-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DCRKUjvnUzxQItB0r+brlWkBaO90e+O4ptZc2PQ4bX+tMy+4FbLCJuG8PzFh3S9q zsv5jWZhjiGNrWek/03PYw== 0000830736-07-000018.txt : 20071114 0000830736-07-000018.hdr.sgml : 20071114 20071114163003 ACCESSION NUMBER: 0000830736-07-000018 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071114 DATE AS OF CHANGE: 20071114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALPHA INNOTECH CORP CENTRAL INDEX KEY: 0000830736 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 581729436 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-14257 FILM NUMBER: 071245324 BUSINESS ADDRESS: STREET 1: 2401 MERCED ST. CITY: SAN LEANDRO STATE: CA ZIP: 94577 BUSINESS PHONE: 5104839620 MAIL ADDRESS: STREET 1: 2401 MERCED ST. CITY: SAN LEANDRO STATE: CA ZIP: 94577 FORMER COMPANY: FORMER CONFORMED NAME: XTRANA INC DATE OF NAME CHANGE: 20010702 FORMER COMPANY: FORMER CONFORMED NAME: BIOPOOL INTERNATIONAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CYTRX BIOPOOL LTD DATE OF NAME CHANGE: 19890716 10QSB 1 body_10qsb.htm ALPHA INNOTECH CORP 10-QSB FOR PERIOD ENDING 9-30-07 body_10qsb.htm

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-QSB
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2007
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number 001-14257
 
ALPHA INNOTECH CORP.
(Exact name of Registrant as specified in its charter)
 
Delaware
58-1729436
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
2401 Merced St., San Leandro, CA 94577
(510) 483-9620
(Address of principal executive offices)
(Issuer’s telephone number )
 
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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.    Yes  x    No  ¨
 
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
 
As of November 9, 2007, there were 10,462,576 shares of the issuer’s Common Stock, $.01 par value per share, outstanding.
 
 
Transitional Small Business Disclosure Format:    Yes  ¨    No  x

 





Alpha Innotech Corp.
Quarter Ended September 30, 2007
Table of Contents
 
PART I. FINANCIAL INFORMATION
       2
   
Item 1. Financial Statements
       2
Condensed Consolidated Balance Sheet (Unaudited)
       2
Condensed Consolidated Statements of Operations (Unaudited)
       3
Condensed Consolidated Statements of Cash Flows (Unaudited)
       4
Notes to Condensed Consolidated Financial Statements (Unaudited)
       5
Item 2. Management’s Discussion and Analysis or Plan of Operation
       11
Item 3. Controls and Procedures
       15
   
PART II. OTHER INFORMATION
 
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
       15
Item 5. Other Information
       16
Item 6. Exhibits
       16

FORWARD LOOKING STATEMENTS
 
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
 
Information included in this Form 10-QSB may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Except for the historical information contained in this discussion of the business and the discussion and analysis of financial condition and results of operations, the matters discussed herein are forward looking statements. These forward looking statements include but are not limited to the Company’s plans for sales growth, expectations of gross margin, expenses, new product introduction, and the Company’s liquidity and capital needs. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. In addition to the risks and uncertainties described in “Risk Factors” contained in the annual report on Form 10-KSB filed with the Securities and Exchange Commission on April 2, 2007, these risks and uncertainties may include consumer trends, business cycles, scientific developments, changes in governmental policy and regulation, currency fluctuations, economic trends in the United States and inflation. Forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

1


PART I. FINANCIAL INFORMATION
 
 Item 1.    Financial Statements
 
ALPHA INNOTECH CORP.
Condensed Consolidated Balance Sheet
 
 
 
September 30,
2007
(Unaudited)
   
December 31,
2006
 
Assets
 
 
   
 
 
Current assets:
 
 
   
 
 
Cash and cash equivalents
  $
433,844
    $
445,656
 
Accounts receivable, net
   
1,799,302
     
2,189,411
 
Inventory, net
   
1,216,884
     
633,550
 
Prepaid expenses and other current assets
   
151,413
     
189,524
 
Total current assets
   
3,601,443
     
3,458,141
 
Property and equipment, net
   
908,864
     
1,048,906
 
Other assets
   
91,307
     
91,307
 
Total assets
  $
4,601,614
    $
4,598,354
 
Liabilities and Shareholders’ Deficit
               
Current liabilities:
               
Accounts payable
  $
2,093,636
    $
1,608,286
 
Accrued liabilities
   
1,158,039
     
975,666
 
Current portion of debt
   
1,330,004
     
1,593,675
 
Deferred revenue
   
1,072,007
     
895.875
 
Other liabilities
   
190,596
     
210,474
 
Total current liabilities
   
5,844,282
     
5,283,976
 
Debt, net of current portion
   
303,221
     
489,068
 
Commitments and contingencies
   
     
 
Shareholders’ deficit:
               
Common stock, $0.01 par value per share: 50,000,000 shares authorized, 10,462,576 and 9,891,393 shares issued and outstanding
   
104,626
     
98,914
 
Additional paid in capital
   
17,358,831
     
17,108,125
 
Accumulated deficit
    (19,001,278 )     (18,373,661 )
Treasury Stock
    (8,068 )     (8,068 )
Total shareholders’ deficit
    (1,545,889 )     (1,174,690 )
Total liabilities and shareholders’ deficit
  $
4,601,614
    $
4,598,354
 
 
               
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


ALPHA INNOTECH CORP.
Condensed Consolidated Statements of Operations (Unaudited)
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2007
   
2006
   
2007
   
2006
 
Revenues
  $
3,680,160
    $
3,354,790
    $
10,838,916
    $
9,506,201
 
Cost of goods sold
   
1,690,139
     
1,503,344
     
4,885,226
     
4,520,056
 
Gross profit
   
1,990,021
     
1,851,446
     
5,953,690
     
4,986,145
 
Operating costs and expenses:
                               
