##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ending June 30, 2010
 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 no. 1-33001
 ENOVA SYSTEMS, INC.
 (Exact name of registrant as specified in its charter)
 California
    
    95-3056150(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 1560 West 190th Street, Torrance, California 90501  (Address of principal executive offices, including zip code)
 (310) 527-2800  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



ENOVA SYSTEMS, INC.
 INDEX
 PART I  FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements (Unaudited)
    
    
    3Balance Sheets as of June 30, 2010 and December 31, 2009
    
    
    3Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009
    
    
    4Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009
    
    
    5Notes to Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity and Use of Proceeds
    
    
    20Item 3. Defaults upon Senior Securities
    
    
    20Item 4. Removed and Reserved
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    20Signatures
    
    
    21EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ENOVA SYSTEMS, INC.
 
 BALANCE SHEETS
 June 30,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,203,000
    
    
    $
    13,078,000Short term investments
    
    
    200,000
    
    
    
    200,000Accounts receivable, net of allowance for
doubtful accounts of $31,000 as of June 30,
2010 and December 31, 2009
    
    
    1,660,000
    
    
    
    1,442,000Inventories and supplies, net
    
    
    4,910,000
    
    
    
    5,605,000Prepaid expenses and other current assets
    
    
    436,000
    
    
    
    263,000Total current assets
    
    
    17,409,000
    
    
    
    20,588,000Long term accounts receivable
    
    
    215,000
    
    
    
    Property and equipment, net
    
    
    1,306,000
    
    
    
    1,363,000Intangible assets, net
    
    
    58,000
    
    
    
    60,000Total assets
    
    $
    18,988,000
    
    
    $
    22,011,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    636,000
    
    
    $
    415,000Deferred revenues
    
    
    98,000
    
    
    
    357,000Accrued payroll and related expenses
    
    
    543,000
    
    
    
    277,000Other accrued liabilities
    
    
    988,000
    
    
    
    1,287,000Current portion of notes payable
    
    
    69,000
    
    
    
    68,000Total current liabilities
    
    
    2,334,000
    
    
    
    2,404,000Accrued interest payable
    
    
    1,115,000
    
    
    
    1,074,000Notes payable, net of current portion
    
    
    1,296,000
    
    
    
    1,286,000Total liabilities
    
    
    4,745,000
    
    
    
    4,764,000Stockholders equity:Series A convertible preferred stock  no par
value, 30,000,000 shares authorized; 2,652,000
shares issued and outstanding; liquidating
preference at $0.60 per share as of June 30,
2010 and December 31, 2009
    
    
    530,000
    
    
    
    530,000Series B convertible preferred stock  no par
value, 5,000,000 shares authorized; 546,000
shares issued and outstanding; liquidating
preference at $2 per share as of June 30, 2010
and December 31, 2009
    
    
    1,094,000
    
    
    
    1,094,000Common Stock  no par value, 750,000,000 shares
authorized; 31,428,000 and 31,404,000 shares
issued and outstanding as of June 30, 2010 and
December 31, 2009, respectively
    
    
    144,049,000
    
    
    
    143,995,000Additional paid-in capital
    
    
    8,621,000
    
    
    
    8,336,000Accumulated deficit
    
    
    (140,051,000
    )
    
    
    (136,708,000
    )Total stockholders equity
    
    
    14,243,000
    
    
    
    17,247,000Total liabilities and stockholders equity
    
    $
    18,988,000
    
    
    $
    22,011,000
  3




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ENOVA SYSTEMS, INC.
 
 STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    2,054,000
    
    
    $
    576,000
    
    
    $
    2,983,000
    
    
    $
    1,264,000Cost of revenues
    
    
    1,764,000
    
    
    
    613,000
    
    
    
    2,610,000
    
    
    
    1,192,000Gross income (loss)
    
    
    290,000
    
    
    
    (37,000
    )
    
    
    373,000
    
    
    
    72,000Operating expensesResearch and development
    
    
    361,000
    
    
    
    335,000
    
    
    
    683,000
    
    
    
    589,000Selling, general & administrative
    
    
    1,551,000
    
    
    
    1,570,000
    
    
    
    3,028,000
    
    
    
    3,065,000Total operating expenses
    
    
    1,912,000
    
    
    
    1,905,000
    
    
    
    3,711,000
    
    
    
    3,654,000Operating loss
    
    
    (1,622,000
    )
    
    
    (1,942,000
    )
    
    
    (3,338,000
    )
    
    
    (3,582,000
    )Other income and (expense)Interest and other income (expense)
    
    
    (2,000
    )
    
    
    (98,000
    )
    
    
    (5,000
    )
    
    
    (104,000
    )Gain (loss) from non-consolidated joint venture
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    (4,000
    )Total other income (expense)
    
    
    (2,000
    )
    
    
    (92,000
    )
    
    
    (5,000
    )
    
    
    (108,000
    )Net loss
    
    $
    (1,624,000
    )
    
    $
    (2,034,000
    )
    
    $
    (3,343,000
    )
    
    $
    (3,690,000
    )Basic and diluted loss per share
    
    $
    (0.05
    )
    
    $
    (0.10
    )
    
    $
    (0.11
    )
    
    $
    (0.18
    )Weighted average number of shares outstanding
    
    
    31,416,000
    
    
    
    20,896,000
    
    
    
    31,410,000
    
    
    
    20,871,000
  4




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ENOVA SYSTEMS, INC.
 
 STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Six Months EndedJune 30,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (3,343,000
    )
    
    $
    (3,690,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Inventory reserve
    
    
    103,000
    
    
    
    240,000Depreciation and amortization
    
    
    273,000
    
    
    
    318,000Loss on asset disposal
    
    
    
    
    
    
    3,000Equity in losses of non-consolidated joint venture
    
    
    
    
    
    
    10,000Gain from dissolution of non-consolidated joint venture
    
    
    
    
    
    
    (6,000
    )Issuance of common stock for director services
    
    
    
    
    
    
    90,000Issuance of common stock for employee services
    
    
    48,000
    
    
    
    124,000Stock option expense
    
    
    285,000
    
    
    
    230,000(Increase) decrease in:Accounts receivable
    
    
    (218,000
    )
    
    
    380,000Inventory and supplies
    
    
    592,000
    
    
    
    469,000Prepaid expenses and other current assets
    
    
    (173,000
    )
    
    
    (24,000
    )Long term accounts receivable
    
    
    (215,000
    )
    
    
    Increase (decrease) in:Accounts payable
    
    
    221,000
    
    
    
    334,000Deferred revenues
    
    
    (259,000
    )
    
    
    670,000Accrued payroll and related expenses
    
    
    266,000
    
    
    
    (69,000
    )Other accrued liabilities
    
    
    (299,000
    )
    
    
    (805,000
    )Accrued interest payable
    
    
    41,000
    
    
    
    41,000Net cash used in operating activities
    
    
    (2,678,000
    )
    
    
    (1,685,000
    )Cash flows from investing activities:Purchases of short-term investments
    
    
    
    
    
    
    (200,000
    )Maturities of short-term investments
    
    
    
    
    
    
    2,000,000Proceeds from the dissolution of non-consolidated joint venture
    
    
    
    
    
    
    137,000Purchases of property and equipment
    
    
    (188,000
    )
    
    
    (100,000
    )Net cash provided by (used in) investing activities
    
    
    (188,000
    )
    
    
    1,837,000Cash flows from financing activities:Payments on notes payable
    
    
    (15,000
    )
    
    
    (33,000
    )Proceeds from the exercise of stock options
    
    
    6,000
    
    
    
    Net cash used in financing activities
    
    
    (9,000
    )
    
    
    (33,000
    )Net increase (decrease) in cash and cash equivalents
    
    
    (2,875,000
    )
    
