Massachusetts |
04-2911026
|
||
(State or Other
Jurisdiction of
|
(I.R.S. Employer
Identification No.)
|
||
Incorporation or
Organization)
|
40 Middlesex Turnpike, Bedford,
Massachusetts 01730
|
||
(Address of
Principal Executive Offices)
|
||
(Zip
Code)
|
(781)
276-4000
|
|||
(Registrant’s
Telephone Number, Including Area Code)
|
|||
Securities
registered pursuant to Section 12(b) of the Act:
|
|||
Title of Each Class |
Name of Each Exchange on Which
Registered
|
||
Common Stock, par value $.01 per share |
The Nasdaq Stock Market
LLC
|
||
Securities
registered pursuant to Section 12(g) of the Act: None
|
PART
I
|
||
Item
1.
|
Business
|
3
|
Item
1A.
|
Risk
Factors
|
13
|
Item
1B.
|
Unresolved
Staff
Comments
|
20
|
Item
2.
|
Properties
|
21
|
Item
3.
|
Legal
Proceedings
|
21
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
21
|
PART
II
|
||
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
22
|
Item
6.
|
Selected
Financial Data
|
25
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
26
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
33
|
Item
8.
|
Consolidated
Financial Statements and Supplementary
Data
|
34
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
52
|
Item
9A.
|
Controls
and
Procedures
|
52
|
Item
9B.
|
Other
Information
|
52
|
PART
III
|
||
Item
10.
|
Directors,
Executive Officers and Corporate
Governance
|
53
|
Item
11.
|
Executive
Compensation
|
53
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
53
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
53
|
Item
14.
|
Principal
Accountant Fees and Services
|
53
|
PART
IV
|
||
Item
15.
|
Exhibits
and Financial Statement Schedules
|
54
|
Signatures
|
56
|
|
·
|
Telephone
companies are expected to add 88 million, 79 million, 74 million and 64
million new DSL ports to their networks in 2007, 2008, 2009 and 2010
respectively.
|
|
·
|
Telephone
companies are expected to add 26 million, 37 million, 48 million and 65
million VDSL ports to their networks in 2007, 2008, 2009 and 2010
respectively.
|
|
·
|
DSL
CPE units of 74 million, 71 million, 64 million and 56 million are
expected to sell in 2007, 2008, 2009 and 2010
respectively.
|
|
·
|
VDSL
CPE units of 2.4 million, 5.3 million, 8.7 million and 13.6 million are
expected to sell in 2007, 2008, 2009 and 2010
respectively.
|
|
·
|
Modem
Models 150 and 350– Standard-compliant CPE transceiver emulation modems
for ADSL or ADSL2+ networks
|
|
·
|
Modem
Models 450 and 550– Standard-compliant transceiver CO and CPE emulation
modems for ADSL/2/2+ and VDSL2 CO and CPE
networks.
|
|
·
|
Customer
specific product form factors that incorporate our modules for test head
environments.
|
|
·
|
DSL
test and development systems - System-level products for ADSL/2/2+ and
VDSL2 performance and interoperability
testing.
|
|
·
|
Data
formatting and interchange software components that support NIST, ISO,
INCITS, ICAO, and FIPS 201 standards and enable
interoperability.
|
|
·
|
Image
compression software components for fingerprint and facial image
compression such as WSQ and
JPEG2000.
|
|
·
|
Biometric
ID cards. Our PIVSuite™ family of software development kits
(SDKs) support registration, identity proofing, ID card personalization
and issuance applications in compliance with FIPS
201. CaptureSuite™ is a family of SDKs for automatic capture
and processing of
fingerprints.
|
|
·
|
Image
processing for biometric quality analysis, capture and transaction
processing
applications.
|
|
·
|
Networking
software for building and deploying multimodal biometric data workflow
solutions. Our Biometrics Services Platform (BioSPTM)
is a service-oriented platform for biometrics data processing and
integration applications. BioSP supports the collection of biometrics from
a distributed network, and subsequent aggregation, analysis, processing
and integration of this data into larger
systems.
|
|
·
|
rapid
price erosion;
|
|
·
|
rapid
technological change;
|
|
·
|
short
product life cycles;
|
|
·
|
cyclical
market patterns; and
|
|
·
|
increasing
foreign and domestic competition.
|
|
·
|
market
acceptance of broadband technologies we supply by semiconductor or
equipment companies;
|
|
·
|
the
extent and timing of new transactions with semiconductor
companies;
|
|
·
|
changes
in our and our customers’ development schedules and levels of expenditure
on research and development;
|
|
·
|
the
loss of a strategic relationship or termination of a project by a
customer;
|
|
·
|
equipment
companies' acceptance of integrated circuits produced by our
customers;
|
|
·
|
the
loss by a customer of a strategic relationship with an equipment company
customer;
|
|
·
|
announcements
or introductions of new technologies or products by us or our
competitors;
|
|
·
|
delays
or problems in the introduction or performance of enhancements or of
future generations of our
technology;
|
|
·
|
failures
or problems in our hardware or software
products;
|
|
·
|
price
pressure in the biometrics or test and diagnostics markets from our
competitors;
|
|
·
|
delays
in the adoption of new industry standards or changes in market perception
of the value of new or existing
standards;
|
|
·
|
competitive
pressures resulting in lower contract revenues or royalty
rates;
|
|
·
|
competitive
pressures resulting in lower software or hardware product
revenues;
|
|
·
|
personnel
changes, particularly those involving engineering and technical
personnel;
|
·
|
costs
associated with protecting our intellectual
property;
|
|
·
|
the
potential that customers could fail to make payments under their current
contracts;
|
|
·
|
ADSL
market-related issues, including lower ADSL chipset unit demand brought on
by excess channel inventory and lower average selling prices for ADSL
chipsets as a result of market
surpluses;
|
|
·
|
VDSL
market-related issues, including lower VDSL chipset unit demand brought on
by excess channel inventory and lower average selling prices for VDSL
chipsets as a result of market
surpluses;
|
|
·
|
hardware
manufacturing issues, including yield problems in our hardware platforms,
and inventory buildup and
obsolescence;
|
|
·
|
product
gross margin may be affected by various factors including, but not limited
to, product mix, product life cycle, and provision for excess and obsolete
inventory;
|
|
·
|
significant
fluctuations in demand for our hardware
products;
|
|
·
|
regulatory
developments; and
|
|
·
|
general
economic trends and other factors.
