Infocus 10Q 2007 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2007

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

For the transition period from to

Commission file number 000-18908

INFOCUS CORPORATION

(Exact name of registrant as specified in its charter)

Oregon		93-0932102
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification No.)
or organization)

27500 SW Parkway Avenue, Wilsonville, Oregon		97070
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 503-685-8888

Indicate by check mark whether the registrant (1) has 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. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer o Accelerated filer x Non-accelerated filer o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock without par value		40,499,813
(Class)		(Outstanding at August 1, 2007)

INFOCUS CORPORATION
FORM 10-Q
INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

INFOCUS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(unaudited)

	June 30,			December 31,
	2007			2006

Assets
Current Assets:
Cash and cash equivalents	$	44,399		$	53,716
Marketable securities	67			104
Restricted cash, cash equivalents, and marketable securities	22,802			22,413
Accounts receivable, net of allowances of $5,767 and $6,995	46,366			50,060
Inventories	29,471			36,833
Consigned inventories	3,799			3,274
Other current assets	7,513			10,706
Total Current Assets	154,417			177,106

Property and equipment, net of accumulated depreciation of $21,095 and $19,527	3,698			3,961
Other assets, net	1,495			1,189
Total Assets	$	159,610		$	182,256

Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable	$	51,176		$	50,141
Related party accounts payable	1,624			1,905
Payroll and related benefits payable	1,261			2,220
Marketing incentives payable	3,987			6,629
Accrued warranty	8,353			9,917
Other current liabilities	7,323			8,034
Total Current Liabilities	73,724			78,846

Long-Term Liabilities	4,011			3,147

Shareholders’ Equity:
Common stock, 150,000,000 shares authorized; shares issued and outstanding: 40,623,900 and 39,747,880	90,576			90,604
Additional paid-in capital	77,489			76,861
Accumulated other comprehensive income:
Cumulative currency translation adjustment	32,546			30,662
Unrealized loss on equity securities	(57		)	(20		)
Accumulated deficit	(118,679		)	(97,844		)
Total Shareholders’ Equity	81,875			100,263
Total Liabilities and Shareholders’ Equity	$	159,610		$	182,256

The accompanying notes are an integral part of these balance sheets.

INFOCUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2007			2006			2007			2006

Revenues	$	73,633		$	97,642		$	151,288		$	209,661
Cost of revenues	61,649			82,961			130,824			178,237
Gross margin	11,984			14,681			20,464			31,424

Operating expenses:
Marketing and sales	9,442			12,871			19,086			27,436
Research and development	3,905			4,492			7,966			9,324
General and administrative	4,770			6,210			10,308			11,703
Restructuring costs	2,050			850			4,450			1,925
	20,167			24,423			41,810			50,388

Loss from operations	(8,183		)	(9,742		)	(21,346		)	(18,964		)

Other income (expense):
Interest expense	(122		)	(97		)	(187		)	(204		)
Interest income	676			569			1,425			1,085
Other, net	(195		)	(3,243		)	(580		)	(10,655		)
	359			(2,771		)	658			(9,774		)
Loss before income taxes	(7,824		)	(12,513		)	(20,688		)	(28,738		)
Provision (benefit) for income taxes	(36		)	318			147			450
Net loss	$	(7,788	)	$	(12,831	)	$	(20,835	)	$	(29,188	)

Basic and diluted net loss per share	$	(0.20	)	$	(0.32	)	$	(0.52	)	$	(0.74	)

Shares used in basic and diluted per share calculations:	39,700			39,636			39,697			39,627

The accompanying notes are an integral part of these statements.

INFOCUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

	Six Months Ended June 30,
	2007			2006

Cash flows from operating activities:
Net loss	$	(20,835	)	$	(29,188	)
Adjustments to reconcile net loss to net cash flows (used in) operating activities:
Depreciation and amortization	2,491			1,393
Stock-based compensation	600			687
Gain on sale of property and equipment	(3		)	(680		)
Gain on sale of marketable securities	—			(809		)
Deferred income taxes	(5		)	192
Non-cash write–down of cost based investments	—			7,454
Non-cash write–down of equity method investments	—			2,106
Other non-cash (income) expense	(309		)	2,116
(Increase) decrease in:
Restricted cash	(389		)	(7,936		)
Accounts receivable	4,468			9,223
Related party accounts receivable	—			(555		)
Inventories	7,415			16,032
Consigned inventories	(525		)	2,982
Income taxes receivable	(68		)	—
Other current assets	3,556			406
Increase (decrease) in:
Accounts payable	766			(3,098		)
Related party accounts payable	(281		)	(1,196		)
Payroll and related benefits payable	(983		)	(955		)
Marketing incentives payable, accrued warranty and other current liabilities	(4,971		)	(1,019		)
Other long-term liabilities	841			(110		)
Net cash used in operating activities	(8,232		)	(2,955		)

Cash flows from investing activities:
Purchase of marketable securities	—			—
Maturities of marketable securities	—			8,873
Proceeds on sale of marketable securities	—			878
Payments for purchase of property and equipment	(2,199		)	(3,233		)
Proceeds from sale of property and equipment	3			5,279
Dividend payments received from joint ventures	—			1,000
Other assets, net	16			554
Net cash provided by (used in) investing activities	(2,180		)	13,351

Cash flows from financing activities:
Proceeds from sale of common stock	—			131
Net cash provided by financing activities	—			131

Effect of exchange rate on cash	1,095			3,782
Increase (decrease) in cash and cash equivalents	(9,317		)	14,309

Cash and cash equivalents:
Beginning of period	53,716			53,105
End of period	$	44,399		$	67,414

Supplemental Cash Flow Information:
Cash paid during the period for interest	$	155		$	194
Cash paid (refunded) during the period for income taxes	$	187		(27		)

The accompanying notes are an integral part of these statements.

INFOCUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1. Basis of Presentation

The consolidated financial information included herein has been prepared by InFocus Corporation without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2006 is derived from our 2006 Annual Report on Form 10-K. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2006 Annual Report on Form 10-K. Results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Note 2. Inventories

Inventories are valued at the lower of purchased cost or market, using average purchase costs, which approximate the first-in, first-out (FIFO) method. For finished goods inventory, the average purchase costs include overhead items, such as inbound freight and other logistics costs. Following is a detail of our inventory (in thousands):

	June 30, 2007		December 31, 2006
Lamps and accessories	$	2,565	$	2,186
Service inventories	6,973		8,537
Finished goods	19,933		26,110
Total non-consigned inventories	$	29,471	$	36,833

Consigned finished good inventories	$	3,799	$	3,274

Total inventories	$	33,270	$	40,107

We classify our inventory in four categories: lamps and accessories, service inventories, finished goods and consigned finished goods inventories. Lamps and accessories consist of replacement lamps and other new accessory products such as screens, remotes and ceiling mounts. These items can be either sold as new or can be consumed in service repair activities. Service inventories consist of service parts held for warranty or out of warranty customer repair activities, remanufactured projectors and projectors in the process of being repaired. Finished goods inventory consists of new projectors in our logistics centers and new projectors in transit from our contract manufacturers where title transfers at shipment. Consigned finished goods inventories consist of new projectors held by certain retailers on consignment until sold. Inventories are reported on the consolidated balance sheets net of reserve for obsolete and excess inventories of $6.0 million and $7.7 million as of June 30, 2007 and December 31, 2006, respectively.

Note 3. Earnings Per Share

Since we were in a loss position for the three and six-month periods ended June 30, 2007 and 2006, there was no difference between the number of shares used to calculate basic and diluted loss per share for those periods. Potentially dilutive securities that are not included in the diluted per share calculations because they would be antidilutive include the following (in thousands):

	Three and Six Months Ended June 30,
	2007	2006
Stock Options	3,121	4,975
Restricted Stock	867	148
Total Securities	3,988	5,123

Note 4. Comprehensive Loss

Comprehensive loss includes foreign currency translation gains and unrealized losses on marketable equity securities available for sale that are recorded directly to shareholders’ equity. The following table sets forth the calculation of comprehensive loss for the periods indicated (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Net loss	$	(7,788	)	$	(12,831	)	$	(20,835	)	$	(29,188	)
Foreign currency translation gains	502			3,429			1,884			5,124
Net unrealized loss on equity securities	(8		)	(102		)	(37		)	(197		)
Unrealized (gain) loss realized during period	—			261			—			(548		)
Total comprehensive loss	$	(7,294	)	$	(9,243	)	$	(18,988	)	$	(24,809	)

Note 5. Stock-Based Compensation

Stock-based compensation expense was included in our statements of operations as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Cost of revenues	$	88	$	34	$	121	$	75
Marketing and sales	105		122		196		264
Research and development	50		48		87		93
General and administrative	108		109		196		255
	$	351	$	313	$	600	$	687

In the first quarter of 2006, we issued performance stock options to certain employees under the 1998 Stock Incentive Plan. Performance stock options are a form of option award in which the number of options that ultimately vest depends on our performance against specified performance targets. The performance period for the options issued in the first quarter of 2006 was January 1, 2006 through December 31, 2006. At the end of the performance period, the performance targets were not achieved and, accordingly, in the first quarter of 2007, stock options potentially exercisable for 312,800 shares with a weighted average exercise price of $3.95 per share were cancelled.

