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   <TITLE>q2.htm - Generated by SEC Publisher for SEC Filing</TITLE>
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     <TD width="40%" align=center><B><FONT size=5 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">FORM 8-K</FONT></B></TD>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: '''''''''''''''''''''''''''Arial'''''''''''''''''''''''''''; FONT-SIZE: 14pt; FONT-WEIGHT: bold" face=Arial>CURRENT REPORT</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><STRONG></STRONG>&nbsp;</DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><STRONG><FONT face=Arial>PURSUANT TO SECTION 13 OR 15(d) OF THE</FONT></STRONG></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><STRONG><FONT face=Arial>SECURITIES EXCHANGE ACT OF 1934</FONT></STRONG>&nbsp;</DIV><STRONG></STRONG>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: 'Times New Roman, serif'; FONT-SIZE: 12pt"><FONT size=2 face=Arial>Date of Report </FONT><FONT face=Arial><FONT size=1>(Date of earliest event reported)</FONT>:&nbsp;&nbsp;<FONT size=2 face=Arial>August 4</FONT><FONT size=2>,&nbsp;2011</FONT></FONT></FONT></DIV>
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     <TD width="65%" align=left><FONT style="FONT-SIZE: 16pt"><B><FONT style="FONT-SIZE: 14pt" face=Arial>PERFORMANCE TECHNOLOGIES, INCORPORATED</FONT></B></FONT></TD></TR></TABLE></DIV>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: 'Arial'" size=1 face=Arial>(Exact name of registrant as specified in its charter)</FONT></DIV>
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     <TD vAlign=bottom width="18%" align=left><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 8pt">&nbsp; </FONT></TD>
     <TD vAlign=bottom width="2%" align=left><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 8pt">&nbsp; </FONT></TD>
     <TD vAlign=bottom width="15%" align=left><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 8pt">&nbsp; </FONT></TD>
     <TD vAlign=bottom width="2%" align=left><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 8pt">&nbsp; </FONT></TD>
     <TD vAlign=bottom width="17%" align=left><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 8pt">&nbsp; </FONT></TD></TR>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 10pt; FONT-WEIGHT: bold" face=Arial>Delaware</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''" size=1 face=Arial>(State or other jurisdiction</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''" size=1 face=Arial>of incorporation)</FONT></DIV></TD>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 10pt; FONT-WEIGHT: bold" face=Arial>02-27460</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''" size=1 face=Arial>(Commission</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''" size=1 face=Arial>File Number)</FONT></DIV></TD>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 10pt; FONT-WEIGHT: bold" face=Arial>16-1158413</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''" size=1 face=Arial>(IRS Employer</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''" size=1 face=Arial>Identification No.)</FONT></DIV></TD></TR>
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     <TD vAlign=bottom width="2%" align=left><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 8pt">&nbsp; </FONT></TD>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 10pt; FONT-WEIGHT: bold" face=Arial>205 Indigo Creek Drive</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 10pt; FONT-WEIGHT: bold" face=Arial>&nbsp;Rochester, New York</FONT></DIV></TD>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block">&nbsp;</DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 10pt; FONT-WEIGHT: bold" face=Arial>14626</FONT></DIV></TD></TR>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''" size=1 face=Arial>(Address of principal executive offices)</FONT></DIV></TD>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''" size=1 face=Arial>(Zip Code)</FONT></DIV></TD></TR></TABLE>
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<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: 'Times New Roman, serif'; FONT-SIZE: 11pt; FONT-WEIGHT: bold" face=Arial>(585) 256-0200&nbsp;&nbsp;&nbsp; </FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline" size=1 face=Arial>(Registrant&#146;s telephone number, including area code)</FONT></DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline" size=2 face=Arial>Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):</FONT></DIV>
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<DIV style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt" face="Times New Roman">[&nbsp;&nbsp;]</FONT></DIV></TD>
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<DIV align=justify><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 9pt" face=Arial>Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</FONT></DIV></TD></TR></TABLE></DIV>
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<DIV style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 10pt" face=Arial>[&nbsp;&nbsp;]</FONT></DIV></TD>
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<DIV align=justify><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''; FONT-SIZE: 9pt" face=Arial>Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</FONT></DIV></TD></TR></TABLE></DIV>
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<P align=justify><B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">Item 2.02 Results of Operations and Financial Condition</FONT></B></P>
<P align=justify><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">On <FONT face="Times New Roman">August 4</FONT>, 2011, Performance Technologies, Incorporated <FONT size=2 face="Times New Roman">("PT") </FONT>issued a press release announcing its results of operations for the quarter and six months <FONT face="Times New Roman">ended June 30, 2011</FONT>. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K.</FONT></P>
<P align=justify><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(c) Exhibits.</FONT></P>
<P align=justify><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(99.1) Press release issued by PT on August 4, 201<FONT size=2 face="Times New Roman">1</FONT>. </FONT></P>
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<P align=justify><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif"><B>SIGNATURES</B></FONT></P>
<P align=justify><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">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 hereunto duly authorized.</FONT></P>
<P align=justify><B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></B></P>
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     <TD width="63%" colSpan=2 align=left><FONT size=2 face="Times New Roman"><B>PERFORMANCE TECHNOLOGIES, INCORPORATED</B></FONT></TD>
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     <TD width="14%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif"><FONT size=2 face="Times New Roman">August 5</FONT>, 2011</FONT></TD>
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     <TD style="BORDER-BOTTOM: #000000 1px solid" width="43%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">By /s/ John M. Slusser</FONT>&nbsp; </TD>
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     <TD width="43%" align=left><FONT size=2 face="Times New Roman">John M. Slusser</FONT></TD>
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     <TD width="14%" align=left>&nbsp; </TD>
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     <TD width="43%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">President and Chief Executive Officer</FONT>&nbsp; </TD>
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     <TD width="14%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif"><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif"><FONT size=2 face="Times New Roman">August 5</FONT></FONT>, 2011</FONT></TD>
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     <TD style="BORDER-BOTTOM: #000000 1px solid" width="43%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">By /s/ Dorrance W. Lamb</FONT>&nbsp; </TD>
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     <TD width="43%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Dorrance W. Lamb</FONT> </TD>
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     <TD width="43%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Chief Financial Officer and Senior Vice President of Finance</FONT>&nbsp; </TD>
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<P align=right><FONT style="FONT-SIZE: 10pt" face=Arial><B>Exhibit 99.1</B></FONT></P>
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<P style="MARGIN: 0in 0in 0pt" align=left><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>For more information contact:&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></P>
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<P style="TEXT-ALIGN: justify; MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>Dorrance W. Lamb</FONT></P>
<P style="TEXT-ALIGN: justify; MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>SVP and Chief Financial Officer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>
<P style="TEXT-ALIGN: justify; MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>PT&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>
<P style="TEXT-ALIGN: justify; MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>585-256-0200 ext. 7276</FONT></P>
<P style="TEXT-ALIGN: justify; MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>http://www.pt.com</FONT></P>
<P style="TEXT-ALIGN: justify; MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>finance@pt.com</FONT><FONT style="FONT-SIZE: 10pt" lang=EN-US face="Times New Roman,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>