    
    119,000Cash and cash equivalents, beginning of period
    
    
    13,078,000
    
    
    
    5,324,000Cash and cash equivalents, end of period
    
    $
    10,203,000
    
    
    $
    5,443,000Supplemental disclosure of cash flow information:Interest paid
    
    $
    3,000
    
    
    $
    4,000Assets acquired through financing arrangements
    
    $
    26,000
    
    
    $
    38,000Net assets acquired in exchange for Enovas interest in joint venture:Inventory
    
    $
    
    
    
    $
    1,075,000Prepaid expenses and other current assets
    
    $
    
    
    
    $
    104,000Reduction of related party payable, net of receivable
    
    $
    
    
    
    $
    32,000
  5




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ENOVA SYSTEMS, INC.
 
 NOTES TO FINANCIAL STATEMENTS
(Unaudited)
 Three and six months ended June 30, 2010 and 2009
 1. Description of the Company and its Business
  2. Summary of Significant Accounting Policies
 Basis of Presentation  Interim Financial Statements
    Fair Value of Financial Instruments
  Revenue Recognition
  
    
    Persuasive Evidence of an Arrangement The Company documents all terms of an
arrangement in a written contract signed by the customer prior to recognizing revenue.
    
    Delivery Has Occurred or Services Have Been Rendered The Company performs all services
or delivers all products prior to recognizing revenue. Professional consulting and
engineering services are considered to be performed when the services are complete.
Equipment is considered delivered upon delivery to a customers designated location. In
certain instances, the customer elects to take title upon shipment.
 6




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
    
    The Fee for the Arrangement is Fixed or Determinable Prior to recognizing revenue, a
customers fee is either fixed or
determinable under the terms of the written contract. Fees for professional consulting
services, engineering services and equipment sales are fixed under the terms of the written
contract. The customers fee is negotiated at the outset of the arrangement and is not
subject to refund or adjustment during the initial term of the arrangement.
    
    Collectibility is Reasonably Assured The Company determines that collectibility is
reasonably assured prior to recognizing revenue. Collectibility is assessed on a
customer-by-customer basis based on criteria outlined by management. New customers are
subject to a credit review process which evaluates the customers financial position and
ultimately its ability to pay. The Company does not enter into arrangements unless
collectibility is reasonably assured at the outset. Existing customers are subject to
ongoing credit evaluations based on payment history and other factors. If it is determined
during the arrangement that collectibility is not reasonably assured, revenue is recognized
on a cash basis. Amounts received upfront for engineering or development fees under
multiple-element arrangements are deferred and recognized over the period of committed
services or performance, if such arrangements require the Company to provide on-going
services or performance. All amounts received under collaborative research agreements or
research and development contracts are nonrefundable, regardless of the success of the
underlying research.
       Inventory
  Inventory reserve
  7




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Allowance for doubtful accounts
  Deferred Revenues
  Warranty Costs
  Stock Based Compensation
  tock Options
 3. Inventory
  June 30,
    
    
    December 31,2010
    
    
    2009Raw Materials
    
    $
    5,639,000
    
    
    $
    6,341,000Work In Progress
    
    
    237,000
    
    
    
    132,000Finished Goods
    
    
    115,000
    
    
    
    111,000Reserve for Obsolescence
    
    
    (1,081,000
    )
    
    
    (979,000
    )Total
    
    $
    4,910,000
    
    
    $
    5,605,000
 8




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4. Property and Equipment
  June 30,
    
    
    December 31,2010
    
    
    2009Computers and software
    
    $
    577,000
    
    
    $
    556,000Machinery and equipment
    
    
    853,000
    
    
    
    795,000Furniture and office equipment
    
    
    98,000
    
    
    
    98,000Demonstration vehicles and buses
    
    
    650,000
    
    
    
    507,000Leasehold improvements
    
    
    1,348,000
    
    
    
    1,348,000Construction in process
    
    
    
    
    
    
    8,0003,526,000
    
    
    