|
|
·
|
the
test and diagnostics, semiconductor, telecommunications or biometrics
markets decline;
|
|
·
|
new
and/or existing customers do not choose to use our software or hardware
products; or
|
|
·
|
new
and/or existing customers do not choose to use our intellectual property
for new chipset products or do not increase their revenues from sales of
chipsets with our technology.
|
|
·
|
we
must typically undergo a lengthy and expensive process of building a
relationship with a potential customer before there is any assurance of an
agreement with such party;
|
|
·
|
we
must persuade semiconductor and equipment manufacturers with significant
resources to rely on us for critical technology on an ongoing basis rather
than trying to develop similar technology
internally;
|
|
·
|
we
must persuade potential customers to bear development costs associated
with our technology applications and to make the necessary investment to
successfully manufacture chipsets and products using our technology;
and
|
|
·
|
we
must successfully transfer technical know-how to
customers.
|
|
—
|
market
acceptance of our biometric technologies and
products;
|
|
—
|
changes
in contracting practices of government or law enforcement
agencies;
|
|
—
|
the
failure of the biometrics market to experience continued
growth;
|
|
—
|
announcements
or introductions of new technologies or products by our
competitors;
|
|
—
|
delays
or problems in the introduction or performance of enhancements or of
future generations of our
technology;
|
|
—
|
failures
or problems in our biometric software
products;
|
|
—
|
the
risk that current or potential customers might decide to develop their own
software rather than buy it from
us;
|
|
—
|
delays
in the adoption of new industry biometric standards or changes in market
perception of the value of new or existing
standards;
|
|
—
|
growth
of proprietary biometric systems which do not conform to industry
standards;
|
|
—
|
competitive
pressures resulting in lower software product
revenues;
|
|
—
|
personnel
changes, particularly those involving engineering, technical and sales and
marketing personnel;
|
|
—
|
costs
associated with protecting our intellectual
property;
|
|
—
|
litigation
by third parties for alleged infringement of their proprietary
rights;
|
|
—
|
the
potential that customers could fail to make payments under their current
contracts;
|
|
—
|
regulatory
developments; and
|
|
—
|
general
economic trends and other factors.
|
|
·
|
quarterly
fluctuations in our operating
results;
|
|
·
|
changes
in future financial guidance that we may provide to investors and public
market analysts;
|
|
·
|
changes
in our relationships with our
customers;
|
|
·
|
announcements
of technological innovations or new products by us, our customers or our
competitors;
|
|
·
|
changes
in DSL or biometrics market growth rates as well as investor perceptions
regarding the investment opportunity that companies participating in the
DSL or biometrics industry afford
them;
|
|
·
|
changes
in earnings estimates by public market
analysts;
|
|
·
|
key
personnel losses;
|
|
·
|
sales
of our common stock; and
|
|
·
|
developments
or announcements with respect to industry standards, patents or
proprietary rights.
|
1.
|
72,000
square feet of office space in Bedford, Massachusetts, which serves as our
headquarters. This site is used for our research and
development, sales and marketing, and administrative
activities. We own this
facility.
|
2.
|
722
square feet of research and development space in San Jose,
California. This facility is currently leased for a 26-month
term, which expires on August 31,
2008.
|
3.
|
411
square feet of research and development space in Orinda,
California. This facility is currently leased for a 3-year
term, which expires on August 31,
2010.
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
2007
|
||||||||||||||||
High
|
$ | 6.25 | $ | 6.50 | $ | 6.74 | $ | 5.48 | ||||||||
Low
|
4.95 | 4.98 | 3.67 | 4.01 | ||||||||||||
2006
|
||||||||||||||||
High
|
$ | 6.30 | $ | 6.32 | $ | 5.90 | $ | 5.71 | ||||||||
Low
|
4.32 | 5.31 | 4.76 | 4.60 |
Value
of Investment ($)
|
||||||
12/31/02
|
12/31/03
|
12/31/04
|
12/31/05
|
12/31/06
|
12/31/07
|
|
Aware,
Inc.
|
$100.00
|
$133.30
|
$222.48
|
$204.13
|
$244.50
|
$192.66
|
Nasdaq
Composite
Index.
