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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>As filed with the Securities and Exchange Commission on March 14, 2011 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Registration Number 333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </B></FONT></P>
<P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>UNITED STATES </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>WASHINGTON, D.C. 20549 </B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>FORM S-1 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>REGISTRATION STATEMENT </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>UNDER </I></B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>THE
SECURITIES ACT OF 1933 </I></B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>APACHE DESIGN SOLUTIONS, INC. </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Exact name of registrant as specified in its charter) </B></FONT></P>
<P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Delaware</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>7372</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>94-3385111</B></FONT></TD></TR>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(State or Other Jurisdiction of<BR>Incorporation or Organization)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Primary Standard Industrial<BR>Classification Code Number)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(I.R.S. Employer<BR>Identification Number)</B></FONT></TD></TR></TABLE> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2645 Zanker Road
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>San Jose, California 95134 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>(408) 457-2000 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Address, including zip code, and telephone number, including area code, of
Registrant&#146;s principal executive offices) </B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Andrew T. Yang, Ph.D.
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Chief Executive Officer </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Apache Design Solutions, Inc. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2645 Zanker Road </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>San Jose, California 95134 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(408) 457-2000 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Name,
address, including zip code, and telephone number, including area code, of agent for service) </B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B><I>With copies to:
</I></B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Warren T. Lazarow, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Brian E. Covotta, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Scott A. Graziano, Esq.</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>O&#146;Melveny &amp; Myers LLP</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2765 Sand Hill Road</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Menlo
Park, California 94025</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Telephone: (650) 473-2600</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Fax: (650) 473-2601</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Robert P. Latta, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Robert G. Day, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Rezwan D. Pavri, Esq.</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Wilson Sonsini Goodrich &amp; Rosati, P.C.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>650 Page Mill Road</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Palo Alto, California 94304</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Telephone: (650) 493-9300</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fax: (650) 493-6811</B></FONT></P></TD></TR></TABLE> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:3px;margin-bottom:0px; text-indent:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">Approximate date of
commencement of proposed sale to the public: <B>As soon as practicable after this Registration Statement becomes effective.</B> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px; text-indent:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">If any
of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT
STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"></FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px; text-indent:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"></FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px; text-indent:3%"><FONT
STYLE="font-family:ARIAL" SIZE="1">If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"></FONT> </FONT></P>
<P STYLE="margin-top:3px;margin-bottom:0px; text-indent:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT
STYLE="font-family:ARIAL" SIZE="1"></FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px; text-indent:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule 12b-2 of the Exchange Act. (Check one):
</FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">Large&nbsp;accelerated&nbsp;filer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"></FONT></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">Accelerated&nbsp;filer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"></FONT></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
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<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">Non-accelerated filer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"></FONT>&nbsp;&nbsp;(Do not check if a
smaller reporting company)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">Smaller&nbsp;reporting&nbsp;company</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="1"></FONT></FONT></TD></TR></TABLE>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>CALCULATION OF REGISTRATION FEE </B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="63%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="17%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="14%"></TD></TR>
<TR STYLE="font-size:1px">
<TD COLSPAN="5" VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
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<TD VALIGN="bottom" ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>TITLE OF EACH CLASS OF<BR>SECURITIES TO BE REGISTERED</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>PROPOSED&nbsp;MAXIMUM<BR>AGGREGATE&nbsp;OFFERING<BR>PRICE (1)(2)</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>AMOUNT OF<BR>REGISTRATION&nbsp;FEE</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" STYLE="BORDER-TOP:1px solid #000000"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Common Stock, $0.0001 par value per share</FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1">$75,000,000</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1">$8,707.50</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD COLSPAN="5" VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR STYLE="font-size:1px">
<TD COLSPAN="5" VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes shares that the underwriters have the option to purchase to cover over-allotments, if any. </FONT></TD></TR></TABLE>
<P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:3px;margin-bottom:0px; text-indent:3%"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section&nbsp;8(a), may determine. </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2" COLOR="#cc062a"><B>The information in this preliminary prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted. </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1%; text-indent:-1%"><FONT
STYLE="font-family:ARIAL" SIZE="2" COLOR="#cc062a">Subject to Completion, Dated March&nbsp;14, 2011 </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Apache Design Solutions, Inc. </B></FONT></P>
 <P STYLE="margin-top:12px;margin-bottom:0px">

<IMG SRC="g156870g14p56.jpg" ALT="LOGO"> </P>
 <P STYLE="margin-top:24px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shares </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Common Stock </B></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">This is the initial public offering of Apache
Design Solutions, Inc. We are offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our common stock. Selling stockholders are offering an additional
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. We anticipate that the initial public
offering price will be between $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. We will apply to list our common stock on the Nasdaq Global Market under the symbol &#147;APAD.&#148;
</FONT></P> <P STYLE="margin-top:20px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="3"><B>Investing in our common stock involves a high degree of risk. See &#147;<A HREF="#bc156870_2">Risk Factors</A>&#148; beginning on page 10.
</B></FONT></P> <P STYLE="margin-top:20px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. </B></FONT></P> <P STYLE="font-size:20px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Per&nbsp;Share</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Public offering price</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Underwriting discounts and commissions</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds, before expenses, to Apache Design Solutions, Inc.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds, before expenses, to the selling stockholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">We have
granted the underwriters the right to purchase up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares of common stock to cover over-allotments. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Deutsche Bank Securities </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Needham &amp; Company, LLC </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="34%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="4"><B>Canaccord Genuity</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="4"><B>ThinkEquity LLC </B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="4"><B>D.A. Davidson &amp; Co.</B></FONT></TD></TR></TABLE> <P STYLE="margin-top:20px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The date of this prospectus is
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center">

<IMG SRC="g156870g23r02.jpg" ALT="LOGO"> </P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="line-height:0pt;margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#FFFFFF">Advancing
Low-Power Innovation </FONT></P> <P STYLE="line-height:0pt;margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#FFFFFF">Software solutions enabling power-efficient, </FONT></P>
<P STYLE="line-height:0pt;margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#FFFFFF">high-performance, noise-immune electronic designs </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_1"></A>PROSPECTUS SUMMARY </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary does not contain all of the
information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed under &#147;Risk Factors&#148; and our consolidated financial
statements and related notes included elsewhere in this prospectus, before making an investment decision. Unless otherwise noted or indicated by the context, the term &#147;Apache&#148; refers to Apache Design Solutions, Inc., and &#147;we,&#148;
&#147;us,&#148; and &#147;our&#148; refer to Apache and its consolidated subsidiaries. </I></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Company </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are a leading provider of
innovative power analysis and optimization software solutions that enable the design of power-efficient, high-performance, noise-immune integrated circuits, or ICs, and electronic systems. Our solutions consist of a suite of software tools and
methodologies that enable design engineers to reduce power consumption, ensure reliable delivery of power to ICs and electronic system components, and mitigate power-induced signal interference, or noise. We believe our solutions are critical to the
design of our customers&#146; products and allow our customers to deliver power-efficient ICs and electronic systems that are resistant to the impact of noise, or noise-immune, at lower costs and with a faster time to market than with alternative
solutions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our singular focus on power analysis and optimization enables us to address growing market demand for more power-efficient
and noise-immune ICs and electronic systems. This demand is being driven primarily by the proliferation of high-performance mobile devices, miniaturization and wireless connectivity of these devices, and the rising costs of electricity for data
centers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our solutions address the challenges posed by increasing design complexity, smaller geometries for ICs, and the integration of
various components of an electronic system onto a single IC. The accuracy, efficiency, capacity, and comprehensiveness of our solutions provide design engineers with the confidence in their analyses to progress a design to the next phase in the
process, which is known as sign-off. Highly accurate and reliable sign-off solutions are critical to engineers due to the costly and highly visible consequences of design flaws that can lead to product failures and recalls. We believe that our
RedHawk platform is the sign-off solution of choice for the analysis of reliable delivery of power to ICs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We generate substantially
all of our revenue through the sale of time-based software licenses. Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli, as well as leading electronic system companies serving a broad
range of end markets. These customers include, among others, ARM Limited, Intel Corporation, Hynix Semiconductor Inc., LSI Corporation, MediaTek Inc., QUALCOMM Incorporated, Samsung Electronics Co., Ltd., Sony Corporation, STMicroelectronics N.V.,
Texas Instruments Incorporated, and Toshiba Corporation. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers today. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our revenue was $25.7 million, $34.6 million, and $44.0 million in 2008, 2009, and 2010, respectively, and we were profitable in each of these years. </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">1 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Industry </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Several factors are driving the growing demand for more power-efficient and noise-immune ICs and electronic systems, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the proliferation of high-performance mobile and other electronic devices with increased functionality, which is requiring manufacturers to develop more
power-efficient electronic components to extend battery life; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the trend towards smaller electronic systems, which constrains the size of batteries and cooling systems, requiring engineers to design ICs that consume less
power while satisfying higher performance requirements; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the explosion in system-to-system wireless communication that is amplifying the amount of noise within and between ICs, causing systems to sometimes malfunction
or fail; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">rising power consumption and electricity costs for information technology, or IT, infrastructure, such as data centers, compelling operators to seek more