    3,312,000Less accumulated depreciation and amortization
    
    
    (2,220,000
    )
    
    
    (1,949,000
    )Total
    
    $
    1,306,000
    
    
    $
    1,363,000
  5. Other Accrued Liabilities
  June 30,
    
    
    December 31,2010
    
    
    2009Accrued Inventory Received
    
    $
    183,000
    
    
    $
    334,000Accrued Professional Services
    
    
    312,000
    
    
    
    395,000Accrued Warranty
    
    
    493,000
    
    
    
    558,000Total
    
    $
    988,000
    
    
    $
    1,287,000
  2010
    
    
    2009Balance at beginning of year
    
    $
    558,000
    
    
    $
    545,000Accruals for warranties issued during the period
    
    
    207,000
    
    
    
    71,000Warranty claims
    
    
    (272,000
    )
    
    
    (86,000
    )Balance at end of quarter
    
    $
    493,000
    
    
    $
    530,000
  2010
    
    
    2009Balance at beginning of quarter
    
    $
    492,000
    
    
    $
    538,000Accruals for warranties issued during the period
    
    
    169,000
    
    
    
    29,000Warranty claims
    
    
    (168,000
    )
    
    
    (37,000
    )Balance at end of quarter
    
    $
    493,000
    
    
    $
    530,000
 6. Intangible Assets
   June 30,
    
    
    December 31,2010
    
    
    2009Patents
    
    $
    93,000
    
    
    $
    93,000Less accumulated amortization
    
    
    (35,000
    )
    
    
    (33,000
    )Total
    
    $
    58,000
    
    
    $
    60,000
  9




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7. Notes Payable, Long-Term Debt and Other Financing
  June 30,
    
    
    December 31,2010
    
    
    2009Secured note payable
to Credit Managers
Association of
California, bearing
interest at prime plus 3%
(6.25% as of June 30,
2010), and is adjusted
annually in April through
maturity. Principal and
unpaid interest due in
April 2016. A sinking
fund escrow may be funded
with 10% of future equity
financing, as defined in
the Agreement
    
    $
    1,238,000
    
    
    $
    1,238,000Secured note payable to a
financial institution in
the original amount of
$23,000, bearing interest
at 11.70%, payable in 36
equal monthly
installments of principal
and interest through
October 1, 2010
    
    
    3,000
    
    
    
    8,000Secured note payable to
Coca Cola Enterprises in
the original amount of
$40,000, bearing interest
at 10% per annum.
Principal and unpaid
interest due on demand
    
    
    40,000
    
    
    
    40,000Secured note payable to a
financial institution in
the original amount of
$39,000, bearing interest
at 4.99% per annum,
payable in 48 equal
monthly installments of
principal and interest
through September 1, 2011
    
    
    13,000
    
    
    
    18,000Secured note payable to a
financial institution in
the original amount of
$38,000, bearing interest
at 8.25% per annum,
payable in 60 equal
monthly installments of
principal and interest
through February 19, 2014
    
    
    29,000
    
    
    
    32,000Secured note payable to a
financial institution in
the original amount of
$19,000 bearing interest
at 10.50% per annum,
payable in 60 equal
monthly installments of
principal and interest
through August 25, 2014
    
    
    17,000
    
    
    
    18,000Secured note payable to a
financial institution in
the original amount of
$26,000 bearing interest
at 7.91% per annum,
payable in 60 equal
monthly installments of
principal and interest
through April 9, 2015
    
    
    25,000
    
    
    
    1,365,000
    
    
    
    1,354,000Less current portion
    
    
    (69,000
    )
    
    
    (68,000
    )Long-term portion
    
    $
    1,296,000
    
    
    $
    1,286,000
  8. Revolving Credit Agreement
  9. Stockholders Equity
 10




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10. Stock Options
 Stock Option Program Description
     Weighted AverageRemainingNumber of Share
    