On May 31, 2007, the Compensation Committee of the Board of Directors authorized the issuance of 809,300 restricted shares to current non-temporary employees under the 1998 Stock Incentive Plan. The restricted shares vest 100% one year from date of grant contingent upon the employee’s continuous employment over that period. The fair market value of our common stock on the date of grant was $2.46 per share. The value of the 809,300 restricted shares was $2.0 million and is being amortized over the one-year vesting period.

Also on May 31, 2007, the Compensation Committee of the Board of Directors authorized the issuance of 65,000 performance restricted shares and 200,000 stock options to our executive officers. The vesting of the performance restricted share awards is contingent upon the achievement of operating income goals for the fourth quarter of 2007 and the second quarter of 2008. At the end of the performance period, if the performance targets are met, each performance share will fully vest on July 31, 2008. If one of the two specified performance goals is achieved, each performance share will vest as to 50% of the total shares on July 31, 2008 and, if neither performance goal is achieved, the shares will be cancelled. The 200,000 stock options granted on May 31, 2007 vest 25% on the first anniversary of the grant date and 1/48th per month thereafter over the remaining three years, subject to the executive’s continued employment during the vesting period. Of the performance restricted shares and the stock options issued, 25,000 and 75,000, respectively, cancelled on July 2, 2007 in connection with the departure of our Chief Financial Officer on that date. The value of the performance restricted shares and the stock options, net of the effect of those cancelled, was $0.1 million and $0.1 million, respectively, and is being recognized over the vesting period of the awards.

To determine the fair value of stock-based awards granted, we used the Black-Scholes option pricing model and the following weighted average assumptions:

Three and Six Months Ended June 30,	2007		2006
Risk-free interest rate	4.54 - -4.93	%	4.82 – 5.24	%
Expected dividend yield	0	%	0	%
Expected lives (years)	0.6-4.0		2.9 – 3.9
Expected volatility	31.6 -56.5	%	52.1 – 71.1	%
Discount for post vesting restrictions	0	%	0	%

The risk-free interest rate used is based on the U.S. Treasury yield over the estimated life of the options granted. Our option pricing model utilizes the simplified method accepted under Staff Accounting Bulletin No. 107 to estimate the expected life of the option. The expected volatility for options granted pursuant to our stock incentive plans is calculated based on our historical volatility over the estimated term of the options granted. We have not paid cash dividends in the past and we do not expect to pay cash dividends in the future resulting in the dividend rate assumption above.

We amortize stock-based compensation on a straight-line basis over the vesting period of the individual award with estimated forfeitures considered. Shares to be issued upon the exercise of stock options will come from newly issued shares.

Note 6. Product Warranties

We evaluate our obligations related to product warranties on a quarterly basis. In general, we offer a standard two-year warranty and, for certain customers, products and regions, the warranty period can be longer or shorter than two years. We monitor failure rates on a product category basis through data collected by our manufacturing sites, factory repair centers and authorized service providers. The service organization also tracks costs to repair each unit. Costs include labor to repair the projector, replacement parts for defective items and freight costs, as well as other costs incidental to warranty repairs. Any cost recoveries from warranties offered to us by our suppliers covering defective components are also considered, as well as any cost recoveries of defective parts, which may be repaired at a factory repair center or through a third party. This data is then used to calculate the warranty accrual based on actual sales for each projector category and remaining warranty periods. For new product introductions, our quality control department estimates the initial failure rates based on test and manufacturing data and historical experience for similar platform projectors. If circumstances change, or a dramatic change in the failure rates were to occur, our estimate of the warranty accrual could change significantly. Revenue generated from sales of extended warranty contracts is deferred and recognized as revenue over the term of the extended warranty coverage. Deferred warranty revenue totaled $2.6 million and $2.7 million, respectively, at June 30, 2007 and December 31, 2006, and was included in other current liabilities on our consolidated balance sheets. Our warranty accrual at June 30, 2007 totaled $12.4 million, of which $8.4 million was classified as a component of current liabilities and $4.0 million was classified as other long-term liabilities on our consolidated balances sheets.

The following is a reconciliation of the changes in the warranty liability for the six months ended June 30, 2007 and 2006 (in thousands)

	Six Months Ended June 30,
	2007			2006
Warranty accrual, beginning of period	$	13,049		$	13,767
Reductions for warranty payments made	(4,267		)	(9,721		)
Warranties issued	5,125			6,550
Adjustments and changes in estimates	(1,557		)	3,221
Warranty accrual, end of period	$	12,350		$	13,817

Note 7. Letter of Credit and Restricted Cash, Cash Equivalents and Marketable Securities

At June 30, 2007, we had one outstanding letter of credit totaling $20 million, which expired on August 2, 2007. The letter of credit was subsequently amended with a new expiration date of November 2, 2007. This letter of credit secures our obligations to a supplier for the purchase of finished goods inventory. The fair value of this letter of credit approximates its contract value. The letter of credit is collateralized by $21.1 million of cash and marketable securities, and, as such, is reported as restricted on the consolidated balance sheets. The remaining restricted cash, cash equivalents and marketable securities of $1.7 million at June 30, 2007 secures our merchant credit card processing account, deposits for building leases and deposits for value added taxes in certain foreign jurisdictions.

Note 8. Line of Credit Amendment and Waiver

We have a $15 million line of credit facility with Wells Fargo Foothill, Inc. (“Wells Fargo”) that expires on August 31, 2007. Pursuant to the terms of the credit agreement, we may borrow against the line subject to a borrowing base determined on eligible accounts receivable. As of June 30, 2007 there were no borrowings outstanding under the agreement and we were in compliance with all financial covenants.

Note 9. Restructuring

In the three and six-month periods ended June 30, 2007, we incurred restructuring charges totaling $2.1 million and $4.5 million, respectively. The charge of $2.1 million in the second quarter of 2007 was primarily related to severance costs for headcount reductions and the charge in the first quarter of 2007 of $2.4 million was primarily related to estimated lease losses on vacated or partially vacated facilities at our corporate headquarters and various European office locations. A portion of the $2.1 million charge recorded in the second quarter of 2007 for severance costs was related to a shift in our research and development model to outsource more of the design functions to our contract manufacturers, which allows us to reduce necessary in-house research and development resources.

At June 30, 2007, we had $4.2 million of restructuring costs accrued on our consolidated balance sheet classified as other current liabilities. We expect the majority of the severance and related costs to be paid by the end of the second quarter of 2008 and the lease loss to be paid over the related lease terms through 2009, net of estimated sub-lease rentals. The following table displays a roll-forward of the accruals established for restructuring (in thousands):

	Accrual at December 31, 2006		2007 Charges		2007 Amounts Paid			Accrual at June 30, 2007
Severance and related costs	$	1,492	$	2,265	$	(1,369	)	$	2,388
Lease loss reserve	2,114		2,185		(2,630		)	1,669
Other	190		—		(50		)	140
Total	$	3,796	$	4,450	$	(4,049	)	$	4,197

Total restructuring charges in the three and six-month periods ended June 30, 2007 and 2006 were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Severance and related costs	$	1,980	$	850	$	2,265	$	850
Lease loss reserve	70		—		2,185		808
Other	—		—		—		267
	$	2,050	$	850	$	4,450	$	1,925

Note 10. Other, net

Other, net included the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Realized gain/(loss) on equity securities	$	—		$	(266	)	$	—		$	542
Income/(loss) related to the profits of Motif, 50-50 joint venture	4			(200		)	312			924
Expense related to losses of SMT, 50-50 joint venture	—			(1,147		)	—			(2,709		)
Write-down of equity method investment in SMT, 50-50 joint venture	—			(2,106		)	—			(2,106		)
Losses related to foreign currency transactions	(179		)	(155		)	(833		)	(503		)
Write-down of cost-based investments in technology companies	—			—			—			(7,474		)
Gain on sale of land	—			636			—			636
Other	(20		)	(5		)	(59		)	35
	$	(195	)	$	(3,243	)	$	(580	)	$	(10,655	)

Note 11. Adoption of FASB Interpretation No. 48

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” which defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. The interpretation applies to all income tax related positions. The interpretation is effective as of the beginning of the first fiscal year beginning after December 15, 2006. Accordingly, we adopted the provisions of Interpretation No. 48 on January 1, 2007.

