UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-Q




(Mark One)







ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the quarterly period ended September 30, 2010




oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from                   to





Commission file number 001-10456







APOGEE TECHNOLOGY, INC.




(Exact name of Small Business Issuer in its charter)










DELAWARE

04-3005815(State or other jurisdiction of

(I.R.S. Employerincorporation)

Identification No.)129 MORGAN DRIVE, NORWOOD, MASSACHUSETTS 02062(Address of principal executive offices)(781) 551-9450(Registrant’s telephone number, including area code)NOT APPLICABLE(Former name, former address and former fiscal year,if changed since last report)


Securities registered under Section 12(g) of the Exchange Act:


Common Stock


(Title of Class)







Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ý   Yes   o   No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) of this chapter) during the proceeding 12 months (or such shorter periods that the registrant was required to submit and post such files).  ý   Yes   o   No







Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer  o

Accelerated filer  o

Non-accelerated filer  o

( Do not check if a smaller

reporting company)

Smaller reporting company  x









Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o   Yes   ý   No







As of November 1, 2010, 13,178,454 of the registrant’s common stock were outstanding.  See Note 1 Basis of Presentation, Going Concern for cessation of trading in our common stock on April 16, 2010.



















APOGEE TECHNOLOGY, INC.


(A Development Stage Company)


INDEX










PART I - FINANCIAL INFORMATIONItem 1 - Financial StatementsConsolidated Balance Sheets at September 30, 2010 (unaudited) and December 31, 2009 (audited)
3Unaudited Consolidated Statements of Operations and Accumulated Deficit for the Three and Nine Months Ended September 30, 2010 and September 30, 2009 and for the period from October 1, 2008 (date re-entering development stage)  through September 30, 2010 (unaudited)
4UnauditedConsolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and September 30, 2009 and for the period from October 1, 2008 (date re-entering development stage) through September 30, 2010(unaudited)
5Notes to Consolidated Financial Statements (unaudited)
6Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
24Item 3 - Quantitive and Qualitative Disclosures about Market Risk
34Item 4T - Controls and Procedures
35PART II - OTHER INFORMATIONItem 1 - Legal Proceedings
35Item 1A - Risk Factors
36Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
39Item 3 - Defaults Upon Senior Securities
39Item 4T - Submission of Matters to a Vote of Security Holders
40Item 5 - Other Information
40Item 6 - Exhibits
41Signatures
42










2








PART I  FINANCIAL INFORMATION






Item 1.  Financial Statements









APOGEE TECHNOLOGY, INC. AND SUBSIDIARY


(A Development Stage Company)


CONSOLIDATED BALANCE SHEETS










SEPTEMBER 30,


DECEMBER 31,2010


2009(Unaudited)


(Audited)ASSETSCurrent assetsCash

$
519


$
4,704Prepaid expenses and other current assets


267



2,694Total current assets


786



7,398Property and equipment, net


30,390



44,042Other assetsPatents, net


175,295



118,570$
206,471


$
170,010LIABILITIES AND STOCKHOLDERS’ DEFICIENCYCurrent liabilitiesAccounts payable and accrued expenses

$
3,476,375


$
3,092,189Officer loans and notes payable


1,447,793



1,060,542Shareholder loans and notes payable


1,345,103



1,206,283Other loans and notes payable


247,020



796,320Total current liabilities


6,516,291



6,155,334Stockholders’ deficiencyPreferred stock, par value $0.0001 per share; 5,000,000 shares authorized, none issued and outstanding


—



—Common stock, $0.01 par value; 40,000,000 shares authorized, 13,178,454 issued and outstanding at September 30, 2010 and 12,132,332 issued and outstanding at December 31, 2009


131,785



121,323Additional paid-in capital


19,748,103



18,973,783Accumulated deficit


(21,891,704
)


(21,891,704
)Accumulated deficit during development stage


(4,298,004
)


(3,188,726
)Total stockholders’ deficiency


(6,309,820
)


(5,985,324
)$
206,471


$
170,010





The accompanying notes are an integral part of these consolidated financial statements.






3










APOGEE TECHNOLOGY, INC. AND SUBSIDIARY


(A Development Stage Company)


CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT


(Unaudited)





Three Months Ended

September 30,


Nine Months Ended

September 30,


Cumulative from Re-entering Development Stage on October 1, 2008 to September 30, 20102010


2009


2010


2009RevenuesProduct sales

$
—


$
—


$
—


$
—


$
—Consulting


25,000



—



40,000



—



40,00025,000



—



40,000



—



40,000Costs and expensesResearch and development


121,388



145,575



319,492



579,317



1,501,602Selling, general and administrative


249,166



269,911



735,622



874,277



2,286,043370,554



415,486



1,055,114



1,453,594



3,787,645Operating loss


(345,554
)


(415,486
)


(1,015,114
)


(1,453,594
)


(3,747,645
)Other income (expense)Gain on extinguishment of debt


16,500



—



341,810



—



341,810Warrant Expense


—



—



(56,754
)


—



(56,754
)Interest and other expense


(127,983
)


(96,532
)


(380,579
)


(279,573
)


(839,565
)Interest and other income


535



500



1,359



1,606



4,150(110,948
)


(96,032
)


(94,164
)


(277,967
)


(550,359
)Net loss

$
(456,502
)

$
(511,518
)

$
(1,109,278
)

$
(1,731,561
)

$
(4,298,004
)Accumulated deficit - beginning

$
(25,733,206
)

$
(24,101,122
)

$
(25,080,430
)

$
(22,881,079
)

$
—Accumulated deficit - ending

$
(26,189,708
)

$
(24,612,640
)

$
(26,189,708
)

$
(24,612,640
)

$
(4,298,004
)Basic and diluted loss per common share

$
(0.03
)

$
(0.04
)

$
(0.09
)

$
(0.14
)Weighted average common shares outstanding - basic and diluted


13,116,878



12,132,332



12,532,163



12,132,332





The accompanying notes are an integral part of these consolidated financial statements






4






APOGEE TECHNOLOGY, INC. AND SUBSIDIARY


(A Development Stage Company)


CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





NINE MONTHS ENDED

SEPTEMBER 30,


Cumulative from Re-entering Development Stage on

OCTOBER 1, 2008

through2010


2009


SEPTEMBER 30, 2010Cash flows from operationsNet loss

$
(1,109,278
)

$
(1,731,561
)

$
(4,298,004
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization


55,055



77,305



210,517Stock compensation expense for employees and directors


(39,828
)


64,217



51,826Original issue discount


93,814



70,543



203,721Warrant Expenses


56,754



—



56,754Patent impairment


—



17,267



205,674Disposal of sensor equipment


—



—



3,731Gain on extinguishment of debt


(341,810
)


—



(341,810
)Changes in operating assets and liabilities:Accounts receivable


—



—



—Prepaid expenses and other current assets


2,426



(12,210
)


34,845Accounts payable and accrued expenses


670,310



699,661



1,890,265Net cash used in operating activities


(612,557
)


(814,778
)


(1,982,481
)Cash flows from investing activitiesPurchases of property and equipment


—



—



—Patent costs


(98,128
)


(10,207
)


(141,824
)Net cash used by investing activities


(98,128
)


(10,207
)


(141,824
)Cash flows from financing activitiesBank overdraft


—



(46,915
)


—Proceeds for shareholder loans and notes payable


130,000



223,000



576,665Proceeds from officer loans and notes payable


381,500



163,900



690,400Proceeds from other loans and notes payable


50,000



485,000



605,563Proceeds from sale of equity securities


145,000



—



256,480Net cash provided by financing activities


706,500



824,985



2,129,108Increase (decrease) in cash


(4,185
)


—



4,803Cash — beginning


4,704



—



(4,284
)Cash— ending

$
519


$
—


$
519Supplemental Cash Flow Information:Cash paid for interest

$
—


$
—


$
—Warrants issued in connection with notes payable – non-cash

$
120,297


$
62,296


$
244,120Conversion of notes payable – non –cash

$
615,000


$
—


$
515,000Conversion of interest payable – non-cash

$
286,122


$
—


$
252,008Income taxes

$
—


$
—


$
—





The accompanying notes are an integral part of these consolidated financial statements







5







APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009




1.
The Company and Basis of Presentation





The Company





The accompanying unaudited interim financial statements of Apogee Technology, inc., a Delaware corporation, have been prepared in accordance with accounting principles generally accepted in the United States of American and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in our last Annual Report filed with the SEC on Form 10-K.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected therein.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.





Apogee Technology, Inc., (“Apogee”, “we”, “us” or “our”) is developing PyraDermTM, a proprietary intradermal drug delivery system for vaccines and other pharmaceuticals that we intend to market to pharmaceutical and medical device companies.  Until March 31, 2009, we were also engaged in the development of IntellaPALTM, a proprietary sensor-based health monitoring systems for the elderly care and other markets that we intended to manufacture and market to individuals and health organizations.





Our Life Science Group is developing PyraDerm, an advanced intradermal drug delivery system, to meet the needs of patients, health insurers, companies developing pharmaceuticals, as well as, governments and international health organizations. PyraDerm is designed to be a low-cost, effective, painless delivery system that can be self administered and easily stored while potentially providing pharmaceutical companies an extended patent position for their current drug formulations. We had previously demonstrated that PyraDermsystem containing adjuvanted vaccine formulations is capable of improving the efficiency of immunization and providing a significant dose sparing effect in a relevant animal model. Technologies that reduce the required vaccine dose would allow faster and more efficient production of vaccines, which is especially important in case of vaccine shortages during epidemic emergencies, such as pandemic influenza. The results of these studies were published in 2009 in the Proceedings of the National Academy of Sciences of the USA serving as an important validation of our approach to intradermal vaccination. In 2009 we had to scale down research and development efforts due to financial constraints focusing on the proof-of-concept thermal stability studies of PyraDerm system and relevant formulations and certain efforts on the development of the production process. In these studies we have been able to demonstrate the advantages of some of its systems compared to commonly used solution formulations. We believe that these findings on improved thermal stability are important for future development of PyraDerm as better shelf-life and lower dependence on temperature controlled distribution chains can be one of the critical advantages of our technology. We also continued to pursue patent applications related to its technology. Upon completion of our studies, if successful, we intend to pursue licensing and partnership agreements for multiple product applications with pharmaceutical, and medical device companies, and government and world health organizations  interested in drug delivery systems and technologies.





We have operated as a technology research and development stage company since October 1, 2008.  We have not yet generated revenue from our principal operations. During the fiscal year ended December 31, 2009 and continuing in 2010, we invested our limited resources predominately in the development of our Life Science Group.  As of March 31, 2009, we closed down operations of our Health Monitoring Products Group.  Costs associated with the closing of this group, as well as the termination of related employees are not material.  Our sole focus is and will remain on the development and growth of our Life Science Group.





Basis of Presentation





Going Concern





The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Apogee has recurring operating losses, negative cash flows from operations, negative working capital of approximately $6.5 million and stockholder’s deficiency of approximately $6.3 million, is in arrears with substantially all of its vendors, and is in default on a majority of its Promissory Notes.  This raises substantial doubt about our ability to continue as a going concern. Net losses were approximately $1.1 million and negative cash flows from operations were approximately $613,000 for the nine months ended September 30, 2010.  Given our current cash position, net losses and negative cash flows from operations and our outstanding current obligations, we will not be able to continue as a going concern without raising additional capital, which is not assured.








6




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009





As of September 30, 2010, we had cash of approximately $500.  See Note 12 - Subsequent Events – Additional Financing.  As of November 11, 2010, we had cash of approximately $19,000.





The long-term success of Apogee is dependent upon our ability to raise additional funds to continue our operations, pay our outstanding liabilities and to successfully develop and market our technologies and products and to attain profitable operations. Although we have modified our business strategy to improve near-term financial performance, there can be no assurance that we will be able to obtain funds, to generate sufficient revenue, if any, or become profitable or that additional funds will be available to us on acceptable terms, if at all.  Accordingly, we may be unable to implement current plans.  In addition, if sufficient capital cannot be obtained, Apogee may be forced to cease operations.  In the event that any future financing is affected, to the extent it includes equity securities; the holders of the common stock may experience additional dilution.  In the event of a cessation of operations, there may not be sufficient assets to fully satisfy all creditors, in which case, the holders of securities may be unable to recoup any of their investment.





We are attempting to secure sufficient financing to meet our current obligations and to continue development of our technology.  We have been working to obtain financing from outside investors for more than 24 months, but have not yet been successful.  In the interim, short-term debt financing provided primarily by two of Apogee’s significant shareholders, including our President, Chief Executive Officer and Chairman of the Board of Directors and Mr. David Spiegel, as well as Mr. Robert Schacter, et al and others, is being utilized to preserve our intellectual property, maintain our technical capabilities and know-how, and support our technology development in accordance with our licensing agreement.  There is no assurance that this short-term debt financing will continue.  Additionally, cost cutting measures, including deferral of salary for the CEO, deferral of capital expenditures, and reduced general spending were instituted during 2009.





Due to the early stages of development of our products, we cannot estimate at this time the amounts of cash or the length of time that will be required to bring our products under development to market.  It is expected that such costs will be funded not only by external funding, if available, but also through partnership activities.  Without additional financing, we will be unable to continue operations.





On October 28, 2009, Apogee received a “Wells Notice” from the staff of the Securities and Exchange Commission, which stated that the staff’s intent was to recommend that the Commission institute a public administrative proceeding against the Apogee, alleging that it violated Section 13(a) of the Securities Exchange Act of 1934.  In connection with the contemplated proceedings, the staff could have sought a suspension or revocation of registration of each class of our registered securities. Also, the staff might have considered whether contempt proceedings in a federal district court were appropriate.  We submitted a response to this letter on November 16, 2009.





On December 18, 2009 we filed our delinquent financial report on Form 10-K for the year ended December 31, 2008. This report contained a Disclaimer of Opinion by our Independent Accountants due to significant uncertainty as to our ability to be a going concern. On April 16, 2010 the SEC issued an Order for an Administrative Hearing based on a claim that the filing as well as Form 10-Q’s for the first three quarters of 2009, which had been filed on January 15, 2010, were materially deficient due to the Disclaimer of Opinion and thus the filings remained delinquent.  This Disclaimer of Opinion was removed on a subsequent filing.  We were also delinquent on our Form 10-K for the Year ended December 31, 2009 An Order of Suspension of trading in our securities was enacted at that time.  We also did not file its Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.