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PT Announces Second Quarter 2011 </FONT></B></H3> <H3 style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 14pt" face=Arial,sans-serif>Financial Results</FONT></B></H3>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&#147;Second Quarter is Profitable on a Non-GAAP Basis&#148; </FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>ROCHESTER, NY &#150; August 4, 2011 &#150; PT (NASDAQ: PTIX), a leading global provider of advanced network communications solutions, today announced its unaudited financial results for the second quarter 2011.</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>Revenue in the second quarter 2011 amounted to $8.5 million, compared to $7.4 million in the second quarter 2010.&nbsp; Revenue for the six months ended June 30, 2011 amounted to $18.1 million, compared to $14.8 million during the corresponding period in 2010.</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>On the basis of generally accepted accounting principles (GAAP), the net loss in the second quarter 2011 amounted to ($.5 million), or ($.04) per basic share, based on 11.1 million shares outstanding, including restructuring charges of $.01 per share and stock compensation expense of $.01 per share. &nbsp;The GAAP net loss in the second quarter 2010 amounted to ($2.0 million), or ($.18) per basic share, including restructuring charges of $.01 per share and stock compensation expense of $.01 per share, based on 11.1 million shares outstanding.</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>The GAAP net loss for the six months ended June 30, 2011 amounted to ($1.6 million), or ($.14) per basic share, including a restructuring charge of $.02 per share and stock-based compensation of $.02 per share, based on 11.1 million shares outstanding.&nbsp; The GAAP net loss for the six months ended June 30, 2010 amounted to ($3.9 million), or ($.35) per basic share, including a restructuring charge of $.01 per share; stock-based compensation of $.03 per share; and a discrete tax provision of $.01 per share, based on 11.1 million shares outstanding.&nbsp; </FONT></P>
<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; TEXT-AUTOSPACE: ideograph-numeric; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif></FONT>&nbsp;</P>
<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>On a non-GAAP basis, the Company had net income in the second quarter 2011 amounting to $.03 million, or $.00 per basic share, compared to a net loss of ($1.6 million), or ($.15) per basic share in the second quarter 2010. &nbsp;The non-GAAP net loss for the six months ended June 30, 2011 amounted to ($.3 million), or ($.02) per basic share, compared to a net loss of ($3.1 million), or ($.28) per basic share in the six months ended June 30, 2010.&nbsp; Please refer to the reconciliations between GAAP and non-GAAP financial measures contained in this release. </FONT></P>
<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; TEXT-AUTOSPACE: ideograph-numeric; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif></FONT>&nbsp;</P>
<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; TEXT-AUTOSPACE: ideograph-numeric; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>On June 30, 2011, the Company&#146;s working capital position was $18.7 million including cash and investments amounting to $13.7 million, and the Company had no long-term debt.</FONT></P>
<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; TEXT-AUTOSPACE: ideograph-numeric; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif></FONT>&nbsp;</P>
<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; TEXT-AUTOSPACE: ideograph-numeric; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&#147;While the uneven economy continues to result in variability in our quarterly revenue, our first half 2011 revenues grew 22% over our prior year,&#148; said John Slusser, president and chief executive officer. &nbsp;&#147;We are gratified to see that our expense reduction efforts are paying off as our quarterly net loss was greatly reduced. &nbsp;Our new product offerings are gaining market traction and I am especially pleased to see the early interest in our new Monterey platform. &nbsp;The signaling alliance we established in the first quarter with GENBAND also continues to further progress.&nbsp; We believe that our first half year-over-year revenue trend&nbsp;</FONT><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>will continue in the second half and we are hopeful that the Company&#146;s operations will soon return to profitability.</FONT><FONT style="FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>&#148;</FONT></P>
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<P style="MARGIN: 0in 0in 0pt" align=center><FONT size=2 face=Arial>- 1 -</FONT></P>
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<B><FONT style="FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>Recent Highlights:</FONT></B></P>
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<LI style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>In early May 2011, PT and Tekelec agreed to voluntarily dismiss all claims and defenses against each other, effectively ending the litigation between the two companies.</FONT>&nbsp; </LI></UL></DIV>
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<LI style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>In late May 2011, PT was pleased to publicly reveal that its previously announced major international wireless carrier order amounting to nearly $3 million was with Globacom, one of Africa&#146;s fastest growing mobile telecommunications companies.&nbsp; Under this order, PT&#146;s SEGway&#153; Signaling solutions will be deployed in Nigeria and Ghana and will include both Mobile Number Portability (MNP) and Short Message Service Defense (SMS-D) functions.&nbsp; Revenues from this order are anticipated to be recognized during the second half of 2011 as the solutions are installed.</FONT>&nbsp;</LI></UL></DIV>
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<LI style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>In June 2011, PT announced a revolutionary new open-standards solution set, code named Monterey. &nbsp;First of its kind in the industry, Monterey is an enhanced application-ready system that combines compatibility with the latest MicroTCA.4 standard with superset extensions including increased backplane performance and higher available power budget. &nbsp;The Monterey architecture leverages the latest trends in high-density computing and high speed 10/40GbE fabrics in a compelling cost-performance, space-efficient model that is ideally suited as the foundation for a wide range of next-generation network communications and services applications.</FONT> </LI></UL>
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<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>Business Overview: </FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>The Company globally targets two primary vertical markets for its network communications products, namely telecommunications, and military, aerospace and government systems.&nbsp; The telecommunications market, historically our largest vertical market, is fundamentally driven by investments in network infrastructure by carriers and service providers.&nbsp; Telecommunications market revenues derived from our IPnexus&#153; Application-Ready Systems products, which are sold to OEMs, depend primarily on broad, multi-year deployments of next-generation telecommunications infrastructure. &nbsp;Telecommunications market revenues generated from service providers purchasing our SEGway and Xpress&#153; product lines result from investments necessary to support existing and evolving service demands such as text messaging and the transition to Internet-based communications networks.&nbsp; Sales into the military, aerospace and government systems market are typically to prime contractors and system integrators that reflect investment levels by various government agencies and military branches in specific programs and projects requiring enhanced communications capabilities.&nbsp; The timing of military, aerospace and government systems shipments for the most part is highly unpredictable. </FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>More in-depth discussions of the Company's strategy and financial performance can be found in the Company's periodic reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission. </FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><B><U><FONT style="FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>About PT (</FONT></U></B><B><FONT style="FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>www.pt.com</FONT></B><B><U><FONT style="FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>)</FONT></U></B><B><FONT style="FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif> </FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>PT (NASDAQ: PTIX) is a global supplier of advanced network communications solutions to carrier, government, and OEM markets.&nbsp; PT&#146;s portfolio includes IP-centric network elements and applications designed for high availability, scalability, and long life cycle deployments.&nbsp; The Company&#146;s entire line of offerings is anchored by IPnexus&#174;, PT&#146;s own IP-native, highly integrated platforms and element management systems.&nbsp; OEMs and application developers, including PT itself, leverage the robust carrier- grade Linux&#174; development environment and rich suite of communications protocols (PT&#146;s Nexusware&#174;) of IPnexus Application-Ready Systems as a cornerstone component of their end product value proposition. &nbsp;PT&#146;s SEGway&#153; Signaling Solutions provide low cost, high density signaling, advanced routing, IP </FONT><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>migration, gateway capabilities, SIP bridge, and core-to-edge distributed intelligence.