
    
    
    
    
    713,202
    
    
    
    
    
    
    
    713,202Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (651,095
    )
    
    
    (651,095
    )Balance at December 31, 2006
    
    
    5,037,124
    
    
    
    5,037
    
    
    
    1,466,000
    
    
    
    (769,919
    )
    
    
    701,118Stock options issued
    
    
    
    
    
    
    
    
    
    
    115,925
    
    
    
    
    
    
    
    115,925Warrants issued
    
    
    
    
    
    
    
    
    
    
    70,955
    
    
    
    
    
    
    
    70,955Restricted shares issued
    
    
    57,853
    
    
    
    58
    
    
    
    69,338
    
    
    
    
    
    
    
    69,396Z-axis transaction
    
    
    392,000
    
    
    
    392
    
    
    
    (392
    )
    
    
    
    
    
    
    Stock received on repayment of note receivable
    
    
    (25,714
    )
    
    
    (26
    )
    
    
    (31,256
    )
    
    
    
    
    
    
    (31,282
    )Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,909,474
    )
    
    
    (2,909,474
    )Balance at December 31, 2007
    
    
    5,461,263
    
    
    $
    5,461
    
    
    $
    1,690,570
    
    
    $
    (3,679,393
    )
    
    $
    (1,983,362
    )
  33




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##### Table of Contents



SILICON MOUNTAIN HOLDINGS, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Year Ended December 31,2007
    
    
    2006Cash Flows from Operating Activities:Net Loss
    
    $
    (2,909,474
    )
    
    $
    (651,095
    )Adjustments to reconcile loss to net cash from operating activities:Depreciation
    
    
    305,995
    
    
    
    186,177Amortization
of loan origination
    
    
    237,144
    
    
    
    69,704Amortization of debt discount
    
    
    259,249
    
    
    
    67,080Bad debt
expense
    
    
    181,928
    
    
    
    18,438(Gain) loss on disposal of fixed assets
    
    
    17,070
    
    
    
    (616
    )Gain on forgiveness of debt
    
    
    
    
    
    
    (49,202
    )Deferred taxes
    
    
    
    
    
    
    (267,000
    )Intangibles
amortization
    
    
    265,652
    
    
    
    198,805Inventory
Obsolescence
    
    
    82,000
    
    
    
    (18,000
    )Stock Based
Compensation Expense Restricted
    
    
    69,396Stock Based
Compensation Expense Warrants
    
    
    70,955Stock Based
Compensation Expense Options
    
    
    115,925
    
    
    
    54,250Laurus
WarrantsIncrease or decrease in assets and liabilities:Accounts receivable
    
    
    (163,812
    )
    
    
    (526,165
    )Inventory
    
    
    34,616
    
    
    
    (344,094
    )Income taxes receivable
    
    
    
    
    
    
    (51,422
    )Prepaid
Expenses and other current assets
    
    
    485,105Other assets
    
    
    
    
    
    
    (158,214
    )Accounts payable
    
    
    769,529
    
    
    
    621,914Accrued expenses and other liabilities
    
    
    124,311
    
    
    
    379,598Net cash used in operating activities
    
    
    (54,411
    )
    
    
    (469,842
    )Cash Flows from Investing Activities:Purchase of property and equipment
    
    
    (180,556
    )
    
    
    (115,763
    )Capitalized software development costs
    
    
    (22,344
    )
    
    
    (136,544
    )Proceeds from note receivable
    
    
    
    
    
    
    205,415Acquisition of Vision Computers, Inc.
    
    
    
    
    
    
    (3,237,058
    )Deferred costs for Z-Axis merger
    
    
    
    
    
    
    (211,528
    )Asset acquisition of WidowPC
    
    
    (165,000
    )
    
    
    Cash acquired in the acquisition of Z-Axis LLC
    
    
    (150,000
    )
    
    
    Net cash used in investing activities
    
    
    (517,900
    )
    
    
    (3,495,478
    )Cash Flows from Financing Activities:Principal payments on notes payable
    
    
    (250,000
    )
    
    
    (215,000
    )Proceeds from term loan
    
    
    
    
    
    
    5,000,000Repayments of term loan
    
    
    
    
    
    
    (430,556
    )Proceeds from line of credit
    
    
    27,800,112
    
    
    
    1,614,866Repayments of lines of credit
    
    
    (27,285,169
    )
    
    
    (1,086,616
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    80,000Payment of debt issuance costs
    
    
    
    
    
    
    (667,014
    )Repayments of capital leases
    
    
    (26,950
    )
    
    
    (35,308
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    750Net cash provided by financing activities
    
    
    237,993
    
    
    
    4,261,122Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    (334,318
    )
    
    
    295,802Cash and Cash Equivalents  Beginning of Period
    
    
    356,311
    
    
    
    60,509Cash and Cash Equivalents  End of Period
    
    $
    21,993
    
    
    $
    356,311Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    982,427
    
    
    $
    200,894Cash paid (refunded) for income taxes
    
    $
    850
    
    
    $
    19,080Supplemental Schedule of Non-Cash Financing Activities:Acquisition of assets with debt
    
    $
    
    
    
    $
    42,660Stock received for note receivable
    
    $
    31,297
    
    
    $
    Warrants issued in connection with loan agreement
    
    $
    
    
    
    $
    713,202
 
  34




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##### Table of Contents



SILICON MOUNTAIN HOLDINGS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For the years ended December 31, 2007 and 2006
 
 Basis of Presentation
    
 Liquidity
 
 Summary of Significant Accounting Policies
 Principles of Consolidation
 Reclassifications
 Cash and Cash Equivalents
 Inventory
 35




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##### Table of Contents



Property and Equipment
 Intangible Assets
 Goodwill
  Impairment of Long-Lived Assets
 Share-Based Payments
 Revenue Recognition
   
  
 36




---



##### Table of Contents



Use of Estimates
 Credit Risk and Concentrations
   Research and Development Costs
 Shipping and Handling Costs
 Credit Card Discount Fees
 Rent Expense
 Software Development Costs
 Advertising Costs
 Warranty Reserve
 Income Taxes
 37