As a result of the implementation of Interpretation No. 48, there was no change in the liability for unrecognized tax benefits, and no adjustments were made to the January 1, 2007 balance of retained earnings. As of the date of adoption, our unrecognized tax benefits totaled $0.2 million, the disallowance of which would not materially affect the annual effective income tax rate.

We operate in numerous taxing jurisdictions and are subject to regular examinations by various U.S. federal, state and foreign jurisdictions for various tax periods. The U.S. federal income returns for the years ended 2003 and 2005 remain open and we closed an examination for the year ended 2004 in February 2007. Additionally, various state and foreign income tax returns are open to examination and presently several foreign income tax returns are under examination. To our best knowledge we are no longer subject to state and local, or foreign income tax examinations by tax authorities for years before 2002. Such examinations could result in challenges to tax positions taken and, accordingly, we may record adjustments to provisions based on the outcomes of such matters. However, we believe that the resolution of these matters, after considering amounts accrued, will not have a material effect on our financial position or results of operations.

The 2004 tax examination in Norway relates to an operating loss incurred for that year which resulted in a refund claim for prior year taxes paid of $1.6 million. The operating loss was attributable, in part, to the closure of our Fredrikstad facility. We are currently appealing the Norwegian taxing authority’s initial decision to deny our refund claim, which was based on their interpretation of the circumstances surrounding the closure of the facility. We believe the facts and circumstances surrounding the facility closure support our position that it is more likely than not that we will receive the refund. However, it is possible that we could be denied the claimed refund which would have an unfavorable impact on our results of operations in the quarter the decision is finalized.

Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of the date of adoption and June 30, 2007, we had $0.3 million accrued for interest and penalties.

Note 12. China Customs Investigation

During the second quarter of 2003, our Chinese subsidiary became the subject of an investigation by Chinese authorities related to our product importation practices. Our case is considered “Administrative” in nature, indicating the Chinese authorities have ruled out any potential of willful intent to underpay duties by our Chinese subsidiary. In exchange for being allowed to resume business operations in China, in 2004 we made a deposit of $14.7 million directly with Shanghai Customs pending final resolution of the case.

In the second half of 2006, we conducted active settlement negotiations with Shanghai customs that resulted in a partial refund of our deposit, net of attorney’s fees and related expenses, of $4.0 million. The remaining deposit was expensed as a regulatory assessment charge in 2006.

We are currently in the process of working towards final settlement with Shanghai Customs and do not expect any further return of our deposit in future periods.

Note 13. New Accounting Pronouncements

SFAS No. 159

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” which allows companies to elect to measure specified financial instruments, warranty and insurance contracts at fair value on a contract-by-contract basis with changes in fair value recognized in earnings each reporting period. The election is called the “fair value option.” SFAS No. 159 applies to all reporting entities and contains financial statement presentation and disclosure requirements for assets and liabilities reported at fair value under the fair value option. SFAS No. 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007. We do not believe the adoption of SFAS No. 159 will have any effect on our financials position or results of operations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements and Factors Affecting Our Business and Prospects

Some of the statements in this quarterly report on Form 10-Q are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, or the PSLRA. Forward-looking statements in this Form 10-Q are being made pursuant to the PSLRA and with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words like “intend,” “plan,” “believe,” “anticipate,” “project,” “may,” “will,” “could,” “continue,” “expect” and variations of these words or comparable words or phrases of similar meaning. They may relate to, among other things:

· our ability to operate profitably;

· our ability to successfully introduce new products;

· the wind-down of South Mountain Technologies (“SMT”), our 50-50 joint venture with TCL Corporation;

· the supply of components, subassemblies, and projectors manufactured for us;

· our financial risks;

· fluctuations in our revenues and results of operations;

· the impact of regulatory actions by authorities in the markets we serve;

· anticipated outcome of legal disputes;

· uncertainties associated with the activities of our contract manufacturing partners;

· the evaluation of strategic alternatives being conducted by our Board of Directors;

· expectations regarding results and charges associated with restructuring our business and other changes to reduce or simplify the cost structure of the business;

· our ability to grow the business; and

· our various expenses and expenditures, including marketing and sales expenses, research and development expenses, general and administrative expenses and expenditures for property and equipment.

These forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, which may cause actual results to differ materially from trends, plans or expectations set forth in the forward-looking statements. The forward-looking statements contained in this quarterly report speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date of this filing. See Item 1A. Risk Factors below for further discussion of factors that could cause actual results to differ from these forward-looking statements.

Company Profile

InFocus Corporation is the industry pioneer and a worldwide leader in digital projection technology. We have over twenty years of innovative experience allowing us to constantly improve our product offerings and deliver a compelling immersive visual experience in home entertainment, business and education environments. Our products include projectors and related accessories for use in the conference room, board room, auditorium, classroom and living room. With the largest installed base of projectors in the industry, we are also the most recognized brand in the U.S. projector market according to TFCinfo.

Overview

Gross margins improved to 16.3% on revenues of $73.6 million for the second quarter of 2007 compared to gross margins of 10.9% on revenues of $77.7 million in the first quarter of 2007. Revenues in the second quarter of 2007 were down 5.3% compared to the first quarter of 2007, which was due to a 20.7% decrease in projector units shipped, offset by a 17.5% increase in average selling prices (“ASPs”). A total of 72,000 projectors were sold in the second quarter of 2007 compared to 91,000 units sold in the first quarter of 2007. The decrease in projector units shipped in the second quarter of 2007 compared to the first quarter of 2007 was attributable to lower volumes of end of life product sales in the second quarter as we successfully transitioned customers to better featured entry level meeting room products. In the first quarter of 2007, we focused sales efforts on the IN24 and IN26 entry level meeting room products in order to deplete existing inventory and prepare to transition customers to the higher margin IN24+ and IN26+ that began shipping near the end of the first quarter of 2007. Projector ASPs were positively impacted by the shift in the mix of products sales in the second quarter of 2007 towards the better featured and higher margin meeting room and mobile products.

Operating expenses, excluding charges for restructuring, in the second quarter of 2007 were $18.1 million compared to $19.2 million in the first quarter of 2007. The reduction in operating expense of $1.1 million in the second quarter of 2007 compared to the first quarter of 2007 was attributed to continued focus on reducing our cost structure and reduced expenses associated with the evaluation of strategic alternatives. Operating expenses in the second quarter of 2007 included $0.1 million of costs associated with strategic alternatives compared to $0.8 million in the first quarter of 2007. Operating expenses in the first and second quarters of 2007 included costs related to our retention bonus program of $0.6 million and $0.2 million, respectively, and stock based compensation of $0.2 million and $0.3 million, respectively.

We recorded a restructuring charge of $2.1 million and $4.5 million, respectively, in the three and six-month periods ended June 30, 2007. The charge of $2.1 million in the second quarter of 2007 primarily related to anticipated severance costs for headcount reductions as we continue to focus on reducing our operating expenses. A portion of the $2.1 million charge recorded in the second quarter of 2007 for severance costs was related to a shift in our research and development model to outsource more of the design functions to our contract manufacturers, which allows us to reduce necessary in-house research and development resources. The majority of the charge of $2.4 million in the first quarter of 2007 related to estimated lease losses for facilities at our corporate headquarters location and various European facilities locations that were vacated or partially vacated in the first quarter of 2007. In addition, a portion of the first quarter 2007 charge was related to severance costs for headcount reductions.

We finished the second quarter of 2007 with $67.3 million of cash, restricted cash and marketable securities and had no outstanding borrowings. The decrease in cash, restricted cash and marketable securities of $9.0 million in the first six months of 2007 was primarily attributed to our net loss during the period, partially offset by positive changes in working capital cash flows from reductions in accounts receivable and inventory.

During the second quarter of 2007, we experienced a number of changes in executive management and also made a number of changes to our Board of Directors.

Effective May 15, 2007, Mr. Kyle Ranson was no longer employed as our President and Chief Executive Officer and he resigned from our Board of Directors. Also effective May 15, 2007, Mr. Joseph O’Sullivan, our Vice President of Global Operations and General Manager Asia Sales, was named Acting Chief Operating Officer with responsibility for our day to day operations. On June 16, 2007, Mr. Roger Rowe notified the Board of Directors of his resignation as our Chief Financial Officer effective July 2, 2007. In response to Mr. Rowe’s resignation as Chief Financial Officer, on June 15, 2007, we entered into an interim Executive Services Agreement (the “Agreement”) with Tatum, LLC (“Tatum”). In connection with the Agreement, Mr. Mark Perry was appointed Interim Chief Financial Officer upon Mr. Rowe’s departure.