|
100.00
|
149.75
|
164.64
|
168.60
|
187.83
|
205.22
|
RDG
Technology
Composite
|
100.00
|
150.27
|
153.63
|
158.57
|
173.85
|
204.38
|
Period
|
(a)
Total
Number of
Shares
Purchased
|
(b)
Average
Price
Paid
per Share
|
(c)
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs(1)
|
(d)
Maximum
Number (or Approximate Dollar Value) of Shares that May Yet Be
Purchased
Under
the Plans
or
Programs
|
||||||
October
1, 2007, to December 31, 2007 30, 2007
|
-
|
-
|
-
|
$4,961,830
|
Year
ended December 31,
|
2007
|
2006
|
2005
|
2004
|
2003
|
|||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||||||
Statements of Operations
Data
|
||||||||||||||||||||
Revenue
|
$ | 26,437 | $ | 24,056 | $ | 15,667 | $ | 16,485 | $ | 10,843 | ||||||||||
Loss
from operations
|
(1,830 | ) | (399 | ) | (3,618 | ) | (1,925 | ) | (8,635 | ) | ||||||||||
Net
income (loss)
|
160 | 1,034 | (2,468 | ) | (1,367 | ) | (8,038 | ) | ||||||||||||
Net
income (loss) per share – basic
|
$ | 0.01 | $ | 0.04 | $ | (0.11 | ) | $ | (0.06 | ) | $ | (0.35 | ) | |||||||
Net
income (loss) per share – diluted
|
$ | 0.01 | $ | 0.04 | $ | (0.11 | ) | $ | (0.06 | ) | $ | (0.35 | ) | |||||||
Balance Sheet Data
|
||||||||||||||||||||
Cash
and short-term investments
|
$ | 38,055 | $ | 37,834 | $ | 36,763 | $ | 34,965 | $ | 35,051 | ||||||||||
Working
capital
|
45,031 | 41,372 | 39,124 | 37,168 | 36,727 | |||||||||||||||
Total
assets
|
56,383 | 54,586 | 49,741 | 50,183 | 51,024 | |||||||||||||||
Total
liabilities
|
3,147 | 3,216 | 2,238 | 1,427 | 1,384 | |||||||||||||||
Total
stockholders’ equity
|
53,236 | 51,370 | 47,503 | 48,756 | 49,640 | |||||||||||||||
Year
ended December 31,
|
||||||||||||
Revenue:
|
2007
|
2006
|
2005
|
|||||||||
Product
sales
|
66 | % | 32 | % | 35 | % | ||||||
Contract
revenue
|
24 | 52 | 43 | |||||||||
Royalties
|
10 | 16 | 22 | |||||||||
Total
revenue
|
100 | 100 | 100 | |||||||||
Costs
and expenses:
|
||||||||||||
Cost
of product
sales
|
15 | 4 | 3 | |||||||||
Cost
of contract
revenue
|
21 | 22 | 21 | |||||||||
Research
and
development
|
41 | 44 | 62 | |||||||||
Selling
and
marketing
|
14 | 14 | 17 | |||||||||
General
and
administrative
|
16 | 18 | 20 | |||||||||
Total
costs and
expenses
|
107 | 102 | 123 | |||||||||
Loss
from
operations
|
(7 | ) | (2 | ) | (23 | ) | ||||||
Interest
income
|
8 | 8 | 7 | |||||||||
Income
(loss) before provision for income taxes
|
1 | 6 | (16 | ) | ||||||||
Provision
for income
taxes
|
- | 2 | - | |||||||||
Net
income
(loss)
|
1 | % | 4 | % | (16 | )% |
Payments
Due By Period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less
than
1
year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
|||||||||||||||
Operating
leases
|
$ | 34 | $ | 18 | $ | 16 | $ | - | $ | - | ||||||||||
Purchase
orders
|
949 | 949 | - | - | - | |||||||||||||||
Total
|
$ | 983 | $ | 967 | $ | 16 | $ | - | $ | - |
|
·
|
Cash
and cash equivalents, which consist of financial instruments with original
maturities of three months or less;
|
|
·
|
Short-term
investments, which consist of financial instruments with remaining
maturities of twelve months or less, and auction rate securities that
typically have interest reset dates of twenty-eight days;
and
|
|
·
|
Investments,
which consist of financial instruments that mature in three years or
less.
|
Valuation
of securities
given
an interest rate
decrease
of
|
No
change
in
interest
rates
|
Valuation
of securities
given
an interest rate
increase
of
|
|||||
Type
of security
|
(100BP)
|
(50
BP)
|
100
BP
|
50
BP
|
|||
Long-term
investments with
|
|||||||
maturities
of one to two years
|
$487
|
$490
|
$494
|
$501
|
$497
|
December
31,
|
||||||||
2007
|
2006
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash
equivalents
|
$ | 1,806 | $ | 8,571 | ||||
Short-term
investments
|
36,249 | 29,263 | ||||||
Accounts
receivable (less allowance for doubtful
|
||||||||
accounts
of $55 in 2007 and $97 in
2006)
|
7,661 | 4,738 | ||||||
Inventories
|
1,424 | 819 | ||||||
Prepaid
expenses and other current
assets
|
708 | 867 | ||||||
Total
current
assets
|
47,848 | 44,258 | ||||||
Property
and equipment,
net
|
7,872 | 8,123 | ||||||
Investments
|
494 | 1,968 | ||||||
Other
assets,
net
|
169 | 237 | ||||||
Total
assets
|
$ | 56,383 | $ | 54,586 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 939 | $ | 692 | ||||
Accrued
expenses
|
174 | 153 | ||||||
Accrued
compensation
|
1,135 | 1,043 | ||||||
Accrued
professional
|
156 | 198 | ||||||
Deferred
revenue
|
413 | 800 | ||||||
Total
current
liabilities
|
2,817 | 2,886 | ||||||
Long-term
deferred
revenue
|
330 | 330 | ||||||
Commitments
and contingent liabilities (Note 7)
|
||||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $1.00 par value; 1,000,000 shares authorized, none
outstanding
|
- | - | ||||||
Common
stock, $.01 par value; shares authorized, 70,000,000
in 2007 and 2006; issued and
outstanding, 23,854,708 in 2007 and 23,642,753 in 2006
|
239 | 236 | ||||||
Additional
paid-in
capital
|
83,626 | 81,923 | ||||||
Accumulated
deficit
|
(30,629 | ) | (30,789 | ) | ||||
Total
stockholders’
equity
|
53,236 | 51,370 | ||||||
Total
liabilities and stockholders’
equity
|
$ | 56,383 | $ | 54,586 |
The
accompanying notes are an integral part of the consolidated financial
statements.