---



##### Table of Contents



Recent Accounting Pronouncements
    38




---



##### Table of Contents



Disclosures about Derivative Instruments and Hedging
Activitiesan amendment of FASB Statement No. 133
 3. Z-Axis Acquisition of Silicon Mountain Memory, Inc.
 The Stock Exchange
      The LLC Sale
  39




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##### Table of Contents



Accounting Treatment
  Acquisitions :
   Accounts receivable
    
    $
    318,894Inventory
    
    
    397,630Note receivable
    
    
    205,415Property and equipment
    
    
    105,750Amortizable intangible assets:Trademarks
    
    
    94,808Customer lists
    
    
    190,306Domain names
    
    
    60,803Business processes
    
    
    778,662Vision computer brand
    
    
    377,112Goodwill
    
    
    858,834Total assets acquired
    
    
    3,388,214Accounts payable
    
    
    (39,156
    )Sales and warranty reserve
    
    
    (112,000
    )Total liabilities assumed
    
    
    (151,156
    )Net assets acquired
    
    $
    3,237,058
  
  
 40




---



##### Table of Contents



Property and Equipment :
  2007
    
    
    2006Furniture and fixtures
    
    $
    92,979
    
    
    $
    87,181Computer equipment and software
    
    
    706,314
    
    
    
    622,253Equipment
    
    
    206,533
    
    
    
    177,980Leasehold improvements
    
    
    45,539
    
    
    
    45,5391,051,365
    
    
    
    932,953Less accumulated depreciation
    
    
    (621,465
    )
    
    
    (382,888
    )Total
    
    $
    429,900
    
    
    $
    550,065
  2007
    
    
    2006Equipment and computer equipment
    
    $
    150,837
    
    
    $
    150,837Less accumulated amortization
    
    
    (106,693
    )
    
    
    (71,493
    )Total
    
    $
    44,144
    
    
    $
    79,344
 Goodwill and Intangible Assets :
   Beginning balance as of December 31, 2006
    
    $
    858,834Reconciliation of opening balances
    
    
    44,000Adjustment of intangible purchase price allocation
    
    
    (711,059
    )Ending balance as of December 31, 2007
    
    $
    191,775
   41




---



##### Table of Contents



Purchase PriceUseful
    
    
    
    
    
    
    AllocationLife
    
    
    
    
    
    
    Adjustments
    
    
    Accumulated(Years)
    
    
    Gross
    
    
    [1]
    
    
    Amortization
    
    
    NetAs of December 31, 2007:Super PC acquisition:Customer list
    
    
    15
    
    
    $
    1,067,616
    
    
    $
    
    
    
    $
    (278,714
    )
    
    $
    788,902WidowPC tradename
    
    
    
    
    
    
    165,000
    
    
    
    
    
    
    
    (22,915
    )
    
    
    142,085VCI acquisition:Trademarks
    
    
    10
    
    
    
    94,808
    
    
    
    1,470,192
    
    
    
    (195,630
    )
    
    
    1,369,370Customer lists
    
    
    3
    
    
    
    190,306
    
    
    
    457,444
    
    
    
    (80,970
    )
    
    
    566,780Domain names
    
    
    
    
    
    
    60,803
    
    
    
    (60,803
    )
    
    
    
    
    
    
    Business processes
    
    
    
    
    
    
    778,662
    
    
    
    (778,662
    )
    
    
    
    
    
    
    Vision computer brand
    
    
    
    
    
    
    377,112
    
    
    
    (377,112
    )
    
    
    
    
    
    
    Total acquisitions
    
    
    
    
    
    
    2,734,307
    
    
    
    711,059
    
    
    
    (578,229
    )
    
    
    2,867,137Loan fees and other miscellaneous
    
    
    3
    
    
    
    667,310
    
    
    
    
    
    
    
    (296,494
    )
    
    
    370,816Total
    
    
    
    
    
    $
    3,401,617
    
    
    $
    711,059
    
    
    $
    (874,723
    )
    
    $
    3,237,953As of December 31, 2006:Super PC acquisition:Customer list
    
    
    15
    
    
    $
    1,067,616
    
    
    $
    
    
    
    $
    (207,542
    )
    
    $
    860,074VCI acquisition:Trademarks
    
    
    10
    
    
    
    94,808
    
    
    
    
    
    
    
    (3,113
    )
    
    
    91,695Customer lists
    
    
    3
    
    
    
    190,306
    
    
    
    
    
    
    
    (24,996
    )
    
    
    165,310Domain names
    
    
    10
    
    
    
    60,803
    
    
    
    
    
    
    
    (1,998
    )
    
    
    58,805Business processes
    
    
    5
    
    
    
    778,662
    
    
    
    
    
    
    
    (51,136
    )
    
    
    727,526Vision computer brand
    
    
    5
    
    
    
    377,112
    
    
    
    
    
    
    
    (24,766
    )
    
    
    352,346Total acquisitions
    
    
    
    
    
    
    2,569,307
    
    
    
    
    
    
    
    (313,551
    )
    
    
    2,255,756Loan fees and other miscellaneous
    
    
    3
    
    
    
    682,712
    
    
    
    
    
    
    
    (73,778
    )
    
    
    608,934Total
    
    
    
    
    
    $
    3,252,019
    
    
    $
    
    
    
    $
    (387,329
    )
    
    $
    2,864,690
 
  Year
    
    Amount2008
    
    $
    584,5932009
    
    
    481,1202010
    
    
    324,5452011
    
    
    292,4522012
    
    
    292,452Thereafter
    
    
    1,262,791$
    3,237,953
 Accrued Expenses :
  2007
    
    
    2006Payroll and related expenses
    
    $
    6,054
    
    
    $
    226,776Compensated absences
    
    
    111,005
    
    
    
    81,941Legal and professional
    
    
    231,980
    
    
    
    10,030Interest on debt
    
    
    66,800
    
    
    
    53,906Customer Deposits
    
    
    296,467
    
    
    
    225,524Reserve for warranty and sales return
    
    
    147,000
    
    
    