On February 23, 2007, we entered into a Settlement Agreement with Caxton Associates L.L.C. (“Caxton”), our largest shareholder. Under the Settlement Agreement, we agreed to appoint up to two Caxton designees to our Board of Directors if we did not publicly announce a definitive agreement for a sale, merger, or other business combination by April 13, 2007. On April 17, 2007, we appointed Caxton designees Bernard T. Marren and John D. Abouchar to our Board of Directors. On June 5, 2007, we entered into a Shareholders Agreement (the “Shareholder Agreement”) with Caxton regarding composition of the Board of Directors and nominations for the election of directors at our 2007 Annual Meeting of Shareholders, which was held on July 31, 2007. Pursuant to the Shareholder Agreement, we allowed Caxton to name two additional directors to the Board of Directors. On June 6, 2007, we appointed Caxton designees Bruce Berkoff and Robert B. Ladd to our Board of Directors.

Pursuant to the Shareholder Agreement, we nominated the four Caxton designees and Messrs. Mike Hallman and Peter Behrendt for election to the Board of Directors at our Annual Meeting of Shareholders which was held on July 31, 2007. Each of these nominees was elected to the Board by the shareholders during this meeting bringing the current number of directors to six. Upon the hiring of a permanent Chief Executive Officer and his/her expected appointment as a director, our Board of Directors will consist of seven members.

Results of Operations

	Three Months Ended June 30,(1)
	2007					2006
(Dollars in thousands)	Dollars			% of revenues		Dollars			% of revenues
Revenues	$	73,633		100.0	%	$	97,642		100.0	%
Cost of revenues	61,649			83.7		82,961			85.0
Gross margin	11,984			16.3		14,681			15.0

Operating expenses:
Marketing and sales	9,442			12.8		12,871			13.2
Research and development	3,905			5.3		4,492			4.6
General and administrative	4,770			6.5		6,210			6.4
Restructuring costs	2,050			2.8		850			0.9
	20,167			27.4		24,423			25.0
Loss from operations	(8,183		)	(11.1	)	(9,742		)	(10.0	)
Other income (expense):
Interest expense	(122		)	(0.2	)	(97		)	(0.1	)
Interest income	676			0.9		569			0.6
Other, net	(195		)	(0.3	)	(3,243		)	(3.3	)
Loss before income taxes	(7,824		)	(10.6	)	(12,513		)	(12.8	)
Provision (benefit) for income taxes	(36		)	—		318			0.3
Net loss	$	(7,788	)	(10.6	)%	$	(12,831	)	(13.1	)%

	Six Months Ended June 30, (1)
	2007					2006
(Dollars in thousands)	Dollars			% of revenues		Dollars			% of revenues
Revenues	$	151,288		100.0	%	$	209,661		100.0	%
Cost of revenues	130,824			86.5		178,237			85.0
Gross margin	20,464			13.5		31,424			15.0

Operating expenses:
Marketing and sales	19,086			12.6		27,436			13.1
Research and development	7,966			5.3		9,324			4.4
General and administrative	10,308			6.8		11,703			5.6
Restructuring costs	4,450			2.9		1,925			0.9
	41,810			27.6		50,388			24.0
Loss from operations	(21,346		)	(14.1	)	(18,964		)	(9.0	)
Other income (expense):
Interest expense	(187		)	—		(204		)	(0.1	)
Interest income	1,425			0.9		1,085			0.5
Other, net	(580		)	(0.4	)	(10,655		)	(5.1	)
Loss before income taxes	(20,688		)	(13.7	)	(28,738		)	(13.7	)
Provision for income taxes	147			0.1		450			0.2
Net loss	$	(20,835	)	(13.8	)%	$	(29,188	)	(13.9	)%

(1) Percentages may not add due to rounding.

Revenues

Revenues decreased $24.0 million, or 24.6%, and $58.4 million, or 27.8%, respectively, in the three and six-month periods ended June 30, 2007 compared to the same periods of 2006.

The decreases in revenue in the 2007 periods compared to the 2006 periods were due primarily to the following:

· a 12,000 unit and 15,000 unit decrease, respectively, in total projector units sold to 72,000 units and 163,000 units in the three and six-month periods ended June 30, 2007 compared to 84,000 units and 178,000 units, respectively, in the comparable periods of 2006; and

· a 9.7% and 20.1% decrease, respectively, in the 2007 periods compared to the 2006 periods in average projector selling prices (“ASPs”), due to both lower overall pricing across various products and, in the first quarter of 2007, a shift in mix towards sales of our lower margin entry level meeting room and home products. In the first quarter of 2007, we experienced increased sales of our IN24 and IN26 products as we worked to deplete existing inventory in order to transition the market to the higher margin and better featured IN24+ and IN26+. Also contributing to the ASP decline in the 2007 periods was increased unit sales of the IN72 entry level home entertainment product. We aggressively sold a large quantity of the IN72 product to deplete existing inventory as the product moved to end of life.

We also experienced a decrease of $4.0 million in revenue in the second quarter of 2007 compared to the first quarter of 2007, primarily due to a 20.7% decrease in projector units shipped. The decline in projector units shipped was partially offset by an increase in projector ASP of 17.5%, which led to increased gross margins in the second quarter of 2007 of 16.3% compared to gross margins in the first quarter of 2007 of 10.9%. The increased ASPs and gross margins for the second quarter of 2007 were due to the product mix improvements recognized in the second quarter of 2007.

Geographic Revenues

Revenues by geographic area and as a percentage of total revenue were as follows (dollars in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2007				2006				2007				2006
United States	$	45,594	61.9	%	$	67,522	69.1	%	$	89,737	59.3	%	$	131,210	62.5	%
Europe	15,808		21.5	%	19,301		19.8	%	36,845		24.4	%	45,690		21.8	%
Asia	8,162		11.1	%	5,856		6.0	%	17,084		11.3	%	15,223		7.3	%
Other	4,069		5.5	%	4,963		5.1	%	7,622		5.0	%	17,538		8.4	%
	$	73,633			$	97,642			$	151,288			$	209,661

United States revenues in the three and six-month periods ended June 30, 2007 were down 32.5% and 31.6%, respectively, compared to the same periods of 2006. These decreases were primarily due to declines in unit sales of 24.4% and 9.5%, respectively, and declines in ASPs of 10.6% and 24.4%, respectively, in the three and six-month periods ended June 30, 2007 compared to the same periods of 2006. The ASP decline in the six-month period ended June 30, 2007 compared to the same period of 2006 was affected by the large volume of entry level meeting room and home entertainment product sales in the first quarter of 2007.

European revenues in the three and six-month periods ended June 30, 2007 were down 18.1% and 19.4%, respectively, compared to the same periods of 2006. These decreases were primarily due to declines in ASPs of 18.5% and 16.2%, respectively, in the three and six-month periods ended June 30, 2007 and unit shipments that were flat and down 3.8%, respectively in the three and six-month periods ended June 30, 2007 compared to the same periods of 2006.

Asian revenues in the three and six-month periods ended June 30, 2007 were up 39.4% and 12.2%, respectively, compared to the same periods of 2006. Asian revenues held strong in the first six months of 2007 compared to the first six months of 2006 as we focused more of our sales efforts in this region and unit sales and market share increased. The increases in unit sales were offset by decreases in ASPs.

Other revenues primarily consist of sales in Canada and Latin America. Other revenues in the three and six-month periods ended June 30, 2007 were down 18.0% and 56.5%, respectively, compared to the same periods of 2006. Unit sales declined 28.7% and 54.3%, respectively, in the three and six-month periods ended June 30, 2007 compared to the same periods of 2006. The primary driver of the declines in revenues and units in the comparable periods was the sale of 8,500 units, which resulted in $6.2 million of revenue, in the first quarter of 2006 related to an education tender order in Mexico that did not reoccur in 2007. The declines in revenue and units were impacted by an increase in ASPs of 14.9% in the three month period ended June 30, 2007 and a decrease in ASPs of 4.6% in the six-month period ended June 30,2007 compared to the same periods of 2006.

Backlog

At June 30, 2007, we had backlog of approximately $4.2 million, compared to approximately $9.5 million at December 31, 2006. Given current supply and demand estimates, it is anticipated that a majority of the current backlog will turn over by the end of the third quarter of 2007. The stated backlog is not necessarily indicative of sales for any future period, nor is a backlog any assurance that we will realize a profit from filling the orders.

Gross Margins

We achieved gross margins of 16.3% and 13.5%, respectively, in the three and six-month periods ended June 30, 2007, compared to 15.0% in both the three and six-month periods ended June 30, 2006 and 10.9% in the first quarter of 2007.

The improvement in gross margins in the second quarter of 2007 compared to the second quarter of 2006 was due primarily to the following:

· product mix shift to higher resolution and margin generating products;

· efficiencies achieved within our supply chain, including the reduction of inventory in order to better match the timing of product costs with revenues;

· introduction of new products with improved gross margins; and

· a $0.8 million charge for inventory write-downs during the three months ended June 30, 2007 compared to a charge of $1.4 million in the three month period ended June 30, 2006.