|
Years
ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Revenue:
|
||||||||||||
Product
sales
|
$ | 17,491 | $ | 7,610 | $ | 5,431 | ||||||
Contract
revenue
|
6,337 | 12,569 | 6,719 | |||||||||
Royalties
|
2,609 | 3,877 | 3,517 | |||||||||
Total
revenue
|
26,437 | 24,056 | 15,667 | |||||||||
Costs
and expenses:
|
||||||||||||
Cost
of product
sales
|
3,998 | 918 | 474 | |||||||||
Cost
of contract
revenue
|
5,425 | 5,182 | 3,270 | |||||||||
Research
and
development
|
10,869 | 10,591 | 9,750 | |||||||||
Selling
and
marketing
|
3,738 | 3,359 | 2,738 | |||||||||
General
and
administrative
|
4,237 | 4,405 | 3,053 | |||||||||
Total
costs and
expenses
|
28,267 | 24,455 | 19,285 | |||||||||
Loss
from
operations
|
(1,830 | ) | (399 | ) | (3,618 | ) | ||||||
Interest
income
|
2,016 | 1,840 | 1,150 | |||||||||
Income
(loss) before provision for income taxes
|
186 | 1,441 | (2,468 | ) | ||||||||
Provision
for income
taxes
|
26 | 407 | - | |||||||||
Net
income
(loss)
|
$ | 160 | $ | 1,034 | $ | (2,468 | ) | |||||
Net
income (loss) per share –
basic
|
$ | 0.01 | $ | 0.04 | $ | (0.11 | ) | |||||
Net
income (loss) per share –
diluted
|
$ | 0.01 | $ | 0.04 | $ | (0.11 | ) | |||||
Weighted
average shares –
basic
|
23,738 | 23,474 | 23,076 | |||||||||
Weighted
average shares –
diluted
|
25,084 | 24,965 | 23,076 |
Years
ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income
(loss)
|
$ | 160 | $ | 1,034 | $ | (2,468 | ) | |||||
Adjustments
to reconcile net income (loss) to net cash
provided
by (used in) operating activities:
|
||||||||||||
Depreciation
and
amortization
|
878 | 686 | 614 | |||||||||
Provision
for doubtful accounts
|
(20 | ) | - | - | ||||||||
Stock-based
compensation
|
1,138 | 1,937 | - | |||||||||
Increase
(decrease) from changes in assets and liabilities:
|
||||||||||||
Accounts
receivable
|
(2,903 | ) | (989 | ) | (679 | ) | ||||||
Inventories
|
(605 | ) | (733 | ) | 57 | |||||||
Prepaid expenses and other
current assets
|
160 | (103 | ) | (347 | ) | |||||||
Accounts
payable
|
247 | 85 | 246 | |||||||||
Accrued
expenses
|
69 | 301 | 142 | |||||||||
Deferred
revenue
|
(386 | ) | 592 | 423 | ||||||||
Net
cash provided by (used in) operating activities
|
(1,262 | ) | 2,810 | (2,012 | ) | |||||||
Cash
flows from investing activities:
|
||||||||||||
Purchases
of property and
equipment
|
(559 | ) | (666 | ) | (368 | ) | ||||||
Purchase
of other
assets
|
- | - | (338 | ) | ||||||||
Sales
of
investments
|
24,497 | 15,984 | 21,977 | |||||||||
Purchases
of
investments
|
(30,009 | ) | (23,521 | ) | (14,888 | ) | ||||||
Net
cash provided by (used in) investing activities
|
(6,071 | ) | (8,203 | ) | 6,383 | |||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from issuance of common
stock
|
647 | 896 | 1,215 | |||||||||
Shares
surrendered by employees to pay taxes related to
unrestricted
stock
|
(41 | ) | - | - | ||||||||
Repurchase
of common
stock
|
(38 | ) | - | - | ||||||||
Net
cash provided by financing activities
|
568 | 896 | 1,215 | |||||||||
Increase
(decrease) in cash and cash equivalents
|
(6,765 | ) | (4,497 | ) | 5,586 | |||||||
Cash
and cash equivalents, beginning of year
|
8,571 | 13,068 | 7,482 | |||||||||
Cash
and cash equivalents, end of
year
|
$ | 1,806 | $ | 8,571 | $ | 13,068 |
Additional
|
Total
|
|||||||||||||||||||
Common
Stock
|
Paid-In
|
Accumulated
|
Stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance
at December 31, 2004
|
22,909 | $ | 229 | $ | 77,882 | $ | (29,355 | ) | $ | 48,756 | ||||||||||
Exercise
of common stock options
|
340 | 4 | 1,062 | 1,066 | ||||||||||||||||
Issuance
of common stock under
employee
stock purchase plan
|
33 | - | 149 | 149 | ||||||||||||||||
Net
loss
|
(2,468 | ) | (2,468 | ) | ||||||||||||||||
Balance
at December 31, 2005
|
23,282 | 233 | 79,093 | (31,823 | ) | 47,503 | ||||||||||||||
Exercise
of common stock options
|
293 | 3 | 881 | 884 | ||||||||||||||||
Issuance
of unrestricted stock
|
66 | - | 367 | 367 | ||||||||||||||||
Issuance