power-efficient products that consume less energy. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Meeting this growing demand for more power-efficient and
noise-immune ICs and electronic systems poses significant challenges for design engineers. These engineers must create designs that meet increasingly stringent power specification limits, or power budgets, while reliably and consistently delivering
power to all components of ICs and electronic systems. They must also create designs that mitigate adverse effects caused by power-induced noise to prevent failures or performance degradation. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">To solve these challenges, design engineers use a collection of third-party products and internally developed tools. However, many of these tools
only address power analysis for specific phases of the design flow, and lack the ability to share data between the various teams working on separate design phases. Further, many of these tools also lack the capability to efficiently simulate the
interaction of an IC with its entire electronic system, which adversely affects the quality and accuracy of the analysis. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our
Solutions </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We offer a suite of software tools and methodologies that provide innovative power analysis and optimization capabilities
throughout various phases of the design process, from initial prototyping to full electronic system design completion. We have introduced several products that have been first to market in various aspects of power and noise analysis. We believe our
solutions deliver the following benefits: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Accuracy</I> </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our solutions analyze design models and provide results that are closely correlated to power and noise measurements of the manufactured ICs and electronic systems. We believe our solutions deliver predictable,
consistent, and reliable analysis results that help our customers reduce costs and meet increasingly stringent power budget requirements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Capacity</I> </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our solutions can
simultaneously analyze an entire IC and electronic system design to model the interactions inside an IC and between the various ICs in an electronic system. Our </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">2 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
approach contrasts with the &#147;divide-and-conquer&#148; approach of other solutions, whereby a design is partitioned into sub-blocks and these sub-blocks are analyzed separately, which can
result in overlooked design errors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Efficiency</I> </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our solutions deliver rapid analyses and increase engineering team productivity. We believe our solutions are able to complete analyses significantly faster than many alternative power analysis tools, if these
alternative tools are able to complete the analyses at all. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Comprehensiveness</I> </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our solutions enable power analyses at various phases of the design of ICs and electronic systems and allow the sharing of data across design
process phases. As a result, our solutions reduce the likelihood of costly design errors and development delays that can be caused by the use of incompatible analysis tools and methodologies by engineering teams working on different components of an
electronic system. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Strengths </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our core competitive strengths include: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Exclusive focus on power </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We focus exclusively on providing solutions that enable high-performance, power-efficient, and noise-immune IC and electronic system designs. This
focus has enabled us to develop what we believe are the most advanced, effective power analysis solutions available on the market. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Diverse and growing blue chip customer base </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli, as well as leading electronic system companies serving market segments such as mobile devices,
high-performance computing and networking, consumer electronics, and automotive and medical electronics. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers today. We grew our customer base by over 118% in the last three
years, from 53 customers at the beginning of 2008 to 116 customers at the end of 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Critical solution for power sign-off</I>
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that our flagship product, RedHawk, is the sign-off solution of choice for the analysis of reliable delivery of power to ICs.
Sign-off solutions often enjoy significant competitive advantages, such as product longevity, structural barriers to entry, and substantial market share. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Comprehensive power analysis solutions</I> </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We provide engineers with a unified environment to
address the challenges associated with power efficiency and noise immunity throughout various phases of the IC and electronic system design process. Additionally, by generating compact, user-friendly models, our solutions facilitate effective
coordination among the multiple engineering teams that work on the design of ICs and complex electronic systems. </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Power-focused global customer support team</I> </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our customer support team consists of application engineers who typically have significant and relevant industry experience and are exclusively
focused on helping our customers with their power-efficiency and noise-immunity design challenges. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Strategy </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our goal is to enhance our leadership position as a provider of software tools and methodologies that enable power-efficient, noise-immune IC and
electronic system designs. Key components of our strategy include: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Extend our core technology leadership</I> </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have established ourselves as a market and technology leader for power analysis in the design of ICs and electronic systems. We believe that our
RedHawk product is the sign-off tool of choice for the analysis of reliable delivery of power to ICs. We plan to continue to invest in research and development to maintain and extend our technology leadership position. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Increase deployment of our products to existing customers</I> </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">As the demand for lower power and higher performance electronic systems continues to rise, and as our customers continue to increase their focus on delivering power-efficient solutions, we plan to increase the
number of licenses and products we sell to our existing customer base. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Broaden our customer base</I> </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We plan to continue to increase our market share among leading IC and electronic system companies. Our ability to acquire new customers is an
important element of our growth strategy, and our sales organization expends a considerable portion of its efforts on expanding our customer base. We intend to leverage our brand, technology leadership, and customer support to add new customers.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Leverage existing partnerships with market leaders to penetrate their customers</I> </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We plan to leverage our relationships with leading semiconductor customers to expand our sales to their end customers and thus improve their ability
to collaborate with their end customers to deliver more power-efficient and noise-immune ICs and electronic systems. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Expand our
addressable market with new products and enter new markets</I> </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We plan to develop new products that target adjacent and related markets
in which we can leverage our strong brand and our core underlying technologies in power analysis to deliver an even broader suite of software tools and methodologies. We may also extend our product offering through selective strategic acquisitions.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Risks Associated with Our Business </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our business, financial condition, results of operations, and prospects are subject to numerous risks. These risks include, among others, that: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we rely on a small number of customers for a significant portion of our revenue; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we depend on the continued financial strength of our customers; </FONT></P></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">4 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we could lose customers to ongoing industry consolidation; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we rely on a small number of products for substantially all of our revenue; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our addressable market is limited because we rely exclusively on solutions addressing power-efficient and noise-immune design analysis and optimization;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we may fail to develop, commercialize or acquire new and enhanced products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we must continue making significant investments in research and development efforts that may be unsuccessful; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the markets in which we operate are highly competitive and competitive pressures may prevent us from obtaining new customers and gaining market share, may
require us to reduce our pricing or cause us to lose existing customers; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we rely on our senior management and other key employees, and may not be able to retain such personnel or attract new personnel; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our senior management does not have experience in managing a public reporting company; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we have a small internal accounting and finance staff which does not have significant experience in complying with the reporting obligations of a public company,
which could negatively impact the timely and accurate reporting of our financial results. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">If we are unable to adequately address these and other risks we face, our business, financial condition, results of operations, and prospects may
be materially and adversely affected. In addition, there are additional risks related to an investment in our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">You should
carefully read &#147;Risk Factors&#148; beginning on page&nbsp;10 for an explanation of the foregoing risks before investing in our common stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Our Corporate Information </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We were incorporated in Delaware in 2001. Our principal executive
offices are located at 2645 Zanker Road, San Jose, California 95134. The telephone number of our principal executive offices is (408)&nbsp;457-2000, and our main corporate website is www.apache-da.com. The information on, or that can be accessed
through, our website is not part of this prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">We have rights to a number of marks used in this prospectus
that are important to our business, including, without limitation, Apache, Apache Design Solutions, RedHawk, Sentinel, PowerArtist, Totem, and PathFinder. We have omitted the <FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> and &#153; designations, as applicable, for the trademarks we name in this prospectus. </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">5 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>The Offering </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="38%"> <P STYLE="margin-bottom:1px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Common stock offered by us </FONT></P></TD>
<TD><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
<TD WIDTH="38%"> <P STYLE="margin-bottom:1px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Common stock offered by selling stockholders </FONT></P></TD>
<TD><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
<TD WIDTH="38%"> <P STYLE="margin-bottom:1px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Common stock to be outstanding after this offering </FONT></P></TD>
<TD><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
<TD WIDTH="38%"> <P STYLE="margin-bottom:1px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Over-allotment option </FONT></P></TD>
<TD><FONT STYLE="font-family:ARIAL" SIZE="2">We have granted the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock to cover over-allotments. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
<TD WIDTH="38%"> <P STYLE="margin-bottom:1px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Use of proceeds </FONT></P></TD>
<TD><FONT STYLE="font-family:ARIAL" SIZE="2">We estimate that the net proceeds from this offering will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million (or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million if the underwriters exercise their over-allotment option in full), after deducting the estimated underwriting discounts and commissions and our estimated offering
expenses, assuming the shares are offered at $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, the midpoint of the estimated offering range set forth on the cover page of this prospectus. We will not receive any of
the proceeds from shares sold by the selling stockholders. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="38%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">We intend to use the net proceeds from our sale of shares of common stock in this offering for working capital and other general corporate purposes, which may include hiring
additional personnel and investing in sales, marketing, and research and development. In addition, we may use a portion of the proceeds received by us from this offering for acquisitions of complementary businesses, technologies or other assets. We
have no agreements with respect to any material acquisitions at this time. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="38%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Pending the use of the proceeds from this offering as described above, we plan to invest the net proceeds in short-term, investment grade, interest-bearing securities.