These improvements were offset by the following in the six-month period ended June 30, 2007 compared to the same period of the prior year:

· a mix shift in the first quarter of 2007 towards entry level meeting room and home entertainment products with lower margins as described above;

· price reductions across our product portfolio; and

· a $2.4 million charge for inventory write-downs during the six-month period ended June 30, 2007 and a charge of $3.0 million in the comparable period of 2006.

We also continue to focus on improving our gross margins through managing the mix of products sold and continuing to improve our supply chain efficiencies by working closely with our contract manufacturers to control product costs and reduce product freight, handling and storage costs.

Marketing and Sales Expense

Marketing and sales expense decreased $3.5 million, or 27.1%, to $9.4 million in the three-month period ended June 30, 2007 compared to $12.9 million in the same period of 2006 and decreased $8.3 million, or 30.3%, to $19.1 million in the six-month period ended June 30, 2007 compared to $27.4 million in the same period of 2006.

The decreases in marketing and sales expense were primarily due to a reduced cost structure related to our previous restructuring activities, which included reductions in personnel related costs and other discretionary spending. We also achieved decreases in overall spending for sales and marketing programs and advertising related spending. Also contributing to the decreases was a reduction in the amount of IT and facilities expenses attributable to sales and marketing. As overall IT and facilities expenses have decreased, allocations to other functional areas have decreased proportionately. Offsetting these factors was a $0.5 million charge in the second quarter of 2007 related to the impairment of a trade show booth that was adjusted to estimated fair market value. In addition, the six-month periods ended June 30, 2007 and 2006 included $196,000 and $264,000, respectively, of stock-based compensation expense.

Research and Development Expense

Research and development expense decreased $0.6 million, or 13.3%, to $3.9 million in the three-month period ended June 30, 2007 compared to $4.5 million in the same period of 2006 and decreased $1.3 million, or 14.0%, to $8.0 million in the six-month period ended June 30, 2007 compared to $9.3 million in the same period of 2006.

These decreases were primarily due to a reduced cost structure related to our previous restructuring activities, including a decrease in personnel related costs and other discretionary spending due to a shift in our research and development model to outsource more of the design functions to our contract manufactures, which allows us to reduce necessary in-house research and development resources. In the future, our remaining internal research and development group will be focused on advanced development and the design work related to our core projection will be outsourced. In addition, the six-month periods ended June 30, 2007 and 2006 included $87,000 and $93,000, respectively, of stock-based compensation expense.

General and Administrative Expense

General and administrative expense decreased $1.4 million, or 22.6%, to $4.8 million in the three-month period ended June 30, 2007 compared to $6.2 million in the same period of 2006 and decreased $1.4 million, or 12.0%, to $10.3 million in the six-month period ended June 30, 2007 compared to $11.7 million in the same period of 2006.

Included in general and administrative expense in the three and six-month periods ended June 30, 2007 was $0.1 million and $0.9 million, respectively, of costs incurred for various external advisors engaged as part of our strategic alternatives evaluation process. Included in general and administrative expense in the three and six-month periods ended June 30, 2006 was $1.1 million and $1.8 million, respectively, of costs related to our audit committee investigations. We also realized decreased overall spending in the 2007 periods compared to the 2006 periods as a result of our previous restructuring activities. In addition, the six-month periods ended June 30, 2007 and 2006 included $196,000 and $255,000, respectively, of stock-based compensation expense.

Restructuring

In the three and six-month periods ended June 30, 2007, we incurred restructuring charges totaling $2.1 million and $4.5 million, respectively. The charge of $2.1 million in the second quarter of 2007 was primarily for severance costs and the charge in the first quarter of 2007 of $2.4 million was primarily related to estimated lease losses on vacated or partially vacated facilities at our corporate headquarters and various European office locations. A portion of the $2.1 million charge recorded in the second quarter of 2007 for severance costs was related to a shift in our research and development model to outsource more of the design functions to our contract manufacturers, which allows us to reduce necessary in-house research and development resources.

In the three and six-month periods ended June 30, 2006, we incurred restructuring charges totaling $0.9 million and $1.9 million, respectively. Of the $1.9 million, approximately $1.1 million related to international facility consolidation activities that were completed during the first quarter of 2006. The second quarter 2006 charge related to severance for former InFocus employees terminated by SMT during that quarter. We were contractually responsible for severance costs for their past service with InFocus.

At June 30, 2007, we had $4.2 million of restructuring costs accrued on our consolidated balance sheet classified as other current liabilities. See further detail in Note 9 of Notes to Consolidated Financial Statements.

Other Income (Expense)

Interest income in the three and six-months ended June 30, 2007 increased to $0.7 million and $1.4 million, respectively, compared to $0.6 and $1.1 million respectively, in the comparable periods of 2006. These increases were primarily due to increased interest rates during the 2007 periods compared to the 2006 periods. Other, net included the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Realized gain/(loss) on equity securities	$	—		$	(266	)	$	—		$	542
Income/(loss) related to the profits of Motif, 50-50 joint venture	4			(200		)	312			924
Expense related to losses of SMT, 50-50 joint venture	—			(1,147		)	—			(2,709		)
Write-down of equity method investment in SMT, 50-50 joint venture	—			(2,106		)	—			(2,106		)
Losses related to foreign currency transactions	(179		)	(155		)	(833		)	(503		)
Write-down of cost-based investments in technology companies	—			—			—			(7,474		)
Gain on sale of land	—			636			—			636
Other	(20		)	(5		)	(59		)	35
	$	(195	)	$	(3,243	)	$	(580	)	$	(10,655	)

Income Taxes

Income tax expense in the first half of 2007 and 2006 primarily represents income tax expense in certain foreign tax jurisdictions.

Liquidity and Capital Resources

Total cash and cash equivalents, marketable securities and restricted cash were $67.3 million at June 30, 2007. At June 30, 2007, we had working capital of $80.7 million, which included $44.4 million of unrestricted cash and cash equivalents. The current ratio at June 30, 2007 and December 31, 2006 was 2.1 to 1 and 2.2 to 1, respectively.

We sustained an operating loss of $21.3 million in the first six months of 2007, contributing to a decrease in net working capital of $17.6 million for the period. If we continue to experience significant operating losses and reductions in net working capital, we may need to obtain additional debt or equity financing to continue current business operations. There is no guarantee that we will be able to raise additional funds on favorable terms, if at all.

We currently have a $15 million line of credit facility with Wells Fargo Foothill, Inc. (“Wells Fargo”) to finance future working capital requirements. On March 28, 2007, we entered into an amendment to extend the maturity date of the credit facility to August 31, 2007 and re-set future financial covenants. Pursuant to the terms of the credit agreement, we may borrow against the line subject to a borrowing base determined on eligible accounts receivable. The credit agreement contains certain covenants. As of June 30, 2007, we were in compliance with all covenants and no amounts were outstanding under this credit facility.

We anticipate that our current cash and marketable securities, along with cash we anticipate generating from operations, will be sufficient to fund our known operating and capital requirements for at least the next 12 months. However, to the extent our operating results fall below our expectations, we may need to raise additional capital through debt or equity financings. We may also need additional capital if we pursue other strategic growth opportunities. There is no guarantee that we will be able to raise additional funds on favorable terms, if at all.

At June 30, 2007, we had one outstanding letter of credit totaling $20 million, which expired on August 2, 2007. The letter of credit was subsequently amended with a new expiration date of November 2, 2007. This letter of credit secures our obligations to a supplier for the purchase of finished goods inventory. The fair value of this letter of credit approximates its contract value. The letter of credit is collateralized by $21.1 million of cash and marketable securities, and, as such, is reported as restricted on the consolidated balance sheets. The remaining restricted cash and marketable securities of $1.7 million secures our merchant credit card processing account, and deposits for building leases and value added taxes in foreign jurisdictions.

Accounts receivable decreased $3.7 million to $46.4 million at June 30, 2007 compared to $50.1 million at December 31, 2006. The decrease in the accounts receivable balance was primarily due to lower sales in the second quarter of 2007 compared to the fourth quarter of 2006. Offsetting the impact on the accounts receivable balance for lower sales in the second quarter of 2007 compared to the first quarter of 2007, was an increase in days sales outstanding to 57 days at June 30, 2007 compared to 54 days at December 31, 2006.

Total inventories, including consigned inventories, decreased $6.8 million to $33.3 million at June 30, 2007 compared to $40.1 million at December 31, 2006. During the first six months of 2007, we continued to work closely with our contract manufacturers to better align incoming product levels with expected sales needs in order to allow us to reduce finished goods inventory. Finished goods inventory, including inventory held on consignment until sold, decreased $5.6 million during the first six months of 2007. Service inventories, which consist of lamps and accessories, service parts held for warranty or customer repair activities, remanufactured projectors and projectors in the process of being repaired, were reduced $1.2 million during the first six months of 2007. See Note 2 of Notes to Consolidated Financial Statements for a summary of the components of inventory as of these dates.