of common stock under
employee
stock purchase plan
|
2 | - | 12 | 12 | ||||||||||||||||
Stock-based
compensation expense
|
- | - | 1,570 | 1,570 | ||||||||||||||||
Net
income
|
1,034 | 1,034 | ||||||||||||||||||
Balance
at December 31, 2006
|
23,643 | 236 | 81,923 | (30,789 | ) | 51,370 | ||||||||||||||
Exercise
of common stock options
|
198 | 3 | 632 | 635 | ||||||||||||||||
Repurchase
of common stock
|
(9 | ) | - | (38 | ) | (38 | ) | |||||||||||||
Issuance
of unrestricted stock
|
29 | - | 153 | 153 | ||||||||||||||||
Shares
surrendered by employees to
pay
taxes related to unrestricted stock
|
(8 | ) | - | (41 | ) | (41 | ) | |||||||||||||
Issuance
of common stock under
employee
stock purchase plan
|
2 | - | 12 | 12 | ||||||||||||||||
Stock-based
compensation expense
|
- | - | 985 | 985 | ||||||||||||||||
Net
income
|
160 | 160 | ||||||||||||||||||
Balance
at December 31, 2007
|
23,855 | $ | 239 | $ | 83,626 | $ | (30,629 | ) | $ | 53,236 |
1.
|
NATURE
OF BUSINESS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Short-term investments
|
2007
|
2006
|
|||||||
Auction
variable rate notes
|
$ | 17,955 | $ | 19,095 | |||||
Corporate
debt securities
|
2,033 | 4,781 | |||||||
U.S.
agency
securities
|
16,261 | 5,387 | |||||||
Total
|
$ | 36,249 | $ | 29,263 |
Investments
|
2007
|
2006
|
|||||||
Corporate
debt securities
|
$ | 494 | $ | 1,968 | |||||
Total
|
$ | 494 | $ | 1,968 |
Building
and improvements
|
30
years
|
Building
improvements
|
5
to 20 years
|
Furniture
and fixtures
|
5
years
|
Computer,
office & manufacturing equipment
|
3
years
|
Purchased
software
|
3
years
|
|
·
|
Hardware
products, including ADSL modules and ADSL test and development systems are
standalone products that are sold independently of our technology
licensing products. The terms of sales generally do not contain
provisions that obligate us to provide additional products or services
after shipment. Additionally, we do not grant return rights
other than normal warranty rights of return. We recognize
revenue: (i) upon shipment when products are shipped FOB shipping point,
and (ii) upon delivery at the customer’s location when products are
shipped FOB destination.
|
|
·
|
Software
products consist of software that is generally sold to OEM customers for
integration into their products. The terms of sale generally do
not contain provisions that obligate us to provide additional products or
services after shipment, other than technical telephone support for a
brief period of time post sale. The cost of providing technical support is
inconsequential because of the limited scope of the support. Additionally,
we do not grant return rights other than normal warranty rights of return,
and we generally do not customize software for
customers. We also sell maintenance contracts that
entitle customers to product updates, which we classify as product
revenue.
|
|
|
We
recognize software revenue by applying the principles set forth in SAB 104
and American Institute of Certified Public Accountants (“AICPA”) Statement
of Position No. 97-2, “Software Revenue
Recognition”. Accordingly, we recognize revenue for software
licenses: (i) upon shipment when products are shipped FOB shipping point,
and (ii) upon delivery at the customer’s location when products are
shipped FOB destination. We recognize revenue for maintenance
contracts ratably over the related contract
period.
|
3.
|
INVENTORIES
|
2007
|
2006
|
|||
Raw
materials
|
$1,424
|
$819
|
4.
|
PROPERTY
AND EQUIPMENT
|
2007
|
2006
|
|||||||
Land
|
$ | 1,080 | $ | 1,080 | ||||
Building
and improvements
|
8,854 | 8,837 | ||||||
Computer
equipment
|
7,168 | 6,684 | ||||||
Purchased
software
|
3,129 | 3,090 | ||||||
Furniture
and fixtures
|
944 | 938 | ||||||
Office
equipment
|
364 | 354 | ||||||
Manufacturing
equipment
|
292 | 289 | ||||||
Total
|
21,831 | 21,272 | ||||||
Less
accumulated depreciation and amortization
|
(13,959 | ) | (13,149 | ) | ||||
Property
and equipment, net
|
$ | 7,872 | $ | 8,123 |
5.