</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="38%"> <P STYLE="margin-bottom:1px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Dividends </FONT></P></TD>
<TD><FONT STYLE="font-family:ARIAL" SIZE="2">We have never paid cash dividends on our common stock. We currently intend to retain any future earnings to fund business development and growth, and we do not anticipate paying any cash dividends for the
foreseeable future. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="38%"> <P STYLE="margin-bottom:1px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Proposed Nasdaq Global Market symbol </FONT></P></TD>
<TD><FONT STYLE="font-family:ARIAL" SIZE="2">&#147;APAD&#148; </FONT></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">6 </FONT></P>


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 <center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Unless otherwise noted, the number of shares of common stock to be outstanding after this offering used in this prospectus is based on 17,190,188 shares outstanding as of February&nbsp;28, 2011, excluding:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">2,210,483 shares of common stock subject to options outstanding as of February&nbsp;28, 2011, at a weighted-average exercise price of $2.42 per share issued
under our 2001 Stock Option/Stock Issuance Plan; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">2,400,000 shares of common stock reserved for issuance pursuant to our 2011 Equity Incentive Plan, and 600,000 shares of common stock reserved for issuance
pursuant to our 2011 Employee Stock Purchase Plan; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock issuable upon the exercise of the underwriters&#146; over-allotment option.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Unless otherwise expressly stated or the context otherwise requires, all information contained in this prospectus
assumes that the amendment of our amended and restated certificate of incorporation and amended and restated bylaws, and the conversion of all outstanding shares of preferred stock into shares of common stock, all of which are expected to occur
immediately prior to or upon the closing of this offering, have occurred. </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<div style ="BORDER-BOTTOM:1pt solid #000000;BORDER-LEFT:1pt solid #000000;BORDER-RIGHT:1pt solid #000000;BORDER-TOP:1pt solid #000000;MARGIN-LEFT:0px;MARGIN-RIGHT:0px;WIDTH:100%"><div style="width:97%; margin-top:1.5%; margin-left:1.5%; margin-right:-1.25%">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Summary Consolidated Financial and Other Data </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth our summary consolidated financial and other data for the years ended December&nbsp;31, 2008, 2009, and 2010. The
summary consolidated financial data for the years ended December&nbsp;31, 2008, 2009, and 2010 were derived from our audited consolidated financial statements included elsewhere in this prospectus. You should read this summary consolidated financial
data in conjunction with &#147;Selected Consolidated Financial and Other Data,&#148; &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; and our consolidated financial statements and related notes
included elsewhere in this prospectus. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands, except per share data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Statements of Operations:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,695</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,601</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44,047</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,812</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,662</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,999</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,883</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,939</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35,048</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating expenses:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales and marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,529</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,797</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,588</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,516</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,903</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,926</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,229</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,955</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,372</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(346</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,984</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,676</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(93</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income (loss) before income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,891</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,042</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Provision (benefit) for income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,507</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,622</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,738</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income per share:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted average common shares outstanding:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,882</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,016</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,253</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,237</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,631</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Other Consolidated Financial Data (Unaudited):</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Non-GAAP net income&nbsp;(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,735</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,971</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,372</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="66%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>As of December 31, 2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Actual</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro&nbsp;Forma&nbsp;(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro&nbsp;Forma<BR>As&nbsp;Adjusted&nbsp;(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Balance Sheet Data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,175</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,175</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Working capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,646</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,646</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,711</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,711</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term debt obligations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Redeemable convertible preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,996</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total stockholders&#146; equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,871</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,867</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">8 </FONT></P>


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<div style ="BORDER-BOTTOM:1pt solid #000000;BORDER-LEFT:1pt solid #000000;BORDER-RIGHT:1pt solid #000000;BORDER-TOP:1pt solid #000000;MARGIN-LEFT:0px;MARGIN-RIGHT:0px;WIDTH:100%"><div style="width:97%; margin-top:1.5%; margin-left:1.5%; margin-right:-1.25%">

 <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. We define non-GAAP net income as GAAP net income
plus amortization of intangible assets and stock-based compensation expense, and giving effect to the tax impact of these adjustments to GAAP net income. For a reconciliation of GAAP net income to non-GAAP net income, as well as a discussion
regarding the reasons for our presentation of non-GAAP net income, see note 1 to &#147;Selected Consolidated Financial and Other Data.&#148; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The unaudited pro forma data as of December&nbsp;31, 2010 assumes the conversion of all of our outstanding shares of preferred stock into common stock. </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The unaudited pro forma as adjusted data gives effect to the conversion referred to in note 2 above and to the sale of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of
common stock by us in this offering at an assumed initial offering price to the public of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, which is the midpoint of the estimated offering range set forth on the cover page of this
prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
per share would increase (decrease) cash and cash equivalents, working capital, total assets, and total stockholders&#146; equity by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million, assuming that the number of shares offered by us, as set
forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. </FONT></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">9 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_2"></A>RISK FACTORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information
contained in this prospectus before purchasing our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may
become important factors that affect us. </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>If any of the following risks occur, our business, financial condition, and operating
results could be materially and adversely affected. In that case, the market price of our common stock could decline, and you could lose some or all of your investment</I>. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Risks Related to Our Business </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We rely on a small number of customers for a significant portion of our
revenue, and our revenue could decline if customers terminate their licenses, delay orders or fail to renew licenses, if we are unable to maintain or expand relationships with our major customers, or if we are unable to develop relationships with
new customers. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">A significant portion of our revenue and the strength of our business depends on sales to a small number of
customers, and our customers often have significant bargaining power in negotiations with us. In 2008, 2009, and 2010, our largest customer, which was a different customer in each year, accounted for 8%, 12%, and 11%, respectively, of our revenue,
and our ten largest customers accounted for more than 62%, 68%, and 59%, respectively, of our revenue. We expect that we will continue depending upon a relatively small number of customers for a substantial portion of our revenue for the foreseeable
future. Substantially all of our licenses are time-based licenses with 12- to 36-month terms that automatically expire at the end of their term unless the customer renews the license with us by executing a new time-based license agreement. Most of
our customer licenses may be terminated by a customer without penalty on 30 days&#146; notice. If our customers terminate their licenses, do not renew their licenses or renew their licenses with shorter terms or in smaller quantities, or we are
unable to collect under these licenses, we may not generate additional revenue, our revenue may decline, and we may have reduced ability to forecast our revenue. We also rely on developing relationships with potential customers to increase our
revenue. If we fail to maintain or expand our relationships with existing customers, or if we fail to develop relationships with new customers, our business, financial condition, and revenue would be materially and adversely affected. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>A deterioration in the financial condition of any of our key customers or their end-user customers, or the perceived or actual financial deterioration of our
business could adversely affect our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently depend on a small number of
customers, and expect to continue to depend on a small number of customers for the foreseeable future, and any material deterioration in the business or financial condition of our customers or their end-user customers could have a material and
adverse effect on our business, financial condition, and results of operations. Previously, some of our customers have gone out of business or become unable to pay for the licenses or services we have provided them or were to provide to them.