&nbsp; The Company&#146;s Xpress&#153; NGN applications enable evolving Mobile 2.0, Multi-media, and IMS-based revenue generating services.&nbsp; PT is headquartered in Rochester, NY and maintains sales and engineering offices around the world.</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>Forward-Looking Statements</FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt; punctuation-wrap: simple"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements.&nbsp; This press release contains forward-looking statements which reflect the Company's current views with respect to future events and financial performance, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and is subject to the safe harbor provisions of those Sections.&nbsp; </FONT><FONT style="LINE-HEIGHT: 12pt; LAYOUT-GRID-MODE: line; FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>The Company&#146;s future operating results are subject to various risks and uncertainties and could differ materially from those discussed in the forward-looking statements and may be affected by various trends and factors which are beyond the Company&#146;s control.&nbsp; </FONT><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>These risks and uncertainties include, among other factors, business and economic conditions, rapid technological changes accompanied by frequent new product introductions, competitive pressures, dependence on key customers, inability to gauge order flows from customers, fluctuations in quarterly and annual results, the reliance on a limited number of third party suppliers, limitations of PT&#146;s manufacturing capacity and arrangements, the protection of PT&#146;s proprietary technology, errors or defects in our products, the effects of pending or threatened litigation, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to investments, foreign regulations, and potential material weaknesses in internal control over financial reporting</FONT><FONT style="LINE-HEIGHT: 12pt; LAYOUT-GRID-MODE: line; FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>.&nbsp; </FONT><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US color=black face=Arial,sans-serif>In addition, during weak or uncertain economic periods, customers&#146; visibility deteriorates causing delays in the placement of their orders.&nbsp; These factors often result in a substantial portion of PT&#146;s revenue being derived from orders placed within a quarter and shipped in the final month of the same quarter.&nbsp; Forward-looking statements should be read in conjunction with the most recent audited Consolidated Financial Statements, the Notes thereto, Risk Factors, and Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company, as contained in the Company&#146;s Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.</FONT></P>
<P style="TEXT-ALIGN: justify; MARGIN-LEFT: 0in; MARGIN-RIGHT: 0in"><B><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>Non-GAAP Financial Measures</FONT></B></P>
<P style="MARGIN: 0in 0in 0pt; VERTICAL-ALIGN: baseline; punctuation-wrap: simple"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>As a supplement to the GAAP-based consolidated financial statements contained in this press release, the Company is providing a presentation of non-GAAP financial measures which can be useful to investors to gain an overall understanding of the Company&#146;s current financial performance.&nbsp; Specifically, the Company believes the non-GAAP financial measures provide useful information to investors by excluding certain expenses the Company believes are not indicative of its core operating results.&nbsp; The non-GAAP financial measures exclude certain expenses such as the effects of (a) amortization of purchased intangible assets, (b) stock-based compensation, (c) restructuring costs, and (d) other legal costs.&nbsp; </FONT></P>
<P style="MARGIN-LEFT: 0in; MARGIN-RIGHT: 0in"><FONT style="LINE-HEIGHT: 12pt; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>Management utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions and forecasting and planning for future periods.&nbsp; We also consider the use of the non-GAAP financial measures to be helpful in assessing various aspects of our business operations. </FONT></P>
<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; TEXT-AUTOSPACE: ideograph-numeric; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>Non-GAAP financial measures are not meant to be considered a substitute for the corresponding GAAP financial information and should not be considered in isolation from measures of financial performance prepared in accordance with GAAP.&nbsp; Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool and that these measures should only be used to evaluate the Company&#146;s results of operations in conjunction with the corresponding GAAP financial information.</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>A reconciliation of non-GAAP measures to GAAP measures is included herein.</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="LINE-HEIGHT: 12pt; TEXT-AUTOSPACE: ideograph-numeric; FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>A conference call will be held on Friday, August 5, at 10:00 a.m., New York time, to discuss the results. All institutional investors can participate in the conference by dialing (866) 250-5144 or (416) 849-6163. The call will be available simultaneously for all other investors at (866) 494-3387 or (416) 915-1198. A digital recording of this conference call may be accessed immediately after its completion from August 5 through August 9, 2011. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 847904. A live webcast of the conference call will be available on the PT website at www.pt.com and will be archived to the site within two hours after the completion of the call. </FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>PT is a trademark of Performance Technologies, Inc. The names of actual companies, products, or services may be the trademarks, registered trademarks, or service marks of their respective owners in the United States and/or other countries.</FONT></P>
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<P style="MARGIN: 0in 0in 0pt" align=center><FONT size=2 face=Arial>-&nbsp;4 -</FONT></P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; CONSOLIDATED BALANCE SHEETS</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (unaudited)</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0.25in 0in 12pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ASSETS</FONT></B></P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>June 30,</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2011</FONT></B></P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>December 31,</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2010</FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Current assets:</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Cash and cash equivalents</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$11,222,000</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$12,796,000</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Investments</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,395,000</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,753,000</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Accounts receivable</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>5,571,000</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>5,478,000</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Inventories</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>6,623,000</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>7,787,000</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Prepaid expenses and other assets</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,513,000</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>940,000</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Prepaid income taxes</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>183,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>31,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="72%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Fair value of foreign currency hedges</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>10,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>17,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="7%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="67%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Total current assets</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>26,517,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>30,802,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="74%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="74%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Investments</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,060,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2,677,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="74%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Property, equipment and improvements, net</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2,592,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2,162,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="74%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Software development costs, net</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>4,148,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,995,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="74%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Purchased intangible assets, net</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>4,940,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>804,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="7%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="67%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Total assets</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$39,257,000 </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$40,440,000 </FONT></P>