    133,000Other
    
    
    102,461
    
    
    
    122,785Total
    
    $
    961,767
    
    
    $
    853,962
 42




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##### Table of Contents



Long-term Debt and Short-term Borrowings
         43




---



##### Table of Contents



44




---



##### Table of Contents



Lines of Credit
 2007
    
    
    2006Revolving line of credit with Laurus Master
Fund, Ltd., dated September 26, 2006. Maximum
loan amount of $3,500,000. The Company is
obligated to make monthly interest payments
calculated at prime plus 2% subject to a
minimum interest rate of 8%, and a maturity
date of September 25, 2009. Balance on line at
December 31, 2007 and 2006 is shown net of
unamortized debt discount of $170,888 and $268,544 respectively. This
line of credit is collateralized by
substantially all the assets of the Company
    
    $
    1,309,995
    
    
    $
    697,396Total lines of credit
    
    $
    1,309,995
    
    
    $
    697,396
 45




---



##### Table of Contents



Note Payable to Related Party
 2007
    
    
    2006Note payable to Shareholder. Interest accrued at
10% with principal and accrued interest due on
demand. Accrued interest payable was $81,557 and
$65,052 at December 31, 2007 and 2006,
respectively. The note payable is guaranteed by
certain officers of the Company and is
collateralized by those officers stock, in
addition to the general assets of the Company
    
    $
    100,000
    
    
    $
    100,000
  Notes Payable
 2007
    
    
    2006Convertible note payable to Laurus Master Fund, Ltd. maturing on September 25, 2009,
with an interest rate of prime plus 3% subject to a minimum of 9%, net of unamortized
discount of $107,992 and $188,789 at December 31, 2007 and 2006,
respectively
    
    $
    2,267,008
    
    
    $
    2,311,211Non-convertible note payable to Laurus Master Fund, Ltd. maturing on September 25,
2009, with an interest rate of prime plus 3% subject to a minimum of 9%, net of
unamortized discount of $107,992 and $188,789 at December 31,
2007 and 2006, respectively
    
    
    2,267,007
    
    
    
    2,311,211Total long-term debt
    
    
    4,534,015
    
    
    
    4,622,422Less current maturities
    
    
    (1,073,529
    )
    
    
    (300,000
    )$
    3,460,486
    
    
    $
    4,322,422
  Year
    

Line
of Credit


Notes
Payable


Total2008
    
$


    

$
    1,073,529
    

    $
    1,073,5292009
    

1,480,883




    3,676,470
    

    
    5,157,353Less debt discount
    
    
(170,888
)


   
    (215,984
    )

    $
    (386,872
    )Total
    
    $
    1,309,995




    $
    4,534,015
    

    $
    5,844,010
 Related Party Transactions :
 Note receivable from Officer
 Note payable to board member 
 46




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##### Table of Contents



Consulting fees to Board Member
 Bridge Financing Agreement
 Sale of Z-Axis LLC
 Commitments and Contingencies :
 Officer and Director Indemnification
 
 Capital
Lease Commitments
 
 Years EndingDecember 312008

$
11,4742009


8,7632010


10,0022011


7,442$
37,681 Operating Leases
 47




---



##### Table of Contents



Years EndingDecember 31,2008
    
    
    192,8162009
    
    
    132,4162010
    
    
    136,3892011
    
    
    140,4802012 and
thereafter
    
    
    740,387$
    1,342,488
  Stockholders Equity:
  Compensation Plans Accounting for Stock-Based Compensation Accounting for Stock-Based Compensation  Transition and Disclosure.
  2007
    
    2006Weighted-average volatility
    
    
    81
    %
    
    
    81
    %Expected dividends
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    4.96
    %
    
    
    4.58
    %Average expected term (in years)
    
    
    5.88
    
    
    
    3.62
  
  
  48




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##### Table of Contents



Outstanding OptionsWeightedAverageRemainingWeighted
    
    
    Contractual
    
    
    AggregateNumber of
    
    
    Average
    
    
    Term
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    (in years)
    
    
    ValueOptions outstanding at January 1, 2006(1)
    
    
    2,347,970
    
    
    $
    0.38Granted (1)
    
    
    561,281
    
    
    
    0.88Exercised (1)
    
    
    (3,329
    )
    
    
    .25Canceled or
forfeited
    
    
    (134,841
    )
    
    
    .47Options outstanding at December 31, 2006
    
    
    2,771,081
    
    
    
    .50
    
    
    
    5.31
    
    
    $
    1,113,092Granted
    
    
    386,964
    
    
    
    1.37Canceled or forfeited
    
    
    (630,921
    )
    
    
    0.88Options outstanding at December 31, 2007
    
    
    2,527,124
    
    
    $
    0.48
    
    
    
    3.13
    
    
    $
    3,780,645Options exercisable at December 31, 2007
    
    
    2,177,893
    
    
    $
    0.36
    
    
    
    3.18
    
    
    $
    3,563,623
 
 
 (1)
    
    A conversion factor of 1.109798602 was applied to all SMM stock
options in order to arrive at the outstanding and exercisable options
for December 31, 2007. This conversion factor is due to the Z-Axis
transaction (see Note 3).   
 Options OutstandingWeighted
    
    
    
    
    
    
    
    
    
    
    Options ExercisableAverage
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    Number of
    
    
    Number
    
    
    AverageExercise
    
    Contractual
    
    
    Exercise
    
    
    Shares
    
    
    of Shares
    
    
    ExercisePrice Range
    
    Life
    
    
    Price
    
    
    Outstanding
    
    
    Exercisable
    
    
    Price$0.06
    
    
    4.67
    
    
    $
    0.06
    
    
    
    25,000
    
    
    
    25,000
    
    
    $
    0.06$0.07
    
    
    4.67
    
    
    $
    0.07
    
    
    
    40,000
    
    
    
    40,000
    
    
    $
    0.07$0.08
    
    
    4.67
    
    
    $
    0.08
    
    
    
    10,000
    
    
    
    10,000
    
    
    $
    0.08$0.13
    
    
    4.67
    
    
    $
    0.13
    
    
    