Moreover, existing customers may seek to renegotiate pre-existing contractual commitments due to adverse changes in their own businesses or for other reasons. One or more of our customers going out of business or otherwise being unable to pay for
the license or services we provide them could </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">10 </FONT></P>


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have a material adverse effect on our business, financial condition, and operating results. Conversely, if our customers believe that we are not financially sound, or if we suffer an actual
deterioration in our financial condition, our customers may choose to stop doing business with us, which would materially adversely affect our business, financial condition, and operating results. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidation among our customers could lead to a reduction in selling prices and license sales, and customer loss, which would harm our business, financial
condition, operating margins, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our reliance on a small number of customers for a significant portion of our
revenue, combined with our limited addressable market, makes us particularly vulnerable to the effects of customer consolidation. Consolidation in the industries in which our customers operate occurs frequently, and we believe it has been increasing
in recent years. Customer consolidation could lead to the loss of customers and reduced license purchases, and a reduction in our addressable market. In addition, customer consolidation could increase our existing and potential customers&#146;
bargaining power, requiring us to reduce the price of our products and offer more attractive sales terms. Ongoing consolidation could therefore harm our business, financial condition, operating margins, and operating results. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We generate our revenue from a limited number of products that focus exclusively on power-efficient and noise-immune solutions, and we are highly susceptible to
changes in demand for our products and to any decline in the size of our addressable market. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We generate our revenue from a limited
number of products that focus exclusively on power-efficient and noise-immune design solutions for integrated circuits, or ICs, and electronic systems. We expect these existing products to continue accounting for a large percentage of our revenue in
the foreseeable future. We currently offer four platforms that focus exclusively on power-efficient and noise-immune solutions. Our flagship platform, RedHawk, accounted for a majority of our revenue in 2008, 2009 and 2010. Our dependence on RedHawk
and our limited number of platforms make us highly susceptible to changes in demand for our solutions and also to changes in demand within our addressable market. Continued market acceptance of, and demand for, RedHawk in particular are critical to
our future operating results. If our competitors introduce new products or offer aggressive pricing or terms on products that compete with our RedHawk platform or any of our other products, our revenue could decline materially and our business,
financial condition, and operating results could be materially harmed. Any factors adversely affecting the overall demand for our products, including competition or technological change, could cause our revenue to decline materially and our business
to suffer significantly. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We may fail to effectively develop and commercialize or acquire new and enhanced products, which would materially and
adversely affect our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The markets in which our customers and their end-user
customers compete tend to be rapidly developing, with constantly evolving technology trends. This results in frequent new product introductions, relatively short product life cycles, and significant price competition. Consequently, our ability to
compete in these markets depends in part on our ability to maintain our technological advantage, anticipate technology development trends, and identify, develop, and commercialize or acquire new and enhanced products and technologies that customers
demand in a timely and cost-effective manner. New products have contributed significantly to our revenue growth in the past, and may continue to do so in the future. We expect the markets in which we operate to continue evolving toward newer and
more advanced products. We may </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">11 </FONT></P>


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not have the financial resources necessary to fund all required future innovations. Expanding into new technologies or extending our product lines into areas we have not previously addressed may
be more costly or difficult than we presently anticipate. For example, our Sahara product, which extended into a new area, failed to gain market acceptance, and we decided to discontinue its sale. Also, any revenue that we receive from enhancements
or new generations of our software products may be less than the costs that we incur to develop or acquire those technologies and products. Even if we successfully develop or acquire new and enhanced products, it may take an extended period of time
for our new products to gain market acceptance, if at all. If we fail to develop or acquire and market new and enhanced products in a timely manner, or if new products do not meet performance features as marketed, our reputation, business, and
results of operations could suffer. To effectively develop and commercialize new and enhanced products, we must, among other things: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">accurately assess technology trends and our customer and their end-customer needs and meet market demands; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">develop and deliver products that sufficiently address technical advances and the increasing complexity of our customers&#146; integrated circuits, or ICs,
including as a result of smaller geometries in ICs and electronic systems; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">optimize our development processes; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">develop and deliver products in a timely and cost-effective manner; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">develop products offering both a high level of integration into a comprehensive platform and a high level of individual product performance;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">increase customer awareness and acceptance of our products; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">price our products competitively; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">effectively integrate customer feedback into our research and development planning; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">create and maintain interoperability with our competitors&#146; products. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Furthermore, our competitors may develop or acquire new products or technologies that have the potential to replace our existing or new product
offerings. The introduction of these new or additional products by competitors may cause potential customers to defer purchases of our products or decide against purchasing our products, and may cause our existing customers to choose to terminate or
not to renew licenses to use our products. If we fail to effectively develop and commercialize or acquire new or enhanced products, our business, financial condition, and operating results will be materially and adversely harmed. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our research and development expenditures have increased in recent years, and we may be unable to develop new products or enhance existing products unless we
continue making significant investments in research and development, which could negatively impact our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Developing our technology for current, enhanced, and new products and integrating acquired technology and products into existing platforms is expensive, and these investments often require a long time to generate
returns. We make significant investments developing new products and enhancing our existing products, conducting product testing and quality assurance testing, improving our core technology, and strengthening our technological expertise in markets
in which we operate. We believe that we must continue investing significant resources to our research and development efforts to maintain and improve our </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">12 </FONT></P>


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technological advantage and competitive position. Our research and development expenditures in 2008, 2009, and 2010 were $7.8 million, $8.6 million, and $11.5 million, respectively. If we decide
to invest significantly greater resources than currently anticipated in research and development efforts, our operating expenses would increase. Our increased investments in research and development may not result in a corresponding increase in
revenue. Conversely, if we decrease our research and development investments, this could result in corresponding or larger revenue decreases due to decreased product enhancement and development and eroding competitive position. Further, research and
development expenses are likely to fluctuate over time, and these investments may be independent of our revenue, which could negatively affect our business, financial condition, and operating results. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>The markets in which we operate are highly competitive, and these competitive pressures may prevent us from obtaining new customers and gaining market share,
may require us to reduce our product and services pricing or cause us to lose existing customers, which could materially harm our business, financial condition, and operating results. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently compete with companies that hold dominant shares in the markets in which we operate, such as ANSYS, Inc., Cadence Design Systems, Inc.,
Magma Design Automation, Inc., Mentor Graphics Corporation, and Synopsys, Inc. Each of these companies has, among other things: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a longer operating history; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">significantly greater financial, managerial, engineering, technical, sales, and marketing resources; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">greater name recognition; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a stronger relationship with many of our top customers and our customers&#146; procurement decision-makers; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">products that we must maintain interoperability with to successfully compete in our target markets; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a larger installed customer base. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our competitors&#146; and potential competitors&#146; advantages may allow them to, among other things: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">adopt our business model and devote greater resources than we can to developing and promoting offerings similar to or better than our own;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">incorporate key functionality of our products into their products, giving them the ability to provide similar functionality with a superior user experience;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">modify their products&#146; interfaces, output file formats or input file formats, resulting in our product development team devoting significant time and
resources to maintaining interoperability with our competitors&#146; products; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">engage in more extensive research and development; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">offer more and a broader range of products and services; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">bundle other products and services as part of their overall sales processes; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">adopt more aggressive pricing policies; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">undertake more far-reaching marketing campaigns; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">offer services that achieve greater market acceptance than ours; and </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">13 </FONT></P>


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<TD> <P STYLE="margin-top:0px;margin-bottom:1px">
</P></TD>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">make more attractive offers to our existing and potential employees, suppliers, customers, and strategic partners and acquisition targets.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Competition and corresponding pricing pressures among vendors or other factors could cause the overall market for
products in the markets in which we operate to have low growth rates, remain relatively flat or even decrease in terms of overall dollars. If our competitors offer deep discounts on certain products in an effort to recapture or gain market segment