</TD></TR>
<TR height=0>
     <TD width="2%"></TD>
     <TD width="5%"></TD>
     <TD width="67%"></TD>
     <TD width="11%"></TD>
     <TD width="4%"></TD>
     <TD width="11%"></TD></TR></TABLE></DIV>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 8pt 0in 12pt">&nbsp;</P>
<DIV align=left>
<TABLE style="WIDTH: 100%" border=0 cellSpacing=0 cellPadding=0>
<TR height=20>
     <TD vAlign=top width="99%" colSpan=6 align=center>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT></P>
<P align=center><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</FONT></B></P>
</TD></TR>
<TR height=20>
     <TD vAlign=top width="99%" colSpan=6>
<P><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif></FONT></B></P>
<P></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="73%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Current liabilities:</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Accounts payable</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$&nbsp;&nbsp; &nbsp;823,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$ 2,756,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Other payable</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>986,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Deferred revenue</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,908,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,946,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Accrued expenses</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2,133,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2,919,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="7%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="66%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Total current liabilities</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>7,850,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>7,621,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="73%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Deferred income taxes</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>49,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>51,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="7%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="66%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Total liabilities</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>7,899,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>7,672,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="73%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="73%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Stockholders&#146; equity:</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Preferred stock</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Common stock</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>133,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>133,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Additional paid-in capital</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>17,210,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>17,042,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Retained earnings</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>23,850,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>25,400,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Accumulated other comprehensive income</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(17,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>11,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="71%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Treasury stock </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(9,818,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(9,818,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="7%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="66%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Total stockholders&#146; equity</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>31,358,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>32,768,000</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="7%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="66%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Total liabilities and stockholders&#146; equity</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$39,257,000 </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt" align=right><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="11%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$40,440,000 </FONT></P>
</TD></TR>
<TR height=0>
     <TD width="2%"></TD>
     <TD width="5%"></TD>
     <TD width="66%"></TD>
     <TD width="11%"></TD>
     <TD width="4%"></TD>
     <TD width="11%"></TD></TR></TABLE></DIV> <H2 style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"></H2></DIV>
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<P style="MARGIN: 0in 0.25in 0pt 0in" align=center><FONT style="FONT-SIZE: 10pt" face=Arial>- 5 -</FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 12pt" lang=EN-US face="Times New Roman,serif"></FONT>&nbsp;</P>
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<DIV style="page: WordSection1"> <H2 style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT></B>&nbsp;</H2> <H2 style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES</FONT></B></H2>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; CONSOLIDATED STATEMENTS OF OPERATIONS </FONT></B></P>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010</FONT></B></P>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (unaudited) </FONT></B></P>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif></FONT></B>&nbsp;</P>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif></FONT></B>&nbsp;</P>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif></FONT></B>&nbsp;</P>
<DIV align=left>
<TABLE style="WIDTH: 100%; BORDER-COLLAPSE: collapse; MARGIN-LEFT: 0pt" border=0 cellSpacing=0 cellPadding=0>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="14%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="12%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="16%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="27%" colSpan=3>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Three Months Ended</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>June 30,</FONT></B></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="4%" colSpan=2>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="27%" colSpan=3>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Six Months Ended</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>June 30,</FONT></B></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="12%">
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2011</FONT></B></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="3%">
<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT></B>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="12%">
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2010</FONT></B></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="3%">
<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT></B>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="13%" colSpan=2>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2011</FONT></B></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="3%">
<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT></B>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="12%">
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2010</FONT></B></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="12%">
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="12%">
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="13%" colSpan=2>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=top width="12%">
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Sales</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$8,453,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$7,449,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$18,125,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$14,804,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Cost of goods sold</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>4,786,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>4,170,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>9,965,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>7,627,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Gross profit</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,667,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,279,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>8,160,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>7,177,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Operating expenses:</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Selling and marketing</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,458,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2,034,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,381,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>4,407,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Research and development</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,569,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,892,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,749,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,882,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>General and administrative</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,117,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>1,364,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2,609,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>2,672,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Restructuring