In June 2010 the SEC and Apogee entered into a Settlement agreement without a Hearing, under which we would file all our delinquent filings without a material deficiency by a mutually agreed date.  Failure to do so would activate an Order to revoke the ability for our securities to trade on an exchange.  On August 18, 2010 we filed Amendment No.1 to our Form 10-K for the fiscal year ended 2008, Amendment No.1 to our Form 10-Qs for the first, second and third quarters of 2009 as well as our Form 10-K and Form 10-Q for the fiscal year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010, respectively.





On August 27, 2010 we received Release No. 62786, informing us that the administrative proceeding were terminated and that final judgment be entered without the imposition of a remedy pursuant to Section 12(j) of the Securities Exchange Act of 1934.






7




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009


We are currently in the process of submitting an application to regain trading status on the OTCBB.





Consolidated Financial Statements





The financial statements include the accounts of Apogee Technology, Inc. and its wholly owned inactive subsidiary, DUBLA, Inc.  All significant intercompany transactions and accounts have been eliminated.







2.
Summary of Significant Accounting Policies







Accounting Standards: On July 1, 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, also known as FASB Accounting Standards Codification (“ASC”) 105-10, General Accepted Accounting Principles (“ASC 105-10”).  ASC 105-10 established the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  The Codification supersedes all existing non-SEC accounting and reporting standards.  All other non -grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.  Following the Codification, the FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.  Instead, it will issue Accounting Standards Updates, which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.  GAAP was not intended to be changed as a result of the FASB’s Codification project, but it will change the way the guidance is organized and presented.  As a result, these changes will have a significant impact on how companies reference GAAP in their financial statements and in their accounting policies for financial statements issued for interim and annual periods ending after September 15, 2009.  Apogee has implemented the Codification in this quarterly report by providing references to the Codification topics, as appropriate.




Revenue Recognition





Consulting and licensing revenue is recognized as services are performed.





Product revenue will be recognized when the following revenue recognition criteria are met:  (1) persuasive evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured.





Royalty revenue will be recognized when earned in accordance with the underlying agreements.





Use of Estimates in Financial Statements





The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period.  Actual results could differ from those estimates.





Development Stage Company





Apogee follows the presentation and disclosure requirements of Accounting Standards Codification (“ASC”) ASC 915 “Accounting and Reporting by Development Stage Enterprises” as we are in the development stage therein as defined since October 1, 2008 and for the year ended December 31, 2009.





Property and Equipment





Major replacements and betterments of equipment are capitalized.  Cost of normal maintenance and repairs is charged to expense as incurred.  Depreciation is provided over the estimated useful lives of the assets using accelerated methods.





Leasehold Improvements





Leasehold improvements are amortized over either the term of lease or the estimated useful life of the improvement.






8




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009


Patents





Costs incurred to register and obtain patents are capitalized and amortized on a straight-line basis over five years, their estimated useful lives.  Management performs analysis for impairment on a periodic basis.





Impairment of Long-Lived Asset





We assess the carrying values of long-lived assets for possible impairment in accordance with the requirements of ASC 360-10.  We conduct impairment tests when we identify events or when we believe that circumstances may have changed to indicate that the carrying amount of a long-lived asset may not be recoverable. Such events or changes in circumstances may include the discontinuation of a product or product line, a sudden or consistent decline in the forecast for a product, changes in technology or in the way an asset is being used, or an adverse change in legal factors or in the business climate. Our impairment review, to determine if a potential impairment charge is required, is based on an undiscounted cash flow analysis. This analysis requires judgment with respect to many factors, including future cash flows, changes in technology, the continued success of product lines and future volume and revenue and expense growth rates. It is possible that our estimates of these assumptions may change in the future, resulting in the need to reassess the carrying value of our long-lived assets for impairment.





Income Taxes





Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities.  Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax laws.  Allowances are recorded if recovery is uncertain.  See Note 10 – Income Taxes and Tax Loss Carryforwards.





Loss Per Share





Basic net loss per share is computed by dividing the net loss attributable to common stockholders for the period by the weighted average number of common stock outstanding during the period.  Diluted net loss per share is computed based on the weighted average number of common stock and dilutive potential common stock outstanding.  Potential common stock consists of incremental common stock issuable upon the exercise of stock options and common stock issuable upon the exercise of common stock warrants.  The calculation of diluted net loss per share excludes potential common stock as the effect is anti-dilutive. The weighted average number of shares of common stock outstanding used to compute basic loss per share for the nine months ended September 30, 2010 and 2009 was 12,532,163 and 12,132,332, respectively.





Research and Development





Costs for research and development are expensed as incurred.





Legal Fees





We record legal costs (such as fees and expenses of external lawyers and other service providers) when incurred or when it is probable that a liability has been incurred on or before the balance sheet date and the amount can be reasonably estimated if invoices have not been received.  Legal fees incurred pursuant to filing patent applications are capitalized as part of the patent costs.





Contingencies





Apogee is involved in and/or indemnifies others in various legal proceedings.  Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable.  See Note 9 – Legal and Related Indemnification Arrangements with our Executives and Others.





Advertising





Advertising costs are expenses when incurred and were not significant for the three and nine months ended September 30, 2010 and 2009.






9


APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009




Stock-Based Compensation





Apogee had a stock-based compensation plan, the 1997 Employee, Director and Consultant Stock Option Plan (the “1997 Plan”), which is described below.  This 1997 Plan expired as of May 14, 2007.  At our Annual Meeting held on August 28, 2007, the shareholders approved the adoption of a new stock-based compensation plan, the 2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”).





We account for stock-based compensation for employees in accordance with ASC Topic 718, "Compensation-Stock Compensation” using the modified prospective method.  Under the fair value recognition provision of ASC Topic 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense as it is earned over the requisite service period, which is the vesting period. The fair value of the options on their grant date is measured using the Black-Scholes option-pricing model, which we believe yields a reasonable estimate of the fair value of the grants made. The valuation provisions of ASC Topic 718 apply to grants issued since January 1, 2006 (the effective date) and to grants that were outstanding as of that date that are subsequently modified. Estimated compensation expense for grants that were outstanding as of the effective date will be recognized over the remaining vesting period.





Non-employee stock-based compensation is accounted for in accordance with ASC Topic 505, "Equity-based payments to Non-Employees."  In accordance with this topic, cost recognized for non-employee share-based payment transactions is determined by the fair value of whichever is more reliably measurable:  (a) the goods or services received; or (b) the equity instruments issued.





Apogee’s stock compensation activity with respect to the nine months ended September 30, 2010 is summarized below:







Stock Options

Shares


Weighted-

Average

Exercise

Price


Weighted-

Average

Remaining

Contractual

TermOutstanding at December 31, 2009


2,929,500


$
4.5383Granted


—Exercised


—Cancelled or expired


142,900



1.9209Outstanding at September 30, 2010


2,786,600


$
4.6725



3.5113Vested at September 30, 2010


2,615,200


$
4.9193



3.2666Exercisable at September 30, 2010


2,615,200


$
4.9193



3.2666





The following table summarizes information about options outstanding as of September 30, 2010:





Options Outstanding


Options ExercisableWeightedAverage


Weighted





WeightedRemaining


Average





AverageRange of Exercise


Number


Contractual


Exercise


Number


ExercisePrices


Outstanding


Term


Price


Exercisable


Price$0.45 — 1.69



929,0000



6.1557


$
0.9899



757,600


$
1.0086$2.71 — 6.59



1,282,600



1.5387


$
5.3971



1,282,600


$
5.3971$8.45 — 12.15



595,000



3.5681


$
8.8849



595,000


$
8.8849Total at September 30, 2010



2,615,200



3.5112


$
4.6725



2,615,200


$
4.9193





Apogee did not grant options during the nine months ended September 30, 2010 and 2009.  No options were exercised during nine months ended September 30, 2010 and 2009.  During the nine months ended September 30, 2010, options to purchase 102,600 shares of Apogee common stock vested.The weighted average fair value of these options was $0.8204. During the nine months ended September 30, 2010 options to purchase 142,900 shares of Apogee common stock expired.  As of September 30, 2010, approximately 171,400 options to purchase approximately 171,400 shares of Apogee common stock with an approximate value of $32,994 are not yet vested.




10




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009





Fair value of financial instruments





Carrying amounts of certain of the our financial instruments, including cash, loans and accounts payable, approximate their fair values due to their relative short maturities and based upon comparable market information available at the respective balance sheet dates. We do not hold or issue financial instruments for trading purposes.





Recent Accounting Pronouncements




In April 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-17, "Revenue Recognition — Milestone Method (Topic 605). The objective of this update is to provide guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions, in particular for instances whereby a portion or all of the consideration is contingent upon milestone events such as achieving a specific result from the research or development efforts. Under this guidance, a vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive.  Determining whether a milestone is substantive is a matter of judgment made at the inception of the arrangement.  In addition, this update requires specific disclosures.  This update is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010.  Early adoption is permitted.  We do not expect any significant changes to our financial accounting and reporting as a result of the issuance of ASU 2010-17.




In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06,Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB's objective is to improve these disclosures and, thus, increase the transparency in financial reporting. Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now require:




•           A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and




•           In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements.




Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.




In addition, ASU 2010-06 clarifies the requirements of the following existing disclosures:




•           For purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and




•           A reporting entity should provide disclosure about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.




ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009 which for us is January 1, 2010 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. We do not expect any significant changes to our financial accounting and reporting as a result of the issuance of ASU 2010-06.








11




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009






3.
Property and Equipment




Property and equipment at September 30, 2010 and December 31, 2009 are comprised of the following:




Property and Equipment

September 30,


December 31,2010


2009Equipment

$
162,790


$
162,790Software


32,943



32,943Furniture and fixtures


22,047



22,047Leasehold improvements


92,892



92,892$
310,672


$
310,672Less accumulated depreciation


(280,282
)


(266,630
)$
30,390


$
44,042







Depreciation expense was $4,551 and $13,652 for the three and nine months ended September 30, 2010, respectively, compared to $8,141 and $24,423 for the three and nine months ended September 30, 2009, respectively.




The estimated useful lives of the classes of physical assets were as follows:










Description
Depreciable LivesEquipment
5 yearsSoftware
3 yearsFurniture and fixtures
7 yearsLeasehold improvements
Term of lease







4.
Asset Impairment







We did not record any patent impairment charge for the nine months ended September 30, 2010.  For the three and nine months ended September 30, 2010 we amortized approximately $15,608 and $41,403, respectively, of patent application related expenses.  We did record a patent impairment charge of approximately $17,000 at March 31, 2009.  These patent applications were related to our Health Monitoring Group which was closed down as of March 31, 2009.  In addition for three and nine months ended September 30, 2009, we amortized approximately $9,800 and $29,200, respectively, of patent application related expenses.





Patent costs are summarized in the table below:








Gross Carrying Value

Accumulated Amortization

Accumulated

Impairment

Net Book ValueDecember 31, 2009
$436,099

(71,855)

(245,674)

$118,570September  30, 2010
$534,227

(113,258)

(245,674)

$175,295








Estimated amortization is as follows:





Year ended December 31,Three months ended December 2010

16,3082011

57,7112012

57,7102013

23,9422014

19,624








12


APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009




5.
Accounts Payable and Accrued Expenses







Accrued expenses are included in accounts payable on the balance sheet. Accounts payable and accrued expenses are as follows:





Accounts Payable

September 30,


December 31,2010


2009Legal and accounting

$
1,730,000


$
1,691,000Consulting expenses


58,000



70,000Interest owed to Promissory Note holders


412,000



412,000Corporate insurance expenses


—



4,000Director and Advisory Committee fees


142,000



100,000Rent expenses


97,000



70,000Other expenses


529,000



420,000$
2,968,000


$
2,767,000







Accrued Expenses

September 30,


December 31,2010


2009Accrued audit expenses

$
73,000


$
100,000Accrued legal expenses


35,000



25,000Accrued consulting expenses


61,000



46,000Accrued payroll and payroll taxes


322,000



134,000Other accrued expenses


18,000



62,000$
509,000


$
367,000







6.  Promissory Notes, Loans and Warrants





During the three and nine months ended September 30, 2010, Apogee received $161,000 and $561,500, respectively, in proceeds from unsecured interest-bearing promissory notes.  During the nine months ended September 30, 2010 Apogee received $381,500 from Mr. Herbert M. Stein, President, Chief Executive Officer and Chairman of the Board of Directors, $130,000 from Mr. David Spiegel, a major shareholder, $50,000 from others.  These promissory notes are payable upon demand, not subject to premium or penalty for prepayment, bear simple interest of 8% per annum, except for the promissory note to JAZFund LLC which bears interest of 12% per annum.  All are to be repaid in 180 days.  An additional 4% interest will be charged after maturity.





On June 26, 2010 the Apogee completed an offer to its Note holders whereby Note holders could convert all interest amounts accrued and unpaid as of April 15, 2010 into Apogee Common Stock at a price of $1 per share. Two Note holders accepted this offer:






13




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009


InterestNote Holder

ConvertedHerbert M. Stein

$
204,098Robert Schacter, et al


82,024Total interest converted

$
286,122





This transaction resulted in a gain on extinguishment of debt of $32,810 as a result of the interest conversion by Mr. Schacter.  This transaction was recorded as of June 30, 2010.  The interest conversion by Mr. Stein was recorded as a capital transaction and recorded in Additional Paid-In Capital.





As a result of the above conversion, total unpaid interest of approximately $412,000 is due as of September 30, 2010, consisting of $78,000 to Mr. Stein, $293,000 to Mr. Spiegel and $41,000 to others.





In addition to loans, we received $145,000, consisting of $100,000 from TYJO Corp. Money Purchase Pension Plan and $45,000 from others, for the purchase of one hundred forty-five thousand (145,000) shares of Apogee Technology, Inc. Common Stock at $1.00 per share.




Mr. Robert Schacter requested that the $545,000 in Promissory Notes issued in the name of Robert Schacter (TYJO Corp. Money Purchase Pension Plan), and $20,000 each issued in the names of Mr. Robert Schacter, as Custodian for Tyler Schacter UTMA/CA and Mr. Robert Schacter, as Custodian for Joseph Schacter UTMA/CA be converted to shares of Apogee Common Stock.  On June 4, 2010 the Board of Directors approved this transaction and authorized the issuance of 585,000 shares of Apogee Technology, Inc. Common Stock at a price of $1.00 per share.  The closing price on June 4, 2010 was $0.50; therefore, Apogee recorded a $292,500 gain on extinguishment of this debt at June 30, 2010.