share or to sell other products, we may then need to lower our prices or offer other favorable terms to compete. Any such changes would likely reduce our profit margins and could adversely affect our operating results. Any substantial changes to our
prices and pricing policies could cause sales and software license revenue to decline or be delayed as our sales force implements and our customers adjust to the new pricing policies. Further, some of our competitors offer or provide free or
lifetime licenses. These practices could, over time, significantly constrain the prices that we can charge for our products and reduce our operating margins. If we cannot offset price reductions with a corresponding increase in sales or with lower
spending, then the reduced license revenue resulting from lower prices could have an adverse effect on our operating results. In addition, there are generally low barriers to entry into the markets in which we operate, and a variety of privately
held companies continue to emerge, developing and introducing new products that compete or may continue to compete with our products and services and offer better functions and speed. One or more of these companies are or could become significant
competitors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We compete principally on the basis of technology leadership, product quality and features (including ease-of-use),
license terms, post-contract customer support, interoperability with our products and other vendors&#146; products, and price and payment terms. Many of our competitors also offer a more comprehensive product range, and, if our competitors introduce
power analysis products that they bundle with their other products, and our customers consider these bundled power analysis products sufficient to satisfy their needs, our customers may choose to no longer purchase our product licenses. Similarly,
if our customers seek to concentrate their software product purchases with a few large providers, we may be at a disadvantage. In addition, our competitors may introduce power analysis products and services that our customers consider superior to
our own. In any such event, we would likely lose business, which would result in lost revenue and would harm our business, financial condition, and operating results. If we fail to successfully compete or fail to address new competitive forces, our
business, financial condition, and operating results will be materially harmed. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We may be unable to retain or attract and train the necessary
personnel for our business, particularly management, engineering, applications support, and technical sales and other key personnel, and any inability to do so could adversely affect our ability to compete, reduce our operating margins, and harm our
business and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Competition in our industry for qualified senior management, engineering, applications support, and
technical sales and other key personnel is intense, particularly in the Silicon Valley area where our headquarters are located, and in India, China, and Taiwan, where we have significant international operations. Our business and operating results
depend in part on our ability to identify, hire, train, and retain qualified engineering personnel with experience in IC or electronic system design. Specifically, we need to continue attracting and retaining field application engineers to work with
our direct sales force to qualify new sales opportunities technically and perform design work to demonstrate our products&#146; capabilities to customers </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">14 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
during their evaluation process. We may lose engineers and other employees to our competitors and to companies outside the markets in which we operate that are larger, more established and
well-financed, have greater name recognition, and/or can offer more attractive compensation packages. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our software requires
sophisticated sales efforts by experienced and knowledgeable personnel.&nbsp;Competition for these individuals is intense due to the limited number of persons with the necessary sales experience and technical understanding.&nbsp;Hiring customer
service and support personnel in our industry is also very competitive due to the limited number of persons with the necessary technical skills. These talented support personnel also tend to form loyal relationships over time with our top tier
customers. In addition, designing an effective incentive compensation structure for our sales and support personnel is critical to our future operating results. We have experimented, and continue to experiment, with different methods of sales and
support personnel compensation. If our incentives are not well designed, we may lose the services of a significant number of our employees or key employees, be unable to hire additional employees of the same caliber, be unable to retain our
customers, and be unable to increase our sales or implement or maintain our growth strategy. The high cost of training new employees, not fully utilizing these employees or losing trained employees to competing employers could harm product
development, our sales and support efforts, and our ability to compete, and reduce our operating margins and harm our business and operating results. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We depend on our senior executives and other key personnel, and any failure to retain such personnel could harm our business and results of operations.
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We depend on our senior executives and other key personnel who are critical to our business. The equity securities held by many of
our senior executives and other key employees are substantially fully vested. As such, the equity-based compensation that is currently in place for our senior management and other key employees may not be sufficient to retain such personnel, and
they may be able to obtain superior compensation arrangements from our competitors or other employers. In addition, our cash compensation, which is comprised of salary, bonus and, in some cases, commissions, may not be adequate to retain the
services of our senior executives and other key employees. Our larger competitors and other companies may be able to offer more generous compensation packages to senior executives and other key employees, and therefore we risk losing key personnel
to those competitors and other companies. We expect that our employee compensation expenses will increase significantly in the near term. However, these expenditures may fail to maintain or improve our employee retention rates and may not enhance
our ability to attract qualified employees. If we lose the services of any of our senior executives or other key personnel, our management, product development processes, and sales efforts could be harmed. Attracting and integrating new personnel
could be expensive and disrupt our ongoing operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We intend to issue stock options and restricted stock units and maintain an
employee stock purchase plan as key components of our overall compensation and employee attraction and retention efforts. We may face pressure from stockholders, who must approve any increases in our equity compensation pool, to limit the use of
equity-based compensation so as to minimize its dilutive effect on stockholders. In addition, we are required under GAAP to recognize compensation expense in our operating results for employee share-based equity compensation under our equity grants
and our employee stock purchase plan, which may negatively impact our operating results and may increase the pressure to limit share-based compensation. These factors may make it more difficult or unlikely for us to continue granting attractive
equity-based compensation packages to our employees, which could adversely impact our ability to attract and retain key employees. If we lose any senior executive or other key employee, our business and operating results could be materially and
adversely affected. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">15 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our senior executives do not have experience in managing a public reporting company, and we have a small internal
accounting and finance staff with limited public reporting company experience, which could divert management&#146;s attention from operating our business, could negatively impact timely and accurate reporting of financial results and could harm our
business. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">None of our current executive officers or other key employees has been involved in the management of a public reporting
company. For example, none of our current executive officers has management experience with respect to Securities and Exchange Commission reporting obligations, compliance with Securities and Exchange Commission and Nasdaq Global Market rules and
regulations, and experience in interacting with institutional investors or research analysts. In addition, we have a small internal accounting and finance staff with limited experience in public reporting. We also do not have any internal finance
personnel located outside of our California headquarters. This lack of experience and personnel could divert management&#146;s attention from operating our company and make it difficult for us to timely and accurately report our financial results,
which could harm our business. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our operating results have fluctuated from quarter-to-quarter and may continue doing so, which may cause our business
and operating results to be materially and adversely affected and the market price of our common stock to decline or be volatile. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our revenue, expenses, and operating results have fluctuated from quarter-to-quarter and may continue doing so. Reasons for the past and potential
ongoing fluctuations include: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the timing of new customer acquisitions, existing customer renewals, and the related timing of delivery of licenses to our customers, which impacts when we can
begin to recognize revenue in accordance with our revenue recognition policies; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">fluctuations in demand for our products, including as a result of economic downturns or cyclicality in our served markets, particularly in the semiconductor and
electronics industries; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our dependence on a small number of customers for a large portion of our revenue; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">customer consolidation, which could lead to customer loss; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in competitive and economic conditions generally or in our customers&#146; markets; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our lengthy and unpredictable sales cycle and the large size of some orders; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">order cancellations and product rescheduling; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in product mix; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">product development delays; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the introduction of new products, and whether such products are adopted by our customers; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">foreign exchange risk as we incur substantial costs in foreign currencies while we recognize revenue principally in U.S. dollars; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">competitive factors, including actions by our competitors, such as discounting, free licensing, offering a flat rate for an unlimited number of licenses,
lifetime licenses or product bundling, and entry of new competitors into our markets; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to innovate, introduce, and support new products, services, and markets, or effectively integrate and support products and technologies that we
acquire; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">16 </FONT></P>


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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">pricing volatility, particularly internationally; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">costs associated with retention of employees, including salary, equity compensation, and bonuses; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">costs associated with the expansion of our business, including capital expenditures and expenses related to the hiring of new employees;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">costs associated with, and the outcomes of, any intellectual property or other litigation to which we may become a party; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the impact of taxes, particularly Accounting Standards Codification, or ASC, Topic ASC 740-10, <I>Accounting for Uncertainty in Income Taxes</I>, which requires
us to establish reserves for uncertain tax positions and accrue potential tax penalties and interest. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Due to the
factors noted above and other risks discussed in this section, we believe that quarter-to-quarter comparisons of our operating results may not be meaningful. You should not rely on our results for one quarter as a future performance indicator.