Sales and marketing
   
1,299,011
     
933,044
     
3,516,406
     
3,073,621
 
Research and development
   
298,820
     
246,256
     
946,310
     
983,729
 
General and administrative
   
604,475
     
639,940
     
1,889,770
     
1,750,978
 
Total operating costs and expenses
   
2,202,306
     
1,819,240
     
6,352,486
     
5,808,328
 
Operating profit (loss)
    (212,285 )    
32,206
      (398,796 )     (822,183 )
Other income (expense):
                               
Interest expense
    (71,811 )     (77,918 )     (220,956 )     (236,012 )
Other income (expense), net
    (5,459 )     (2,354 )     (7,865 )    
18,643
 
Total other income (expense)
    (77,270 )     (80,272 )     (228,821 )     (217,369 )
Net loss applicable to common shareholders
  $ (289,555 )   $ (48,066 )   $ (627,617 )   $ (1,039,552 )
Net loss per share - basic and diluted
  $ (0.03 )   $ (0.00 )   $ (0.06 )   $ (0.11 )
Weighted average shares outstanding - basic and diluted
   
10,449,147
     
9,858,694
     
10,343,383
     
9,796,937
 
 
                               
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


ALPHA INNOTECH CORP.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 
 
Nine Months Ended
September 30,
 
 
 
2007
   
2006
 
Cash flow from operating activities
 
 
   
 
 
Net loss
  $ (627,617 )   $ (1,039,552 )
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation and amortization
   
406,784
     
436,971
 
Allowance for sales returns and doubtful accounts
    (237 )    
12,189
 
Provision for inventory
   
2,862
     
 
 
Provision for demo equipment
    (8,175 )     (49,371 )
Accretion of debt discount to interest expense
   
     
3,703
 
Stock based compensation
   
252,814
     
192,875
 
Change in operating assets and liabilities:
               
Accounts receivables
   
390,346
     
416,488
 
Inventory
    (586,195 )    
325,897
 
Prepaid expenses and other current assets
   
38,112
     
92,726
 
Other assets
   
      (19,147 )
Accounts payable
   
485,350
     
9,621
 
Accrued liabilities
   
182,372
      (103,132 )
Deferred revenue
   
176,132
     
50,800
 
Other liabilities
    (19,878 )     (16,239 )
Net cash provided by operating activities
   
692,670
     
313,829
 
Cash flows from investing activities:
               
Purchase of property and equipment
    (258,567 )     (329,211 )
Net cash used in investing activities
    (258,567 )     (329,211 )
Cash flows from financing activities:
               
Proceeds from borrowing of debt obligations
   
481
     
375,000
 
Repayment of debt obligations
    (450,000 )     (520,939 )
Proceeds from exercise of warrants
   
3,604
     
14,488
 
Repurchase of common stock
   
      (8,068 )
Net cash used in financing activities
    (445,915 )     (139,519 )
Net decrease in cash and cash equivalents
    (11,812 )     (154,901 )
Cash and cash equivalents at the beginning of the period
   
445,656
     
545,665
 
Cash and cash equivalents at the end of the period
  $
433,844
    $
390,764
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


ALPHA INNOTECH CORP.
September 30, 2007
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 
1.    Organization and Summary of Significant Accounting Policies
 
Nature of Operations - Alpha Innotech Corporation was incorporated and began operations in June 1992, in the state of California, with facilities in San Leandro, California. Xtrana, Inc. was incorporated in January 1987 in the state of Delaware. On October 3, 2005, Alpha Innotech Corporation was acquired by Xtrana, Inc. In the transactions, Alpha Innotech Corporation merged with a subsidiary of Xtrana, Inc. and became a wholly-owned subsidiary of Xtrana, Inc. Xtrana, Inc. changed its corporate name to Alpha Innotech Corp. and obtained a new trading symbol APNO.OB.
 
Alpha Innotech Corp. and subsidiary (the “Company”) develop and market both macro imaging and micro imaging systems. The macro imaging systems are used for image documentation, quantitative analysis, and image archiving. These systems are used with electrophoresis samples (gel, blots, autoradiographs, etc), microscopy applications, and general imaging from insects to culture plates. The micro imaging systems address the micro array, multiplex array and cell based markets. Researchers use the microimaging products to analyze slides or multi-well microplates printed with genomic, proteomic or cellular samples and in some cases, fixed cell cultures.
 
Basis of Presentation - The Company has prepared the accompanying condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted pursuant to these rules and regulations. These condensed consolidated financial statements should be read in conjunction with our audited financials statements and footnotes related thereto for the year ended December 31, 2006 included in our annual report on Form 10-KSB filed with the Securities and Exchange Commission on April 2, 2007 (“Annual Report”). The unaudited condensed consolidated financial statements include, in our opinion, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position as of September 30, 2007, and the results of our operations and cash flows for the nine month ended September 30, 2007 and September 30, 2006. The results of operations for such interim periods are not necessarily indicative of the results to be achieved for the full year.
 
Management’s Plan - Through September 30, 2007, the Company has incurred substantial losses. For the nine-month period ended September 30, 2007, the Company had a loss from operations in the amount of $398,796 and a net loss of $627,617. The Company has a working capital deficiency and a stockholder’s deficit as of September 30, 2007. However, the Company has had a positive cash flow from operations for the past four quarters. For the nine-month period ended September 30, 2007, the Company had a positive cash flow from operations in the amount of $692,670. As a result, management believes the Company has sufficient cash to fund its operating, investing, and financing activities in the near term.
 
Going Concern - The accompanying condensed consolidated financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities in the normal course of business. The Company has incurred recurring losses from operations and was unable to generate positive cash from operations from 1999 through 2005. These conditions raise substantial doubts about the Company’s ability to continue as a going concern. Management plans to manage expenses and operate using the existing line of credit. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
 
Comprehensive Loss- For all periods presented, there were no differences between net loss and comprehensive loss.
 
Loss Per Share - Basic net loss per share to common stockholders is calculated based on the weighted-average number of shares of common stock outstanding during the period, excluding those shares that are subject to repurchase by or forfeiture to the Company Diluted net loss per share attributable to common stockholders would give effect to the dilutive effect of common stock issuable upon the exercise or conversion of stock options and warrants. Dilutive securities have been excluded from the diluted net loss per share computations as they have an anti-dilutive effect due to the Company’s net loss.