Effective June 4, 2010 all promissory notes issued in the name of Robert Schacter (TYJO Corp. Money Purchase Pension Plan), Mr. Robert Schacter, as Custodian for Tyler Schacter UTMA/CA and Mr. Robert Schacter, as Custodian for Joseph Schacter UTMA/CA were converted and shares of Apogee Common Stock were issued.





Mr. Friedrich Reiner requested that his $30,000 Promissory Note be converted into shares of Apogee Common Stock.   On September 22, 2010 the Board of Directors approved this transaction and authorized the issuance of 30,000 shares of Apogee Technology, Inc. Common Stock at a price of $1.00 per share.  The closing price on September 22, 2010 was $0.45; therefore, Apogee recorded a $16,500 gain on extinguishment of debt at September 30, 2010.





In addition, unpaid rent and utilities of approximately $92,000 and $55,000, respectively, are owed to Mr. Spiegel as of September 30, 2010.





As of September 30, 2010 promissory notes in the amount of $2.6 million are in default and accruing post-maturity interest.








Promissory Notes and Loans Due To

David SpiegelDate of


Maturity
Initial
CurrentPromissory Note
Amount

Date
Interest Rate
Interest RateDecember 11, 2007
$150,000

March 10, 2008
8.00%
12.00%February 21, 2008
100,000

August 19, 2008
8.00%
12.00%March 20, 2008
100,000

September 16, 2008
8.00%
12.00%April 1, 2008
50,000

September 28, 2008
8.00%
12.00%May 15, 2008
50,000

November 11, 2008
8.00%
12.00%June 16, 2008
65,000

December 13, 2008
8.00%
12.00%June 18, 2008
50,000

December 15, 2008
8.00%
12.00%July 15, 2008
50,000

January 11, 2009
8.00%
12.00%July 28, 2008
50,000

January 24, 2009
8.00%
12.00%August 12, 2008
35,000

February 8, 2009
8.00%
12.00%August 27, 2008
35,000

February 23, 2009
8.00%
12.00%September 5, 2008
35,000

March 4, 2009
8.00%
12.00%October 27, 2008
35,000

April 25, 2009
8.00%
12.00%January 6, 2009
80,000

July 5, 2009
8.00%
12.00%March 19, 2009
64,000

September 15, 2009
8.00%
12.00%May 19, 2009
35,000

November 15, 2009
8.00%
12.00%June 10, 2009
25,000

December 7, 2009
8.00%
12.00%July 1, 2009
32,000

December 28, 2009
8.00%
12.00%November 5, 2009
103,000

May 4, 2010
8.00%
12.00%December 21, 2009
68,000

June 19. 2010
8.00%
12.00%December 29, 2009
4,665

July 24, 2010
8.00%
12.00%April 16, 2010
16,000

October 13, 2010
8.00%
8.00%June 4, 2010
14,000

December 1, 2010
8.00%
8.00%August 11, 2010
100,000

February 7, 2011
8.00%
8.00%$1,346,665









14




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009


Promissory Notes and Loans Due To

Herbert M. SteinDate of


Maturity
Initial
CurrentPromissory Note
Amount

Date
Interest Rate
Interest RateDecember 11, 2007
$250,000

March 10, 2008
8.00%
12.00%February 21, 2008
100,000

August 19, 2008
8.00%
12.00%March 20, 2008
50,000

September 16, 2008
8.00%
12.00%April 1, 2008
50,000

September 28, 2008
8.00%
12.00%May 15, 2008
50,000

November 11, 2008
8.00%
12.00%June 16, 2008
35,000

December 13, 2008
8.00%
12.00%June 18, 2008
40,000

December 15, 2008
8.00%
12.00%July 15, 2008
30,000

January 11, 2009
8.00%
12.00%July 28, 2008
50,000

January 24, 2009
8.00%
12.00%August 12, 2008
35,000

February 8, 2009
8.00%
12.00%August 27, 2008
35,000

February 23, 2009
8.00%
12.00%September 5, 2008
35,000

March 4, 2009
8.00%
12.00%October 27, 2008
25,000

April 25, 2009
8.00%
12.00%February 2, 2009
30,000

August 1, 2009
8.00%
12.00%February 17, 2009
10,000

August 16, 2009
8.00%
12.00%March 19, 2009
25,900

September 15, 2009
8.00%
12.00%April 13, 2009
33,000

October 10, 2009
8.00%
12.00%May 18, 2009
12,000

November 14, 2009
8.00%
12.00%July 1, 2009
20,000

December 28, 2009
8.00%
12.00%November 5, 2009
42,500

May 4, 2010
8.00%
12.00%December 21, 2009
83,500

June 19, 2010
8.00%
12.00%January 25, 2010
79,000

July 24, 2010
8.00%
12.00%February 22, 2010
66,000

August 21, 1010
8.00%
12.00%April 16, 2010
86,500

October 13, 2010
8.00%
8.00%June 4, 2010
116,000

December 1, 2010
8.00%
8.00%August 11, 2010
45,700

February 7, 2011
8.00%
8.00%September 22, 2010
6,300

March 21, 2011
8.00%
8.00%9,000$1,450,400









15




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009





Promissory Notes and Loans Due To

OthersDate of


Maturity
Initial
CurrentPromissory Note
Amount

Date
Interest Rate
Interest RateJuly 28, 2008
$20,000

March 4, 2009
8.00%
12.00%October 27, 2008
6,000

April 25, 2009
8.00%
12.00%January 6, 2009
500

July 5, 2009
8.00%
12.00%February 17, 2009
37,000

August 16, 2009
8.00%
12.00%March 19, 2009
500

September 15, 2009
8.00%
12.00%April 13, 2009*
61,500

October 10, 2009
8.00%
12.00%May 18, 2009
32,500

November 14, 2009
8.00%
12.00%November 5, 2009
70,000

May 4, 2010
8.00%
12.00%December 21, 2009
2,563

June 19, 2010
8.00%
12.00%June 4, 2010
20,000

December 1, 2010
12.00%
12.00%$250,563







The promissory notes issued to Messrs. Stein, Spiegel and Others from December 11, 2007 through December 21, 2009 for an aggregate of $2.4 million are incurring a post-maturity rate of interest of 12% compounded monthly.  The promissory notes originally were issued with simple interest of 8% per year and were to be repaid in cash after 90 days for the December 11, 2007 and 180 days for the remaining promissory notes.   The effective interest rate for 2009 was approximately 16%.




*The promissory note issued to JAZFund LLC on April 13, 2009 in the amount of $30,000 is incurring a post-maturity rate of 16% compounded monthly.  This promissory note originally was issued with simple interest of 12% per year and was to be repaid in cash after 180 days.







The following tables represent the net payable from promissory notes and loans as of September 30, 2010.







Officer Loans Herbert M. Stein

Shareholder Loans

David Spiegel

TotalTotal proceeds from Loans and Promissory Notes

$
1,450,400

$
1,346,665

$
2,797,065Discount  (Fair Market Value of Warrants)


(2,607
)

(1,562
)

(4,169
)$
1,447,793

$
1,345,103

$
2,792,896








16





APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009





Loans

OthersTotal proceeds from Loans Promissory Notes

$
250,563Discount (Fair Market Value of Warrants)


(3,543
)$
247,020





In connection with the issuance of the promissory notes and the sale of Apogee Technology, Inc. common stock, we issued warrants to purchase additional shares of our common stock.  Each warrant expires three years from issue date with an exercise price of $1.00 per share.  As of September 30, 2010, these warrants represent, in the aggregate, an underlying one hundred nineteen thousand six hundred sixty-six (119,666) shares of common stock for Mr. Spiegel, an underlying one hundred nineteen thousand one hundred forty (119,140) shares of common stock for Mr. Stein, an underlying three hundred thirty-four thousand five hundred (334,500) shares of common stock for Mr. Schacter, and an underlying one hundred fourteen thousand three hundred six (114,306) shares of common stock for others.  These warrants were issued as additional consideration for the notes.  These warrants include customary terms and include a cashless or net exercise provision for exercise.  Holders of these warrants are not entitled to receive dividends, vote, receive notice of any meetings of stockholders or otherwise have any right as stockholders with respect to their warrant shares.  The values of these warrants were determined by using the Black Scholes valuation model.  Warrants associated with the issuance of the promissory notes were issued at approximately 10% to 140% of the funds received.





Included below and in consideration of his continued financial support, the Board of Directors, on June 4, 2010, approved the issuance of an additional 151,750 in warrants to Mr. Robert Schacter et al.  Apogee used the Black Scholes method to value these warrants.  As a result of this transaction, we recorded an additional warrant expense of $56,754 during the second quarter ended June 30, 2010.





Also included below and, in consideration of the conversion of Mr. Friedrich Reiner’s $30,000 Promissory Note to Apogee Technology, Inc. common stock, the Board of Directors on September 22, 2010 approved the issuance of an additional 15,000 in warrants to Mr. Reiner.   Apogee used the Black Scholes method to value these warrants.  As a result of this transaction, we recorded a $5,290 discount value during the third quarter ended September 30, 2010.





Both the warrants issued to Mr. Robert Schacter et al and Mr. Friedrich Reiner include customary terms and include a cashless or net exercise provision for exercise.  These warrants are not entitled to receive dividends, vote, receive notice of any meetings of stockholders or otherwise have any right as stockholders with respect to their warrant shares.  The values of these warrants were determined by using the Black Scholes valuation model.








David SpiegelStock Price


Risk FreeNumber of
At Date of
Term of
Strike
Interest

Value PerDate of Warrant
Shares
Issuance
Warrant
Price
Rate
Volatility
Warrant
Total ValueFebruary 21, 2008
10,000
$0.65
3 Years
$1.00
2.23
98.45824%
$0.3462
$3,462.00March 20, 2008
10,000
$0.70
3 Years
$1.00
1.71
99.87467%
$0.3867
3,867.00April 1, 2008
5,000
$0.85
3 Years
$1.00
1.94
100.00925%
$0.5042
2,521.00May 15, 2008
5,000
$0.83
3 Years
$1.00
2.70
102.78266%
$0.5036
2,518.00June 16, 2008
6,500
$0.63
3 Years
$1.00
3.33
104.12541%
$0.3555
2,310.75June 18, 2008
5,000
$0.61
3 Years
$1.00
3.19
104.07197%
$0.3397
1,698.50July 15, 2008
5,000
$0.87
3 Years
$1.00
2.70
104.55357%
$0.5429
2,714.50July 28, 2008
5,000
$0.75
3 Years
$1.00
2.90
104.54508%
$0.4481
2,240.50August 12, 2008
3,500
$0.75
3 Years
$1.00
2.73
104.93498%
$0.4488
1,570.80August 27, 2008
3,500
$0.85
3 Years
$1.00
2.58
106.26182%
$0.5331
1,865.85September 5, 2008
3,500
$0.86
3 Years
$1.00
2.44
106.21122%
$0.5404
1,891.40October 27, 2008
3,500
$0.60
3 Years
$1.00
1.83
108.82589%
$0.3431
1,200.85January 6, 2009
8,000
$0.75
3 Years
$1.00
1.10
108.80131%
$0.4566
3,652.80March 19, 2009
6,400
$0.68
3 Years
$1.00
1.21
109.80676%
$0.4057
2,596.48May 19, 2009
3,500
$0.70
3 Years
$1.00
1.37
111.74849%
$0.4288
1,500.80June 10, 2009
2,500
$0.60
3 Years
$1.00
2.00
126.10551%
$0.3959
989.75July 1, 2009
3,200
$0.87
3 Years
$1.00
1.57
128.93341%
$0.6295
2,014.40November 5, 2009
10,300
$1.02
3 Years
$1.00
1.44
131.45892%
$0.7681
7,911.43December 21, 2009
6,800
$1.05
3 Years
$1.00
1.42
133.83768%
$0.8029
5,459.72January 25, 2010
466
$0.96
3 Years
$1.00
1.40
134.80467%
$0.7268
338.69April 16, 2010
1,600
$0.90
3 Years
$1.00
1.56
136.43020%
$0.6800
1,088.00June 4, 2010
1,400
$0.50
3 Years
$1.00
1.17
153.12821%
$0.3740
523.60August 11, 2010
10,000
$0.30
3 Years
$1.00
0.81
157.16541%
$0.2115
2,115.00Total
119,666






$56,051.82






17




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009


Herbert M. SteinStock Price


Risk FreeNumber of
At Date of
Term of
Strike
Interest

Value PerDate of Warrant
Shares
Issuance
Warrant
Price
Rate
Volatility
Warrant
Total ValueFebruary 21, 2008
10,000
$0.65
3 Years
$1.00
2.23
98.45824%
$0.3462
$3,462.00March 20, 2008
5,000
$0.70
3 Years
$1.00
1.71
99.87467%
$0.3867
1,933.50April 1, 2008
5,000
$0.85
3 Years
$1.00
1.94
100.00925%
$0.5042
2,521.00May 15, 2008
5,000
$0.83
3 Years
$1.00
2.70
102.78266%
$0.5036
2,518.00June 16, 2008
3,500
$0.63
3 Years
$1.00
3.33
104.12541%
$0.3555
1,244.25June 18, 2008
4,000
$0.61
3 Years
$1.00
3.19
104.07197%
$0.3397
1,358.80July 15, 2008
3,000
$0.87
3 Years
$1.00
2.70
104.55357%
$0.5429
1,628.70July 28, 2008
5,000
$0.75
3 Years
$1.00
2.90
104.545 08%
$0.4481
2,240.50August 12, 2008
3,500
$0.75
3 Years
$1.00
2.73
104.93498%
$0.4488
1,570.80August 27, 2008
3,500
$0.85
3 Years
$1.00
2.58
106.26182%
$0.5331
1,865.85September 5, 2008
3,500
$0.86
3 Years
$1.00
2.44
106.21122%
$0.5404
1,891.40October 27, 2008
2,500
$0.60
3 Years
$1.00
1.83
108.82589%
$0.3431
857.75February 2, 2009
3,000
$0.70
3 Years
$1.00
1.27
109.04276%
$0.4188
1,256.40February 17, 2009
1,000
$0.83
3 Years
$1.00
1.22
109.04322%
$0.5219
521.90March 19, 2009
2,590
$0.68
3 Years
$1.00
1.21
109.80676%
$0.4057
1,050.76April 13, 2009
3,300
$0.60
3 Years
$1.00
1.27
110.59204%
$0.3469
1,144.77May 18, 2009
1,200
0.70
3 Years
$1.00
1.36
111.77410%
$0.4288
514.56July 1, 2009
2,000
$0.87
3 Years
$1.00
1.57
128.93341%
$0.6295
1,259.20November 5, 2009
4,250
$1.02
3 Years
$1.00
1.44
131.45892%
$0.7681
3,264.43December 21, 2009
8,350
$1.05
3 Years
$1.00
1.42
133.83768%
$0.8029
6,704.22January 25, 2010
7,900
$0.96
3 Years
$1.00
1.40
134.80467%
$0.7268
5,741.72February 22, 2010
6,600
$0.70
3 Years
$1.00
1.48
134.43818%
$0.5011
3,307.26April 16, 2010
8,650
$0.96
3 Years
$1.00
1.40
134.80467%
$0.7268
6,286.82June 4, 2010
11,600
$0.50
3 Years
$1.00
1.17
153.12821%
$0.3740
4,338.40August 11, 2010
4,570
$0.30
3 Years
$1.00
0.81
157.16541%
$0.2115
966.56September 22, 2010
630
$0.45
3 Years
$1.00
0.68
166.23169%
$0.3527
222.20Total
119,140