Quarterly variations in our operations could have a material and adverse effect on our business and operating results. These variations could make the market price of our common stock volatile, and the price of our common stock might fall below the
initial public offering price or could fluctuate, perhaps significantly. In one or more future quarters, it is likely that our operating results will be below securities analyst or investor expectations. If this occurs, the market price of our
common stock will likely decrease. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We may be unable to sustain our recent revenue growth or increase our operating income or net income, which could
have a negative impact on our stock price. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We experienced significant growth from 2006 to 2010. Our revenue increased from $14.7
million in 2006 to $44.0 million in 2010. Our net income increased from $0.5 million to $3.3 million over that same period. However, we had a net loss of $1.2 million in 2007, our operating income decreased from $6.0 million in 2009 to $5.7 million
in 2010, and our net income was relatively flat during the last three years, at $3.2 million in 2008 and $3.3 million in each of 2009 and 2010. In addition, in 2008, we had an operating loss prior to recognizing certain tax benefits, which
recognition resulted in our achieving net income for the year. We may be unable to sustain our recent revenue growth or increase or maintain our operating income or net income unless we develop and sell licenses for new and enhanced products,
increase our revenue with existing customers, develop new customers, and undertake acquisitions. We also need to manage our operating expenses. Even if we do these things, they may be insufficient to allow us to maintain our historical revenue
growth rates or operating income or net income, and our revenue, operating income, and net income could decline or our net income could become a net loss, which could have a negative impact on our stock price. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Continued consolidation among our competitors and potential competitors may harm our business, financial condition, operating margins, and operating results.
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The markets in which we operate have been subject to increased consolidation in recent years. We expect this trend will continue as
our competitors and potential competitors attempt to increase or maintain market share by complementing or expanding product offerings, or as companies are acquired or are unable to continue operations. Ongoing consolidation would result in stronger
competition from companies that are better able than us to compete as single source vendors and could lead to increased price pressure. Stronger competition for customers would make it difficult to attract new customers and retain existing
customers, and could lead to losses of customers. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">17 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Lack of growth in new IC design starts and other potential long-term trends may continue to adversely affect the
markets in which we operate, including demand for our products and services harming our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The increasing complexities of ICs and systems-on-a-chip and customer concerns about managing costs and risks have produced long-term negative trends, including: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the number of IC design starts has declined and may continue to decline, which may reduce demand for our products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">increased globalization and the recent global economic downturn, which have made cost controls among our customers more permanent and aggressive and have
adversely impacted our customers&#146; software tools spending; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the cost and complexity of IC design, which may be leading some companies to limit their design activity or to focus only on discrete phases of the design
process while outsourcing other design aspects to companies using our competitors&#146; products. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">These trends, if
sustained, could continue adversely affecting the markets in which we operate, including demand for our products and services, which in turn would materially harm our business, financial condition, and operating results. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>If the industries into which we and our customers sell our products experience a downturn or other cyclical effects affecting our customers&#146; budgets, our
revenue would likely grow more slowly than anticipated or decline. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">New IC design projects drive demand for our products. The demand
from semiconductor and electronic systems companies is uncertain and difficult to predict. A downturn, such as the recent downturn in the semiconductor, systems, and other industries, a reduction in design starts, a slowdown in the pace of IC
innovation, a reduction in our customers&#146; budgets or customer or competitor consolidation would cause a decrease in revenue growth or revenue, and would harm our business, financial condition, and operating results. Growth in the IC design
software industry typically lags the semiconductor industry. Our revenue may be adversely impacted if the expected recovery is muted for the semiconductor industry or in general. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The primary customers for our products are companies in the mobile devices, high-performance computing and networking, consumer electronics, and
automotive and medical electronics industries. A downturn in our customers&#146; markets or in general economic conditions that results in the cutback of research and development budgets or the delay of software purchases would likely result in
lower demand for our products and services and could harm our business, financial condition, and operating results. If the global economy weakens or the economies in the countries into which we sell licenses to our products decline, existing
customers may decrease their purchases of our products or delay their implementation of our software products, and prospective customers may decide not to adopt our products, any of which could negatively impact our business, financial condition,
and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Structural barriers and our customers&#146; internal capabilities make gaining market share difficult, and our failure to
establish or maintain a leadership position in the markets in which we compete would harm our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The markets in which we operate are characterized by companies with very strong leadership positions in specific market segments. For example, one company may have a large percentage of sales in the physical
verification segment of the market while another may have a </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">18 </FONT></P>


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similarly strong position in the mixed-signal simulation market. Gaining market share in the markets in which we operate is difficult because it often takes years for a customer to move from a
competitor. The products our competitors offer are generally difficult to master. This difficulty often results in customers being disinclined to make changes once their employees, as well as others in the industry, have developed familiarity with a
particular product. Many of our competitors, such as ANSYS, Inc., Cadence Design Systems, Inc., Magma Design Automation, Inc., Mentor Graphics Corporation, and Synopsys, Inc., have established relationships with our current and potential customers
and can devote substantial resources aimed at preventing us from establishing or enhancing our customer relationships. Many of our competitors currently sell products that our customers and potential customers have broadly adopted, providing them a
substantial advantage when they sell products that perform functions substantially similar to some of our products. These structural barriers may prevent us from obtaining new customers and gaining market share, may require us to reduce product
pricing and cause us to lose existing customers, which could harm our business and operating results. To execute our business strategy, we must maintain and increase our leadership position in power analysis for ICs and electronic systems, continue
our efforts to increase global sales, and seek to expand areas of market leadership. If we fail to do so in a timely manner or at all, we may be unable to gain market share and our business, financial condition, and operating results would suffer.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We also compete with the internal IC design automation development groups of our existing and potential customers. Therefore, these
customers may not require, or may be reluctant to purchase, products offered by independent vendors such as us. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We currently sell licenses to
products that focus exclusively on power-efficiency and noise-immunity, and therefore the size of our addressable market is limited. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our current solutions consist exclusively of a suite of software tools and methodologies that enable IC and electronic systems design engineers to
manage and reduce power consumption, deliver reliable and consistent power to circuit and system components, and help mitigate power-induced noise. As such, our addressable market is limited by the scope of our products and methodologies. In order
to sustain our revenue or increase our revenue, we may need to enter new markets in which we have limited or no prior experience. If we are unable to develop new products or extend the use of our current products into new markets, this could
adversely affect our business, revenue, and results of operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Technological innovations could significantly reduce or eliminate demand for our
products, which would have a material adverse effect on our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">IC and package
foundries are continuously developing new technologies and new fabrication processes. Technological innovations could reduce or eliminate our customers&#146; need for our products. For example, the development of very low-power designs or very
low-noise power delivery networks within the IC could significantly reduce or eliminate demand for our products, which would have a material adverse effect on our business, financial condition, and operating results. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">19 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>If other software companies, including competitors, do not cooperate in working with us to interface our products
with their design flows, or IC and electronic system designers and manufacturers do not integrate our software into existing design flows, demand for our products may decrease and our business, financial condition, and operating results will suffer.