    67,500
    
    
    
    67,500
    
    
    $
    0.13$0.14
    
    
    4.67
    
    
    $
    0.14
    
    
    
    10,000
    
    
    
    10,000
    
    
    $
    0.14$0.19
    
    
    4.67
    
    
    $
    0.19
    
    
    
    33,706
    
    
    
    33,704
    
    
    $
    0.19$0.25
    
    
    5.72
    
    
    $
    0.25
    
    
    
    356,048
    
    
    
    356,048
    
    
    $
    0.25$0.27
    
    
    4.67
    
    
    $
    0.19
    
    
    
    30,000
    
    
    
    30,000
    
    
    $
    0.27$0.28
    
    
    1.08
    
    
    $
    0.28
    
    
    
    1,015,466
    
    
    
    1,015,466
    
    
    $
    0.28$0.30
    
    
    4.67
    
    
    $
    0.30
    
    
    
    99,930
    
    
    
    99,930
    
    
    $
    0.30$0.33
    
    
    4.67
    
    
    $
    0.30
    
    
    
    47,500
    
    
    
    47,500
    
    
    $
    0.33$0.35
    
    
    4.67
    
    
    $
    0.35
    
    
    
    30,000
    
    
    
    30,000
    
    
    $
    0.35$0.36
    
    
    4.67
    
    
    $
    0.36
    
    
    
    15,070
    
    
    
    15,070
    
    
    $
    0.36$0.38
    
    
    4.67
    
    
    $
    0.38
    
    
    
    25,000
    
    
    
    25,000
    
    
    $
    0.38$0.39
    
    
    4.67
    
    
    $
    0.39
    
    
    
    10,000
    
    
    
    10,000
    
    
    $
    0.39$0.49
    
    
    4.67
    
    
    $
    0.49
    
    
    
    30,000
    
    
    
    30,000
    
    
    $
    0.49$0.54
    
    
    4.67
    
    
    $
    0.54
    
    
    
    10,000
    
    
    
    10,000
    
    
    $
    0.54$0.75
    
    
    4.84
    
    
    $
    0.75
    
    
    
    262,191
    
    
    
    262,191
    
    
    $
    0.75$0.83
    
    
    3.42
    
    
    $
    0.83
    
    
    
    48,831
    
    
    
    48,831
    
    
    $
    0.83$1.00
    
    
    5.83
    
    
    $
    1.00
    
    
    
    40,507
    
    
    
    11,653
    
    
    $
    1.00$1.33
    
    
    2.37
    
    
    $
    1.33
    
    
    
    290,375
    
    
    
    
    
    
    $
    1.33$2.00
    
    
    3.95
    
    
    $
    2.00
    
    
    
    30,000
    
    
    
    
    
    
    $
    2.00$0.06-$2.00
    
    
    3.14
    
    
    $
    0.40
    
    
    
    2,527,124
    
    
    
    2,177,893
    
    
    $
    0.36
 
    49




---



##### Table of Contents



Employee Benefit Plans:
 Defined Contribution Plan
 Income Taxes:
  2007
    
    
    2006Current expense (benefit)
    
    $
    911
    
    
    $
    Deferred expense (benefit)
    
    
    243,000
    
    
    
    (267,000
    )Total expense (benefit)
    
    $
    243,911
    

    
    $
    (267,000
    )
 
 2007
    
    
    2006Current deferred tax assets:Inventory related
    
    $
    53,000
    
    
    $
    8,000Accrued vacation and other compensation
    
    
    43,000
    
    
    
    47,000Accrued warranty
    
    
    57,000
    
    
    
    54,000Other
    
    
    34,000
    
    
    
    4,000Total
current deferred tax assets before allowance
    
    $
    187,000
    
    
    $
    113,000Valuation
allowance
    
    
    (187,000
    )
    
    
    0Net current
deferred tax asset after allowance
    
    $
    
    
    
    $
    113,000Long-term deferred tax assets:Other
    
    $
    29,000
    
    
    $
    8,000Net operating loss carryforwards
    
    
    600,000
    
    
    
    139,000Intangible
assets
    
    
    47,000
    
    
    
    0Other
    
    
    4,000
    
    
    
    0Total long-term deferred tax assets
    
    
    680,000
    
    
    
    147,000Long-term deferred tax liabilities:Property, equipment and intangible assets
    
    
    (3,000
    )
    
    
    (17,000
    )Total long-term deferred tax liabilities
    
    
    (3,000
    )
    
    
    (17,000
    )Net
long-term deferred tax asset (liability) before allowance
    
    $
    677,000
    
    
    $
    130,000Valuation
allowance
    
    
    (677,000
    )
    
    
    0Net
long-term tax asset after allowance
    
    $
    
    
    
    $
    130,000
 
 
  
 
  
 
 2007
    
    
    2006Tax (benefit) expense computed at the statutory
rate
    
    $
    933,000
    
    
    $
    322,000State income tax
    
    
    106,000
    
    
    
    28,000Valuation allowance
    
    
    (864,000
    )
    
    
    0Effect of permanent differences
    
    
    (329,000
    )
    
    
    (78,000
    )Other
    
    
    (89,911
    )
    
    
    (5,000
    )Provision for income taxes (expense) benefit
    
    
    ($243,911
    )
    
    $
    267,000
 
 
  
 Subsequent Events :
   50




---



##### Table of Contents



Equity Funding
 
 Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    (1) (3)
  
 Item 8A(T). Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 
 Managements Annual Report on Internal Control over Financial Reporting
       
  
  51




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  Item 8B. Other Information
  
 PART III
 
 Item 9. Directors and Executive Officers of the Registrant
 Security Ownership of Certain Beneficial Owners and Management.
 Name of Director
    
    Age
    
    Year of Election as Director
    
    Position with the CompanyRudolph A. (Tré)
Cates III
    
    
    37
    
    
    
    2007
    
    
    Director, President and Chief Executive OfficerMark S. Crossen
    
    
    59
    
    
    
    2007
    
    
    DirectorSteve King
    
    
    52
    
    
    