$59,671.75






18




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009





Robert Schacter et al*Stock Price


Risk FreeNumber of
At Date of
Term of
Strike
Interest

Value PerDate of Warrant
Shares
Issuance
Warrant
Price
Rate
Volatility
Warrant
Total ValueSeptember 5, 2008
14,000
$0.86
3 Years
$1.00
2.44
106.21122%
$0.5404
$7,565.60October 27, 2008
25,000
$0.60
3 Years
$1.00
1.83
108.82589%
$0.3431
8,577.50January 8, 2009
25,000
$0.90
3 Years
$1.00
1.16
108.85621%
$0.5777
14,442.50February 2, 2009
12,500
$0.70
3 Years
$1.00
1.27
109.04276%
$0.4188
5,235.00February 17, 2009
12,500
$0.83
3 Years
$1.00
1.22
109.04322%
$0.5219
6,523.75March 19, 2009
12,500
$0.68
3 Years
$1.00
1.21
109.80676%
$0.4057
5,071.25April 13, 2009
5,000
$0.60
3 Years
$1.00
1.27
110.59204%
$0.3469
1,734.50June 10, 2009
6,250
$0.60
3 Years
$1.00
2.00
126.10551%
$0.3959
2,474.38November 5, 2009
20,000
$1.02
3 Years
$1.00
1.44
131.45892%
$0.7681
15,362.00June 4, 2010
25,000
$0.50
3 Years
$1.00
1.17
153.12821%
$0.3740
9,350.00June 4, 2010
151,750
$0.50
3 Years
$1.00
1.17
153.12821%
$0.3740
56,754.50July 9, 2010
12,500
$0.55
3 Years
$1.00
1.03
156.64976%
$0.4240
5,300.00September 22, 2010
12,500
$0.45
3 Years
$1.00
0.68
166.23169%
$0.3527
4,408.75Total
334,500






$142,799.73





*322,500 warrants issued in the name of TYJO Corporation Money Purchase Pension Plan, 6,000 warrants issued in the name of Mr. Robert Schacter, as Custodian for Tyler Schacter UTMA/CA and 6,000 warrants issued in the name of Mr. Robert Schacter, as Custodian for Joseph Schacter UTMA/CA.








OthersStock Price


Risk FreeNumber of
At Date of
Term of
Strike
Interest

Value PerDate of Warrant
Shares
Issuance
Warrant
Price
Rate
Volatility
Warrant
Total ValueJuly 28, 2008
2,000
$0.75
3 Years
$1.00
2.90
104.54508%
$0.4460
$    892.00October 27, 2008
600
$0.60
3 Years
$1.00
1.83
108.82589%
$0.3431
205.86January 6, 2009
50
$0.75
3 Years
$1.00
1.10
108.80131%
$0.4566
22.83February 17, 2009
8,950
$0.83
3 Years
$1.00
1.22
109.04322%
$0.5219
4,671.01March 19, 2009
50
$0.68
3 Years
$1.00
1.21
109.80676%
$0.4057
20.29April 13, 2009
10,650
$0.60
3 Years
$1.00
1.27
110.59204%
$0.3469
3,694.49May 18, 2009
3,200
$0.70
3 Years
$1.00
1.36
111.77410%
$0.4288
1,372.15May 19 2009
50
$0.70
3 Years
$1.00
1.37
111.74849%
$0.4288
21.44November 5, 2009
16,000
$1.02
3 Years
$1.00
1.44
131.45892%
$0.7681
12,289.60December 21, 2009
256
$1.05
3 Years
$1.00
1.42
133.83768%
$0.8029
205.54January 25, 2010
7,500
$0.96
3 Years
$1.00
1.40
134.80467%
$0.7268
5,451.00June 4, 2010
27,500
$0.50
3 Years
$1.00
1.17
153.12821%
$0.3740
10,285.00July 21, 2010
22,500
$0.55
3 Years
$1.00
0.91
156.39589%
$0.4233
9,524.00September 22, 2010
15,000
$0.45
3 Years
$1.00
0.68
166.23169%
$0.3527
5,290.50Total
114,306






$53,945.71





The carrying value of the notes and loans payable approximate fair value due to their short-term maturity.






19


APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009




7.
Stockholders’ Deficiency





Sale of Common Stock




On May 24, 2010, June 4, 2010 and July 9, 2010, Apogee received $50,000, $25,000 and $25,000, respectively, from TYJO Corporation Money Purchase Pension Plan for the purchase of 100,000 shares of Apogee common stock and warrants to purchase 50,000 shares of Apogee common stock.  These warrants are exercisable immediately upon issuance, for a term of three years at an exercise price of $1.00 per share.




In addition Apogee received $45,000 as part of an on-going Private Placement for 45,000 shares of Apogee common stock and warrants to purchase 22,500 shares of Apogee common stock.  Proceeds through September 30, 2010 were $41,850 net of $3,150 in expenses.  These warrants are exercisable immediately upon issuance, for a term of three years at an exercise price of $1.00 per share.





Promissory Note Conversion





Mr. Robert Schacter requested that the $545,000 in Promissory Notes issued in the name of Robert Schacter (TYJO Corp. Money Purchase Pension Plan), and $20,000 each issued in the names of Mr. Robert Schacter, as Custodian for Tyler Schacter UTMA/CA and Mr. Robert Schacter, as Custodian for Joseph Schacter UTMA/CA be converted to shares of Apogee Common Stock.  On June 4, 2010 the Board of Directors approved this transaction and authorized the issuance of 585,000 shares of Apogee Technology, Inc. Common Stock at a price of $1.00 per share.  The closing price on June 4, 2010 was $0.50; accordingly, we recorded a $292,500 gain on extinguishment of this debt at June 30, 2010.  Total shares issued as of September 30, 2010 to Mr. Schacter et al was 685,000.





Mr. Friedrich Reiner requested that his $30,000 Promissory Note be converted into shares of Apogee Common Stock.   On September 22, 2010 the Board of Directors approved this transaction and authorized the issuance of 30,000 shares of Apogee Technology, Inc. Common Stock at a price of $1.00 per share.  The closing price on September 22, 2010 was $0.45; therefore, we recorded a $16,500 gain on extinguishment of debt at September 30, 2010. As of September 30, 2010, 50,000 shares of Apogee Common Stock have been issued to Mr. Reiner.





Interest Conversion





On June 26, 2010 Apogee completed an offer to its Note holders whereby Note holders could convert all interest  amounts accrued and unpaid as of April 15, 2010 into Apogee’s Common Stock at a price of $1 per share. Two Note holders accepted this offer:





InterestNote Holder

ConvertedHerbert M. Stein

$
204,098Robert Schacter, et al


82,024Total interest converted

$
286,122





This transaction resulted in a gain on extinguishment of debt of $32,810 as a result of the interest conversion by Mr. Schacter.  This transaction was recorded as of June 30, 2010.  The interest conversion by Mr. Stein was recorded as a capital transaction and recorded in Additional Paid-In Capital





Additional Warrants




In consideration of his continued financial support, the Board of Directors, on June 4, 2010, approved the issuance of warrants to purchase 151,750 shares of Apogee common stock to Mr. Robert Schacter et al.   Apogee used the Black Scholes method to value these warrants.  As a result of this transaction, we recorded a $56,754 expense during the second quarter ended June 30, 2010.   These warrants are exercisable immediately upon issuance, for a term of three years at an exercise price of $1.00 per share.








20




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009





Additionally, in consideration of the conversion of Mr. Friedrich Reiner’s $30,000 Promissory Note to Apogee Technology, Inc. common stock, the Board of Directors, on September 22, 2010, approved the issuance of an additional 15,000 in warrants to Mr. Reiner.   Apogee used the Black Scholes method to value these warrants.  As a result of this transaction, we recorded a $5,290 warrant expense during the third quarter ended September 30, 2010.




Stock Options




During the three and nine months ended September 30, 2010 and 2009, no stock options were awarded.




8.
Related Party Transactions







Apogee rents its facility from an entity controlled by a stockholder for $4,400 per month pursuant to a lease that expired December 31, 2005. Currently, we are renting the facility on a month-to-month basis.  Rent expense was $52,800 for the fiscal year ended December 31, 2009 and $39,600 through September 30, 2010.  Rent has been accrued and remains unpaid since January 2009 totaling $92,400 through September 30, 2010.  See also Note 6 – Promissory Notes, Loans and Warrants from Officers and Significant Stockholders.







9.
Legal and RelatedIndemnification Arrangements with our Executives and Others







Apogee has assumed and will continue to assume the final legal costs and related expenses of Herbert M. Stein, in connection with the civil action styled Joseph Shamy vs. Herbert M. Stein, Case No.: 50 2005 CA 007719 XXXXMB.  In this action instituted in the 15th Judicial Circuit in and for Palm Beach County, Florida (the "Court), Joseph Shamy sued Herbert M. Stein, President, Chief Executive Officer and Chairman of the Board of Apogee in connection with Shamy’s purchase of Apogee shares in 2003 and 2004.  In February 2009, in connection with a settlement, the Court entered a Final Judgment against Mr. Stein.  In early January 2010, a filing was made with the Court to memorialize the Total and Complete Satisfaction of Judgment, which states that all sums due under the civil action were fully paid and that the Final Judgment was satisfied and canceled.  Further, the Clerk of the Court was directed to note satisfaction of the Final Judgment and cancellation of all judgments of record in this action. Apogee was not a party to the aforementioned settlement or the satisfaction of the Final Judgment.  Through September 30, 2010, we have incurred approximately $914,000 toward this indemnification.  For the three and nine months ended September 30, 2010, we incurred approximately $3,000 toward this indemnification, compared to approximately $9,000 and $81,000 for the three and nine months ended September 30, 2009.





Apogee first became aware of an investigation by the SEC in May 2005. The subject matter of this investigation was Apogee's prior revenue recognition practices that were addressed in the restatement of our financial statements for the fiscal year ended December 31, 2004. As previously disclosed in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as amended, Apogee’s Audit Committee, with the assistance of independent counsel, conducted an investigation into Apogee’s historical accounting practices that resulted in the implementation of remedial actions. See our Annual Report on Form 10-KSB for the year ended December 31, 2004, as amended, for detail regarding the restatement.





In July 2008, Apogee, it’s Chief Executive Officer and other employees received notifications from the Staff of the SEC relating to the Staff's 2005 investigation. These notifications, known as “Wells Notices,” stated that the Staff is considering recommending that the Commission bring enforcement actions against Apogee and certain employees, based on alleged violations of certain provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933, as amended, Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 thereunder. The Wells Notice sent to Apogee indicates that in any action actually brought against us, the Staff would seek an injunction against future violations of the federal securities laws as relief.





On May 19, 2009, the Securities and Exchange Commission (“commission”) filed a settled enforcement action against Apogee, one employee, and one former employee (“Others”) in connection with Apogee’s prior revenue recognition practices.  Each of the defendants has agreed to settle this matter, without admitting or denying the allegations of the Commission’s complaint.  Apogee and others agreed to the entry of a final judgment permanently enjoining them from variously violating or aiding and abetting violations of Sections of the Securities Act of 1933, and Sections of the Securities Exchange Act of 1934, and various Rules.  The others also agreed to financial and other sanctions.  Through September 30, 2010, we have incurred approximately $554,000 toward this indemnification.  For the three and nine months ended September 30, 2010 we did not incur any legal expenses associated with this indemnification.  This compares to approximately $-0- and $1,600, respectively for the three and nine months ended September 30, 2009.






21




APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009


As of March 31, 2009, Apogee’s Directors and Officers Liability Insurance was cancelled due to non-payment.  Apogee may be required to pay any uninsured claims and related costs.





As noted elsewhere, Apogee, on December 18, 2009, filed our delinquent financial report on Form 10-K for the year ended December 31, 2008. This report contained a Disclaimer of Opinion by our Independent Accountants due to significant uncertainty as to our ability to be a going concern. On April 16, 2010 the SEC issued an Order for an Administrative Hearing based on a claim that the filing as well as Form 10-Q’s for the first three quarters of 2009, which had been filed on January 15, 2010, were materially deficient due to the Disclaimer of Opinion and thus the filings remained delinquent.  The Disclaimer of Opinion was removed on a subsequent filing.  Apogee was also delinquent on our Form 10-K for the Year ended December 31, 2009.  An Order of Suspension of trading of our securities was enacted at that time.  We also did not file our Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.





In June 2010 the SEC and Apogee entered into a Settlement agreement without the above mentioned Hearing, under which we would file all our delinquent filings without a material deficiency by a mutually agreed date.  Failure to do so would activate an Order to revoke the ability for our securities to trade on an exchange.  On August 18, 2010 we filed Amendment No.1 to our Form 10-K for the fiscal year ended 2008, Amendment No.1 to our Form 10-Qs for the first, second and third quarters of 2009 as well as our Form 10-K and Form 10-Q for the fiscal year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010, respectively.





On August 27, 2010 we received Release No. 62786, informing us that the administrative proceeding were terminated and that final judgment be entered without the imposition of a remedy pursuant to Section 12(j) of the Securities Exchange Act of 1934.





We are currently in the process of submitting an application to regain trading status on the OTCBB.