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">To implement our business strategy, we must provide products that interface with other companies&#146; software. Our competitors may
not support efforts by us or by our customers to integrate our products into their existing design flows. For example, some of our competitors have in the past refused, and may in the future refuse, to design their products to allow interoperability
with our products. We must develop cooperative relationships with our competitors so that they will work with us to integrate our software into customers&#146; design flows. Currently, our software is designed to interface with certain of the
existing software of ANSYS, Inc., Cadence Design Systems, Inc., Magma Design Automation, Inc., Synopsys, Inc., and others. In the event that our competitors refuse to design their products to allow interoperability with our products, we may need to
redesign our products to allow our customers to successfully operate our solutions in a manner that is compatible with the solutions of our competitors. Such redesigns could be costly to us, may be rejected by our customers, and may subject us to
the risk that our competitors could seek to invalidate our efforts to achieve interoperability with their products through litigation or other means. Further, if we are unable to persuade customers to adopt our software products for power analysis
instead of those of competitors (including competitors offering a broader set of products), or if we are unable to persuade other software companies to work with us to interface our software to meet the demands of IC designers and manufacturers,
demand for our products may decrease and our business, financial condition, and operating results will suffer. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our operating results may be harmed
if our customers do not adopt, or are slow to adopt, smaller geometries for the design of ICs and electronic systems. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our customers
are currently working on a range of design geometries, including 90-nanometer, 65-nanometer, 45-nanometer, and 22-nanometer designs. We continue to work toward developing and enhancing our product lines in anticipation of increased customer demand
for smaller design geometries. Customers may fail to adopt, or may face technical difficulties in adopting, these geometries on a large scale and we may be unable to persuade our customers to purchase our products. Accordingly, any revenue we
receive from enhancements to our products, new products or acquired products and technologies may be less than their development or acquisition costs. If customers fail to adopt or delay the adoption of smaller design geometries on a large scale,
our business, financial condition, and operating results may be harmed. In addition, if customers are not able to generate profits as they adopt smaller geometries, future demand for our products may be adversely affected, and our business,
financial condition, and operating results may be harmed. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our lengthy and unpredictable sales cycle requires us to incur substantial efforts and
expense that may not result in revenue and could harm our operating results and our stock price. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Potential customers for our
software products typically commit significant resources to evaluate available software. Our sales cycle typically ranges between three and nine months but can be longer. The complexity of our products requires us to spend substantial time and
effort to assist potential customers in evaluating our software and in benchmarking our products against those of our competitors. As our products&#146; complexity increases, we expect our sales cycle to lengthen. In addition, potential customers
may be limited in their current spending by existing time-based licenses with their legacy vendors. In these cases, customers typically delay a significant new commitment to our software until the existing license term expires. It is
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">20 </FONT></P>


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common in some markets in which we operate for customers to own perpetual licenses of our competitors&#146; products. These customers pay a proportionally small annual fee or no fee for continued
license support and maintenance, making it difficult for us to displace these perpetual or free licenses. Also, because our products require our customers to invest significant time and incur significant costs, we must target those individuals
within our customers&#146; organizations who are able to make these decisions on behalf of their companies. These individuals tend to be senior management in an organization, typically at the vice president level. We have faced and continue facing
difficulty identifying and establishing contact with such individuals. Even after those individuals decide to purchase our products, the negotiation and documentation processes have been and are likely to continue being lengthy and can lead the
decision-maker to reconsider the purchase. Consequently, we may continue to incur substantial expense and devote significant management time and effort to develop potential relationships that do not result in agreements or revenue and that may also
prevent us from pursuing other opportunities. Any failure to achieve revenue after expending substantial efforts and expense could harm our operating results and stock price. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>We may be unable to effectively manage our recent and anticipated growth, which has and will continue to place significant strain on our management personnel, systems, and resources and could materially harm our
business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our revenue increased from $14.7 million in 2006 to $44.0 million in 2010, and
our headcount has increased from 92 at the end of 2006 to 257 at the end of 2010. We have also completed two acquisitions since the beginning of 2007 and currently have operations and employees in ten countries. Our rapid growth has placed and will
continue to place significant demands on our management and our administrative, operational, and financial infrastructure. In addition, the lease for our corporate headquarters expires in October 2011 and we may be required to seek another location,
which could disrupt our operations, including the development of our systems, procedures, and controls over financial reporting, and increase our operating expenses. Among the numerous challenges we continue to face are: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">implementing, adapting, and modifying our business model and strategy; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">developing and improving our internal administrative infrastructure, particularly our financial, operational, human resources, communications, and other internal
systems, procedures, disclosure controls, and controls over financial reporting; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">managing a larger number of employees and customers in a greater number of industries and locations; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">implementing and maintaining effective oversight of personnel and offices; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">attracting, training, developing, and retaining sufficient skilled technical, sales, and management personnel; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">continuing to sell our products and provide high quality services to our customers; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">integrating new personnel and expanded operations while preserving our culture and values. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Moreover, as we introduce new products and enter new markets, we may face new market, technological, and operational risks and challenges with
which we are unfamiliar, and it will require substantial management efforts and skills to mitigate these risks and challenges. As a result of any of these challenges and potential problems associated with our growth, our business, financial
condition, and operating results could be materially harmed. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">21 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Forecasting our tax rates is complex and subject to uncertainty, and changes in our tax provisions or additional
income tax liability exposure could negatively affect our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our management must
make significant assumptions, judgments, and estimates to determine our current provision for income taxes, deferred tax assets and liabilities, and any valuation allowance that may be recorded against our deferred tax assets. These assumptions,
judgments, and estimates are difficult to make due to their complexity, and the relevant tax law is often changing. Our future effective tax rates could be adversely affected by several factors, including the following: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">non-tax deductible expense increases, including stock-based compensation and acquisition costs in connection with a business combination;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in the valuation of our deferred tax assets and liabilities; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in our mix of pre-tax profits and losses in jurisdictions with differing statutory tax rates; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">additional tax assessments resulting from federal, state or foreign tax examinations; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in tax laws or interpretations of such tax laws, especially tax laws related to foreign operations and imposition of withholding taxes and the lapse of
availability of tax credits; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">ownership changes that may limit certain asset realizations. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We are subject to taxes in the United States and numerous foreign jurisdictions. The amounts we record in intercompany transactions for services, licenses, funding, and other items affects our tax liabilities. Tax
authorities may disagree with our intercompany charges or other matters and seek to assess additional taxes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, our
operations are subject to income and transaction taxes in the United States and in numerous foreign jurisdictions. Changes to tax laws in the jurisdictions in which we do business, such as an increase in tax rates or an adverse change in the
treatment of an item of income or expense, could result in a material increase in our tax expense. Currently, a substantial portion of our revenue is generated from customers located outside the United States, and a significant number of our
employees, are located outside the United States. United States income taxes and foreign withholding taxes have not been provided on undistributed earnings for certain non-United States subsidiaries to the extent such earnings are considered to be
indefinitely reinvested in the operations of those subsidiaries. The President of the United States and the U.S. Treasury Department have proposed changing certain U.S. tax rules&nbsp;for U.S. corporations doing business outside the United States,
and these U.S. tax law changes could increase our future U.S. income tax liability. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our tax filings are subject to review or audit by
the U.S. Internal Revenue Service and state, local, and foreign taxing authorities. We exercise judgment in determining our worldwide provision for income and other taxes and, in the ordinary course of our business, there may be transactions and
calculations where the ultimate tax determination is uncertain. For example, we accrue withholding tax liability in foreign jurisdictions based on our best estimates, which may be insufficient compared to any withholding tax determinations made by
tax authorities in those jurisdictions and could result in significant tax expense. Examinations of our tax returns could result in significant proposed adjustments. An assessment of additional taxes could adversely affect our tax provision and net
income in the period or periods for which that determination is made. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">22 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Unanticipated changes in our tax provisions or additional tax liability exposure could negatively
affect our business, financial condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our limited operating history and the rapidly evolving nature of the markets in
which we operate may make it difficult for you to evaluate our business. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We were incorporated in 2001, and since that time have been
developing products to meet the rapidly evolving demands of customers in the markets in which we operate. We shipped our initial product, RedHawk, in 2002, released two other platforms, Sentinel and Totem, in 2007 and 2009, respectively, acquired
PowerArtist in 2009, and introduced our newest product, PathFinder, in 2010. This limited operating history makes financial forecasting and evaluation of our business difficult. Furthermore, because we depend in part on our development, and industry
acceptance, of our products, it is difficult to evaluate trends that may affect our business. We have limited historic financial data, and we operate in a rapidly evolving market, and, as such, any predictions about our future revenue and expenses
may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We have high customer
engagement and support costs, and our gross margins may decrease if we incur higher than expected customer support services costs or if we reduce prices. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The complexity of our products requires us to incur high field application engineering support costs to engage new customers and assist them in evaluating our products and to support our existing customers. If we