    
    Weighted Average
    
    
    Contractual Term
    
    
    AggregateOptions
    
    
    Exercise Price
    
    
    in Years
    
    
    Intrinsic ValueOutstanding at December 31, 2009
    
    
    1,410,000
    
    
    $
    2.10
    
    
    
    7.65Granted
    
    
    
    
    
    $
    
    
    
    
    Exercised
    
    
    (23,000
    )
    
    $
    0.27
    
    
    
    Forfeited or Cancelled
    
    
    (39,000
    )
    
    $
    3.42
    
    
    
    Outstanding at June 30, 2010
    
    
    1,348,000
    
    
    $
    2.09
    
    
    
    7.24
    
    
    $
    112,000Exercisable at June 30, 2010
    
    
    749,000
    
    
    $
    2.64
    
    
    
    6.66
    
    
    $
    61,000
   For the six months ended
    
    
    For the three months endedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Expected life (in years)
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Average risk-free interest rate
    
    
    
    
    
    
    2
    %
    
    
    
    
    
    
    2
    %Expected volatility
    
    
    
    
    
    
    194
    %
    
    
    
    
    
    
    194
    %Expected dividend yield
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Forfeiture rate
    
    
    
    
    
    
    3
    %
    
    
    
    
    
    
    3
    %
 11




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##### Table of Contents



11. Concentrations
   12. Recent Accounting Pronouncements
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 This Quarterly Report on Form 10-Q contains statements indicating expectations about future
performance and other forward-looking statements that involve risks and uncertainties. We usually
use words such as may, will, should, expect, plan, anticipate, believe, estimate,
predict, future, intend, potential, or continue or the negative of these terms or similar
expressions to identify forward-looking statements. These statements appear throughout this
Quarterly Report on Form 10-Q and are statements regarding our current intent, belief or
expectation, primarily with respect to our operations and related industry developments. Examples
of these statements include, but are not limited to, statements regarding the following: our future
operating expenses, our future losses, our future expenditures for research and development and the
sufficiency of our cash resources. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this Quarterly Report on Form 10-Q . Our actual
results could differ materially from those anticipated in these forward-looking statements for many
reasons, including the risks faced by us and described in our Annual Report on Form 10-K for the
year ended December 31, 2009.
 The following discussion and analysis should be read in conjunction with the unaudited interim
financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form
10-Q and with the financial statements and notes thereto and Managements Discussion and Analysis
of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for
the year ended December 31, 2009.
 Overview
   12




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Recent Developments
     13




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Critical Accounting Policies
   Cash and cash equivalents
 Inventory
 Inventory reserve
 Allowance for doubtful accounts
 14




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Stock-based Compensation
 Revenue recognition
    15




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##### Table of Contents



RESULTS OF OPERATIONS
  Second Quarter of Fiscal 2010 vs. Second Quarter of Fiscal 2009
 Three Months Ended
    
    
    As a % of RevenuesJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    %Change
    
    
    2010
    
    
    2009Revenues
    
    $
    2,054,000
    
    
    $
    576,000
    
    
    
    257
    %
    
    
    100
    %
    
    
    100
    %Cost of revenues
    
    
    1,764,000
    
    
    
    613,000
    
    
    
    188
    %
    
    
    86
    %
    
    
    106
    %Gross profit (loss)
    
    
    290,000
    
    
    
    (37,000
    )
    
    
    884
    %
    
    
    14
    %
    
    
    -6
    %Operating expensesResearch and development
    
    
    361,000
    
    
    
    335,000
    
    
    
    8
    %
    
    
    18
    %
    
    
    58
    %Selling, general & administrative
    
    
    1,551,000
    
    
    
    1,570,000
    
    
    
    -1
    %
    
    
    76
    %
    
    
    273
    %Total operating expenses
    
    
    1,912,000
    
    
    
    1,905,000
    
    
    
    0
    %
    
    
    93
    %
    
    
    331
    %Operating loss
    
    
    (1,622,000
    )
    
    
    (1,942,000
    )
    