5


 
The following outstanding stock options and warrants were excluded from the computation of diluted net loss per share attributable to holders of common stock as they had anti-dilutive effects as of September 30, 2007 and 2006.
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2007
   
2006
   
2007
   
2006
 
Shares issuable upon exercise of stock options
   
111,916
     
     
111,916
     
 
Shares issuable upon exercise of warrants
   
358,356
     
405,356
     
358,356
     
405,356
 
Denominator for basis and diluted calculations
   
470,272
     
405,356
     
470,272
     
405,356
 
 
Accounting for Uncertainty in Income Taxes - In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109,” which clarifies the accounting for uncertainty in tax positions. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN 48 provides guidance on de-recognition, classification, interest and penalties, and accounting in interim periods and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 requires that we recognize in our financial statements the impact of a tax position if that position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company adopted the provisions of FIN 48 as of January 1, 2007, with the cumulative effect of the change in accounting principle to have been recorded as an adjustment to opening retained earnings if there had been any (there were none). At the adoption date and as of March 31, 2007, the Company did not have any unrecognized tax benefits and no adjustments to liabilities or operation were required.
 
Recent Accounting Pronouncements - In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its financial position and results of operations.  
 
2.    Balance Sheet Components
Accounts receivable consisted of the following at September 30, 2007 and December 31, 2006:

   
2007
   
2006
 
Accounts receivable
  $
1,949,676
    $
2,340,022
 
Less allowance for sales returns
    (145,374 )     (143,453 )
Less allowance for doubtful accounts
    (5,000 )     (7,158 )
         Accounts receivable, net
  $
1,799,302
    $
2,189,411
 

Inventory consisted of the following at September 30, 2007 and December 31, 2006:

   
2007
   
2006
 
Raw materials
  $
1,171,116
    $
571,693
 
Inventory in transit
   
90,464
     
103,691
 
Less allowance for excess and obsolete inventory
    (44,696 )     (41,834 )
          Inventory, net
  $
1,216,884
    $
633,550
 
 

6


Property and equipment consisted of the following at September 30, 2007 and December 31, 2006:

   
2007
   
2006
 
Machinery and equipment
  $
422,397
    $
404,687
 
Furniture and fixtures
   
208,201
     
208,201
 
Leasehold improvements
   
1,507,500
     
1,507,500
 
Loaner and demonstration units
   
994,929
     
812,188
 
Computers
   
339,893
     
309,072
 
Software
   
102,610
     
90,517
 
Total property and equipment
   
3,575,530
     
3,332,165
 
Less accumulated depreciation and amortization
    (2,666,666 )     (2,283,259 )
Property and equipment, net
  $
908,864
    $
1,048,906
 
 
In 2002, the Company entered into a capital lease agreement for production equipment. As of September 30, 2007, property and equipment includes $4,756 of equipment under capital lease and accumulated amortization of assets under capital lease was $4,756.
 
Accrued liabilities consisted of the following at September 30, 2007 and December 31, 2006:

   
2007
   
2006
 
Payroll and related costs
  $
377,050
    $
412,877
 
Warranty
   
160,152
     
135,773
 
Audit and tax service fees
   
72,000
     
56,500
 
Finder’s fee
   
175,000
     
175,000
 
Consultant and Board member fees
   
81,160
     
68,930
 
Founder's bonus
   
205,000
     
 
Other
   
87,677
     
126,586
 
    Total accrued liabilities
  $
1,158,039
    $
975,666
 

3.     Share-Based Employee Compensation
 
Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payments” (“SFAS 123R”) using the modified prospective transition method. Under the modified prospective transition method, prior periods are not restated for the effect of SFAS 123R. Starting with the first quarter of 2006, compensation cost includes all share-based payments granted prior to, but not vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123R. The company recognizes the fair value of its stock option awards as compensation expense over the requisite service period of each award, generally four years. Compensation expense related to stock options granted prior to January 1, 2006 and on or after January 1, 2006 is recognized on a straight-line basis.
 
The following table presents share-based compensation expense included in the Consolidated Statement of Operations:


   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2007
   
2006
   
2007
   
2006
 
Cost of Goods Sold
  $ 567     $
2,527
    $ 5,668     $
4,644
 
Sales and marketing
   
33,909
     
4,983
     
75,351
     
13,632
 
Research and development
   
735
     
4,104
     
20,619
     
9,705
 
General and administrative
   
67,796
     
132,814
     
151,176
     
164,894
 
     Total share-based compensation
  $
103,007
    $
144,428
    $
252,814
    $
192,875
 
 
As of September 30, 2007, $795,008 of total unrecognized share-based compensation expense related to non-vested awards is expected to be recognized over the respective vesting terms of each award through September, 2011. The weighted average term of the unrecognized stock-based compensation is 1.97 years.

 

7


 
In the nine-months ended September 30, 2007, no share-based compensation expense was capitalized and there were no recognized tax benefits associated with the share-based compensation expense. The share-based compensation expense did not significantly impact basic and diluted net loss per share in nine-months ended September 30, 2007.
 
The following table summarizes the Company’s unvested stock option activity for the nine-months ended September 30, 2007:
 
   
Number of Shares
   
Weighted Average Grant Date Fair Value
 
Non-vested stock outstanding at January 1, 2007
   
389,566
    $
1.42
 
Granted
   
700,800
     
0.99
 
Vested
    (145,561 )    
0.96
 
Forfeited
    (40,062 )    
1.02
 
Expired
    (14,395 )    
5.48
 
Non-vested stock outstanding at September 30, 2007
   
890,348
    $
1.11
 

The fair value of unvested shares is $990,037 for the nine-month period ended September 30, 2007.
 
The Company estimates the fair value of stock options using the Black-Scholes Option Pricing Model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, expected option term, expected volatility of the stock over the option’s expected term, risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The Company believes that the valuation technique and approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the stock options granted.