|
INCOME
TAXES
|
2007
|
2006
|
||||||||
Federal
net operating loss carryforwards
|
$ | 15,662 | $ | 16,983 | |||||
Research
and development and other tax credit carryforwards
|
16,744 | 15,674 | |||||||
State
net operating loss carryforwards
|
704 | 520 | |||||||
Capitalized
research and development costs
|
8,186 | 9,456 | |||||||
Other
|
1,529 | 1,139 | |||||||
Total
|
42,825 | 43,772 | |||||||
Less
valuation allowance
|
(42,825 | ) | (43,772 | ) | |||||
Deferred
tax assets, net
|
$ | - | $ | - |
Year
ended December 31,
|
|||||||||||||
2007
|
2006
|
2005
|
|||||||||||
Federal
statutory rate
|
34 | % | 34 | % | (34 | %) | |||||||
State
rate, net of federal benefit
|
(16 | ) | 4 | (10 | ) | ||||||||
Foreign
tax expense
|
- | 27 | - | ||||||||||
Tax
credits
|
(545 | ) | (97 | ) | (53 | ) | |||||||
Change
in valuation allowance
|
504 | 43 | 97 | ||||||||||
Nondeductible
compensation expense
|
31 | 16 | - | ||||||||||
Other
|
6 | 1 | - | ||||||||||
Effective
tax rate
|
14 | % | 28 | % | 0 | % |
6.
|
EQUITY
AND STOCK COMPENSATION PLANS
|
2007
|
2006
|
||||||||
Cost
of product sales
|
$ | 13 | $ | 15 | |||||
Cost
of contract revenue
|
176 | 149 | |||||||
Research
and development
|
483 | 904 | |||||||
Selling
and marketing
|
119 | 289 | |||||||
General
and administrative
|
347 | 580 | |||||||
Stock-based
compensation expense
|
$ | 1,138 | $ | 1,937 |
Year
Ended
December
31, 2007
|
Year
Ended
December
31, 2006
|
||||
Expected
term(1)
|
6.25
years
|
3.25-6.25
years
|
|||
Expected
volatility factor(2)
|
51-56%
|
60-67%
|
|||
Risk-free
interest rate(3)
|
3.80-4.73%
|
4.55-4.99%
|
|||
Expected
annual dividend yield
|
—
|
—
|
(1)
|
The
expected term for each grant was determined as the midpoint between the
vesting date and the end of the contractual term, also known as the
“simplified method” for estimating the expected term described by Staff
Accounting Bulletin No. 107 (“SAB 107”).
|
(2) |
The
expected volatility for each grant is estimated based on an average of
historical volatility for a period equal to the expected term of the stock
option.
|
(3) | The risk-free interest rate for each grant is based on the U.S. Treasury yield curve in effect at the time of grant for a period equal to the expected term of the stock option. |
2007
|
2006
|
2005
|
||||||||||||||||||||||
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||||
Outstanding
at beginning of year
|
6,489,812 | $ | 4.80 | 6,284,606 | $ | 4.73 | 4,509,808 | $ | 3.95 | |||||||||||||||
Granted
|
737,000 | 4.79 | 697,000 | 5.24 | 2,161,500 | 6.10 | ||||||||||||||||||
Exercised
|
(197,853 | ) | 3.21 | (293,394 | ) | 3.01 | (339,884 | ) | 3.13 | |||||||||||||||
Forfeited
or
cancelled
|
(54,254 | ) | 5.87 | (198,400 | ) | 6.66 | (46,818 | ) | 4.05 | |||||||||||||||
Outstanding
at end of year
|
6,974,705 | $ | 4.84 | 6,489,812 | $ | 4.80 | 6,284,606 | $ | 4.73 | |||||||||||||||
Options
exercisable at year end
|
5,809,280 | $ | 4.80 | 5,688,735 | $ | 4.72 | 5,598,113 | $ | 4.78 |
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||
Exercise
Price
Range
|
Number
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term (in
years)
|
Number
|
Weighted
Average
Exercise
Price
|
|||||||||
$0 to $5 |
3,856,105
|
$
|
3.35
|
6.43
|
3,414,089
|
$
|
3.19
|
|||||||
$5 to $10 |
3,032,350
|
5.86
|
6.26
|
2,308,941
|
6.03
|
|||||||||
$10 to $30 |
16,750
|
20.38
|
2.80
|
16,750
|
20.38
|
|||||||||
$30 to $40 |
45,000
|
33.56
|
1.46
|
45,000
|
33.56
|
|||||||||
$40 to $50 |
14,500
|
44.02
|
2.21
|
14,500
|
44.02
|
|||||||||
$50 to $70 |
10,000
|
58.06
|
1.75
|
10,000
|
58.06
|
|||||||||
6,974,705
|
$
|
4.84
|
6.30
|
5,809,280
|
$
|
4.80
|
Year
Ended
December
31, 2005
|
|||||
Net
loss as reported
|
$ | (2,468 | ) | ||
Add:
Stock-based employee compensation expense included in loss
|
|||||
Less:
Total stock-based employee compensation expense determined under the fair
value method
|
(10,113 | ) | |||
Pro
forma net loss
|
$ | (12,581 | ) | ||
Net
loss per share:
|
|||||
Basic and
diluted — as reported
|
$ | (0.11 | ) | ||
Basic
and diluted — pro-forma
|
$ | (0.55 | ) |
Year
Ended
December
31, 2005
|
|||||
Expected
term
|
3-5 years
|
||||
Volatility
|
67-87 | % | |||
Risk-free
interest rate
|
4.05 | % | |||
Dividend
yield
|
— |
7.