charges</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>60,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>64,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>182,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>127,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="6%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="36%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Total operating expenses</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>4,204,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>5,354,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>9,921,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>11,088,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Loss from operations</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(537,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(2,075,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(1,761,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(3,911,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Other income, net</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>15,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>41,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>90,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>104,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Loss before income taxes</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(522,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(2,034,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(1,671,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(3,807,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Income tax (benefit) provision</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp; (70,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp; (74,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>(121,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>53,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="6%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="36%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Net loss</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$(452,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$(1,960,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$(1,550,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; BORDER-TOP: windowtext 1pt solid; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$(3,860,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Basic loss per share</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.04)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.18)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.14)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.35)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>Weighted average common shares</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>11,116,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>11,116,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>11,116,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 2pt double; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>11,116,000</FONT></P>
</TD></TR>
<TR style="HEIGHT: 17.4pt">
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; HEIGHT: 17.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; HEIGHT: 17.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; HEIGHT: 17.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; HEIGHT: 17.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; HEIGHT: 17.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; HEIGHT: 17.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; HEIGHT: 17.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; HEIGHT: 17.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR height=0>
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     <TD width="12%"></TD></TR></TABLE></DIV> <H2 style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt">&nbsp;</H2>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial>- 6 -</FONT></P>
</DIV>
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<DIV style="page: WordSection1"> <H2 style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES</FONT></B></H2>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES</FONT></B></P>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010</FONT></B></P>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (unaudited) </FONT></B></P>
<P style="PAGE-BREAK-AFTER: avoid; TEXT-ALIGN: center; MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial,sans-serif></FONT></B>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>Three Months Ended</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>June 30,</FONT></B></P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>Six Months Ended</FONT></B></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>June 30,</FONT></B></P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>2011</FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT></B>&nbsp;</P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>2010</FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT></B>&nbsp;</P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>2011</FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT></B>&nbsp;</P>
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<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>2010</FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>Gross Profit Reconciliation</FONT></B></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; GAAP gross profit</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$3,667,000&nbsp; </FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$ 3,279,000&nbsp; </FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$8,160,000&nbsp; </FONT></P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$ 7,177,000&nbsp; </FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;Amortization of purchased intangible assets<SUP>(a)</SUP></FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>279,000&nbsp; </FONT></P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>534,000&nbsp; </FONT></P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif></FONT>&nbsp;</P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp; &nbsp;</FONT><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>Stock-based compensation<SUP>(b)</SUP></FONT></P>
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     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>3,000&nbsp; </FONT></P>
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     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>6,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>6,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 5pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 10pt" face=Arial,sans-serif>13,000&nbsp; </FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;Non-GAAP gross profit</FONT></P>
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     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>3,949,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>3,285,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>8,700,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>7,190,000&nbsp; </FONT></P>
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<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-GAAP gross profit percentage of sales</FONT></P>
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<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>46.7%&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>44.1%&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>48.0%&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>48.6%&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>Operating expense Reconciliation</FONT></B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif> </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>GAAP operating expenses</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>4,204,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>5,354,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>9,921,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>11,088,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; Stock-based compensation <SUP>(b)</SUP></FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(76,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(124,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(162,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(275,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; Restructuring costs<SUP>(c)</SUP></FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(60,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(64,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(182,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(127,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; Other legal expenses<SUP>(d)</SUP></FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(67,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(150,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(414,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(300,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="2%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="40%" colSpan=4>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;Non-GAAP operating expenses</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>4,001,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>5,016,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>9,163,000</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>10,386,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; PADDING-TOP: 0in" width="6%" colSpan=2>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 10pt" face="Times New Roman,serif"></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="36%" colSpan=3>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>Net Loss Reconciliation</FONT></B></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; GAAP net