10.
Tax Loss Carryforwards







The following approximates the net loss carryforwards we have available in the future for federal and state tax purposes as of December 31, 2009:










December  31,

December 31,2009

2008Net operating loss carryforwardsFederal

$
21,000,000

$
19,000,000State

$
14,000,000

$
12,000,000





December  31,

December 31,2009

2008Business credits available in the futureFederal

$
960,000

$
940,000State

$
40,000

$
330,000





Apogee does not record a net tax benefit asset due to the uncertainty of its realization.





The net operating loss carryforwards will begin to expire in 2012 for federal tax purposes and in 2010 for state tax purposes.  The federal and state credits will begin to expire in 2017.




22





APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
 (A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2010 and September 30, 2009




Significant changes in our ownership, future changes in tax laws and regulations and the alternative minimum tax, may substantially reduce the available carryforwards and related tax benefits.





11.                   Supplemental Cash Flow Information





As of September 30, 2010, we recorded cumulatively approximately $1.0 million in interest expense of which approximately $7,700 was paid. This amount is subsequent to the conversion of approximately $204,000 by Mr. Stein and $82,000 by Mr. Schacter.  We recorded interest expense of approximately $128,000 and $381,000, respectively, for the three and nine months ended September 30, 2010, compared to approximately $97,000 and $280,000 for the same periods in 2009.





12. Subsequent Events




Additional Financings




The following table details all financings subsequent to September 30, 2010:







Amount



Risk


TotalDate of
of


Number
Free

Value
ValueLoan or Promissory
Loan or
Maturity

of
Interest

Per
ofNote and Warrant
Note
Date
Interest
Warrants
Rate
Volatility
Warrant
WarrantsOthers
126,000

8.00%
63,000





Associated with the above referenced financing is an agreement by which DeBeers Fund Management LLC receives a 7% fee.





Total Warrants issued through November 1, 2010 is 750,612 as detailed below:





Number of InterestStock/Note Holder

Warrants IssuedHerbert M. Stein


119,140David Spiegel


119,666Robert Schacter et al


334,500Others


177,306Total Warrants issued through November 1, 2010


750,612










23






ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




GENERAL





The following Management’s Discussion and Analysis of the Company’s Financial Condition and Results of Operations for the three and nine-month periods ended September 30, 2010 and September 30, 2009, should be read in conjunction with the Company’s Financial Statements and related footnotes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains, in addition to historical statements, forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include the factors discussed in the section titled ITEM 1A – RISK FACTORS, as well as other factors described in our Annual Report on Form 10-K for the year ended December 31, 2009.





OVERVIEW





Apogee Technology, Inc., (“Apogee”, “we”, “us” or “our”) is developing PyraDermTM, a proprietary intradermal drug delivery system for vaccines and other pharmaceuticals that we intend to market to pharmaceutical and medical device companies.  Until March 31, 2009, we were also engaged in the development of IntellaPALTM, a proprietary sensor-based health monitoring systems for the elderly care and other markets that we intended to manufacture and market to individuals and health organizations.





Our Life Science Group is developing PyraDerm, an advanced intradermal drug delivery system, to meet the needs of patients, health insurers, companies developing pharmaceuticals, as well as, governments and international health organizations. PyraDerm is designed to be a low-cost, effective, painless delivery system that can be self administered and easily stored while potentially providing pharmaceutical companies an extended patent position for their current drug formulations. We had previously demonstrated that PyraDermsystem containing adjuvanted vaccine formulations is capable of improving the efficiency of immunization and providing a significant dose sparing effect in a relevant animal model. Technologies that reduce the required vaccine dose would allow faster and more efficient production of vaccines, which is especially important in case of vaccine shortages during epidemic emergencies, such as pandemic influenza. The results of these studies were published in 2009 in the Proceedings of the National Academy of Sciences of the USA serving as an important validation of our approach to intradermal vaccination. In 2009 we had to scale down research and development efforts due to financial constraints focusing on the proof-of-concept thermal stability studies of PyraDerm system and relevant formulations and certain efforts on the development of the production process. In these studies Apogee has been able to demonstrate the advantages of some of its systems compared to commonly used solution formulations. We believe that these findings on improved thermal stability are important for future development of PyraDerm as better shelf-life and lower dependence on temperature controlled distribution chains can be one of the critical advantages of our technology. We also continued to pursue patent applications related to its technology. Upon completion of our studies, if successful, we intend to pursue licensing and partnership agreements for multiple product applications with pharmaceutical, and medical device companies, and government and world health organizations  interested in drug delivery systems and technologies.





In 2009, we closed down the operations of the Health Monitoring Product Group.  Costs associated with this cessation of operations and terminations of related employees were not material.





At September 30, 2010, we had an accumulated deficit of approximately $26.2 million, as compared to a deficit of approximately $25.1 million as of December 31, 2009.  Since re-entering development stage on October 1, 2008, we have an accumulated deficit of approximately $4.3 million, as compared to a deficit of approximately $3.2 million as of December 31, 2009.





From December 12, 2007 through September 30, 2010, we have received approximately $3.8 million in loans and stock sales.  Since September 30, 2010, we have received an additional $126,000 in funding, which is inadequate to meet the current needs of Apogee resulting in non-payment of loan principal and interest and vendors.   See Note 12 - Subsequent Events – Additional Financings.




As of September 30, 2010, we had 6 employees, compared to 8 employees at September 30, 2009.  Effective as of June 9, 2008 through October 31, 2009, 5 of the remaining employees transitioned to part-time status in an effort to reduce human resource costs.  As of November 1, 2009 a majority of employees have returned to full time with the remaining employee returning to full time status effective as of June 14, 2010.




24





Subject to additional funding, Apogee’s continued focus remains on developing and growing the Life Science Group.




SELECTED CONSOLIDATED FINANCIAL DATA




The following selected financial data for the three- and nine-month periods ended September 30, 2010 and 2009 have been derived from our unaudited financial statements. Any trends reflected by the following table may not be indicative of future results.





For the Three-Month Period

Ended

September 30,


For the Nine-Month Period

Ended

September 30,2010


2009


2010


2009Statement of Operations Data:Revenue

$
25,000


$
—


$
40,000


$
—Costs and expenses


(370,554
)


(415,486
)


(1,055,114
)


(1,453,594
)Other Income (expenses)


(110,948
)


(96,032
)


(94,164
)


(277,967
)Net Loss

$
(456,502
)

$
(511,518
)

$
(1,109,278
)

$
(1,731,561
)Shares Outstanding










13,178,454



12,132,332Total Assets









$
206,471


$
196,220Stockholders’ deficiency









$
(6,309,820
)

$
(5,578,758
)Loss per share (basic and fully diluted)









$
(0.09
)

$
(0.14
)








Cumulative from Re-entering Development Stage on

October 1, 2008

through

September 30, 2010Statement of Operations Data:Revenue

$
40,000Costs and expenses


(3,787,645
)Other Income (expenses)


(550,359
)Net Loss

$
(4,298,004
)







RESULTS OF OPERATIONS OF THE COMPANY





Development Stage Company





Apogee is considered to be in the development stage as defined in Accounting Standards Codification (“ASC”) ASC 915 “Accounting and Reporting by Development Stage Enterprises”.  Since October 1, 2008, we have devoted substantially all of our efforts to business planning, raising capital and research and development.





Revenue Recognition





Consulting and licensing revenue is recognized as services are performed. During the three and nine months ended September 30, 2010, we recognized $25,000 and $40,000, respectively in consulting revenue as a result of achieving certain research milestones in the framework of our collaboration with Children’s Hospital Corporation (“CHB”).





Product revenue will be recognized when the following revenue recognition criteria are met:  (1) persuasive evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured.  We had no product sales since the first quarter ended March 31, 2008.






25





In addition, we record royalty revenue when earned in accordance with the underlying agreements.  Royalty revenue from our prior (DDX) products ceased as of January 1, 2006.




Operating Expenses




Research and Development Costs





Our research and development, or R&D, expenses consist primarily of salaries, development material costs, and external consulting and service costs related to the development and design of new products.  Research and development expenses decreased by approximately $25,000, or 17%, to approximately $121,000 for the three months ended September 30, 2010, compared to approximately $146,000 for the three months ended September 30, 2009. During the nine months ended September 30, 2010, R&D expenses decreased by approximately $260,000, or 45%, to approximately $319,000, compared to approximately $579,000 for the nine months ended September 30, 2009.  The decrease in the three and nine month comparisons was the result of a reduction in expenses for our Life Science Group as well as the discontinuation of activities related to both our sensor products and our Health Monitoring Group.





For the three and nine months ended September 30, 2010, human resource costs decreased by approximately $32,000, or 28%, and $200,000, or 43%, to approximately $81,000 and $263,000, respectively, compared to approximately $113,000 and $463,000 for the same periods in 2009.  Effective as of June 9, 2008, human resource expense was reduced by 20% for most R&D employees as a result of transitioning from full time to part time in order to reduce expenses.  In addition to the transition to part-time status of some of our employees, we discontinued operations of our Health Monitoring Group effective as of March 31, 2009, thereby reducing our overall headcount by three employees.  Expenses related to the Health Monitoring Group were insignificant.  As of June 14, 2010 all employees in the R&D Department returned to full time status.





After management review and analysis, it was determined that no patent impairment charges were warranted for the three and nine months ended September 30, 2010.  At March 31, 2009, we recorded a patent impairment charge of approximately $17,000 to reflect the write-off of patent costs associated with the discontinuation of our Health Monitoring Group.





Depreciation and amortization expense decreased by approximately $5,000, or 22%, and $22,000, or 29%, to approximately $20,000 and $54,000 for the three and nine months ended September 30, 2010, respectively, from approximately $25,000 and $76,000 for the same periods in 2009.





For the three and nine months ended September 30, 2010, we maintained a minimal level of R&D spending required for preservation of our intellectual property, maintenance of our technical capabilities and know-how, and support of our technology development in accordance with our licensing agreement.  If we are able to secure additional financing, we anticipate that we will continue to commit resources to research and development activities as our financial position allows, and as a result, R&D costs are expected to increase substantially in the future.





Selling, General and Administrative Costs





General and Administrative costs consist primarily of executive and administrative salaries, professional fees and other associated corporate expenses. Selling, General and Administrative, or SG&A, expenses were approximately $249,000 and $736,000 for the three and nine months ended September 30, 2010, respectively, compared to approximately $270,000 and $874,000 for the same periods in 2009.  The decrease of approximately $21,000, or 8% and $138,000, or 16%, respectively, was primarily attributed to a reduction in professional fees, stock compensation expenses, and an overall reduction in operating expenses.  Legal fees were reduced with the settlement of the SEC investigation on May 19, 2009 as well as the settlement of the civil action by Joseph Shamy (as described below).





For the three months ended September 30, 2010 human resource costs increased nominally to approximately $156,000 compared to approximately $151,000 for the three months ended September 30, 2009.  For the nine months ended September 30, 2010 human resource costs decreased by approximately $44,000 or 9%, to approximately $421,000, compared to approximately $465,000 for the nine months ended September 30, 2009.  With the return to full time status of most employees, salaries, payroll taxes and employee benefits increased by approximately $15,000 or 11% for the three months ended September 30, 2010, to approximately $152,000, compared to approximately $137,000 for the three months ended September 30, 2009.  For the nine months ended September 30, 2010 salaries, payroll taxes and employee benefits increased by approximately $51,000 or 12%, to approximately $467,000 compared to approximately $416,000 for the nine months ended September 30, 2009.  These increases were partially offset by decreases in the stock compensation expenses as a result of “true-up” adjustments for three and nine month periods ended September 30, 2010.  For the three and nine months ended September 30, 2010 the stock compensation expense was approximately $7,000 and $23,000, respectively , compared to approximately $14,000 and $48,000 for the three and nine months ended September 30, 2009.  In addition for the three and nine months ended September 30, 2010 we recorded  “true-up” adjustments to the stock compensation expense of approximately ($2,000) and ($69,000), respectively.  The “true-up” reduction in these expenses was the result a higher realized forfeiture rate applied to existing options.  Mr. Herbert M. Stein has not drawn cash compensation from Apogee since June 30, 2009 nor has the Board of Directors received cash compensation since early 2008.  We have accrued Mr. Stein’s salary and related taxes, as well as the Board of Directors’ compensation totaling approximately $326,000 and $103,000, respectively, through September 30, 2010.






26





Professional expenses decreased by approximately $16,000, or 31%, and $65,000, or 27%, to approximately $37,000 and $174,000, respectively, for the three and nine months ended September 30, 2010, compared to approximately $53,000 and $239,000 for the same periods in 2009.  For the three and nine months ended September 30, 2010 legal expenses decreased by approximately $1,000, or 9% and $33,000, or 26%, to approximately $14,000 and $94,000, respectively, compared to approximately $15,000 and $127,000 for the three and nine months ended September  30, 2009.  Legal fees decreased as a result of the settlement of the current SEC situation, as well as, the settlement of the prior SEC investigation and the settlement of the civil action by Joseph Shamy (as described below).  See Note 9 to the consolidated financial statements - Legal and Related Indemnification Arrangements with our Executives.





An investigation by the SEC settled on May 19, 2009, which Apogee first became aware of in May 2005, was ongoing through early 2009. The subject matter of this investigation was Apogee's prior revenue recognition practices that were addressed in Apogee's restatement of our financial statements for the fiscal year ended December 31, 2004.  As previously disclosed in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as amended, Apogee’s Audit Committee, with the assistance of independent counsel, conducted an investigation into Apogee’s historical accounting practices that resulted in the implementation of remedial actions. See our Annual Report on Form 10-KSB for the year ended December 31, 2004, as amended, for detail regarding the restatement.  In July 2008, Apogee, it’s Chief Executive Officer and other employees received notifications from the Staff of the SEC relating to the Staff's 2005 investigation. These notifications, known as “Wells Notices,” stated that the Staff considered recommending that the Commission bring enforcement actions against Apogee and certain employees, based on alleged violations of certain provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933, as amended, Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 thereunder. The Wells Notice sent to us indicated that in any action actually brought against Apogee, the Staff would seek an injunction against future violations of the federal securities laws as relief.




On May 19, 2009, the Securities and Exchange Commission (“commission”) settled this enforcement action.  See Note 9 to the consolidated financial statements - Legal and Related Indemnification Arrangements with our Executives and Others.