At June 30, 2007 and December 31, 2006, we had approximately 4 weeks of inventory in the Americas channel. Annualized inventory turns were approximately 7 times for the quarter ended June 30, 2007 and 7 times for each of the two previous quarters.

Other current assets decreased $3.2 million to $7.5 million at June 30, 2007 compared to $10.7 million at December 31, 2006. Decreases in miscellaneous receivables for cooperative advertising and other non-trade accounts receivable related activity accounted for $2.4 million of the decline. In addition, prepaid expenses decreased $1.3 million due to the timing of payments for insurance policies and a reduction of prepaid tradeshow expense.

Expenditures for property and equipment totaled $2.2 million in the first six months of 2007 and were primarily for purchases of product tooling. Total expenditures for property and equipment are expected to be between $4 million and $6 million in 2007.

Related party accounts payable decreased $0.3 million to $1.6 million at June 30, 2007 compared to $1.9 million at December 31, 2006 and represent outstanding payables to SMT primarily for the purchase of projectors.

Seasonality

Given the buying patterns of various geographies and market segments, our revenues are subject to certain elements of seasonality during various portions of the year. Historically, between 20% and 30% of our revenues have come from Europe and, as such, we typically experience a seasonal downturn due to the vacation season in mid-summer, which results in decreased revenues from that region in the third quarter compared to the second quarter. Conversely, we typically experience a strong resurgence of revenue from Europe in the fourth quarter. In addition, we sell our products into the education and government markets that typically see seasonal peaks in the United States in the second and third quarter of each year. The first quarter of each year is typically down from the immediately preceding fourth quarter due to corporate buying trends and typical aggressive competition from our Asian competitors with March 31 fiscal year ends.

Critical Accounting Policies and Estimates

Except for the adoption of Interpretation No. 48 as described in Note 11 of Notes to Consolidated Financial Statements, we reaffirm the critical accounting policies and estimates as reported in our 2006 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 12, 2007.

New Accounting Pronouncements

See Note 13 of Notes to Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our reported market risks since the filing of our 2006 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 12, 2007.

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Acting Chief Operating Officer and Interim Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a- 15(b) under the Securities Exchange Act of 1934, as amended (Exchange Act). Based on that evaluation, our Acting Chief Operating Officer and our Interim Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and

reported in a timely manner, and (2) accumulated and communicated to our management, including our Acting Chief Operating Officer and our Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management does not expect that our disclosure controls and procedures will prevent and detect all errors and fraud. Any control system, no matter how well designed and operated, is based on certain assumptions and can provide only reasonable, not absolute assurance, that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we become involved in ordinary, routine or regulatory legal proceedings incidental to our business. When a loss is deemed probable and reasonably estimable an amount is recorded in our financial statements. While the ultimate results of these matters cannot presently be determined, management does not expect that they will have a material adverse effect on our results of operations or financial position. Therefore, no adjustments have been made to the accompanying financial statements relative to these routine matters.

China Customs Regulatory Assessment

We are currently in the process of working towards final settlement with Shanghai Customs and do not expect any further return of our deposit in future periods.

Item 1A. Risk Factors

A restated description of the risk factors associated with our business is set forth below. This description includes any material changes to and supersedes the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2006.

Because of the following factors, as well as other variables affecting our operating results, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

We may need to raise additional financing if our financial results do not improve.

We sustained an operating loss of $21.3 million and $49.8 million, respectively; during the six-month period ended June 30, 2007 and the year ended December 31, 2006, contributing to a decrease in net working capital of $17.6 million and $42.1 million during the respective time periods. If we continue to experience significant operating losses and reductions in net working capital, we may need to obtain additional debt or equity financing to continue current business operations. There is no guarantee that we will be able to raise additional funds on favorable terms, if at all.

Our restructuring plans may not be successful.

Over the last three years, we have implemented a series of restructuring plans with the goal of simplifying the business and returning the company to profitability. As part of the restructuring plans, we have implemented actions to reduce our cost to serve customers, improve our supply chain efficiency to reduce our product costs, and reduce our operating expenses. Our goal as a result of these actions was to improve gross margins to 16% to 18% and reduce our operating expenses to a level that will allow us to achieve breakeven or better results. We have faced a number of challenges related to our restructuring plans including uncertainties associated with the impact of our actions on revenues and gross margins.

Through the date of this report, our restructuring plans have not been successful in returning the company to operating profitability, primarily a result of lower than anticipated revenues. We continue to focus on increasing revenues, increasing gross margins and further reducing operating expenses to return the company to profitability.

Our Board of Directors’ evaluation of strategic alternatives for the company may not result in any actions that result in an increase in shareholder value.

On October 10, 2006, we announced that our Board of Directors is conducting an ongoing evaluation into strategic alternatives for the company and that Banc of America Securities is engaged as our financial advisor to assist the Board in its evaluation. The evaluation process is ongoing and there can be no assurances that the evaluation process will result in any specific transaction or other action that would yield an increase in shareholder value. We do not intend to disclose further developments regarding the evaluation unless and until we have entered into a definitive agreement for a transaction that has been approved by our Board or the Board has determined to terminate the evaluation process.

If our contract manufacturers or other outsourced service providers experience any delay, disruption or quality control problems in their operations, we could lose market share and revenues, and our reputation may be harmed.

We have outsourced the manufacturing of our products to third party manufacturers. We rely on our contract manufacturers to procure components, provide spare parts in support of our warranty and customer service obligations, and in some cases, subcontract engineering work. We generally commit the manufacturing of each product platform to a single contract manufacturer. In addition, going forward, we will be placing more reliance on our contract manufacturers for design activities related to our core projection products, as we move to having a larger percentage of our research and development work outsourced.

Our reliance on contract manufacturers exposes us to the following risks over which we have limited control:

· Unexpected increases in manufacturing and repair costs;

· Interruptions in shipments if our contract manufacturer is unable to complete production;

· Inability to completely control the quality of finished products;

· Inability to completely control delivery schedules;

· Unpredictability of manufacturing yields;

· Changes in our contract manufacturer’s business models or operations;

· Potential loss of differentiation in our products compared to our competitors;

· Potential lack of adequate capacity to manufacture all or a part of the products we require; and

· Reduced control over the availability of our products.

Our contract manufacturers are primarily located in Asia and may be subject to disruption by natural disasters, as well as political, social or economic instability. The temporary or permanent loss of the services of any of our primary contract manufacturers could cause a significant disruption in our product supply chain and operations and delays in product shipments. In addition, we do not have long-term contracts with any of our third-party contract manufacturers and these contracts are terminable by either party on relatively short notice.

In addition, we outsourced our U.S. customer service and technical support call center to a third party provider. We rely on this third party to provide efficient and effective support to our customers and partners. To the extent our customers are not satisfied with the level of service provided by our third party provider we may lose market share and our revenues and corporate reputation could be negatively affected.

Our competitors may have greater resources and technology, and we may be unable to compete with them effectively.

The markets for our products are highly competitive and we expect aggressive price competition in our industry, especially from Asian manufacturers, to continue into the foreseeable future. Some of our current and prospective competitors have, or may have, significantly greater financial, technical, manufacturing and marketing resources than we have. Our products also face competition from alternate technologies such as LCD and plasma televisions and displays. Our ability to compete depends on factors within and outside our control, including the success and timing of product introductions, product performance and price, product distribution and customer support.

In order to compete effectively, we must continue to reduce the cost of our products, our manufacturing and other overhead costs, our channel sales models and our operating expenses in order to offset declining selling prices for our products, while at the same time drive our products into new markets. There is no assurance we will be able to compete successfully with respect to these factors.

If we are unable to manage the cost of older products or successfully introduce new products with higher gross margins, our revenues may decrease or our gross margins may decline.

The market in which we compete is subject to technological advances with continual new product releases and aggressive price competition. As a result, the price at which we can sell our products typically declines over the life of the product. The price at which a product is sold is generally referred to as the average selling price. In order to sell products that have a declining average selling price and still maintain our gross margins, we need to continually reduce our product costs. To manage product-sourcing costs, we must collaborate with our contract manufacturers to engineer the most cost-effective design for our products. In addition, we must carefully monitor the price paid by our contract manufacturers for the significant components used in our products. We must also successfully manage our freight and inventory holding costs to reduce overall product costs. We also need to continually introduce new products with improved features and increased performance at lower costs in order to maintain our overall gross margins. Our inability to successfully manage these factors could reduce revenues or result in declining gross margins. In addition, our increased reliance on our contract manufacturers for design and development work could enhance the risks described above.