loss</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(452,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(1,960,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(1,550,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>(3,860,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;Amortization of purchased intangible assets<SUP>(a)</SUP></FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>279,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>534,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock-based compensation<SUP>(b)</SUP></FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>79,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>130,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>168,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>288,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Restructuring costs<SUP>(c)</SUP></FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>60,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>64,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>182,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>127,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other legal expenses<SUP>(d)</SUP></FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>67,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>150,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>414,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>300,000&nbsp; </FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;Non-GAAP net income (loss)</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp; 33,000&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$(1,616,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp; (252,000)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$(3,145,000)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><B><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>Loss per Common Share</FONT></B></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;&nbsp; GAAP basic net loss per common share</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.04)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.18)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.14)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.35)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="TEXT-INDENT: -12.6pt; MARGIN: 0in 0in 0pt 12.6pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp; &nbsp;Non-GAAP basic<SUP>(e)</SUP> net income (loss) per common share</FONT></P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.00&nbsp;&nbsp; </FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.15)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.02)</FONT></P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="BORDER-BOTTOM: windowtext 1pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" vAlign=bottom width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0pt 0pt 0in" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif>&nbsp;$&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.28)</FONT></P>
</TD></TR>
<TR>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="42%" colSpan=5>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="13%" colSpan=2>
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="3%">
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD>
     <TD style="PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in" width="12%">
<P style="TEXT-ALIGN: right; MARGIN: 0in 0in 0pt" align=right><FONT style="FONT-SIZE: 9pt" face=Arial,sans-serif></FONT>&nbsp;</P>
</TD></TR>
<TR height=0>
     <TD width="2%"></TD>
     <TD width="4%"></TD>
     <TD width="8%"></TD>
     <TD width="12%"></TD>
     <TD width="16%"></TD>
     <TD width="12%"></TD>
     <TD width="3%"></TD>
     <TD width="12%"></TD>
     <TD width="3%"></TD>
     <TD width="1%"></TD>
     <TD width="12%"></TD>
     <TD width="3%"></TD>
     <TD width="12%"></TD></TR></TABLE><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>The Non-GAAP financial measures above, and its reconciliation to our GAAP results for the periods presented, reflect adjustments relating to the following items: </FONT></DIV>
<P style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif><BR>
<SUP>(a)&nbsp;&nbsp;&nbsp; </SUP>Amortization of purchased intangible assets</FONT><I><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif> </FONT></I><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>- a non-cash expense arising from the acquisition of intangible assets that the Company is required to amortize over their expected useful life. The value of purchased intangible assets increased significantly as a result of the acquisition of the USP and SP2000 signaling technologies acquired from GENBAND.</FONT></P>
<P style="MARGIN: 0in 0in 0pt"><SUP><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>(b)&nbsp;&nbsp;&nbsp; </FONT></SUP><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>Stock-based compensation costs - a non-cash expense incurred in accordance with share-based compensation accounting guidance. </FONT></P>
<P style="MARGIN: 0in 0in 0pt"><SUP><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>(c) </FONT></SUP><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp; Restructuring costs</FONT><I><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif> </FONT></I><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>- costs incurred as a result of restructuring activities taken to bring operating expenses more in line with expected revenues.&nbsp; </FONT></P>
<P style="MARGIN: 0in 0in 0pt"><SUP><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>(d)&nbsp; </FONT></SUP><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>&nbsp;&nbsp;Other legal costs - expenses not indicative of core operating activities.</FONT></P>
<P style="MARGIN: 0in 0in 0pt"><SUP><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>(e)&nbsp;&nbsp;</FONT></SUP><FONT style="FONT-SIZE: 9pt" lang=EN-US face=Arial,sans-serif>&nbsp; Basic and diluted net income per common share are identical for the three months ended June 30, 2011<FONT style="FONT-SIZE: 9pt" face=Arial>.</FONT></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0in 0in 0pt" align=center><FONT color=#0000ff></FONT>&nbsp;</P>
</DIV>
<a name="_bclFooter9"></a><DIV>
<P style="MARGIN: 0in 0.25in 0pt 0in" align=center><FONT style="FONT-SIZE: 10pt" lang=EN-US face=Arial>- 7 -</FONT></P>
</DIV></DIV>

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q2.htm - Generated by SEC Publisher for SEC Filing
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported)
:
August 4
, 2011
PERFORMANCE TECHNOLOGIES, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation)
02-27460
(Commission
File Number)
16-1158413
(IRS Employer
Identification No.)
205 Indigo Creek Drive
Rochester, New York
14626
(Address of principal executive offices)
(Zip Code)
(585) 256-0200
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
[  ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]
P
re-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On
August 4
, 2011, Performance Technologies, Incorporated
("PT")
issued a press release announcing its results of operations for the quarter and six months
ended June 30, 2011
. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K.
(c) Exhibits.
(99.1) Press release issued by PT on August 4, 201
1
.
SIGNATURES
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 hereunto duly authorized.
PERFORMANCE TECHNOLOGIES, INCORPORATED
August 5
, 2011
By /s/ John M. Slusser
John M. Slusser
President and Chief Executive Officer
August 5
, 2011
By /s/ Dorrance W. Lamb
Dorrance W. Lamb
Chief Financial Officer and Senior Vice President of Finance
Exhibit 99.1
For more information contact:
Dorrance W. Lamb
SVP and Chief Financial Officer
PT
585-256-0200 ext. 7276
http://www.pt.com
finance@pt.com
PT Announces Second Quarter 2011
Financial Results
"Second Quarter is Profitable on a Non-GAAP Basis"
ROCHESTER, NY – August 4, 2011 – PT (NASDAQ: PTIX), a leading global provider of advanced network communications solutions, today announced its unaudited financial results for the second quarter 2011.
Revenue in the second quarter 2011 amounted to $8.5 million, compared to $7.4 million in the second quarter 2010.  Revenue for the six months ended June 30, 2011 amounted to $18.1 million, compared to $14.8 million during the corresponding period in 2010.
On the basis of generally accepted accounting principles (GAAP), the net loss in the second quarter 2011 amounted to ($.5 million), or ($.04) per basic share, based on 11.1 million shares outstanding, including restructuring charges of $.01 per share and stock compensation expense of $.01 per share.  The GAAP net loss in the second quarter 2010 amounted to ($2.0 million), or ($.18) per basic share, including restructuring charges of $.01 per share and stock compensation expense of $.01 per share, based on 11.1 million shares outstanding.
The GAAP net loss for the six months ended June 30, 2011 amounted to ($1.6 million), or ($.14) per basic share, including a restructuring charge of $.02 per share and stock-based compensation of $.02 per share, based on 11.1 million shares outstanding.  The GAAP net loss for the six months ended June 30, 2010 amounted to ($3.9 million), or ($.35) per basic share, including a restructuring charge of $.01 per share; stock-based compensation of $.03 per share; and a discrete tax provision of $.01 per share, based on 11.1 million shares outstanding.
On a non-GAAP basis, the Company had net income in the second quarter 2011 amounting to $.03 million, or $.00 per basic share, compared to a net loss of ($1.6 million), or ($.15) per basic share in the second quarter 2010.  The non-GAAP net loss for the six months ended June 30, 2011 amounted to ($.3 million), or ($.02) per basic share, compared to a net loss of ($3.1 million), or ($.28) per basic share in the six months ended June 30, 2010.  Please refer to the reconciliations between GAAP and non-GAAP financial measures contained in this release.