|
COMMITMENTS
AND CONTINGENT LIABILITIES
|
Year ended December 31,
|
||||
2008
|
$ | 18 | ||
2009
|
9 | |||
2010
|
7 | |||
Total
minimum lease payments
|
$ | 34 |
8.
|
BUSINESS
SEGMENTS AND MAJOR CUSTOMERS
|
Year
ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
United
States
|
$ | 15,508 | $ | 12,797 | $ | 9,202 | ||||||
Germany
|
5,759 | 6,630 | 4,926 | |||||||||
Rest
of world
|
5,170 | 4,629 | 1,539 | |||||||||
$ | 26,437 | $ | 24,056 | $ | 15,667 |
Year
ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Customer
A
|
- | 20 | % | 20 | % | |||||||
Customer
B
|
19 | % | 26 | % | 30 | % | ||||||
Customer
C
|
16 | % | 2 | % | 1 | % | ||||||
Customer
D
|
10 | % | 1 | % | - |
9.
|
EMPLOYEE
BENEFIT PLAN
|
10.
|
NET
INCOME (LOSS) PER SHARE
|
Year
ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Net
income
(loss)
|
$ | 160 | $ | 1,034 | $ | (2,468 | ) | |||||
Weighted
average common shares outstanding
|
23,738 | 23,474 | 23,076 | |||||||||
Additional
dilutive common stock equivalents
|
1,346 | 1,491 | - | |||||||||
Diluted
shares outstanding
|
25,084 | 24,965 | 23,076 | |||||||||
Net
income (loss) per share –
basic
|
$ | 0.01 | $ | 0.04 | $ | (0.11 | ) | |||||
Net
income (loss) per share –
diluted
|
$ | 0.01 | $ | 0.04 | $ | (0.11 | ) |
11.
|
QUARTERLY
RESULTS OF OPERATIONS - UNAUDITED
|
2007
Quarters Ended
|
||||||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||||||
Revenue
|
$ | 5,800 | $ | 6,429 | $ | 7,456 | $ | 6,753 | ||||||||
Gross
profit
|
3,952 | 3,329 | 5,002 | 4,732 | ||||||||||||
Income
(loss) from operations
|
(593 | ) | (1,464 | ) | 529 | (300 | ) | |||||||||
Net
income (loss)
|
(98 | ) | (968 | ) | 1,034 | 193 | ||||||||||
Net
income (loss) per share – basic
|
$ | 0.00 | $ | (0.04 | ) | $ | 0.04 | $ | 0.01 | |||||||
Net
income (loss) per share – diluted
|
$ | 0.00 | $ | (0.04 | ) | $ | 0.04 | $ | 0.01 |
2006
Quarters Ended
|
||||||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||||||
Revenue
|
$ | 6,134 | $ | 4,790 | $ | 6,682 | $ | 6,450 | ||||||||
Gross
profit
|
4,736 | 3,463 | 5,033 | 4,724 | ||||||||||||
Income
(loss) from operations
|
128 | (1,669 | ) | 680 | 462 | |||||||||||
Net
income (loss)
|
522 | (1,210 | ) | 840 | 882 | |||||||||||
Net
income (loss) per share – basic
|
$ | 0.02 | $ | (0.05 | ) | $ | 0.04 | $ | 0.04 | |||||||
Net
income (loss) per share – diluted
|
$ | 0.02 | $ | (0.05 | ) | $ | 0.03 | $ | 0.04 |
Col.
A
|
Col.
B
|
Col.
C(1)
|
Col.
C(2)
|
Col.
D
|
Col.
E
|
|||||||||||||||
Additions
|
||||||||||||||||||||
Balance
at
|
Charged
to
|
Charged
|
Deductions
|
Balance
|
||||||||||||||||
Beginning
|
Costs
and
|
to
Other
|
Charged
to
|
at
End
|
||||||||||||||||
of
Period
|
Expenses
|
Accounts
|
Reserves
|
of
Period
|
||||||||||||||||
Allowance
for doubtful accounts receivable:
|
||||||||||||||||||||
2007
|
$ | 97 | $ | (20 | ) | - | $ | 22 | $ | 55 | ||||||||||
2006
|
$ | 97 | - | - | - | $ | 97 | |||||||||||||
2005
|
$ | 110 | - | - | 13 | $ | 97 | |||||||||||||
Inventory
reserves:
|
||||||||||||||||||||
2007
|
$ | 313 | $ | 102 | - | $ | 6 | $ | 409 | |||||||||||
2006
|
$ | 284 | 29 | - | - | $ | 313 | |||||||||||||
2005
|
$ | 284 | - | - | - | $ | 284 |
Page
|
|
(1)
Report of Independent Registered Public Accounting
Firm
|
34
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
35
|
Consolidated
Statements of Operations for each of the three
years
in the period ended December 31,
2007
|
36
|
Consolidated
Statements of Cash Flows for each of the
three
years in the period ended December 31, 2007
|
37
|
Consolidated
Statements of Stockholders’ Equity for each of
the
three years in the period ended December 31, 2007
|
38
|
Notes
to Consolidated Financial Statements
|
39
|
(2)
Schedule II - Valuation and Qualifying
Accounts
|
51
|
Exhibit No.