The value of each option grant was estimated on the date of grant using the Black-Scholes Option Pricing Model with the following assumptions:
 
   
Nine-Months Ended
September 30,
 
 
 
2007
   
2006
 
Dividend yield
    0.00 %     0.00 %
Volatility
    165.07 %     121.61 %
Risk-free interest rate
    4.69 %     4.75 %
Expected term in years
 
10 years
   
10 years
 
 
 
Activity under the Company’s stock plans for the nine-month period ended September 30, 2007 is as follows:

 
   
Shares
   
Weighted -Average
Exercise
Price per
Share
   
Weighted-
Average Remaining Contractual
Terms
   
Aggregate Intrinsic Value
 
Outstanding at December 31, 2006
   
880,821
    $
2.30
             
Grants
   
700,800
     
0.99
             
Forfeitures
    (40,062 )    
1.02
             
Expirations
    (14,395 )    
5.48
             
Outstanding at September 30, 2007
   
1,527,164
    $
1.71
     
7.94
    $
783,860
 
Exercisable at September 30, 2007
   
636,816
    $
2.54
     
6.04
    $
10,633
 

The aggregate intrinsic value is the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of its third quarter of 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options as of that date. The Company’s closing stock price on Friday, September 28, 2007 was $1.17.
 
 
8


 
 
4.    Stock Option Plans
 
At September 30, 2007, the Company had five stock option plans for the benefit of employees, officers, directors, and consultants of the Company. As of September 30, 2007, a total of 1,895,105 shares of the Company’s common stock were reserved for issuance under the Plans. Options granted under the Plans are generally exercisable for a period of ten years from the date of grant at an exercise price that is not less than the closing price of the common stock on the date of grant. Options granted under the Plans generally vest over a one- to five-year period from the date of the grant.
 
Stock option plan activity for the nine-month periods ended September 30, 2007 and September 30, 2006 was as follows:

         
Outstanding Options
 
   
Shares Available for Grant
   
Number of Shares
   
Weighted Average Exercise Price
   
Aggregate Price
 
                         
Balance, January 1, 2006
   
460,368
     
475,117
    $
3.21
    $
1,524,282
 
Authorization of 2006 Plan
   
1,000,000
     
     
     
 
Options granted
    (416,001 )    
416,001
     
1.46
     
608,643
 
Options cancelled
   
43,985
      (43,985 )    
1.63
      (71,792 )
Options expired
   
3,156
      (3,981 )    
4.58
      (18,215 )
Balance, September 30, 2006
   
1,091,508
     
843,152
     
2.42
     
2,042,917
 
Options granted
    (60,000 )    
60,000
     
0.95
     
57,000
 
Options cancelled
   
9,708
      (9,708 )    
1.38
      (13,406 )
Options expired
   
11,123
      (12,623 )    
4.58
      (57,873 )
Balance, December 31, 2006
   
1,052,339
     
880,821
     
2.30
     
2,028,639
 
Evergreen provision per 2006 plan
   
494,570
     
     
     
 
Restricted stock issued
    (530,000 )    
     
     
 
Options granted
    (700,800 )    
700,800
     
0.99
     
696,086
 
Options cancelled
   
40,062
      (40,062 )    
1.02
      (40,728 )
Options expired
   
11,770
      (14,395 )    
5.48
      (78,931 )
Balance, September 30, 2007
   
367,941
     
1,527,164
    $
1.71
    $
2,605,066
 

 

9


The following information summarizes stock options outstanding at September 30, 2007: 

 
   
Options Outstanding at September 30, 2007
   
Options Exercisable at September 30, 2007
 
Exercise Price
   
Number Outstanding
   
Weighted Average Remaining Contractual Life (in Years)
   
Weighted Average Exercise Price
   
Number Outstanding
   
Weighted Average Exercise Price
 
 
   
 
   
 
   
 
   
 
   
 
 
$
0.90
     
403,000
     
9.38
    $
0.90
     
    $
0.90
 
 
0.95
     
51,666
     
9.08
     
0.95
     
48,334
     
0.95
 
 
1.12
     
215,300
     
9.95
     
1.12
     
     
1.12
 
 
1.20
     
60,000
     
9.72
     
1.20
     
15,000
     
1.20
 
 
1.35
     
144,813
     
8.65
     
1.35
     
48,993
     
1.35
 
 
1.40
     
29,932
     
3.10
     
1.40
     
29,932
     
1.40
 
 
1.50
     
40,000
     
8.19
     
1.50
     
40,000
     
1.50
 
 
1.53
     
200,000
     
8.53
     
1.53
     
100,000
     
1.53
 
 
1.66
     
56,117
     
7.59
     
1.66
     
29,647
     
1.66
 
 
1.92
     
7,943
     
7.31
     
1.92
     
6,517
     
1.92
 
 
2.30
     
11,000
     
4.85
     
2.30
     
11,000
     
2.30
 
 
2.62
     
100,024
     
4.63
     
2.62
     
100,024
     
2.62
 
 
2.89
     
120,006
     
3.90
     
2.89
     
120,006
     
2.89
 
 
3.70
     
49,500
     
4.56
     
3.70
     
49,500
     
3.70
 
 
6.60
     
2,000
     
1.08
     
6.60
     
2,000
     
6.60
 
 
7.00
     
6,000
     
3.72
     
7.00
     
6,000
     
7.00
 
 
7.81
     
1,500
     
3.50
     
7.81
     
1,500
     
7.81
 
 
9.38
     
200
     
2.30
     
9.38
     
200
     
9.38
 
 
9.40
     
15,663
     
1.67
     
9.40
     
15,663
     
9.40
 
 
10.00
     
6,000
     
2.86
     
10.00
     
6,000
     
10.00
 
 
10.30
     
1,500
     
2.86
     
10.30
     
1,500
     
10.30
 
 
11.56
     
4,500
     
0.67
     
11.56
     
4,500
     
11.56
 
 
16.87
     
500
     
2.43
     
16.87
     
500
     
16.87
 
         
1,527,164
                     
636,816
         


 
The weighted average remaining contractual life of outstanding options at September 30, 2007 was 7.94 years. At September 30, 2007, there were 636,816 options exercisable with a weighted average exercise price of $2.54.
 