On June 30, 2011, the Company's working capital position was $18.7 million including cash and investments amounting to $13.7 million, and the Company had no long-term debt.
"While the uneven economy continues to result in variability in our quarterly revenue, our first half 2011 revenues grew 22% over our prior year," said John Slusser, president and chief executive officer.  "We are gratified to see that our expense reduction efforts are paying off as our quarterly net loss was greatly reduced.  Our new product offerings are gaining market traction and I am especially pleased to see the early interest in our new Monterey platform.  The signaling alliance we established in the first quarter with GENBAND also continues to further progress.  We believe that our first half year-over-year revenue trend
will continue in the second half and we are hopeful that the Company's operations will soon return to profitability.
"
- 1 -
Recent Highlights:
In early May 2011, PT and Tekelec agreed to voluntarily dismiss all claims and defenses against each other, effectively ending the litigation between the two companies.
In late May 2011, PT was pleased to publicly reveal that its previously announced major international wireless carrier order amounting to nearly $3 million was with Globacom, one of Africa's fastest growing mobile telecommunications companies.  Under this order, PT's SEGway™ Signaling solutions will be deployed in Nigeria and Ghana and will include both Mobile Number Portability (MNP) and Short Message Service Defense (SMS-D) functions.  Revenues from this order are anticipated to be recognized during the second half of 2011 as the solutions are installed.
In June 2011, PT announced a revolutionary new open-standards solution set, code named Monterey.  First of its kind in the industry, Monterey is an enhanced application-ready system that combines compatibility with the latest MicroTCA.4 standard with superset extensions including increased backplane performance and higher available power budget.  The Monterey architecture leverages the latest trends in high-density computing and high speed 10/40GbE fabrics in a compelling cost-performance, space-efficient model that is ideally suited as the foundation for a wide range of next-generation network communications and services applications.
Business Overview:
The Company globally targets two primary vertical markets for its network communications products, namely telecommunications, and military, aerospace and government systems.  The telecommunications market, historically our largest vertical market, is fundamentally driven by investments in network infrastructure by carriers and service providers.  Telecommunications market revenues derived from our IPnexus™ Application-Ready Systems products, which are sold to OEMs, depend primarily on broad, multi-year deployments of next-generation telecommunications infrastructure.  Telecommunications market revenues generated from service providers purchasing our SEGway and Xpress™ product lines result from investments necessary to support existing and evolving service demands such as text messaging and the transition to Internet-based communications networks.  Sales into the military, aerospace and government systems market are typically to prime contractors and system integrators that reflect investment levels by various government agencies and military branches in specific programs and projects requiring enhanced communications capabilities.  The timing of military, aerospace and government systems shipments for the most part is highly unpredictable.
More in-depth discussions of the Company's strategy and financial performance can be found in the Company's periodic reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission.
About PT (
www.pt.com
)
PT (NASDAQ: PTIX) is a global supplier of advanced network communications solutions to carrier, government, and OEM markets.  PT's portfolio includes IP-centric network elements and applications designed for high availability, scalability, and long life cycle deployments.  The Company's entire line of offerings is anchored by IPnexus®, PT's own IP-native, highly integrated platforms and element management systems.  OEMs and application developers, including PT itself, leverage the robust carrier- grade Linux® development environment and rich suite of communications protocols (PT's Nexusware®) of IPnexus Application-Ready Systems as a cornerstone component of their end product value proposition.  PT's SEGway™ Signaling Solutions provide low cost, high density signaling, advanced routing, IP
migration, gateway capabilities, SIP bridge, and core-to-edge distributed intelligence.  The Company's Xpress™ NGN applications enable evolving Mobile 2.0, Multi-media, and IMS-based revenue generating services.  PT is headquartered in Rochester, NY and maintains sales and engineering offices around the world.
- 2 -
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements.  This press release contains forward-looking statements which reflect the Company's current views with respect to future events and financial performance, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and is subject to the safe harbor provisions of those Sections.
The Company's future operating results are subject to various risks and uncertainties and could differ materially from those discussed in the forward-looking statements and may be affected by various trends and factors which are beyond the Company's control.
These risks and uncertainties include, among other factors, business and economic conditions, rapid technological changes accompanied by frequent new product introductions, competitive pressures, dependence on key customers, inability to gauge order flows from customers, fluctuations in quarterly and annual results, the reliance on a limited number of third party suppliers, limitations of PT's manufacturing capacity and arrangements, the protection of PT's proprietary technology, errors or defects in our products, the effects of pending or threatened litigation, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to investments, foreign regulations, and potential material weaknesses in internal control over financial reporting
.
In addition, during weak or uncertain economic periods, customers' visibility deteriorates causing delays in the placement of their orders.  These factors often result in a substantial portion of PT's revenue being derived from orders placed within a quarter and shipped in the final month of the same quarter.  Forward-looking statements should be read in conjunction with the most recent audited Consolidated Financial Statements, the Notes thereto, Risk Factors, and Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company, as contained in the Company's Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.
Non-GAAP Financial Measures
As a supplement to the GAAP-based consolidated financial statements contained in this press release, the Company is providing a presentation of non-GAAP financial measures which can be useful to investors to gain an overall understanding of the Company's current financial performance.  Specifically, the Company believes the non-GAAP financial measures provide useful information to investors by excluding certain expenses the Company believes are not indicative of its core operating results.  The non-GAAP financial measures exclude certain expenses such as the effects of (a) amortization of purchased intangible assets, (b) stock-based compensation, (c) restructuring costs, and (d) other legal costs.
Management utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions and forecasting and planning for future periods.  We also consider the use of the non-GAAP financial measures to be helpful in assessing various aspects of our business operations.
Non-GAAP financial measures are not meant to be considered a substitute for the corresponding GAAP financial information and should not be considered in isolation from measures of financial performance prepared in accordance with GAAP.  Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial information.
A reconciliation of non-GAAP measures to GAAP measures is included herein.