    
    -16
    %
    
    
    -79
    %
    
    
    -337
    %Other income and (expense)Interest and other income (expense)
    
    
    (2,000
    )
    
    
    (98,000
    )
    
    
    -98
    %
    
    
    0
    %
    
    
    -17
    %Gain (loss) from non-consolidated joint venture
    
    
    
    
    
    
    6,000
    
    
    
    -100
    %
    
    
    0
    %
    
    
    1
    %Total other income (expense)
    
    
    (2,000
    )
    
    
    (92,000
    )
    
    
    -98
    %
    
    
    0
    %
    
    
    -16
    %Net loss
    
    $
    (1,624,000
    )
    
    $
    (2,034,000
    )
    
    
    -20
    %
    
    
    -79
    %
    
    
    -353
    %
 First Six Months of Fiscal 2010 vs. First Six Months of Fiscal 2009
 Six Months Ended
    
    
    As a % of RevenuesJune 30,
    
    
    June 30,2010
    
    
    2009
    
    

%Change
    
    
    2010
    
    
    2009Revenues
    
    $
    2,983,000
    
    
    $
    1,264,000
    
    
    
    136
    %
    
    
    100
    %
    
    
    100
    %Cost of revenues
    
    
    2,610,000
    
    
    
    1,192,000
    
    
    
    119
    %
    
    
    87
    %
    
    
    94
    %Gross profit (loss)
    
    
    373,000
    
    
    
    72,000
    
    
    
    418
    %
    
    
    13
    %
    
    
    6
    %Operating expensesResearch and development
    
    
    683,000
    
    
    
    589,000
    
    
    
    16
    %
    
    
    23
    %
    
    
    47
    %Selling, general & administrative
    
    
    3,028,000
    
    
    
    3,065,000
    
    
    
    -1
    %
    
    
    102
    %
    
    
    242
    %Total operating expenses
    
    
    3,711,000
    
    
    
    3,654,000
    
    
    
    2
    %
    
    
    124
    %
    
    
    289
    %Operating loss
    
    
    (3,338,000
    )
    
    
    (3,582,000
    )
    
    
    -7
    %
    
    
    -112
    %
    
    
    -283
    %Other income and (expense)Interest and other income (expense)
    
    
    (5,000
    )
    
    
    (104,000
    )
    
    
    -95
    %
    
    
    0
    %
    
    
    -8
    %Gain (loss) from non-consolidated joint venture
    
    
    
    
    
    
    (4,000
    )
    
    
    -100
    %
    
    
    0
    %
    
    
    0
    %Total other income (expense)
    
    
    (5,000
    )
    
    
    (108,000
    )
    
    
    -95
    %
    
    
    0
    %
    
    
    -9
    %Net loss
    
    $
    (3,343,000
    )
    
    $
    (3,690,000
    )
    
    
    -9
    %
    
    
    -112
    %
    
    
    -292
    %
 The sum of the amounts and percentages may not equal the totals for the period due to the effects
of rounding.
  Revenues
 Cost of Revenues
 16




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##### Table of Contents



Gross Profit (Loss)
 Research and Development (R&D).
 Selling, General, and Administrative Expenses (S, G & A).
 Interest and Other Income (Expense)
 Gain (loss) from Non-Consolidated Joint Venture
 Net Loss.
 Comparability of Quarterly Results
 LIQUIDITY AND CAPITAL RESOURCES
    17




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##### Table of Contents



18




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##### Table of Contents



Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
   19




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##### Table of Contents



ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity and Use of Proceeds
  
 ITEM 3. Defaults upon Senior Securities
  
 ITEM 4. Removed and Reserved
  
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
  31.1
    
    Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.*31.2
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
 *
    
    - Filed herewith 20




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##### Table of Contents



SIGNATURE
    /s/ Jarett FentonBy: Jarett Fenton, Chief Financial Officer 21




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##### Table of Contents



31.1
    
    Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.31.2
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 22