In February 2007, the Company granted restricted stock awards and issued 530,000 shares of the Company’s common stock to employees. During the vesting period the employees have the rights of a shareholder in terms of voting and dividends but are restricted from transferring the shares. The restricted shares vest over a three-year period with 1/3 of the shares vesting one year from February 2007, and at a rate of 1/36th per month for the remaining 24 months, so long as the employees continue to be employed by the Company. Restricted shares are valued at the price of common stock on the date of grant, $0.90, and the expense is recorded ratably over the vesting period.


10



 
A summary of the unvested restricted share activity for the nine-month period ended September 30, 2007 is as follows:


 
 
Number of Shares
   
Weighted- Average Grant Date Fair Value
 
 
 
 
   
 
 
Unvested at January 1, 2007
   
    $
 
Granted
   
530,000
     
0.90
 
Unvested at September 30, 2007
   
530,000
    $
0.90
 

At September 30, 2007, there was $397,490 of total unrecognized compensation costs related to the outstanding restricted stock awards that will be recognized over a weighted average period of 2.38 years.
 
As of September 30, 2007, the Company had 642,683 warrants to purchase common stock outstanding and exercisable for prices ranging from $0.0875 to $14.69 with a weighted average exercise price of $0.98 per share.  The weighted average remaining contractual life of these warrants at September 30, 2007 was 5.10 years. These warrants have expiration dates ranging from December 2007 to July 2016.
 
5.     Cash Flow Information
 
   
Nine-Months Ended
September 30,
 
   
2007
   
2006
 
Supplemental disclosures:
           
Cash paid for interest
  $
220,956
    $
236,012
 
Supplemental schedule of noncash financing activities:
   
 
     
 
 
Issuance of restricted shares
  $
5,300
    $
 
  

Item 2.                      Management’s Discussion and Analysis or Plan of Operation 
 
The information contained in this Form 10-QSB is intended to update the information contained in our Annual Report on Form 10-KSB for the year ended December 31, 2006 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-KSB. The following discussion and analysis also should be read together with our condensed consolidated financial statements and the notes to the condensed consolidated financial statements included elsewhere in this Form 10-QSB.
 
Except for the historical information contained herein, this report contains forward-looking statements (identified by the words “estimate,” “anticipate,” “expect,” “believe,” and similar expressions), which are based upon management’s current expectations and speak only as of the date made. These forward-looking statements are subject to risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements and include the factors discussed in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006.
 
 Critical Accounting Policies and Estimates
 
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In addition, estimates and assumptions about future events and their effects cannot be determined with certainty. These estimates and assumptions may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have been included in the consolidated financial statements as soon as they became known. Actual results may differ from these estimates under different assumptions or conditions. In addition, we are periodically faced with uncertainties, the outcomes of which are not within our control and may not be known for extended periods of time.

11


 
Our critical accounting policies are set forth below.
 
Revenue Recognition
 
Our revenue is derived from the sale of digital imaging systems and other products, net of returns and allowances, and is recognized when a contract is executed, all delivery obligations have been met, the fee is fixed and determinable, and collection is probable. All products are sold with a one year standard warranty agreement and we record an associated reserve for estimated warranty costs.
 
For products sold where software is deemed to be more than incidental, we follow Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended. Revenue earned on software arrangements involving multiple elements is allocated to each element based on vendor-specific objective evidence, which is based on the price charged when the same element is sold separately. When a digital imaging system is sold, the multiple elements are software and maintenance and support. Revenue allocated to software is recognized when a contract is executed, all delivery obligations have been met, the fee is fixed and determinable, and collection is probable. Revenue allocated to maintenance and support is recognized ratably over the maintenance term, typically for a period of one year, beginning when a digital imaging system is considered sold or an extended maintenance and support contract is signed.
 
Revenue is recorded net of estimated returns. Our management makes estimates of potential future product returns related to current period revenue. We analyze historical returns, current economic trends and changes in customer demand and acceptance of our products when evaluating the adequacy of our allowance for sales returns and other allowances, such as allowance for bad debts, in any accounting period. As of September 30, 2007, our allowance for sales returns was $145,374 and our allowance for doubtful accounts was $5,000.
 
Inventory
 
We record inventories at the lower of cost or market value, with cost generally determined on a first-in, first-out basis. We perform periodic valuation assessments based on projected sales forecasts and analyzing upcoming changes in future configurations of our products and record inventory write-downs for excess and obsolete inventory. As of September 30, 2007, our allowance for excess and obsolete inventory was $44,696.
 
Deferred Taxes Valuation Allowance
 
We believe sufficient uncertainties exist regarding the future realization of deferred tax assets, and, accordingly, a full valuation allowance is required at September 30, 2007. In subsequent periods if and when we generate pre-tax income, a tax expense will not be recorded to the extent that the remaining valuation allowance can be used to offset that expense. Once a consistent pattern of pre-tax income is established or other events occur that indicate that the deferred tax assets will be realized, additional portions or all of the remaining valuation allowance will be reversed back to income. Should we generate pre-tax losses in subsequent periods, a tax benefit will not be recorded and the valuation allowance will be increased. Despite the valuation allowance, we retain the ability to utilize the benefits of net operating loss carryforwards and research and development credits.
 
 
Recent Accounting Pronouncements - In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its financial position and results of operations.
 
Results of Operations
 
Revenues
 
Our revenues are primarily derived from sales of instruments, software, consumables, and service contracts. Total revenues were $3,680,160 and $3,354,790 for the three-month periods ended September 30, 2007 and 2006, respectively, representing an increase of $325,370 or 9.7%.  This increase was primarily due to increased sales of the Company's higher end products such as the FluorChem and sales of upgrades, offset in part by a decrease in sales of a lower end product that has been discontinued.  Total revenues were $10,838,916 and $9,506,201 for the nine-month periods ended September 30, 2007 and 2006, respectively, an increase of $1,332,715 or 14.0%. This increase was again primarily due to increased sales of the Company's higher end products such as the FluorChem as well as sales of accessories and upgrades, again partially offset by decreased sales of the lower end product.
 