|
Description of Exhibit
|
3.1
|
Amended
and Restated Articles of Organization (filed as Exhibit 3.2 to the
Company’s Registration Statement on Form S-1, File No. 333-6807 and
incorporated herein by reference).
|
3.2
|
Articles
of Amendment to the Articles of Organization (filed as Exhibit 3.3 to the
Company’s Form 10-Q for the quarter ended September 30, 2002 and
incorporated herein by reference).
|
3.3
|
Amended
and Restated By-Laws (filed as Exhibit 3.1 to the Company’s Form 8-K filed
with the Securities and Exchange Commission on December 10, 2007 and
incorporated herein by reference).
|
4.1
|
Rights
Agreement dated as of October 2, 2001 between Aware, Inc. and Equiserve
Trust Company, N.A., as Rights Agent (filed as Exhibit 4(a) to the
Company’s Form 8-K filed with the Securities and Exchange Commission on
October 3, 2001 and incorporated herein by reference).
|
4.2
|
Terms
of Series A Participating Cumulative Preferred Stock of Aware, Inc.
(attached as Exhibit A to the Rights Agreement filed as Exhibit 4.1
hereto).
|
4.3
|
Form
of Right Certificate (attached as Exhibit B to the Rights Agreement filed
as Exhibit 4.1 hereto).
|
4.4
|
Amendment
No. 1 to Rights Agreement dated September 6, 2007 between Aware, Inc. and
Computershare Trust Company, N.A., as Rights Agent (filed as Exhibit 4.1
to the Company’s Form 8-K filed with the Securities and Exchange
Commission on September 7, 2007 and incorporated herein by
reference).
|
10.1*
|
1996
Stock Option Plan, as amended and restated (filed as Annex A to the
Company’s Definitive Proxy Statement filed with the Securities and
Exchange Commission on April 11, 2000 and incorporated herein by
reference).
|
10.2*
|
1996
Employee Stock Purchase Plan, as amended and restated (filed as Exhibit
99.1 to the Company’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on November 29, 2005 and incorporated herein by
reference).
|
10.3*
|
Form
of Director and Officer Indemnification Agreement (filed as Exhibit 10.4
to the Company’s Form 10-K for the year ended December 31, 2002 and
incorporated herein by reference).
|
10.4*
|
2001
Nonqualified Stock Plan (filed as Exhibit 99(d)(4) to the Company’s
Schedule TO filed with the Securities and Exchange Commission on March 3,
2003 and incorporated herein by reference).
|
10.5*
|
Form
of Nonqualified Stock Option Agreement under the 2001 Nonqualified Stock
Plan (filed as Exhibit 10.6 to Company’s Form 10-K for the year ended
December 31, 2006 and incorporated herein by
reference).
|
10.6*
|
Offer
letter dated December 17, 2007 by and between Richard Moberg and Aware,
Inc. (filed as Exhibit 99.2 to Company’s Form 8-K filed with the
Securities and Exchange Commission on December 18, 2007 and incorporated
herein by reference).
|
10.7*
|
Consultant
Agreement dated December 17, 2007 by and between Richard Moberg and Aware,
Inc. (filed as Exhibit 99.3 to Company’s Form 8-K filed with the
Securities and Exchange Commission on December 18, 2007 and incorporated
herein by reference).
|
21.1
|
Subsidiaries
of Registrant.
|
23.1
|
Consent
of Independent Registered Public Accounting Firm.
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.
|
Signature
|
Title
|
|
/s/
Michael A. Tzannes
|
Chief
Executive Officer and Director
|
|
Michael
A. Tzannes
|
(Principal
Executive Officer)
|
|
/s/
Edmund C. Reiter
|
President
and Director
|
|
Edmund
C. Reiter
|
||
/s/
Keith E. Farris
|
Chief
Financial Officer
|
|
Keith
E. Farris
|
(Principal
Financial and Accounting Officer)
|
|
/s/
John K. Kerr
|
Chairman
of the Board of Directors
|
|
John
K. Kerr
|
||
/s/
Frederick D. D’Alessio
|
Director
|
|
Frederick
D. D’Alessio
|
||
/s/
G. David Forney, Jr.
|
Director
|
|
G.
David Forney, Jr.
|
||
/s/
Adrian F. Kruse
|
Director
|
|
Adrian
F. Kruse
|
||
/s/
Mark G. McGrath
|
Director
|
|
Mark
G. McGrath
|
Name of
Organization
|
Jurisdiction
|
Aware
Security Corporation . . . . . . . . . . . . . . . . . . . . . . .
.
|
Massachusetts
|
|
1.
|
I
have reviewed this annual report on Form 10-K of Aware,
Inc.;
|
|
2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this annual report based on such evaluation;
and
|
|
d)
|
disclosed
in this annual report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date: February 15, 2008 | /s/ Michael A. Tzannes | ||
Michael A. Tzannes | |||
Chief Executive Officer |
|
1.
|
I
have reviewed this annual report on Form 10-K of Aware,
Inc.;
|
|
2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this annual report based on such evaluation;
and
|
|
d)
|
disclosed
in this annual report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date: February 15, 2008 | /s/ Keith E. Farris | ||
Keith E. Farris | |||
Chief Financial Officer |
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/ Michael A. Tzannes | /s/ Keith E. Farris | ||
Chief Executive Officer | Chief Financial Officer | ||
Date: February 15, 2008 | Date: February 15, 2008 |