    2007
    
    
    Chairman, DirectorChong M. Lee
    
    
    48
    
    
    
    2007
    
    
    DirectorCamillo Martino
    
    
    46
    
    
    
    2007
    
    
    DirectorP. Shaun Hanner
    
    
    39
    
    
    
    
    
    
    Chief Operating OfficerJuan Perez
    
    
    41
    
    
    
    
    
    
    Executive Vice President, Chief Financial
Officer and Treasurer
 Rudolph A. (Tr ) Cates III, Director, President and Chief Executive Officer
  Mark S. Crossen, Director
  52




---



##### Table of Contents



Steve King, Director, Chairman of the Board
  Chong Man Lee, Director
  Camillo Martino, Director
  P. Shaun Hanner, Chief Operating Officer
  53




---



##### Table of Contents



TM
 Juan C. Perez, Executive Vice President, Chief Financial Officer and Treasurer
  Section 16(a) Beneficial Ownership Reporting Compliance
  Corporate Governance, Code of Ethics
  Board Committees
  Audit
    
    CompensationChong Man Lee(*)
    
    Camillo Martino(*)Camillo Martino
    
    Mark CrossenSteve King
    
    Steve King
 
 (*)
    
    Chairman Audit Committee.
 54




---



##### Table of Contents



Compensation Committee.
 
 Item 10. Executive Compensation
 Summary Compensation Table
  55




---



##### Table of Contents



Summary Compensation Table*
 HG
    
    NonqualifiedF
    
    Non-Equity
    
    Deferred
    
    IA
    
    
    
    
    
    C
    
    D
    
    E
    
    Option
    
    Incentive Plan
    
    Compensation
    
    All Other
    
    JName and Principal
    
    B
    
    Salary
    
    Bonus
    
    Stock
    
    Awards
    
    Compensation
    
    Earnings
    
    Compensation
    
    TotalPosition
    
    Year
    
    ($)
    
    ($)
    
    Awards
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Rudolph (Tré) A.
    
    
    2007
    
    
    $
    141,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    141,250Cates III, Chief
    
    
    2006
    
    
    
    100,250
    
    
    $
    15,050
    
    
    
    
    
    
    $
    33,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,500Executive
Officer1Patrick Hanner,
    
    
    2007
    
    
    $
    133,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    133,750Chief Operating
Officer2
    
    
    2006
    
    
    
    103,746
    
    
    $
    15,050
    
    
    
    
    
    
    $
    18,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137,546Juan Perez, Chief
    
    
    2007
    
    
    $
    73,231
    
    
    
    
    
    
    
    
    
    
    $
    133,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    206,231Financial
Officer3Roger Haston,
    
    
    2007
    
    
    $
    57,209
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    57,209Former Chief
    
    
    2006
    
    
    
    98,916
    
    
    
    15,050
    
    
    
    
    
    
    $
    18,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,716Financial
Officer3
 
 *
    
    In August 2007, Alan Treibitz resigned from his position as our Chief Executive Officer,
Chief Operating Officer and Chief Financial Officer, as well as his position as a member of
our board of directors. For the twelve months ended March 31, 2007, Mr. Treibitz received as
compensation $166,532 in cash and 556 post-split, post-exchange shares of our common stock.
For the twelve months ended March 31, 2006, Mr. Treibitz received $163,654 of compensation
comprised of $162,750 as salary and $904 as bonus.Also in August 2007, Stephanie Kelso resigned from her position as our President, as well
as her position as a member of our board of directors. For the twelve months ended March
31, 2007, Ms. Kelso received as compensation $139,854 in cash and 4,722 post-split,
post-exchange shares of our common stock. For the twelve months ended March 31, 2006, Ms.
Kelso received $137,258 of compensation comprised of $136,500 as salary and $758 as bonus.1
    
    Mr. Cates was appointed Chief Executive Officer of the Company in August 2007 in
conjunction with the closing of the SMM Acquisition. The information set forth in the table
regarding Mr. Cates reflects compensation Mr. Cates earned as Chief Executive Officer of SMM,
our wholly-owned subsidiary, during its fiscal years ended
December 31, 2007 and 2006.2
    
    Mr. Hanner was appointed Chief Operating Officer of the Company in August 2007 in
conjunction with the closing of the SMM Acquisition. The information set forth in the table
regarding Mr. Hanner reflects compensation he earned as Chief Operating Officer of SMM, our
wholly-owned subsidiary, during its fiscal years ended
December 31, 2007 and 2006.3
    
    Mr. Haston resigned from his position as Chief Financial Officer of SMM, our
wholly-owned subsidiary, in June 2007. The information set forth in the table regarding Mr.
Haston reflects compensation he earned as Chief Financial Officer of SMM during its fiscal
years ended December 31, 2007 and 2006. 56




---



##### Table of Contents



Salary (Column C)
  Bonus (Column D)
  Option Awards (Column F)
  Accounting for Stock-Based Compensation Accounting for
Stock-Based Compensation  Transition and Disclosure.
  57




---



##### Table of Contents



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END*
  Option Awards
    
    Stock AwardsJI
    
    EquityEquity
    
    IncentiveIncentive
    
    PlanPlan
    
    Awards:D
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    MarketEquity
    
    
    
    
    
    
    
    
    
    G
    
    H
    
    Number
    
    or PayoutIncentive
    
    
    
    
    
    
    
    
    
    Number
    
    Market
    
    of
    
    Value ofPlan
    
    
    
    
    
    
    
    
    
    of
    
    Value of
    
    Unearned
    
    UnearnedAwards:
    
    
    
    
    
    
    
    
    
    Shares
    
    Shares
    
    Shares,
    
    Shares,Number of
    
    
    
    
    
    
    
    
    
    or Units
    
    or Units
    
    Units or
    
    Units orNumber of Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    of Stock
    
    of Stock
    
    Other
    
    OtherUnderlying Unexercised
    
    Underlying
    
    E
    
    
    
    
    
    That
    
    That
    
    Rights
    
    RightsOptions
    
    Unexercised
    
    Option
    
    F
    
    Have
    
    Have
    
    That
    
    That(#)
    