12


 
For the three- and nine-month periods ended September 30, 2007, revenues outside of the United States represented 51.4% and 50.3%, respectively, of our total revenues compared to 42.7% and 39.2% of our total revenues for the three- and nine-month periods ended September 30, 2006. The increase was primarily due to increased sales of the Company's higher end products overseas.
 
For the three- and nine-month periods ended September 30, 2007, revenues from sales to GE Healthcare under our previously disclosed OEM agreement represented 20.9% and 20.8%, respectively, of our total revenues, compared to 15.1% and 15.0% of our total revenues for the three- and nine-month periods ended September 30, 2006.
 
Cost of Goods Sold
 
Cost of goods sold includes direct material, labor and manufacturing overhead. Cost of goods sold were $1,690,139 and $1,503,344 for the three-month periods ended September 30, 2007 and 2006, respectively, representing an increase of $186,795 or 12.4%. Percentage increases in cost of goods sold exeeded percentage increases in revenues in the three-month period primarily due to higher manufacturing overhead costs resulting from bill of material variances and higher freight in costs, as well as by promotional pricing on certain microimaging product sales; the increases were offset in part by the introduction of new, higher-margin products such as the AlphaImager EC. Cost of goods sold were $4,885,226 and $4,520,056 for the nine-month periods ended September 30, 2007 and 2006, respectively, representing an increase of $365,170 or 8.1%. Percentage increases in revenues exceeded percentage increases in cost of goods sold in the nine-month period primarily due to increased sales of high margin upgrades and the introduction of new products such as the AlphaImager EC.
 
Gross Profit
 
Gross profit was $1,990,021 and $1,851,446 for the three-month periods ended September 30, 2007 and 2006, respectively, representing an increase of $138,575 or 7.5%. The increase was due primarily to higher sales, offset in part by higher manufacturing overhead costs. The gross profit was $5,953,690 and $4,986,145 for the nine-month periods ended September 30, 2007 and 2006, respectively, representing an increase of $967,545 or 19.4%. The increase in gross profit was again due to higher sales, accentuated by increased sales of high margin upgrades and the introduction of new, higher-margin products such as the AlphaImager EC. The gross profit as a percentage of revenues was 54.1% and 55.2% for the three-month periods ended September 30, 2007 and 2006, respectively.  The decrease in gross margin as a percentage of revenues was due primarily to an increase in manufacturing overhead cost. The gross profit as a percentage of revenues was 54.9% and 52.5% for the nine-month periods ended September 30, 2007 and 2006, respectively.  The increase in gross margins as a percentage of revenue was due primarily to an increase in sales of high margin upgrades and the introduction of higher-margin products such as the AlphaImager EC, offset in part by higher manufacturing overhead costs.
 
Sales and Marketing Expenses
 
Sales and marketing expenses were $1,299,011 and $933,044 for the three-month periods ended September 30, 2007 and 2006, respectively, representing an increase of $365,967 or 39.2%. Sales and marketing expenses were $3,516,406 and $3,073,621 for the nine-month periods ended September 30, 2007 and 2006, respectively, representing an increase of $422,785 or 14.4%. These increased expenses were due primarily to increased payroll and travel expenses associated with the expansion of our domestic direct sales team, offset in part by decreases in commissions paid to domestic manufacturer’s representatives. Payroll related expenses associated with the addition of technical support and marketing personnel and expenses related to the settlement of a dispute also contributed to higher sales and marketing expenses. Sales and marketing expenses as a percentage of revenues increased from 27.8% to 35.3% for the three-month periods ended September 30, 2006 and 2007, respectively.  There was a slight increase in sales and marketing expenses as a percentage of revenues from 32.3% to 32.4% for the nine-month periods ended September 30, 2006 and 2007, respectively.
 
Research and Development Expenses
 
Research and development expenses were $298,820 and $246,256 for the three-month periods ended September 30, 2007 and 2006, respectively, representing a increase of $52,564 or 21.3%.  These increases were due primarily to increases in payroll related expense associated with the addition of personnel. Outsourced software development costs for the development of new software products also increased.  Research and development expenses were $946,310 and $983,729 for the nine-month periods ended September 30, 2007 and 2006, respectively, representing a decrease of $37,419 or 3.8%.  Increases in payroll related expense and purchased parts were offset by a reduction in consultants and facilities related expenses.  Research and development expenses as a percentage of revenues increased from 7.3% to 8.1% for the three-month periods ended September 30, 2006 and 2007, respectively. Research and development expenses as a percentage of revenues decreased from 10.3% to 8.7% for the nine-month periods ended September 30, 2006 and 2007, respectively.

13


 
 
General and Administrative Expenses
 
General and administrative expenses were $604,475 and $639,940 for the three-month periods ended September 30, 2007 and 2006, respectively, representing a decrease of $35,465 or 5.5%. This decline was primarily due to decreases in Board member service related fees and stock based compensation charges, offset in part by increases in administrative expenses such as legal, audit and bank fees. General and administrative expenses were $1,889,770 and $1,750,978 for the nine-month periods ended September 30, 2007 and 2006, respectively, representing an increase of $138,792 or 7.9%. This increase was primarily due to accruals to the Company’s founders in accordance with their employment agreements and bonus plan, offset in part by decreases in other administrative expenses such as bank fees, investor relations, Board member fees and recruiting. The general and administrative expenses as a percentage of revenues decreased from 19.1% to 16.4% for the three-month periods ended September 30, 2006 and 2007, respectively. The general and administrative expenses as a percentage of revenues decreased from 18.4% to 17.4% for the nine-month periods ended September 30, 2006 and 2007, respectively.
 
Other Income (Expense)
 
Interest expenses were $71,811 and $77,918 for the three-month periods ended September 30, 2007 and 2006, respectively, representing a decrease of $6,107 or 7.8%. Interest expenses were $220,956 and $236,012 for the nine-month periods ended September 30, 2007 and 2006, respectively, representing a decrease of $15,056 or 6.4%. The lower expenses were attributable primarily to a lower outstanding balance owed on a term note.
 