We had agreed to indemnify certain employees, directors and a former employee in connection with the SEC investigation. As of September 30, 2010, we have incurred approximately $554,000 to date in legal expenses to indemnify these individuals in association with this matter.  During the three and nine months ended September 30, 2010 we did not incur any legal expenses associated with this indemnification.  We did not incur any legal expenses associated with this indemnification for the three months ended September 30, 2009.  For the nine months ended September 30, 2009 we incurred approximately $1,600 toward this indemnification.    In light of the settlement we do not anticipate any additional legal fees associated with this matter.




In addition, we had incurred legal fees associated with the indemnification costs in connection with the civil action styled Joseph Shamy vs. Herbert M. Stein Case No.: 50 2005 CA 007719 XXXXMB.  In this action instituted in the 15th Judicial Circuit in and for Palm Beach County, Florida (the "Court), Joseph Shamy sued Herbert M. Stein, President, Chief Executive Officer and Chairman of the Board of Apogee in connection with Shamy’s purchase of Apogee shares in 2003 and 2004.  In February 2009, in connection with a settlement, the Court entered a Final Judgment against Mr. Stein.  In early January 2010, a filing was made with the Court to memorialize the Total and Complete Satisfaction of Judgment, which states that all sums due under the civil action were fully paid and that the Final Judgment was satisfied and canceled.  Further, the Clerk of the Court was directed to note satisfaction of the Final Judgment and cancellation of all judgments of record in this action. Apogee was not a party to the aforementioned settlement or the satisfaction of the Final Judgment. Through September 30, 2010, we have incurred approximately $914,000 toward this indemnification.  For the three months ended September 30, 2010 we did not incur any legal expenses associated with this matter, compared to approximately $9,000 for the three months ended September 30, 2009.  For the nine months ended September 30, 2010, we incurred approximately $3,000 toward this indemnification, compared to approximately $82,000 for the nine months ended September 30, 2009.  See Note 9 to the consolidated financial statements - Legal and Related Indemnification Arrangements with our Executives







27





On October 28, 2009, Apogee received a “Wells Notice” from the staff of the Commission related to our failure to timely file our reports under the Exchange Act in 2009.  See Note 9 to the consolidated financial statements - Legal and Related Indemnification Arrangements with our Executives.





As noted elsewhere, Apogee, on December 18, 2009, filed our delinquent financial report on Form 10-K for the year ended December 31, 2008. This report contained a Disclaimer of Opinion by its Independent Accountants due to significant uncertainty as to Apogee’s ability to be a going concern. On April 16, 2010 the SEC issued an Order for an Administrative Hearing based on a claim that the filing as well as Form 10-Q’s for the first three quarters of 2009, which had been filed on January 15, 2010, were materially deficient due to the Disclaimer of Opinion and thus the filings remained delinquent.  The Disclaimer of Opinion was removed on a subsequent filing.  We were also delinquent on our Form 10-K for the Year ended December 31, 2009. An Order of Suspension of trading in our securities was enacted at that time.  We also did not file our Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.





In June 2010 the SEC and Apogee entered into a Settlement agreement without the above mentioned Hearing, under which we would file all its delinquent filings without a material deficiency by a mutually agreed date. Failure to do so would activate an Order to revoke the ability for our securities to trade on an exchange.  On August 18, 2010 we filed Amendment No.1 to our Form 10-K for the fiscal year ended 2008, Amendment No.1 to our Form 10-Qs for the first, second and third quarters of 2009 as well as our Form 10-K and Form 10-Q for the fiscal year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010, respectively.





On August 27, 2010 we received Release No. 62786, informing us that the administrative proceeding were terminated and that final judgment be entered without the imposition of a remedy pursuant to Section 12(j) of the Securities Exchange Act of 1934.





We are currently in the process of submitting an application to regain trading status on the OTCBB.





We were not receiving reimbursement under our Director and Officer insurance policy for either the indemnification of Mr. Stein or the ongoing investigation by the SEC.  As of March 31, 2009, Apogee’s Directors and Officers Liability Insurance was cancelled due to non-payment.





Corporate insurance decreased by approximately $3,800, or 92% and $27,800, or 97%, for the three and nine months ended September 30, 2010, to approximately $350 and $800 for the three and nine months ended September 30, 2010, respectively, compared to approximately $4,100 and $28,600 for the same periods in 2009.  This decrease was the result of the Directors and Officers Liability Insurance being cancelled effective as of March 31, 2009 and Commercial and Product Liability Insurance being cancelled effective as of October 13, 2009 due to non-payment.  In addition, we had reductions to various other overhead expenses, including: communication, marketing and maintenance.  Operating expenses are expected to increase when our financial position allows.




Interest Income (Expense)




Interest income includes income from Apogee’s cash and from investments and expenses related to its financing activities. During the three and nine months ended September 30, 2010 and 2009, we did not generate interest income.  As a result of the conversion of Mr. Robert Schacter et al’s interest as well as the conversion of Mr. Robert Schacter et al’s and Mr. Reiner’s promissory notes into Apogee common stock at $1.00 per share, we recorded a “gain on extinguishment of debt” of approximately $16,500 and $341,500, respectively, for the three and nine months ended September 30, 2010.  No related expense was recorded for 2009.  This transaction resulted in a gain on extinguishment of debt of $32,810 as a result of the interest conversion by Mr. Schacter.  The interest conversion by Mr. Stein was recorded as a capital transaction and recorded in Additional Paid-In Capital.





Interest expense resulting from the issuance of promissory notes and related warrants to Mr. Herbert M. Stein, Mr. David Spiegel, Mr. Robert Schacter et al and others was approximately $128,000 and $381,000, respectively, for the three and nine months ended September 30, 2010, compared to approximately $97,000 and $280,000 for the three and nine months ended September 30, 2009.  See below for a detail of these expenses.








Interest IncurredName on

3 Months ended September 30,


9 Months ended September 30,Promissory Note

2010


2009


2010


2009David Spiegel

$
47,281


$
37,489


$
139,695


$
101,483Herbert Stein


53,430



29,857



145,288



83,936Robert Schacter et al


4,409



23,765



45,932



80,160Others


22,863



5,420



49,663



13,994$
127,983


$
96,531


$
380,578


$
279,573








28




Net Loss





Apogee’s net loss for the three months ended September 30, 2010 was approximately $457,000, or $0.03 per basic and diluted common share, compared to a net loss of approximately $512,000, or $0.04 per basic and diluted common share, for the three months ended September 30, 2009.  For the nine months ended September 30, 2010, we reported a loss of approximately $1.1 million, or $0.09 per basic and diluted common share, compared to a net loss of approximately $1.7 million, or $0.14 per basic and diluted common share, for the nine months ended September 30, 2009.  This decrease in our net loss was primarily the result of the approximately $341,000 “gain on extinguishment of debt” recorded for the nine months ended September 30, 2010, as a result of the interest and debt conversion to Apogee common stock for Mr. Schacter at $1 per share and the debit conversion to Apogee common stock for Mr. Reiner at $1 per share and reductions in expenses of approximately $400,000 as described above.




LIQUIDITY AND CAPITAL RESOURCES




The tables below summarize our outstanding unsecured interest-bearing promissory notes  (including amounts subsequent to September 30, 2010) totaling approximately $3.0 million  (This amount is subsequent to the conversion of $585,000 in promissory notes by Mr. Robert Schacter et al and the $30,000 conversion of a promissory note by Mr. Friedrich Reiner):





Herbert M. SteinDate of

Maturity
Initial
CurrentPromissory Note
Amount
Date
Interest Rate
Interest RateDecember 11, 2007
$250,000
March 10, 2008
8.00%
12.00%February 21, 2008
100,000
August 19, 2008
8.00%
12.00%March 20, 2008
50,000
September 16, 2008
8.00%
12.00%April 1, 2008
50,000
September 28, 2008
8.00%
12.00%May 15, 2008
50,000
November 11, 2008
8.00%
12.00%June 16, 2008
35,000
December 13, 2008
8.00%
12.00%June 18, 2008
40,000
December 15, 2008
8.00%
12.00%July 15, 2008
30,000
January 11, 2009
8.00%
12.00%July 28, 2008
50,000
January 24, 2009
8.00%
12.00%August 12, 2008
35,000
February  8, 2009
8.00%
12.00%August 27, 2008
35,000
February 23, 3009
8.00%
12.00%September 5, 2008
35,000
March 4, 2009
8.00%
12.00%October 27, 2008
25,000
April 25, 2009
8.00%
12.00%February 2, 2009
30,000
August 1, 2009
8.00%
12.00%February 17, 2009
10,000
August 16 2009
8.00%
12.00%March 19, 2009
25,900
September 15, 2009
8.00%
12.00%April 13, 2009
33,000
October 10, 2009
8.00%
12.00%May 18, 2009
12,000
November 14, 2009
8.00%
12.00%July 1, 2009
20,000
December 28, 2009
8.00%
12.00%November 5, 2009
42,500
May 4, 2010
8.00%
12.00%December 21, 2009
83,500
June 19, 2010
8.00%
12.00%December 30, 2009
27,000
January 25, 2010
8.00%
12.00%January 7, 2010
15,000
January 25, 2010
8.00%
12.00%January 8, 2010
10,000
January 25, 2010
8.00%
12.00%January 14, 2010
27,000
January 25, 2010
8.00%
12.00%February 12, 2010
66,000
August 21, 2010
8.00%
12.00%April 16, 2010
86,500
October 13, 2010
8.00%
12.00%June 4, 2010
116,000
December 1, 2010
8.00%
8.00%August 11, 2010
45,700
February 7, 2011
8.00%
8.00%September 22, 2010
6,300
March 21, 2011
8.00%
8.00%9,000$1,450,400







29







David SpiegelDate of

Maturity
Initial
CurrentPromissory Note
Amount
Date
Interest Rate
Interest RateDecember 11, 2007
$150,000
March 10, 2008
8.00%
12.00%February 21, 2008
100,000
August 19, 2008
8.00%
12.00%March 20, 2008
100,000
September 16, 2008
8.00%
12.00%April 1, 2008
50,000
September 28, 2008
8.00%
12.00%May 15, 2008
50,000
November 11, 2008
8.00%
12.00%June 16, 2008
65,000
December 13, 2008
8.00%
12.00%June 18, 2008
50,000
December 15, 2008
8.00%
12.00%July 15, 2008
50,000
January 11, 2009
8.00%
12.00%July 28, 2008
50,000
January 24, 2009
8.00%
12.00%August 12, 2008
35,000
February 8, 2009
8.00%
12.00%August 27, 2008
35,000
February 23, 3009
8.00%
12.00%September 5, 2008
35,000
March 4, 2009
8.00%
12.00%October 27, 2008
35,000
April 25, 2009
8.00%
12.00%January 6, 2009
80,000
July 5, 2009
8.00%
12.00%March 19, 2009
64,000
September 15, 2009
8.00%
12.00%May 19, 2009
35,000
November 15, 2009
8.00%
12.00%June 10, 2009
25,000
December 7, 2009
8.00%
12.00%July 1, 2009
32,000
December 28, 2009
8.00%
12.00%November 5, 2009
103,000
May 4, 2010
8.00%
12.00%December 21, 2009
68,000
June 19, 2010
8.00%
12.00%January 25, 2010
4,665
July 24, 2010
8.00%
12.00%April 16, 2010
16,000
October 13, 2010
8.00%
12.00%June 4, 2010
14,000
December 1, 2010
8.00%
8.00%August 11, 2010
100,000
February 7, 2011
8.00%
8.00%$1,346,665








30





OthersDate of

Maturity
Initial
CurrentPromissory Note
Amount
Date
Interest Rate
Interest RateJuly 28, 2008
$20,000
January 24, 2009
8.00%
12.00%October 27, 2008
6,000
April 25, 2009
8.00%
12.00%January 6, 2009
500
July 6, 2009
8.00%
12.00%February 17, 2009
37,000
August 16, 2009
8.00%
12.00%March 19, 2009
500
September 15, 2009
8.00%
12.00%April 13, 2009
31,500
October 10, 2009
8.00%
12.00%April 13, 2009
30,000
October 10, 2009
12.00%
16.00%April 16, 2010
20,000
October 13, 2010
12.00%
12.00%May 18, 2009
32,000
November 14, 2009
8.00%
12.00%May 19, 2009
500
November 15, 2009
8.00%
12.00%November 5, 2009
70,000
May 4, 2010
8.00%
12.00%December 21, 2009
2,563
June 19, 2010
8.00%
12.00%126,000$376,563





As of September 30, 2010, we had cash of approximately $500 and a working capital deficiency of approximately $6.5 million.  This compares to cash of approximately $4,700 as of December 31, 2009 and a working capital deficiency of approximately $6.1 million.  During the three and nine months ended September 30, 2010, we received proceeds from loans and unsecured interest-bearing promissory notes and stock purchases totaling $161,000 and $561,500, compared to approximately $135,000 and $871,900, for the same periods in 2009, detailed as follows:





Combined Loan AmountsName on

3 Months ended September 30,


9 Months ended September 30,Promissory Note

2010


2009


2010


2009David Spiegel

$
100,000


$
67,000


$
130,000


$
223,000Herbert Stein


61,000



33,000



381,500



163,900Robert Schacter et al


—



25,000



—



345,000Other


—



10,000



50,000



140,000$
161,000


$
135,000


$
561,500


$
871,900








These promissory notes are payable upon demand and were not subject to any premium or penalty for prepayment. The loan interest rate is 8% per annum, except for 12% loan interest rate for JAZFund, payable monthly in arrears on the outstanding balance.  An additional 4% interest is charged on any notes exceeding maturity.  In addition, post maturity notes are compounded monthly.





Mr. Robert Schacter requested that the $545,000 in Promissory Notes issued in the name of Robert Schacter (TYJO Corp. Money Purchase Pension Plan), and $20,000 each issued in the names of Mr. Robert Schacter, as Custodian for Tyler Schacter UTMA/CA and Mr. Robert Schacter, as Custodian for Joseph Schacter UTMA/CA be converted to shares of Apogee Common Stock.  On June 4, 2010 the Board of Directors approved this transaction and authorized the issuance of 585,000 shares of Apogee Technology, Inc. Common Stock at a price of $1.00 per share.  The closing price on June 4, 2010 was $0.50; therefore, we recorded a $292,500 gain on extinguishment of this debt at June 30, 2010.