    Unearned
    
    Exercise
    
    Option
    
    Not
    
    Not
    
    Have Not
    
    Have NotA
    
    B
    
    C
    
    Options
    
    Price
    
    Expiration
    
    Vested
    
    Vested
    
    Vested
    
    VestedName
    
    Exercisable
    
    Unexercisable
    
    (#)
    
    ($)
    
    Date
    
    (#)
    
    ($)
    
    (#)
    
    ($)Rudolph (Tré)
    
    
    554,899
    
    
    
    
    
    
    
    
    
    
    $
    0.28
    
    
    
    01/30/2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    A. Cates III,
    
    
    44,392
    
    
    
    
    
    
    
    
    
    
    $
    0.83
    
    
    
    02/28/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Executive
Officer1Patrick Hanner,
    
    
    359,527
    
    
    
    
    
    
    
    
    
    
    $
    0.28
    
    
    
    01/30/2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Operating
    
    
    27,745
    
    
    
    
    
    
    
    
    
    
    $
    0.75
    
    
    
    10/27/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Officer2Juan Perez,
    
    
    
    
    
    
    110,980
    
    
    
    
    
    
    $
    1.33
    
    
    
    07/13/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief
Financial
Officer2
 
 *
    
    In August 2007, Alan Treibitz resigned from his position as our Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer, as well as his position as a
member of our board of directors, and Stephanie Kelso resigned from her position as our
President, as well as her position as a member of our board of directors.1
    
    Mr. Cates was appointed Chief Executive Officer of the Company in August 2007 in
conjunction with the closing of the SMM Acquisition. The information set forth in the table
regarding Mr. Cates reflects outstanding equity awards Mr. Cates earned as Chief Executive
Officer of SMM, our wholly-owned subsidiary, during its fiscal year ended December 31, 2006.2
    
    Mr. Hanner was appointed Chief Operating Officer of the Company in August 2007 in
conjunction with the closing of the SMM Acquisition. The information set forth in the table
regarding Mr. Hanner reflects 58




---



##### Table of Contents



outstanding equity awards he earned as Chief Operating Officer of SMM, our wholly-owned
subsidiary, during its fiscal year ended December 31, 2006.3
    
    Mr. Haston resigned from his position as Chief Financial Officer of SMM, our
wholly-owned subsidiary, in July 2007. The information set forth in the table regarding Mr.
Haston reflects outstanding equity awards he earned as Chief Financial Officer of SMM during
its fiscal year ended December 31, 2006. Employment Contracts and Termination of Employment and Change-In-Control Arrangements
   st
  59




---



##### Table of Contents



DIRECTOR COMPENSATION
 
 Changein PensionValue andNonqualifiedNon-Equity
    
    DeferredFees Earned or
    
    
    
    
    
    
    
    
    
    Incentive Plan
    
    Compensation
    
    All OtherPaid in Cash
    
    Stock Awards
    
    Option Awards
    
    Compensation
    
    Earnings
    
    Compensation
    
    TotalName+
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Rudolph (Tré) A. Cates III,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Director, Chief
Executive Officer
and PresidentSteven King,
    
    
    2,750
    
    
    
    7,204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,954Director and
Chairman of the
Board1John Blackman,
    
    
    10,000
    
    
    
    34,358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,358DirectorMark Crossen,
    
    
    
    
    
    
    6,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,650DirectorMickey Fain,
    
    
    2,000
    
    
    
    11,638
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,638Director1Chong Man Lee,
    
    
    2,500
    
    
    
    13,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,800DirectorEric A. Wittenberg,
    
    
    1,500
    
    
    
    9,975
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,475Director1Camillo
Martino
    
    
    625
    
    
    
    4,988
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,613Director
 
 
 +
    
    Prior to the closing of the SMM Acquisition, Steven H. Cohen, Alan Treibitz, Stephanie
Kelso, Marilyn T. Heller, Marvin A. Davis and James E. Pacotti, Jr., were the members of our
board of directors. Concurrent with the closing of the SMM Acquisition, these individuals
resigned from our board of directors. For the twelve months ended March 31, 2007, we
compensated board members Marvin Davis and James E. 60




---



##### Table of Contents



Pacotti, Jr. $5,000 for their service on the board and $1,500 each per board meeting that
they attended. Similarly, we compensated board members Steven Cohen and Marilyn Heller
$2,000 for their service on the board and $500 each per board meeting that they attended.
In addition, we issued to these individuals options to purchase an aggregate of 6,667
post-split, post-exchange shares of our common stock for the twelve months ended March 31,
2007. Pursuant to the terms of the SMM Acquisition Agreement, these options became fully
exercisable upon the closing of the SMM Acquisition. For the twelve months ended March 31,
2007, we did not compensate board members Alan Treibitz and Stephanie Kelso for their
service on the board.Messrs. Cates, Blackman, Crossen, Fain, King, Lee and Wittenberg were appointed directors
of the Company in August 2007 in conjunction with the closing of the SMM Acquisition.
Prior to the closing of the SMM Acquisition, each individual was, and Messrs. Cates,
Crossen, King and Lee continue to be, a director of SMM, our wholly-owned subsidiary. The
information set forth in the table reflects compensation received by these individuals for
SMMs fiscal year ended December 31, 2007 for his role as director of SMM.1
    
    On May 9, 2008, Messrs. Blackman, Fain and Wittenberg resigned from the Board of
Directors of the Company and any of its subsidiaries for which they were a director.   61




---



##### Table of Contents



Shares ofthe CompanysRestrictedStockName
    
    GrantedRudolph (Tré) A. Cates III, Director, Chief Executive Officer and President
    
    
    John Blackman, Director and Chairman of the Board1
    
    
    12,500Mark Crossen, Director
    
    
    5,000Mickey Fain, Director1
    
    
    8,750Steven King, Director
    
    
    5,000Chong Man Lee, Director
    
    
    10,000Eric A. Wittenberg, Director1
    
    
    7,500
 
 1
    
    On May 9, 2008, Messrs. Blackman, Fain and Wittenberg resigned from the Board of
Directors of the Company and any of its subsidiaries for which they were a director.  Director Independence
  
 Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Number of Shares
    
    Percentage ofBeneficially
    
    Common StockBeneficial Owner1
    
    Owned
    
    OutstandingRudolph (Tré) A. Cates III 2
    
    
    1,467,431
    
    
    
    17.82
    %Patrick Hanner 3
    
    
    694,318
    
    
    
    8.40
    %John Blackman 4, 12
    
    
    192,827
    
    
    
    2.30
    %Mark Crossen 5
    
    
    2,301,581
    
    
    
    27.90
    %Chong Man Lee 6
    
    
    39,965
    
    
    
    *Eric Wittenburg 7, 12
    
    
    23,860
    
    
    
    *Mickey Fain 8, 12
    
    
    52,993
    
    
    
    *Steve King 9
    
    
    5,549
    
    
    
    *Camillo Martino10
    
    
    3,750
    
    
    
    *N/AJuan Perez
    
    
    *
    
    
    
    *
 62




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##### Table of Contents



Number of Shares
    
    Percentage ofBeneficially
    
    Common StockBeneficial Owner1
    
    Owned
    
    OutstandingAll directors and executive officers as a group (ten persons)11
    
    
    4,772,274
    
    
    
    70.94
    %Roger Haston
    
    
    443,919
    
    
    
    8.13
    %
 
 
    
    Named executive officer.*
    
    Less than 1% of the outstanding common stock.1
    
    Beneficial ownership is defined in the regulations
promulgated by the SEC as (A) having or sharing, directly or
indirectly (i) voting power, which includes the power to
vote or to direct the voting, or (ii) investment power,
which includes the power to dispose or to direct the
disposition, of shares of the common stock of an issuer; or
(B) directly or indirectly creating or using a trust, proxy,
power of attorney, pooling arrangement or any other
contract, arrangement or device with the purpose or effect
of divesting such person of beneficial ownership of a
security or preventing the vesting of such beneficial
ownership. Unless otherwise indicated, the beneficial owner
has sole voting and investment power.2
    
    Mr. Cates shares of common stock include currently
exercisable stock options to purchase 599,291 shares at
exercise prices ranging from $0.28 to $0.83 until various
dates in 2009 and 2011.3
    
    Mr. Hanners shares of common stock include currently
exercisable stock options to purchase 387,272 shares at
exercise prices ranging from $0.28 to $0.75 until various
dates in 2009 and 2013.4
    
    Mr. Blackmans shares of common stock include currently
exercisable stock options to purchase 61,250 shares at an
exercise price of $0.28 to $0.75 until February 28, 2011.5
    
    Mr. Crossens shares of common stock include
(a) 480,000 shares of common stock held by RayneMark
Investments LLC, of which Mr. Crossen is the executive
director and majority owner, (b) currently exercisable stock
options to purchase 12,500 shares at $0.75 until April 20,
2011 and (c) currently exercisable warrants held by
RayneMark Investments LLC to purchase 50,000 shares at an
exercise price of $1.00 until June 1, 2013.6
    
    Mr. Lees shares of common stock include currently
exercisable stock options to purchase 17,000 shares at an
exercise price of $0.28 and $0.75 until April 20, 2011.7
    
    Mr. Wittenbergs shares of common stock include currently
exercisable stock options to purchase 14,000 shares at an
exercise price of $0.75 until February 28, 2011.8
    
    Mr. Fains shares of common stock include currently
exercisable stock options to purchase 14,000 shares at an
exercise price of $0.75 until February 28, 2011.9
    
    Mr. King holds an option to purchase 145,000 shares of
common stock with an exercise price $1.33, which is not
exercisable within the next 60 days but will vest at various
dates in 2008, 2009 and 2010.10
    
    On October 1, 2007, Mr. Martino was granted 3,750 restricted
shares of our common stock, which vested fully on
December 31, 2007.11
    
    Includes 1,093,750 shares of common stock subject to options
and warrants exercisable within the next 60 days.12
    
    On May 9, 2008, Messrs. Blackman, Fain and Wittenberg
resigned from the Board of Directors of the Company and any
of its subsidiaries for which they were a director. 63




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##### Table of Contents



Item 12. Certain Relationships and Related Transaction
 Equity Funding
 Debt Financing
 Z-AXIS  Prior to the SMM Acquisition
    SMM  Prior to the SMM Acquisition
  64




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65




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##### Table of Contents



Item 13. Exhibits and Financial Statement Schedules
 Exhibit Number
    
    Description2.1
    
    LLC Interest Sale Agreement, dated as of June 30, 2006, between Z-Axis Corporation and HTK, LLC
(1)2.2
    
    Stock Exchange Agreement, dated as
of May 7, 2006(1)2.3
    
    Amendment No. 1 to Stock
Exchange Agreement dated June 30,
2006(1)2.4
    
    Amendment No. 2 to Stock
Exchange Agreement dated December 31,
2006(1)3.1
    
    Amended and Restated Articles of Incorporation (2)3.2
    
    Amended and Restated Bylaws (3)10.1
    
    Master Security Agreement, dated August 28, 2007 (2)10.2
    
    Joinder Agreement, dated August 28, 2007 (2)10.3
    
    Registration Rights Agreement, dated August 28, 2007 (2)10.4
    
    Guaranty, dated August 28, 2007 (2)10.5
    
    Security and Purchase Agreement, dated September 25, 2006 (2)10.6
    
    Stock Pledge Agreement, dated September 25, 2006 (2)10.7
    
    Amended and Restated Secured Convertible Term Note, dated August 28, 2007 (2)10.8
    
    Secured Term Note, dated September 25, 2006 (2)10.9
    
    Secured Revolving Note, dated September 25, 2006 (2)10.10
    
    Common Stock Purchase Warrant, dated August 30, 2007 (2)10.11
    
    Silicon Mountain Memory, Incorporated 2003 Equity Incentive Plan (2)10.12
    
    Form of Stock Option Agreement of Silicon Mountain Memory, Incorporated 2003 Equity Incentive
Plan(2)10.13
    