Liquidity and Capital Resources
 
From inception through September 30, 2007, Alpha Innotech Corporation ("Alpha CA") has raised a total of $1,956,076, net of offering costs, in convertible notes that were converted into redeemable convertible preferred stock in 2004, a total of $7,615,319, net of offering costs, from the sale of redeemable convertible preferred stock, and $107,549, net of offering costs, from the issuance of common stock. As a result of the closing of the merger with Xtrana, on October 3, 2005 Alpha CA received an additional $2,033,000 in cash. As described below, the Company also raised a total of $375,000 from the sale of convertible notes. As of September 30, 2007, the Company had $433,844 in cash and a working capital deficit.
 
At September 30, 2007, the Company had the following capital resources available:
 
 
Issuance of Convertible Note - On July 21, 2006, the Company completed a private placement offering of subordinated Senior Convertible Note with the principal amount of $375,000 due in 2011 (the "Note"). The Note bears interest at a rate of 3% per year. During the occurrence of an "Event of Default" under the Note, the Note will bear interest at a rate of 10% per year. The Note is convertible into shares of common stock of the Company at an initial conversion price of $1.60 per share. As of September 30, 2007, no portion of the principal amount of the note had been repaid or converted.
  
 
Loan from Alexandria - On April 8, 2005, Alpha CA secured a loan in the amount of $1,500,000. The loan bears interest at the rate of 12.5% per annum and the outstanding principal amount of the loan is due and payable in 30 equal monthly installments of $50,000 per month ($600,000 per year) beginning on November 1, 2005. As of September 30, 2007, $1,150,000 of the principal had been repaid, leaving $350,000 still owing. The obligations under the loan are secured by a second priority lien and security interest in substantially all our assets.
 
 
BFI Business Finance Line of Credit - On March 9, 2004, Alpha CA established a line of credit in the maximum amount of $1 million with BFI Business Finance (“BFI”). As of September 30, 2007, the Company had drawn $980,000 leaving $20,000 available to draw. The interest rate is variable. As of September 30, 2007, the interest rate was 11.39% and the outstanding balance was subject to a 0.50% per month administrative fee. Effective October 26, 2007, BFI and Alpha CA entered into a First Modification to Loan and Security Agreement ("Modification") raising the maximum amount of the line of credit to $1.5 million. A copy of the Modification is attached as Exhibit 10.8.
 
Cash provided by operating activities was $692,670 and $313,829 for the nine-month periods ending September 30, 2007 and 2006, respectively.  During the nine-month period ending September 30, 2007, the cash provided by operating activities was primarily due to a positive change in working capital of $666,239, offset by a net income of $26,431, net of adjusted noncash expenses. The noncash expense items included depreciation and amortization expense of $406,784 and imputed cost of stock based compensation of $252,814. During the nine-month period ending September 30, 2006, the cash provided by operating activities was primarily due to a positive change in working capital of $757,014, offset in part by a net loss of $(443,185), net of adjusted noncash expenses. The noncash expenses included depreciation and amortization expense of $436,971 and imputed cost of stock based compensation of $192,875.

 

14


 
Cash used in investing activities was $258,567 and $329,211 for the nine-month periods ending September 30, 2007 and 2006, respectively, to purchase property and equipment needed to support our operations. These amounts include costs of demonstration systems used by our sales teams and which, in some cases, are ultimately sold to customers.
 
Net cash used in financing activities was $445,915 and $139,519, for the nine-month periods ending September 30, 2007 and 2006, respectively. In the nine-month period ending September 30, 2007, we repaid $450,000 of debt obligations and $3,604 was provided from exercise of warrants.  In the nine-month period ending September 30, 2006, $375,000 was provided from issuance of debt obligations, we repaid $520,939 of debt obligations, $14,488 was provided from exercise of warrants, and $8,068 was used to repurchase common stock to facilitate a cashless exercise of warrants.
 
While management believes the Company has sufficient cash to fund its operating, investing, and financing activities in the near term, additional working capital may be needed if the Company experiences growth above that which is currently foreseen by management. For example, the Company’s existing line of credit may prove to be insufficient should higher inventory levels be required, or additional working capital may be needed to offset certain cash payments to the Company’s founders if certain revenue and net income levels are achieved. If the Company’s capital resources are unable to meet its capital requirements, the Company will have to raise additional funds. The Company may be unable to raise sufficient additional capital when it needs it or to raise capital on favorable terms. The sale of equity or convertible debt securities in the future may be dilutive to the Company’s stockholders, and debt financing arrangements may require the Company to pledge certain assets and enter into covenants that could restrict certain business activities or the Company’s ability to incur further indebtedness and may contain other terms that are not favorable to the Company or the Company’s stockholders. If the Company is unable to obtain adequate funds on reasonable terms, the Company may be required to curtail operations significantly or to obtain funds by entering into financing agreements on unattractive terms.
 
Item 3.    Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures. Based on his evaluation as of the end of the period covered by this Quarterly Report on Form 10-QSB, our chief executive officer and chief financial officer has concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
 
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting identified in connection with our evaluation that occurred during the three-month period ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
PART II. OTHER INFORMATION
 
 
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
 
Exercise of Warrants. On August 1, 2007, Biotechnology Development Fund II, L.P. ("Purchaser") exercised warrants ("Warrants") to purchase 41,183 shares of common stock for a total purchase price of $3,603.51. Purchaser currently owns approximately 2,003,845, or 19.2%, of the approximately 10,462,576 shares of common stock of the Company outstanding as of November 9, 2007. The warrants were originally issued to Purchaser in 2002 and 2004 by Alpha CA. The Warrants were assumed by the Company pursuant to the Agreement and Plan of Merger, dated as of December 14, 2004, as amended, as further described in the definitive Proxy Statement filed with the Securities and Exchange Commission on August 12, 2005.
 
The securities issued upon the Warrants exercise have not been registered under the Securities Act of 1933 and were issued pursuant to exemptions from registration under Section 4(2) of the Securities Act and Rule 506 of Regulation D. There was a total of one purchaser, which was an "accredited investor" as such term is defined in Regulation D. A legend was placed on the stock certificate indicating that the securities have not been registered and are restricted from resale. The Company will use the proceeds received from the Warrants exercise for general corporate purposes.
 