In consideration of his continued financial support, the Board of Directors, on June 4, 2010, approved the issuance of an additional 151,750 in warrants to Mr. Robert Schacter et al.   We used the Black Scholes method to value these warrants.  As a result of this transaction, we recorded a $56,754 warrant expense during the second quarter ended June 30, 2010.   These warrants include customary terms and include a cashless or net exercise provision for exercise.  These warrants are not entitled to receive dividends, vote, receive notice of any meetings of stockholders or otherwise have any right as stockholders with respect to their warrant shares.  The values of these warrants were determined by using the Black Scholes valuation model.





31





Mr. Friedrich Reiner requested that his $30,000 Promissory Note be converted into shares of Apogee Common Stock.  On September 22, 2010 the Board of Directors approved this transaction and authorized the issuance of 30,000 shares of Apogee Technology, Inc. Common Stock at a price of $1.00 per share.  The closing price on September 22, 2010 was $0.45; therefore, we recorded a $16,500 gain on extinguishment of debt at September 30, 2010.  As added consideration for his conversion, the Board of Directors also approved the issuance of an additional 15,000 is warrants.  These warrants were valued using the Black Scholes method.  As a result of this transaction, we recorded a $5,290 warrant expense during the third quarter ended September 30, 2010.  The terms of these warrants were the same as the above warrants issued to Robert Schacter et al during the second quarter ended June 30, 2010.





On June 26, 2010 Apogee completed an offer to our Note holders whereby Note holders could convert all interest  amounts accrued and unpaid as of April 15, 2010 into Apogee Common Stock at a price of $1 per share. Two Note holders accepted this offer:





InterestNote Holder

ConvertedHerbert M. Stein

$
204,098Robert Schacter, et al


82,024Total interest converted

$
286,122





This transaction resulted in a gain on extinguishment of debt of $32,810 as a result of the interest conversion by Mr. Schacter.  This transaction was recorded as of June 30, 2010.  The interest conversion by Mr. Stein was recorded as a capital transaction and record in Additional Paid-In Capital





For the nine months ended September 30, 2010, Apogee sold 145,000 shares of our common stock to accredited investors at a price of $1.00 per share.  The aggregate net proceeds to Apogee after fees and expenses were $141,850, which we will use for general working capital and corporate purposes.  The shares of Apogee’s common stock were issued and sold in a private placement in reliance on an exemption from registration provided by Section 4(2) of Securities Act of 133, as amended, and Rule 506 of Regulation D promulgated thereunder.The shares of the common stock issued in this private placement have not been registered under the Securities Act of 1933 and may not be subsequently offered or sold by the investors in the United States absent registration or an applicable exemption from the registration requirements.  In addition, the issuance of warrants were approved by the Board of Directors, pursuant to which these shareholders shall have the right to acquire up to 50% of the number of shares of Common Stock issued as a result of their investment.  These warrants are exercisable immediately upon issuance and for a term of three years at an exercise price of $1.00 per share.





A summary of the equity funding for the nine months ended September 30, 2010 is as follows:








Shareholder

Interest Conversion


Debt Conversion


Stock Purchased


Total Shares PurchasedRobert Schacter et al

$
82,024


$
585,000


$
100,000


$
767,024Friedrich Reiner


—



30,000



20,000



50,000Herbert M. Stein


204,098



—



—



204,098Others


—



—



25,000



25,000$
286,122


$
615,000


$
145,000


$
1,046,122





Net cash used in operating activities for the nine-month period ended September 30, 2010 decreased to approximately $613,000 compared to approximately $815,000 in the nine-month period ended September 30, 2009.  As of September 30, 2010, our accounts payable and accrued expenses were approximately $3.5 million, of which a majority is composed of professional fees.   We are currently in arrears with loan and interest payments as well as with a majority of our vendors.  Mr. Stein has not drawn cash compensation from Apogee since June 30, 2009, nor has the Board of Directors received cash compensation since early 2008.  We have accrued Mr. Stein’s salary and related taxes as well as the Board of Directors’ compensation.






32





Net cash used in investing activities for the nine months ended September 30, 2010 was approximately $98,000, compared to approximately $10,000 for the nine months ended September 30, 2009.  This amount is exclusively related to our continued support of existing patent applications related to our Life Science Group.





Net cash provided by financing activities was approximately $707,000 for the nine months ended September 30, 2010.  This compares to approximately $825,000 for the nine months ended September 30, 2009 and approximately $1.1 million for the twelve months ended December 31, 2009.  During the nine-month period ended September 30, 2010, we received the proceeds from unsecured interest bearing promissory notes totaling $561,500 as described above.  See Footnote 6 of the consolidated financials statements - Promissory Notes, Loans and Warrants.  We are currently in default on substantially all of the promissory notes.  As part of an on-going private placement, Apogee sold 145,000 shares of our common stock to accredited investors at a price of $1.00 per share.  The aggregate gross proceeds to Apogee, before fees and expenses, were $145,000.  We must raise additional capital to continue operations.





Apogee is in the process of attempting to secure sufficient financing, to pay its indebtedness and to continue operations.  We have been working to obtain financing from outside investors for more than 24 months, but have not yet been successful.  As of September 30, 2010 approximately $2.6 million in promissory notes are in default.  In the interim, short-term debt financing provided primarily by two of Apogee’s significant shareholders, including our President, Chief Executive Officer and Chairman of the Board of Directors and Mr. David Spiegel, as well as and others, is being utilized to preserve our intellectual property, maintain our technical capabilities and know-how, and support our technology development in accordance with our licensing agreement.  Due to the early stages of development of our products technology, we cannot estimate at this time the amounts of cash and length of time that will be required to bring our products under development to market.  It is expected that such costs will be funded not only by external financing, but also through partnership activities.  Additionally, discontinuations of sensor development, deferral of capital expenditures, and reduced general spending have been instituted until such time as financing is secured.  We do not expect any significant changes in the number of employees until funding has been secured, if ever.  If we are unable to generate or obtain financing, we will be required to further curtail our operations, including a reduction in the number of employees, or cease conducting business.





CRITICAL ACCOUNTING POLICIES AND ESTIMATES





Apogee prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates, judgments and assumptions that we believe are reasonable based upon the information currently available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Any future changes to these estimates and assumptions could have a significant impact on the reported amounts of revenue, expenses, assets and liabilities in our financial statements. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:





Development Stage Company





Apogee is considered to be in the development stage as defined in Accounting Standards Codification (“ASC”) ASC 915 “Accounting and Reporting by Development Stage Enterprises”.  Since October 1, 2008, we have devoted substantially all of our efforts to business planning, raising capital and research and development.





Revenue Recognition





Consulting and licensing revenue is recognized as services are performed.  During the three and nine months ended September 30, 2010, we recognized 25,000 and $40,000, respectively in consulting revenue as a result of achieving certain research milestones in the framework of our collaboration with Children’s Hospital Corporation (“CHB”).




Royalty revenue will be recognized when earned in accordance with the underlying agreements.





Product revenue will be recognized when the following revenue recognition criteria are met:  (1) persuasive evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured.  We had no product sales since the first quarter ended March 31, 2008.





Valuation/Impairment of Long-Lived Assets






33





Property, plant and equipment, patents and trademarks are amortized over their estimated useful lives. Useful lives are based on management’s estimates over the period that such assets will potentially generate.  In accordance with ASC Topic 360, "Property, Plant and Equipment," long-lived assets to be held and used are reviewed to determine whether any events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.  The conditions considered include whether or not the asset is in service, has become obsolete, or whether external market circumstances indicate that the carrying amount may not be recoverable.  We recognize a loss for the difference between the estimated fair value of the asset and the carrying amount. The fair value of the asset is measured using either available market prices or estimated discounted cash flows.  Future adverse changes in market conditions or poor operating results of underlying capital investments or certain assets could result in losses or an inability to recover the carrying value of such assets, thereby possibly requiring an impairment charge in the future.  Based on our analysis, no asset impairment charges were considered necessary for the three and nine months ended September 30, 2010.  At March 31, 2009, we recorded a patent impairment charge of approximately $17,000 to reflect the write-off of patent costs associated with the discontinuation of our Health Monitoring Group.  Additionally, we amortize the balance of our patent applications over five years, which resulted in charges of $16,000 and $41,000 for the three and nine months ended September 30, 2010, compared to approximately $10,000 and $30,000 for the same periods in 2009.





Stock-Based Compensation





We account for stock-based compensation for employees in accordance with ASC Topic 718, "Compensation-Stock Compensation” using the modified prospective method.  Under the fair value recognition provision of ASC Topic 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense as it is earned over the requisite service period, which is the vesting period. The fair value of the options on their grant date is measured using the Black-Scholes option-pricing model, which we believe yields a reasonable estimate of the fair value of the grants made. The valuation provisions of ASC Topic 718 apply to grants issued since January 1, 2006 (the effective date) and to grants that were outstanding as of that date that are subsequently modified. Estimated compensation expense for grants that were outstanding as of the effective date will be recognized over the remaining vesting period.





Non-employee stock-based compensation is accounted for in accordance with ASC Topic 505, "Equity-based payments to Non-Employees."  In accordance with this topic, cost recognized for non-employee share-based payment transactions is determined by the fair value of whichever is more reliably measurable:  (a) the goods or services received; or (b) the equity instruments issued.





Legal Fees





We record legal costs (such as fees and expenses of outside legal counsel and other service providers) when incurred or when it is probable that a liability has been incurred on or before the balance sheet date and the amount can be reasonably estimated if invoices have not been received.  Legal fees decreased for the three and nine months ended September 30, 2010 with the settlement of the current and prior SEC investigations as well as the settlement of the civil action by Joseph Shamy against our President, Chief Executive Officer and Chairman of the Board of Directors.





Contingencies





Apogee is involved in and/or indemnifies others in various legal proceedings.  Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable.  See Note 9 to the consolidated financial statements - Legal and Related Indemnification Arrangements with our Executives and Others.





Off-Balance Sheet Arrangements





We have no off-balance sheet arrangements nor do we have any special purpose entities.





ITEM 3 – QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Apogee’s financial instruments include: cash, loans and accounts payable.  At September 30, 2010, the carrying value of our cash, loans and accounts payable approximate fair values given the short maturity of these instruments.





34






We believe that our financial instruments do not carry a material foreign currency exchange rate risk since any international sales will be paid in U.S. dollars and material purchases from foreign suppliers are typically also denominated in U.S. dollars.




It is our policy not to enter into derivative financial instruments for speculative purposes.





ITEM 4T – CONTROLS AND PROCEDURES





(a) Evaluation of Disclosure Controls and Procedures. Apogee’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this report.  Based on this evaluation, Apogee’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, the disclosure controls and procedures were effective to ensure that the information required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.




(b) Changes in Internal Controls. There have not been any changes in Apogee’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of such internal control that occurred during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.





PART II - OTHER INFORMATION





ITEM 1 – LEGAL PROCEEDINGS





From time to time, we may be a party to various legal proceedings arising in the ordinary course of our business.  If and when these proceedings arise, we are committed to vigorously defending ourselves in any such legal actions.





An investigation by the Security and Exchange Commission (“SEC”), which Apogee first became aware of in May 2005, was ongoing in 2008. The subject matter of this investigation is Apogee's prior revenue recognition practices that were addressed in the restatement of our financial statements for the fiscal year ended December 31, 2004. As previously disclosed in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as amended, Apogee’s Audit Committee, with the assistance of independent counsel, conducted an investigation into Apogee’s historical accounting practices that resulted in the implementation of remedial actions. See our Annual Report on Form 10-KSB for the year ended December 31, 2004, as amended, for detail regarding the restatement.





In July 2008, Apogee, it’s Chief Executive Officer and other employees received notifications from the Staff of the SEC relating to the Staff's 2005 investigation. These notifications, known as “Wells Notices,” stated that the Staff is considering recommending that the Commission bring enforcement actions against Apogee and certain employees, based on alleged violations of certain provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933, as amended, Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 thereunder. The Wells Notice sent to us indicated that in any action actually brought against Apogee, the Staff would seek an injunction against future violations of the federal securities laws as relief.





On May 19, 2009, the SEC settled the enforcement action with Apogee, one employee, and one former employee (“Others”).  Each of the Defendants has agreed to settle this matter, without admitting or denying the allegations of the SEC’s complaint.  Apogee and Others agreed to the entry of a final judgment permanently enjoining them from violating or aiding and abetting violations of Sections of the Securities Act of 1933, as amended, and Sections of the Securities Exchange Act of 1934, as amended, and various Rules thereunder.  Others also agreed to financial and other sanctions.





In addition, we incurred legal fees associated with the indemnification costs in connection with the civil action styled Joseph Shamy vs. Herbert M. Stein Case No.: 50 2005 CA 007719 XXXXMB.  In this action instituted in the 15th Judicial Circuit in and for Palm Beach County, Florida (the "Court), Joseph Shamy sued Herbert M. Stein, President, Chief Executive Officer and Chairman of the Board of Apogee in connection with Shamy’s purchase of Apogee shares in 2003 and 2004.  In February 2009, in connection with a settlement, the Court entered a Final Judgment against Mr. Stein.  In early January 2010, a filing was made with the Court to memorialize the Total and Complete Satisfaction of Judgment, which states that all sums due under the civil action were fully paid and that the Final Judgment was satisfied and canceled.  Further, the Clerk of the Court was directed to note satisfaction of the Final Judgment and cancellation of all judgments of record in this action. Apogee was not a party to the aforementioned settlement or the satisfaction of the Final Judgment. See Note 9 to the consolidated financial statements - Legal and Related Indemnification Arrangements with our Executives and Others.




35





Due to its financial condition, Apogee had been unable to fund payments to its independent auditors. Accordingly, it did not timely file its 2008 Annual Report on Form 10-K, as well as quarterly reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009, and September 30, 2009. Additionally, we did not file timely Current Reports on a Form 8-K and reports under Section 16 of the Securities Exchange Act of 1934, as amended.  Subsequently, during the fourth quarter of 2009, we paid the outstanding balance to our auditors and filed our Annual Report on 10-K for the fiscal year ended December 31, 2008 on December 18, 2009.





On October 28, 2009, Apogee received a “Wells Notice” from the Staff of the SEC, which stated the Staff’s intent to recommend that the SEC institute a public administrative proceeding against Apogee, alleging that it violated Section 13(a) of the Securities Exchange Act of 1934, as amended for failing to file its 2008 Form 10-K and other periodic reports.