    Side Letter Agreement, dated August 30, 2007 (2)10.14
    
    Amendment to Amended and Restated Secured Convertible Term Note and Secured Term Note dated as of
November 5, 2007(4)10.15
    
    Omnibus Amendment dated as of March 18, 2008(5)10.16
    
    Form of Common Stock Purchase Warrant(5)10.17
    
    Overadvance Side Letter Agreement dated as of March 14, 2008(5)10.18
    
    Form of Common Stock Purchase Warrant(5)10.19
    
    Form of Subscription Agreement(5)10.20
    
    Settlement and Release Agreement dated as of April 25, 2008(6)10.21
    
    Form of Common Stock Purchase Warrant(6)10.22
    
    Amended and Restated Overadvance Side Letter Agreement effective as of April 15, 2008(6)10.23
    
    Form of Common Stock Purchase Warrant(6)10.24
    
    Tag-Along Rights Side Letter Agreement dated April 24, 2008(6)14.1
    
    Code of Business Conduct and
Ethics(6)21.1
    
    Subsidiaries of Registrant (6)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(6)31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(6)32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6)
 
 (1)
    
    Incorporated by reference from our Definitive Joint Proxy Statement on
Schedule 14A filed on July 24, 2007 (File No. 000-11284).(2)
    
    Incorporated by reference from our Current Report on Form 8-K filed on
September 4, 2007 (File No. 000-11284).(3)
    
    Incorporated by reference from our Current Report on Form 8-K filed on
October 3, 2007 (File No. 000-11284).(4)
    
    Incorporated by reference from our Current Report on Form 8-K filed on
November 30, 2007 (File No. 000-11284).(5)
    
    Incorporated by reference from our Current Report on Form 8-K filed on
March 20, 2008 (File No. 000-11284).(6)
    
    Filed herewith. 66




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
 Audit Fees
 
  
 Audit-Related Fees, Tax Fee and All Other Fees
  67




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##### Table of Contents



SIGNATURES
 
 th
 
 SILICON MOUNTAIN HOLDINGS, INC.By:
    
    /s/ Rudolph (Tré) A. Cates IIIRudolph (Tré) A. Cates III,President, Chief Executive Officer and DirectorBy:
    
    /s/ Juan C. PerezJuan C. Perez,Chief Financial Officer and Secretary
  
 By:
    
    /s/ Steven KingSteven King, Chairman of the BoardDate: May 19, 2008By:
    
    /s/ Mark CrossenMark Crossen, DirectorDate: May 19, 2008By:
    
    /s/ Chong Man LeeChong Man Lee, DirectorDate: May 19, 2008By:
    
    /s/ Camillo MartinoCamillo Martino, DirectorDate: May 19, 2008
 
 68




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description2.1
    
    LLC Interest Sale Agreement, dated as of June 30, 2006, between Z-Axis Corporation and HTK, LLC
(1)2.2
    
    Stock Exchange Agreement, dated as
of May 7, 2006(1)2.3
    
    Amendment No. 1 to Stock
Exchange Agreement dated June 30,
2006(1)2.4
    
    Amendment No. 2 to Stock
Exchange Agreement dated December 31,
2006(1)3.1
    
    Amended and Restated Articles of Incorporation (2)3.2
    
    Amended and Restated Bylaws (3)10.1
    
    Master Security Agreement, dated August 28, 2007 (2)10.2
    
    Joinder Agreement, dated August 28, 2007 (2)10.3
    
    Registration Rights Agreement, dated August 28, 2007 (2)10.4
    
    Guaranty, dated August 28, 2007 (2)10.5
    
    Security and Purchase Agreement, dated September 25, 2006 (2)10.6
    
    Stock Pledge Agreement, dated September 25, 2006 (2)10.7
    
    Amended and Restated Secured Convertible Term Note, dated August 28, 2007 (2)10.8
    
    Secured Term Note, dated September 25, 2006 (2)10.9
    
    Secured Revolving Note, dated September 25, 2006 (2)10.10
    
    Common Stock Purchase Warrant, dated August 30, 2007 (2)10.11
    
    Silicon Mountain Memory, Incorporated 2003 Equity Incentive Plan (2)10.12
    
    Form of Stock Option Agreement of Silicon Mountain Memory, Incorporated 2003 Equity Incentive
Plan(2)10.13
    
    Side Letter Agreement, dated August 30, 2007 (2)10.14
    
    Amendment to Amended and Restated Secured Convertible Term Note and Secured Term Note dated as of
November 5, 2007(4)10.15
    
    Omnibus Amendment dated as of March 18, 2008(5)10.16
    
    Form of Common Stock Purchase Warrant(5)10.17
    
    Overadvance Side Letter Agreement dated as of March 14, 2008(5)10.18
    
    Form of Common Stock Purchase Warrant(5)10.19
    
    Form of Subscription Agreement(5)10.20
    
    Settlement and Release Agreement dated as of April 25, 2008(6)10.21
    
    Form of Common Stock Purchase Warrant(6)10.22
    
    Amended and Restated Overadvance Side Letter Agreement effective as of April 15, 2008(6)10.23
    
    Form of Common Stock Purchase Warrant(6)10.24
    
    Tag-Along Rights Side Letter Agreement dated April 24, 2008(6)14.1
    
    Code of Business Conduct and
Ethics(6)21.1
    
    Subsidiaries of Registrant (6)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(6)31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(6)32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6)
 
 (1)
    
    Incorporated by reference from our Definitive Joint Proxy Statement on
Schedule 14A filed on July 24, 2007 (File No. 000-11284).(2)
    
    Incorporated by reference from our Current Report on Form 8-K filed on
September 4, 2007 (File No. 000-11284).(3)
    
    Incorporated by reference from our Current Report on Form 8-K filed on
October 3, 2007 (File No. 000-11284).(4)
    
    Incorporated by reference from our Current Report on Form 8-K filed on
November 30, 2007 (File No. 000-11284).(5)
    
    Incorporated by reference from our Current Report on Form 8-K filed on
March 20, 2008 (File No. 000-11284).(6)
    
    Filed herewith. 69