Our revenues and profitability can fluctuate from period to period and are often difficult to predict for particular periods due to factors beyond our control.

Our results of operations for any quarter or the year are not necessarily indicative of results to be expected in future periods. Our operating results have historically been, and are expected to continue to be, subject to quarterly and yearly fluctuations as a result of a number of factors, including:

· The introduction and market acceptance of new technologies, products and services;

· Variations in product selling prices and costs and the mix of products sold;

· The size and timing of customer orders, which, in turn, often depend upon the success of our customers’ business or specific products or services;

· Changes in the conditions in the markets for projectors and alternative technologies;

· The size and timing of capital expenditures by our customers;

· Conditions in the broader markets for information technology and communications equipment;

· The timing and availability of products coming from our offshore contract manufacturing partners;

· Changes in the supply of components; and

· Seasonality of markets such as education, government and consumer retail, which vary quarter to quarter and are influenced by outside factors such as overall consumer confidence, budgets and political party changes.

These trends and factors could harm our business, operating results and financial condition in any particular period.

Our operating expenses and portions of our costs of revenues are relatively fixed and we may have limited ability to reduce expenses quickly in response to any revenue shortfalls.

Our operating expenses, warranty costs, inbound freight and inventory handling costs are relatively fixed. Because we typically recognize a significant portion of our revenues in the last month of each quarter, we may not be able to adjust our operating expenses or other costs sufficiently to adequately respond to any revenue shortfalls. If we are unable to reduce operating expenses or other costs quickly in response to any revenue shortfall, it could negatively impact our financial results.

If we do not effectively manage our sales channel inventory and product mix, we may incur costs associated with excess inventory or experience declining gross margins.

If we are unable to properly monitor, control and manage our sales channel inventory and maintain an appropriate level and mix of products with our customers within our sales channels, we may incur increased and unexpected costs associated with this inventory. We generally allow distributors, dealers and retailers to return a limited amount of our products in exchange for placing an order for other new products. In addition, under our price protection policy, subject to certain conditions which vary around the globe, if we reduce the list price of a product, we may issue a credit in an amount equal to the price reduction for each of the products held in inventory by our distributors, dealers and retailers. If these customers are unable to sell their inventory in a timely manner, under our policy, we may lower the price of the products or these products may be exchanged for newer products. If these events occur, we could incur increased expenses associated with rotating and reselling product, or inventory reserves associated with writing down returned inventory, or suffer declining gross margins.

If we cannot continually develop new and innovative products and integrate them into our business, we may be unable to compete effectively in the marketplace.

Our industry is characterized by continuing improvements in technology and rapidly evolving industry standards. Consequently, short product life cycles and significant price fluctuations are common. Product transitions present challenges and risks for all companies involved in the data/video digital projector and display markets. Demand for our products and the profitability of our operations may be adversely affected if we fail to effectively manage product transitions.

Advances in product technology require continued investment in research and development and product engineering to maintain our market position. There are no guarantees that such investment will result in the right products being introduced to the market at the right time. In addition, our increased reliance on our contract manufacturers for design and development work could enhance the risks described above.

If we are unable to provide our contract manufacturers with an accurate forecast of our product requirements, we may experience delays in the manufacturing of our products and the costs of our products may increase.

We provide our contract manufacturers with a rolling forecast of demand which they use to determine their material and component requirements. Lead times for ordering materials and components vary significantly and depend on various factors, such as the specific supplier, contract terms and supply and demand for a component at a given time. Some of our components have long lead times measuring as much as 4 to 6 months from the point of order.

If our forecasts are less than our actual requirements, our contract manufacturers may be unable to manufacture sufficient products to meet actual demand in a timely manner. If our forecasts are too high, our contract manufacturers may be unable to use the components they have purchased. The cost of the components used in our products tends to decline as the product platform and technologies mature. Therefore, if our contract manufacturers are unable to promptly use components purchased on our behalf, our cost of producing products may be higher than our competitors due to an over-supply of higher-priced components. Moreover, if they are unable to use certain components, we may be required to reimburse them for any potential inventory exposure they incur within lead time.

Our failure to anticipate changes in the supply of product components or customer demand may result in excess or obsolete inventory that could adversely affect our gross margins.

Substantially all of our products are made for immediate delivery on the basis of purchase orders rather than long-term agreements. As a result, contract manufacturing activities are scheduled according to a monthly sales and production forecast rather than on the receipt of product orders or purchase commitments. From time to time in the past, we have experienced significant variations between actual orders and our forecasts.

If there were to be a sudden and significant decrease in demand for our products, or if there were a higher incidence of inventory obsolescence because of rapidly changing prices of product components, rapidly changing technology and customer requirements or an increase in the supply of products in the marketplace, we could be required to write-down our inventory and our gross margins could be adversely affected.

Our contract manufacturers may be unable to obtain critical components from suppliers, which could disrupt or delay our ability to procure our products.

We rely on a limited number of third party manufacturers for the product components used by our contract manufacturers. Reliance on suppliers raises several risks, including the possibility of defective parts, reduced control over the availability and delivery schedule for parts and the possibility of increases in component costs. Manufacturing efficiencies and our profitability can be adversely affected by each of these risks.

Certain components used in our products are now available only from single sources. Most importantly, Digital Light Processing® (“DLP®”) devices are only available from Texas Instruments. The majority of our current products are based on DLP® technology making the continued availability of DLP® devices increasingly important.

Our contract manufacturers also purchase other single or limited-source components for which we have no guaranteed alternative source of supply, and an extended interruption in the supply of any of these components could adversely affect our results of operations. We have worked to improve the availability of lamps and other key components to meet our future needs, but there is no guarantee that we will secure all the supply we need to meet demand for our products.

Furthermore, many of the components used in our products are purchased from suppliers located outside the U.S. Trading policies adopted in the future by the U.S. or foreign governments could restrict the availability of components or increase the cost of obtaining components. Any significant increase in component prices or decrease in component availability could have an adverse effect on our results of operations.

Product defects resulting in a large-scale product recall or successful product liability claims against us could result in significant costs or negatively impact our reputation and could adversely affect our business results and financial condition.

As with any high tech manufacturing company, we are sometimes exposed to warranty and potential product liability claims in the normal course of business. There can be no assurance that we will not experience material product liability losses arising from such potential claims in the future and that these will not have a negative impact on our reputation and, consequently, our revenues. We generally maintain insurance against most product liability risks and record warranty provisions based on historical defect rates, but there can be no assurance that this insurance coverage and these warranty provisions will be adequate for any potential liability ultimately incurred. In addition, there is no assurance that insurance will continue to be available on terms acceptable to us. A successful claim that exceeds our available insurance coverage or a significant product recall could have a material adverse impact on our financial condition and results of operations.

SMT, our joint venture with TCL Corporation, has not been successful in implementing its business plan and is in the process of winding down its business.

SMT, our 50-50 joint venture with TCL Corporation, has not been successful in executing its business plan, primarily a result of failing to secure third party OEM customers for its products. As a result, the parent companies sought alternatives for funding ongoing operations at SMT without success. During the third quarter of 2006, SMT began the process of winding down its operations in an orderly fashion, including the sale of its assets and the settlement of its outstanding liabilities. At June 30, 2007, the majority of SMT employees had been laid off and only those employees working on the wind-down of the company remained. During 2006, we completely wrote off our initial investment in SMT and also recorded a charge for our share of estimated additional wind-down costs. There can be no assurance that we will not incur additional costs as SMT completes the wind-down process.

Customs or other issues involving product delivery from our contract manufacturers could prevent us from timely delivering our products to our customers.

Our business depends on the free flow of products. Due to continuing threats of terrorist attacks, U.S. Customs has increased security measures for products being imported into the U.S. In addition, increased freight volumes and work stoppages at west coast ports have, in the past, and may, in the future, cause delay in freight traffic. Each of these situations could result in delay of receipt of products from our contract manufacturers and delay fulfillment of orders to our customers. Any significant disruption in the free flow of our products may result in a reduction of revenues, an increase of in-transit (unavailable for sale) inventory, or an increase in administrative and shipping costs.

A deterioration in general global economic condition could adversely affect demand for our products.

Our business is subject to the overall health of the global economy. Purchase decisions for our products are made by corporations, governments, educational institutions, and consumers based on their overall available budget for information technology products. Any number of factors impacting the global economy including geopolitical issues, balance of trade concerns, inflation, interest rates, currency fluctuations and consumer confidence can impact the overall spending climate, both positively and negatively, in one or more geographies for our products. Deterioration in any one or combination of these factors could change overall industry dynamics and demand for discretionary products like ours and negatively impact our results of operations.

We are subject to risks associated with exporting products outside the United States.