In connection with the contemplated proceedings, the Staff may seek a suspension or revocation of each class of Apogee’s registered securities. Also, the Staff may consider whether contempt proceedings in a federal district court are appropriate.  Apogee submitted a response to this letter on November 16, 2009.  Should suspension or revocation of registration of our stock occur, our ability to raise additional funding may be severely impacted.  On December 18, 2009 we filed our 2008 Annual Report on Form 10-K and our 2009 Quarterly Reports on Form 10-Q for the periods ended March 31, 2009, June 30, 2009 and September 30, 2009 in January 2010.





As noted above Apogee, on December 18, 2009, filed its delinquent financial report on Form 10-K for the year ended December 31, 2008. This report contained a Disclaimer of Opinion by its Independent Accountants due to significant uncertainty as to Apogee’s ability to be a going concern. On April 16, 2010 the SEC issued an Order for an Administrative Hearing based on a claim that the filing as well as Form 10-Q’s for the first three quarters of 2009, which had been filed on January 15, 2010, were materially deficient due to the Disclaimer of Opinion and thus the filings remained delinquent. The Disclaimer of Opinion was removed on a subsequent filing.  We were also delinquent on its Form 10-K for the Year ended December 31, 2009. An Order of Suspension of trading in Apogee’s securities was enacted at that time.





In June 2010 the SEC and Apogee entered into a Settlement agreement without the above mentioned Hearing, under which we would file all our delinquent filings without a material deficiency by a mutually agreed date. Failure to do so would activate an Order to revoke the ability for Apogee’s securities to trade on an exchange.  On August 18, 2010 we filed Amendment No.1 to our Form 10-K for the fiscal year ended 2008, Amendment No.1 to our Form 10-Qs for the first, second and third quarters of 2009 as well as our Form 10-K and Form 10-Q for the fiscal year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010, respectively.





On August 27, 2010 we received Release No. 62786, informing us that the administrative proceeding were terminated and that final judgment be entered without the imposition of a remedy pursuant to Section 12(j) of the Securities Exchange Act of 1934.





We are currently in the process of submitting an application to regain trading status on the OTCBB.





ITEM 1A – RISK FACTORS




There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.




Aside from those risks discussed below, there have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.





RISKS RELATED TO OUR BUSINESS





WE REQUIRE ADDITONAL CAPITAL TO CONTINUE OPERATIONS AND HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.






36





As of September 30, 2010, we had approximately $500 in cash, a stockholders’ deficiency of approximately $6.3 million, an accumulated deficit of approximately $26.2 million and a working capital deficiency of approximately $6.5 million.  We had a net loss of approximately $457,000 and $1.1 million for the three and nine months ended September 30, 2010, respectively, compared to net loss of approximately $512,000 and $1.7 million for the same periods in 2009.  In the fiscal year ended December 31, 2009, we recorded a net loss of approximately $2.2 million.





We have substantial debt and interest obligations and expect to incur additional debt to the extent available, to maintain our operations. As of September 30, 2010, subsequent to the conversion of $615,000 of promissory notes into 615,000 shares of Apogee Common Stock at $1.00 per share, we had approximately $3.0 million in promissory notes and loans outstanding to a significant shareholder, our President, Chief Executive Officer and Chairman of the Board of Directors, individual investors and others.  These promissory notes are payable upon demand, not subject to any premium or penalty for prepayment, bear simple interest of 8% or for JAZFund LLC 12% per annum until maturity.  An additional 4% interest compounded monthly is charged on all post-maturity notes.  We are currently in default on substantially all of the promissory notes.





We have large unpaid balances with professional firms, primarily attorneys.  We are currently in arrears with loan and interest payments and a majority of our vendors.





As of March 31, 2009 and October 13, 2009, respectively, Apogee’s Directors and Officers Liability Insurance and other business insurance were cancelled due to non-payment and we maybe required to pay uninsured losses and/or cease operations due to these potential uninsured losses.





On October 28, 2009, Apogee received a “Wells Notice” from the staff of the Commission related to our failure to timely file our reports under the Exchange Act in 2009.  See Note 9 to the consolidated financial statements - Legal and Related Indemnification Arrangements with our Executives.




As noted elsewhere, Apogee, on December 18, 2009, filed our delinquent financial report on Form 10-K for the year ended December 31, 2008. This report contained a Disclaimer of Opinion by its Independent Accountants due to significant uncertainty as to Apogee’s ability to be a going concern. On April 16, 2010 the SEC issued an Order for an Administrative Hearing based on a claim that the filing as well as Form 10-Q’s for the first three quarters of 2009, which had been filed on January 15, 2010, were materially deficient due to the Disclaimer of Opinion and thus the filings remained delinquent.  The Disclaimer of Opinion was removed on a subsequent filing.  We were also delinquent on our Form 10-K for the Year ended December 31, 2009. An Order of Suspension of trading in our securities was enacted at that time.  We also did not file our Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.





In June 2010 the SEC and Apogee entered into a Settlement agreement without the above mentioned Hearing, under which we would file all its delinquent filings without a material deficiency by a mutually agreed date. Failure to do so would activate an Order to revoke the ability for our securities to trade on an exchange.  On August 18, 2010 we filed Amendment No.1 to our Form 10-K for the fiscal year ended 2008, Amendment No.1 to our Form 10-Qs for the first, second and third quarters of 2009 as well as our Form 10-K and Form 10-Q for the fiscal year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010, respectively.





On August 27, 2010 we received Release No. 62786, informing us that the administrative proceeding were terminated and that final judgment be entered without the imposition of a remedy pursuant to Section 12(j) of the Securities Exchange Act of 1934.





We are currently in the process of submitting an application to regain trading status on the Over-the-Counter Bulletin Board “OTCBB”.  Acceptance cannot be assured.





Even if we are able to secure additional financing to support our operations and repay our existing indebtness, our ability to generate future revenue and achieve profitability depends on a number of factors, many of which are described in the Risk Factors Section of Annual Report on Form 10-K for the fiscal year ended December 31, 2009, including our ability to develop and generate revenues from our medical device products, which are at a very early stage of development.  We cannot assure you when, if ever, we will generate meaningful revenues from the sales of these products under development.





IF OUR ATTEMPTS TO SECURE ADDITIONAL FINANCING ARE NOT SUCCESSFUL, WE WILL BE REQUIRED TO CEASE OR CURTAIL OUR OPERATIONS, OR OBTAIN FUNDS ON UNFAVORABLE TERMS.  THESE FACTORS CREATE A SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.






37





Our available resources are not sufficient to fund our operations, without additional sources of financing we would not be able to continue our business, and we expect to incur operating losses for the foreseeable future.  Consequently, in order to maintain our operations, which we have already curtailed substantially, we will need to access additional equity or debt capital.  Securing financing is proving even more difficult than anticipated in light of the current global economic crisis and the turmoil impacting global financial markets.  These factors create a substantial doubt about our ability to continue as a going concern.  In light of our negative stockholders’ equity, there can be no assurance that we will be able to obtain the necessary additional capital on a timely basis or on acceptable terms, if at all, to continue our operations and, to the extent available, to fund the development of our business. In any of such events, the continuation of our operations would be materially and adversely affected and we may have to cease conducting business.





As noted above, Apogee is in the process of attempting to secure sufficient financing to continue operations.  We have been working to obtain financing from outside investors for more than 24 months, but have not yet been successful.  In the interim, short-term debt financing provided primarily by two of Apogee’s significant shareholders, including our President, Chief Executive Officer and Chairman of the Board of Directors and Mr. David Spiegel, as well as Mr. Robert Schacter, et al and others, is being utilized to preserve our intellectual property, maintain our technical capabilities and know-how, and support our technology development in accordance with our licensing agreement.  Additionally, cost cutting measures, deferral of capital expenditures, non-payment of professional and other service providers and reduced general spending have been instituted until such time as financing is secured, if ever.  If we are unable to obtain financing, we will be required to further curtail our operations or cease conducting business.  Given our current level of debt, we do not expect that our stockholders would receive any proceeds if we declare bankruptcy or seek to liquidate Apogee.  As of March 31, 2009, we closed down operations of the Health Monitoring Product Group.  Costs associated with this cessation of operations as well as the termination of employees associated with this Group were not material.





SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS





This document and the documents incorporated by reference herein contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Also, Apogee’s management may make forward-looking statements orally or in writing to investors, analysts, the media and others. Forward-looking statements express our expectations or predictions of future events or results. They are not guarantees and are subject to many risks and uncertainties. There are a number of factors that could cause actual events or results to be significantly different from those described in the forward-looking statements. Forward-looking statements might include statements regarding one or more of the following:




·           anticipated financing activities;




·           anticipated strategic alliances or arrangements with development or marketing partners;




·           anticipated research and product development results;




·           projected development and commercialization timelines;




·           descriptions of plans or objectives of management for future operations, products or services;




·           forecasts of future economic performance; and




·           descriptions or assumptions underlying or relating to any of the above items.




Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts or events. They use words such as “anticipate”, “estimate”, “expect”, “project”, “intend”, “opportunity”, “plan”, “potential”, “believe” or words of similar meaning. They may also use words such as “will”, “would”, “should”, “could” or “may”.




Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of such statements. We do not intend to update any of the forward-looking statements after the date of this report to conform such statements to actual results except as required by law. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. You should carefully consider that information before you make an investment decision. You should review carefully the risks and uncertainties identified in this report and in Apogee’s Annual Report on Form 10-K for the year ended December 31, 2009.







38




ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





During the period ended September 30, 2010, our unregistered sales of equity securities were reported on Current Reports on Form 8-K.  See Note 7 – Stockholders’ Deficiency - Promissory Note Conversion.








ITEM 3 – DEFAULTS UPON SENIOR SECURITIES





As of September 30, 2010, subsequent to the conversion of promissory notes by Robert Schacter et al and Friedrich Reiner, $2,634,128 was in default and accruing post-maturity interest. The promissory notes listed below now bear interest at 12% with the exception of one promissory note which now bears interest at 16%, the interest after maturity, are payable on demand, and are compounded monthly as a result of non-payment at maturity date.





David SpiegelAmountAccruing PostDate of
Maturity
Maturity InterestPromissory Note
Date
Interest at 12%December 12, 2007
March 10, 2008
$150,000February 21, 2008
August 19, 2008
100,000March 20, 2008
September 16, 2008
100,000April 1, 2008
September 28, 2008
50,000May 15, 2008
November 11, 2008
50,000June 16, 2008
December 13, 2008
65,000June 18, 2008
December 15, 2008
50,000July 15, 2008
January 11, 2009
50,000July 28, 2008
January 24, 2009
50,000August 12, 2008
February 8, 2009
35,000August 27, 2008
February 23, 2009
35,000September 5, 2008
March 4, 2009
35,000October 27,2008
April 25 ,2009
35,000January 9, 2009
July 5, 2009
80,000March 19, 2009
September 15, 2009
64,000May 19, 2009
November 15, 2009
35,000June 10, 2009
December 7, 2009
25,000July 1, 2009
December 28, 2009
32,000November 5, 2009
May 4, 2010
103,000December 21, 2009
June 19, 2010
68,000January 25, 2010
July 24, 2010
4,665Total

$1,216,665






39





Herbert M. SteinAmountAccruing PostDate of
Maturity
Maturity InterestPromissory Note
Date
Interest at 12%December 12, 2007
March 10, 2008
$250,000February 21, 2008
August 19, 2008
100,000March 20, 2008
September 16, 2008
50,000April 1, 2008
September 28, 2008
50,000May 15, 2008
November 11, 2008
50,000June 16, 2008
December 13, 2008
35,000June 18, 2008
December 15, 2008
40,000July 15, 2008
January 11, 2009
30,000July 28, 2008
January 24, 2009
50,000August 12, 2008
February 8, 2009
35,000August 27, 2008
February 23, 2009
35,000September 5, 2008
March 4, 2009
35,000October 27, 2008
April 25, 2009
25,000February 2, 2009
August 1, 2009
30,000February 17, 2009
August 16, 2009
10,000March 19, 2009
September 15, 2009
25,900April 13, 2009
October 10, 2009
33,000May 18, 2009
November 14, 2009
12,000July 1, 2009
December 28, 2009
20,000November 5, 2009
May 4, 2010
42,500December 21, 2009
June 19, 2010
83,500January 25, 2010
July 24, 2010
79,000February 22, 2010
August 21, 2010
66,000Total

$1,186,900








OthersAmountAccruing PostDate of
Maturity
Maturity InterestPromissory Note
Date
Interest at 12%July 28, 2008
January 24, 2009
$20,000October 27, 2008
April 25, 2009
6,000January 6, 2009
July 5, 2009
500February 17, 2009
August 16, 2009
37,000March 19, 2009
September 15, 2009
500April 13, 2009
October 10, 2009
31,500April 13, 2009*
October 10, 2009
30,000May 18, 2009
November 14, 2009
32,000May 19, 2009
November 15, 2009
500November 5, 2009
May 4, 2010
70,000December 21, 2009
June 19, 2010
2,563Total

$230,563









* Post maturity interest at 16% for JAZFund LLC





ITEM 4T – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.





ITEM 5 – OTHER INFORMATION





None.








40








ITEM 6 – EXHIBITS





(a)  Exhibits:







ExhibitNumber

Description10.1+

Promissory Note dated as of August 11, 2010 by and between Apogee Technology, Inc. and Herbert M. Stein.  (Previously filed on a Current Report on Form 8-K, August 13, 2010.)10.2+

Promissory Note dated as of August 11, 2010 by and between Apogee Technology, Inc. and David Spiegel.  (Previously filed on a Current Report on Form 8-K, August 13, 2010.)10.3+

Form of Warrant. (Previously filed on a Current Report on Form 8-K, August 13, 2010.)10.4+

Promissory Note dated as of September 22, 2010 by and between Apogee Technology, Inc. and Herbert M. Stein.  (Previously filed on a Current Report on Form 8-K, September 27, 2010.)10.5+

Form of Warrant. (Previously filed on a Current Report on Form 8-K, September 27, 2010.)10.6+

Common Stock Purchase Warrant (Previously filed on a Current Report on Form 8-K, September 27, 1010.)31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.32

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer and Chief Financial Officer.









+ Previously filed as indicated.






































41
















SIGNATURES









In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.







APOGEE TECHNOLOGY, INC.Date: November  15, 2010
By:
/s/
Herbert M. SteinName: Herbert M. SteinTitle: Chairman of the Board,President, Chief Executive Officer(principal executive officer)APOGEE TECHNOLOGY, INC.Date: November 15, 2010
By:
/s/
Paul J. MurphyName: Paul J. MurphyTitle: Chief Financial Officer and Vice President of Finance(principal financial officer and principal accounting officer)