# # #
- 3 -
A conference call will be held on Friday, August 5, at 10:00 a.m., New York time, to discuss the results. All institutional investors can participate in the conference by dialing (866) 250-5144 or (416) 849-6163. The call will be available simultaneously for all other investors at (866) 494-3387 or (416) 915-1198. A digital recording of this conference call may be accessed immediately after its completion from August 5 through August 9, 2011. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 847904. A live webcast of the conference call will be available on the PT website at www.pt.com and will be archived to the site within two hours after the completion of the call.
PT is a trademark of Performance Technologies, Inc. The names of actual companies, products, or services may be the trademarks, registered trademarks, or service marks of their respective owners in the United States and/or other countries.
- 4 -
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
June 30,
2011
December 31,
2010
Current assets:
Cash and cash equivalents
$11,222,000
$12,796,000
Investments
1,395,000
3,753,000
Accounts receivable
5,571,000
5,478,000
Inventories
6,623,000
7,787,000
Prepaid expenses and other assets
1,513,000
940,000
Prepaid income taxes
183,000
31,000
Fair value of foreign currency hedges
10,000
17,000
Total current assets
26,517,000
30,802,000
Investments
1,060,000
2,677,000
Property, equipment and improvements, net
2,592,000
2,162,000
Software development costs, net
4,148,000
3,995,000
Purchased intangible assets, net
4,940,000
804,000
Total assets
$39,257,000
$40,440,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$    823,000
$ 2,756,000
Other payable
986,000
Deferred revenue
3,908,000
1,946,000
Accrued expenses
2,133,000
2,919,000
Total current liabilities
7,850,000
7,621,000
Deferred income taxes
49,000
51,000
Total liabilities
7,899,000
7,672,000
Stockholders' equity:
Preferred stock
Common stock
133,000
133,000
Additional paid-in capital
17,210,000
17,042,000
Retained earnings
23,850,000
25,400,000
Accumulated other comprehensive income
(17,000)
11,000
Treasury stock
(9,818,000)
(9,818,000)
Total stockholders' equity
31,358,000
32,768,000
Total liabilities and stockholders' equity
$39,257,000
$40,440,000
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PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2011
2010
2011
2010
Sales
$8,453,000
$7,449,000
$18,125,000
$14,804,000
Cost of goods sold
4,786,000
4,170,000
9,965,000
7,627,000
Gross profit
3,667,000
3,279,000
8,160,000
7,177,000
Operating expenses:
Selling and marketing
1,458,000
2,034,000
3,381,000
4,407,000
Research and development
1,569,000
1,892,000
3,749,000
3,882,000
General and administrative
1,117,000
1,364,000
2,609,000
2,672,000
Restructuring charges
60,000
64,000
182,000
127,000
Total operating expenses
4,204,000
5,354,000
9,921,000
11,088,000
Loss from operations
(537,000)
(2,075,000)
(1,761,000)
(3,911,000)
Other income, net
15,000
41,000
90,000
104,000
Loss before income taxes
(522,000)
(2,034,000)
(1,671,000)
(3,807,000)
Income tax (benefit) provision
(70,000)
(74,000)
(121,000)
53,000
Net loss
$(452,000)
$(1,960,000)
$(1,550,000)
$(3,860,000)
Basic loss per share
$       (.04)
$         (.18)
$         (.14)
$          (.35)
Weighted average common shares
11,116,000
11,116,000
11,116,000
11,116,000
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PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2011
2010
2011
2010
Gross Profit Reconciliation
GAAP gross profit
$3,667,000
$ 3,279,000
$8,160,000
$ 7,177,000
Amortization of purchased intangible assets
(a)
279,000
534,000
Stock-based compensation
(b)
3,000
6,000
6,000
13,000
Non-GAAP gross profit
3,949,000
3,285,000
8,700,000
7,190,000
Non-GAAP gross profit percentage of sales
46.7%
44.1%
48.0%
48.6%
Operating expense Reconciliation
GAAP operating expenses
4,204,000
5,354,000
9,921,000
11,088,000
Stock-based compensation
(b)
(76,000)
(124,000)
(162,000)
(275,000)
Restructuring costs
(c)
(60,000)
(64,000)
(182,000)
(127,000)
Other legal expenses
(d)
(67,000)
(150,000)
(414,000)
(300,000)
Non-GAAP operating expenses
4,001,000
5,016,000
9,163,000
10,386,000
Net Loss Reconciliation
GAAP net loss
(452,000)
(1,960,000)
(1,550,000)
(3,860,000)
Amortization of purchased intangible assets
(a)
279,000
534,000
Stock-based compensation
(b)
79,000
130,000
168,000
288,000
Restructuring costs
(c)
60,000
64,000
182,000
127,000
Other legal expenses
(d)
67,000
150,000
414,000
300,000
Non-GAAP net income (loss)
$     33,000
$(1,616,000)
$  (252,000)
$(3,145,000)
Loss per Common Share
GAAP basic net loss per common share
$          (.04)
$           (.18)
$          (.14)
$           (.35)
Non-GAAP basic
(e)
net income (loss) per common share
$           .00
$           (.15)
$          (.02)
$           (.28)
The Non-GAAP financial measures above, and its reconciliation to our GAAP results for the periods presented, reflect adjustments relating to the following items:
(a)
Amortization of purchased intangible assets
- a non-cash expense arising from the acquisition of intangible assets that the Company is required to amortize over their expected useful life. The value of purchased intangible assets increased significantly as a result of the acquisition of the USP and SP2000 signaling technologies acquired from GENBAND.
(b)
Stock-based compensation costs - a non-cash expense incurred in accordance with share-based compensation accounting guidance.
(c)
Restructuring costs
- costs incurred as a result of restructuring activities taken to bring operating expenses more in line with expected revenues.
(d)
Other legal costs - expenses not indicative of core operating activities.
(e)
Basic and diluted net income per common share are identical for the three months ended June 30, 2011
.
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