15


 
Item 5.    Other Information
 
Effective October 26, 2007, BFI Business Finance ("BFI") and Alpha CA entered into a First Modification to Loan and Security Agreement ("Modification") raising to $1.5 million the maximum amount BFI will lend to Alpha CA pursuant to a line of credit. A copy of the Modification is attached as Exhibit 10.8.
 
Item 6.    Exhibits
 
Exhibit No.
Description
   
10.8
      First Modification to Loan and Security Agreement with BFI Business Finance dated as of October 26, 2007
   
31.1
Certificate of our Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
   
    32.1
Certificate of our Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 
SIGNATURES
 
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: November 14, 2007
 
Alpha Innotech Corp.
     
 
 
/s/ Ronald Bissinger
 
 
Ronald Bissinger
 
 
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)


16


EX-10.8 2 exhibit_10.htm FIRST MODIFICATION TO LOAN AND SECURITY AGREEMENT exhibit_10.htm
 
 
Exhibit 10.8
 
First Modification to Loan and Security Agreement
 
This First Modification to Loan and Security Agreement (this “Modification”) is entered into by and between ALPHA INNOTECH CORPORATION (“Borrower”) and BFI Business Finance (“Lender”) as of this 26TH day of October, 2007, at San Jose, California.
 

RECITALS

 
A.           Lender and Borrower have  previously entered into or are concurrently herewith entering into a
 
Loan and Security Agreement (the “Agreement”) dated March 9, 2004.

B.           Lender and Borrower may  have  previously executed  one or more Modifications to  Loan and
 
Security Agreement (the "Previous Modification(s)").

C.           Borrower has requested, and Lender has agreed, to modify the Agreement as set forth below.

 
AGREEMENT

 
For good and valuable consideration, the parties agree as set forth below:

1.           Incorporation by Reference.  The Agreement and the Previous Modification(s), if any, as modified hereby and the Recitals are incorporated herein by this reference.
2.           Effective Date.  The terms of this Modification shall be in full force and effect as of October 26, 2007.
3.           Modification  to  Agreement.    The  Agreement  is  hereby  modified  to  amend  and  restate  the section(s) referenced below:

 
a.
Section 1.  Lender shall from time to time in Lender’s sole discretion advance sums to Borrower up to  eighty percent (80%)  of the Net Face Amount of  Prime Accounts (as defined  below in Paragraph 6) and such other sums as Lender may determine (each, an “Advance” and collectively,
“Advances”), but in no event shall the aggregate indebtedness (under this Agreement or under all Obligations) to Lender at any one time exceed without Lender’s prior written approval, the sum of One Million  Five Hundred Thousand  and 00/100 Dollars  ($1,500,000.00) (the  “Maximum Amount”).  In the event that the balance owing  under this Agreement exceeds the  Maximum Amount, or in the event that said balance exceeds the percentage set forth above of the Value of Prime Accounts as determined by Lender, Borrower  understands and  agrees that Lender shall make no further Advances to the Borrower unless and until Borrower pays Lender the amount of such excess (each an “Overadvance”), and Borrower hereby promises to pay the Overadvance to Lender upon Lender’s demand.

b.      Section 43.   Lender agrees that Accounts of a  foreign  account  debtor or its affiliates (each, a
"Foreign Account")  may be  deemed to be Prime Accounts provided: (i) such Foreign Account otherwise is a Prime Account; (ii) Borrower  has obtained credit insurance for each Foreign Account on terms, in amounts and  from insurers satisfactory to Lender; and  (iii) such Foreign Accounts do  not constitute more than fifty (50.00%)  of  all otherwise  Prime Accounts (but the portion of such Foreign Accounts not in excess of such percentage may be deemed to be Prime Accounts).



CAmod (rev. 09.19.2003)                                                               Page 1 of 2                                                            Initial Here F




 
4.         Condition Precedent. It shall be a Condition Precedent to the effectiveness of this Modification that Lender shall have received a fully executed Officer Certificate from Ron Bissinger.

5.           Fee. At the time of execution of the Modification, Borrower agrees to pay a one-time fee in the amount of Five Thousand and 00/100 Dollars ($5,000.00).

6.           Legal Effect.  Except as specifically set forth in this Modification, all of the terms and conditions of the Agreement remain in full force and effect.

7.           Integration.   This  is an  integrated  Modification and  supersedes all prior negotiations andagreements regarding the subject matter hereof.   All amendments hereto must be in writing and signed by the parties.

IN WITNESS WHEREOF, the parties have executed this First Modification to Loan and Security Agreement as of the date first set forth above.




BFI Business Finance                                                                           ALPHA INNOTECH CORPORATION





By:     David Drogos                                                                           By:     Ron Bissinger
 
Its:  President                                                                           Its:  Chief Executive Officer


 






 
CAmod (rev. 09.19.2003)                                                               Page 2 of 2


EX-31.1 3 exhibit_31.htm SARBANES OXLEY SECTION 302 CERTIFICATION exhibit_31.htm
EXHIBIT 31.1
 
CERTIFICATION OF CEO PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14 AND 15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Ronald Bissinger, certify that:
 
1. I have reviewed this quarterly report on Form 10-QSB of Alpha Innotech Corp.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
 
4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
 
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b. Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
c. Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
 
5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s Board of directors (or persons performing the equivalent functions):
 
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
 
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
 
Date: November 14, 2007
 
 
     
 
 
/s/ Ronald Bissinger
 
 
Ronald Bissinger
 
 
Chief Executive Officer and Chief Financial Officer
 
 
(Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer)




EX-32.1 4 exhibit_32.htm SARBANES OXLEY SECTION 906 CERTIFICATION exhibit_32.htm
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the Quarterly Report on Form 10-QSB for the Quarter Ended September 30, 2007 (the “Report”) by Alpha Innotech Corp. (“Registrant”), the undersigned hereby certify that:
 
1.
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.
 
Dated: November 14, 2007
 
/s/ Ronald Bissinger
Ronald Bissinger
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)




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