To the extent we export products outside the United States, we are subject to United States laws and regulations governing international trade and exports, including, but not limited to, the International Traffic in Arms Regulations, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the Department of the Treasury. A determination that we have failed to comply with one or more of these export controls could result in civil and/or criminal sanctions, including the imposition of fines upon us, the denial of export privileges, and debarment from participation in United States government contracts. Any one or more of such sanctions could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to risks associated with our international operations.

Revenues outside the United States accounted for approximately 41% of our revenues in the first six months of 2007, 36% of our revenues in 2006 and 38% of our revenues in 2005. The success and profitability of our international operations are subject to numerous risks and uncertainties, including:

· local economic and labor conditions;

· political instability;

· terrorist acts;

· unexpected changes in the regulatory environment;

· trade protection measures;

· tax laws; and

· foreign currency exchange rates.

Currency exchange rate fluctuations may lead to decreases in our financial results.

To the extent that we incur costs in one currency and make our sales in another, our gross margins may be affected by changes in the exchange rates between the two currencies. Although our general policy is to hedge against these currency transaction risks on a monthly basis, given the volatility of currency exchange rates, we cannot provide assurance that we will be able to effectively manage these risks. Volatility in currency exchange rates may generate foreign exchange losses, which could have an adverse effect on our financial condition or results of operations.

In addition, we have moved much of our manufacturing and supply chain activities to emerging markets, particularly China, to take advantage of their lower cost structures. In July 2005, China announced a change to their monetary policy allowing the Yuan to begin to appreciate vis a vis the United States dollar. We view change in monetary policy in China as a net positive for our business as a controlled appreciation in the Yuan will allow for continued strong economic growth in China while alleviating foreign political pressures and reducing the risk of trade restrictions against Chinese exporters. In addition, since a number of the major components used in our products are imported by our Chinese manufacturers, a stronger Yuan will reduce the cost of our products manufactured there. We also expect other Asian currencies to strengthen relative to the dollar, making their exports into the United States, our largest market, more expensive, primarily for our polysilicon based competitors. While we currently view these changes positively, any number of factors may emerge which may reduce or reverse these benefits and adversely affect our operating results.

Our reliance on third party logistics and customer service providers may result in customer dissatisfaction or increased costs.

We have outsourced all of our logistics and service repair functions worldwide. We are reliant on our third party providers to effectively and accurately manage our inventory, service repair, and logistics functions. This reliance includes timely and accurate shipment of our products to our customers and quality service repair work. Reliance on third parties requires proper training of employees, creating and maintaining proper controls and procedures surrounding both forward and reverse logistics functions, and timely and accurate inventory reporting. In addition, reliance on third parties requires adherence to product specifications in order to ensure quality and reliability of our products. Failure of our third parties to deliver in any one of these areas could have an adverse effect on our results of operations.

We may be unsuccessful in protecting our intellectual property rights.

Our ability to compete effectively against other companies in our industry depends, in part, on our ability to protect our current and future proprietary technology under patent, copyright, trademark, trade secret and other intellectual property laws. We utilize contract manufacturers in China and Taiwan, and anticipate doing increased business in these markets and elsewhere around the world including other emerging markets. These emerging markets may not have the same protections for intellectual property that are available in the United States. We cannot make assurances that our means of protecting our intellectual property rights in the United States or abroad will be adequate, or that others will not develop technologies similar or superior to our trade secrets or design around our patents. In addition, management may be distracted by, and we may incur substantial costs in, attempting to protect our intellectual property.

Also, despite the steps taken by us to protect our intellectual property rights, it may be possible for unauthorized third parties to copy or reverse-engineer trade secret aspects of our products, develop similar technology independently or otherwise obtain and use information that we regard as our trade secrets, and we may be unable to successfully identify or prosecute unauthorized uses of our intellectual

property rights. Further, with respect to our issued patents and patent applications, we cannot provide assurance that pending patent applications (or any future patent applications) will be issued, that the scope of any patent protection will exclude competitors or provide competitive advantages to us, that any of our patents will be held valid if subsequently challenged, or that others will not claim rights in or ownership of the patents (and patent applications) and other intellectual property rights held by us.

If we become subject to intellectual property infringement claims, we could incur significant expenses and could be prevented from selling specific products.

We are periodically subject to claims that we infringe the intellectual property rights of others. We cannot provide assurance that, if and when made, these claims will not be successful. Intellectual property litigation is, by its nature, expensive and unpredictable. Any claim of infringement could cause us to incur substantial costs defending against the claim even if the claim is invalid, and could distract management from other business. Any potential judgment against us could require substantial payment in damages and also could include an injunction or other court order that could prevent us from offering certain products.

We rely on large distributors, national retailers and other large customers for a significant portion of our revenues, and changes in price or purchasing patterns could lower our revenues or gross margins.

We sell our products through large distributors such as Ingram Micro, Tech Data and CDW, national retailers such as Best Buy, Circuit City and Office Depot and through a number of other customers and channels. We rely on our larger distributors, national retailers, and other large customers for a significant portion of our total revenues in any particular period. We have no minimum purchase commitments or long-term contracts with any of these customers. Our customers, including our largest customers, could decide at any time to discontinue, decrease or delay their purchases of our products. In addition, the prices that our distributors and retailers pay for our products are subject to competitive pressures and change frequently.

If any of our major customers change their purchasing patterns or refuse to pay the prices that we set for our products, our net revenues and operating results could be negatively impacted. If our large distributors and retailers increase the size of their product orders without sufficient lead-time for us to process the order, our ability to fulfill product demand could be compromised. In addition, because our accounts receivable are concentrated within our largest customers, the failure of any of them to pay on a timely basis, or at all, could reduce our cash flow or result in a significant bad debt expense.

In order to compete, we must attract, retain and motivate key employees, and our failure to do so could have an adverse effect on our results of operations.

In order to compete, we must attract, retain and motivate key employees, including those in managerial, operations, engineering, service, sales, marketing, and support positions. Hiring and retaining qualified employees in all areas of the company is critical to our business. Each of our employees is an “at will employee” and may terminate his/her employment without notice and without cause or good reason. As a result of our announcement in October 2006 that our Board of Directors was exploring strategic alternatives for the company, we implemented a retention bonus program for all employees. The retention bonus program paid a bonus to employees who remained with us through April 30, 2007, which totaled $1.4 million. On May 31, 2007, the Compensation Committee of the Board of Directors authorized the issuance of 809,300 restricted shares to current non-temporary employees under the 1998 Stock Incentive Plan. The restricted shares vest 100% one year from date of grant contingent upon the employee’s continuous employment over that period. The fair market value of our common stock on the date of grant was $2.46 per share. The value of the 809,300 restricted shares was $2.0 million and is being amortized over the one-year vesting period. The compensation committee of our Board of Directors is continually evaluating additional actions that may be necessary to attract, retain and motivate our employees.

We depend on our officers, and, if we are not able to retain them, our business may suffer.

Due to the specialized knowledge each of our officers possess with respect to our business and our operations, the loss of service of any of our officers could adversely affect our business. We do not carry key person life insurance on our officers. Each of our officers is an “at will employee” and may terminate his/her employment without notice and without cause or good reason. All of our officers, other than the Chief Executive Officer, were provided a retention bonus program allowing them to earn a retention bonus if certain operating performance goals were achieved for the first quarter of 2007 and they remained employed by us on April 30, 2007. The established performance goals were not achieved and thus no bonus was paid to our officers under this program.

On June 16, 2007, Mr. Roger Rowe notified the Board of Directors of his resignation as our Chief Financial Officer, effective July 2, 2007. In response to Mr. Rowe’s resignation as Chief Financial Officer, on June 15, 2007, we entered into an Interim Executive Services Agreement (the “Agreement”) with Tatum, LLC (“Tatum”). In connection with the Agreement, Mr. Mark Perry was appointed Interim Chief Financial Officer.

Changes at the executive officer level may cause delays in achieving our operational goals and plans as new individuals learn the business.

The compensation committee of our Board of Directors is currently evaluating additional actions that may be necessary to retain and motivate our officers.

Our results of operations could vary as a result of the methods, estimates and judgments we use in applying our accounting policies.

The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations (see “Critical Accounting Policies and Estimates” in Item 2 above). Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise that lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations. For example, we are required to make judgments or take certain tax positions in relation to income taxes in both U.S. and foreign tax jurisdictions. To the extent a taxing authority takes a position different from ours and we are unsuccessful in defending our position, the outcome of that decision could impact the amount of income tax expense recorded in the period these new positions are known.

Item 6. Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

32.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

32.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

SIGNATURE

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

Date:	August 7, 2007	INFOCUS CORPORATION


		By:	/s/ Mark H. Perry
		Mark H. Perry
		Interim Chief Financial Officer
		(Principal Financial Officer)

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Constraining
Legalese
Litigous
Readability	H.S. freshman Good

Infocus (INFS) Inactive 10-Q2007 Q2 Quarterly report

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