fail to manage our customer engagement and support costs, our operating results could suffer. In addition, our gross margins may decrease if we are unable to manage support costs associated with the license revenue we generate or if we reduce
prices. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We have a limited ability to quickly and significantly reduce our operating costs, making us particularly vulnerable to the cyclical nature
of the semiconductor industry and other industries we or our customers serve, and economic deterioration generally. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We operate with
a relatively small headcount, and a significant portion of our operating costs are fixed and significant, which makes it difficult for us to quickly and significantly reduce our costs. We are therefore highly vulnerable if the semiconductor or other
industries we or our customers serve or economic conditions generally deteriorate, which would have a material adverse effect on our business, financial condition, and operating results. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We make many operational and strategic decisions based upon revenue forecasts. Our longer-term forecasts are subject to significant estimation and
are impacted by many external factors, including global economic conditions and our customers&#146; demands. A variation in actual revenue from that forecasted could cause us to plan or to budget incorrectly and, therefore, could adversely affect
our business, financial condition, and operating results. Current global economic conditions may increase the likelihood or the magnitude of variations between actual revenue and our forecasts. Our failure to properly plan for shifts in customer
demand and changes in economic conditions could adversely affect our business, financial condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We will incur significant
costs as a result of being a public company and complying with Nasdaq Global Market listing and other requirements, and our failure to comply with Nasdaq Global Market listing requirements would subject us to delisting. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As a public company, we will incur significant legal, accounting, and other expenses. In addition, Sarbanes-Oxley, as well as rules subsequently
implemented by the Securities and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">23 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
Exchange Commission, the Nasdaq Global Market, and Dodd-Frank, require public company corporate governance practices that will substantially increase our legal and financial compliance costs. We
have recently added internal resources and have utilized additional outside legal, accounting, and advisory services, which have increased and will continue increasing our operating expenses. In particular, we will incur administrative and
information technology, or IT, expenses relating to compliance with Section&nbsp;404 of Sarbanes-Oxley, which requires that we implement and maintain an effective system of internal control over financial reporting and annual certification of our
compliance by our independent registered public accounting firm. If we do not comply with these requirements, we could be delisted. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We will incur
significant costs as we upgrade our internal resources and systems in connection with becoming a public company, which could impact our compliance efforts and obligations and materially and adversely impact our business, financial condition, and
operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our reporting obligations as a public company will place a significant strain on our management, operational and
financial resources, and systems for the foreseeable future. Prior to this offering, we have been a private company with limited personnel and other resources with which to address our internal control over financial reporting and procedures. For
example, we currently maintain our accounts using a combination of QuickBooks, other off-the-shelf software, and manual entry. We must therefore significantly upgrade our finance and accounting systems which could significantly increase our
operating expenses and impact our ability or prevent us from timely reporting our operating results, timely filing required reports with the Securities and Exchange Commission, and complying with Section 404 of Sarbanes-Oxley. This upgrade may be
complicated by the potential relocation of our corporate headquarters, and the broad geographical reach of our operations. We must attract, train, and retain additional internal finance staff which will increase our operating costs. These additional
costs and burdens could materially and adversely impact our business, financial condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>An inability to establish and
maintain effective internal control over financial reporting and related systems and procedures could adversely affect the market price of our common stock, cause us to delay filing our public reports, and lead to delisting by the Nasdaq Global
Market. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Pursuant to Section&nbsp;404 of Sarbanes-Oxley, we will be required to report on, and our independent registered public
accounting firm will be required to attest to, the effectiveness of our internal control over financial reporting. Following the completion of this offering, we expect that we will need to conduct an assessment of the effectiveness of our internal
control over financial reporting as of December&nbsp;31, 2012. In addition, our independent registered public accounting firm must deliver an attestation report on the effectiveness of our internal control over financial reporting. Our management
may conclude that our internal controls are not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may disagree and may decline to
attest to the effectiveness of our internal control over financial reporting or may issue an adverse opinion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">During our 2007 audit,
our limited resources in our accounting and finance department were identified as a material weakness. During our 2008 and 2009 audits, our lack of adequate resources to address certain financial reporting issues and accounting for certain complex
transactions was identified as a significant deficiency. We may identify control deficiencies or weaknesses as a result of the assessment process we will undertake to comply with Section&nbsp;404 of Sarbanes-Oxley. We may be unable to remediate
control deficiencies or weaknesses identified in time to meet the deadline imposed by Section&nbsp;404 of Sarbanes-Oxley. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">24 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Effective internal control over financial reporting and related systems and procedures are necessary
for us to provide timely and reliable financial reports. Establishing and maintaining effective internal control over financial reporting and related systems and procedures will continue to strain our management and may inhibit their ability to
adequately focus on our day-to-day operations. Failure to do so could lead to a loss of investor confidence in the reliability of our reporting processes, which could adversely affect the market price of our common stock. A failure to comply with
Section&nbsp;404 of Sarbanes-Oxley could also cause us to delay filing our public reports, potentially resulting in delisting by the Nasdaq Global Market. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Our disclosure controls and procedures and our internal control over financial reporting may fail to adequately allow us to report information accurately to investors or to detect and prevent errors or fraud,
and any failure of such control and procedures could damage investor confidence in us, cause the market price of our common stock to decline, and materially and adversely impact our business, financial condition, and operating results.
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We cannot assure you that our disclosure controls and procedures, or our internal control over financial reporting, will prevent all
errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of meeting control system objectives. The design of a control system must also reflect applicable resource
constraints, and we must consider the control system benefits relative to their costs. As a result of these inherent limitations, no evaluation of controls can provide absolute assurance that we have identified or will identify or prevent all
control issues and instances of errors or fraud, if any, within our company. The failure of our control systems to allow us to accurately report information or detect or prevent error or fraud could damage investor confidence in us, cause the market
price of our common stock to decline, and materially adversely impact our business, financial condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We may not obtain
sufficient patent protection, which could harm our competitive position and increase our expenses. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our ability to compete depends in
part upon the protection for our software and other technology. Our intellectual property portfolio includes 32 issued U.S. patents, one issued non-U.S. patent, two pending U.S. patent applications, and one pending non-U.S. patent application. We
believe that these numbers are relatively small in comparison to many of our competitors. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent
applications at a reasonable cost or in a timely manner. Given the costs, effort, risks, and downside of obtaining patent protection, including the requirement to ultimately disclose the invention to the public, we may choose not to seek patent
protection for certain innovations; however, such patent protection could later prove to be important to our business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Further, patents
afford only limited protection for our technology. Our patent applications may not issue as granted patents, and the scope of patent protection gained may be insufficient, and issued patents may be deemed invalid or unenforceable. Competitors may
design around our present or future issued patents or may develop competing non-infringing technologies. We also cannot assure you that any of our present or future patents will not lapse or be invalidated, challenged or abandoned, or that any of
our pending or future patents will have the coverage originally sought. In addition, our patent rights may not be enforced in jurisdictions where legal protection may be weak. We may also be unable to assert our patents against potential competitors
or to settle current or future disputes because of our relationships with third parties. For business reasons, we may also agree not to assert our patents against certain customers and other third parties. For example, we have agreed not to assert
our patents against one of our largest customers. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, issuance of a patent does not guarantee that we have an absolute right to practice the
patented invention because one or more third parties may have dominant patent rights covering certain aspects of the invention. Patent applications in the U.S.&nbsp;are typically not published until 18&nbsp;months after filing, or in some cases not
at all until issuance, and publications of discoveries in industry-related literature lag behind actual discoveries. We cannot be certain that we were the first to make the inventions claimed in our issued patents or pending patent applications or
otherwise used in our products, that we were the first to file for protection in our patent applications or that third parties do not have blocking patents that could be used to prevent us from making, marketing, selling or otherwise practicing our
patented products or technology. Moreover, rights that may be granted under any patent application that may be issued in the future may not provide competitive advantages to us because of limitations to the scope of our patent claims or the rate of
improvements or developments made to the technology since patent protection was initially sought by us. Further, patent protection in foreign jurisdictions where we may need this protection may be limited or unavailable. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe the patent portfolios of many of our competitors are significantly larger than ours, and this may increase the risk that they may sue us
for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross-licenses. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We
might be required to spend significant resources to monitor for potential infringement of our patents by our competitors and others. We may initiate claims or litigation against third parties for infringement of our patents to establish the validity
of our patents, or to determine the validity or scope of the patents of third parties. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management
personnel, which may adversely affect our business, operating results, and financial condition. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>In addition to patents, we rely on trademark,
copyright, and trade secret laws and contractual rights to protect our intellectual property, and the failure to sufficiently protect our intellectual property could harm our ability to compete and grow our business. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to patents, we continue to rely on a combination of trademark, copyright, and trade secret laws and contractual rights, such as
confidentiality agreements and licenses, to establish and protect our intellectual property rights. We seek or may seek to protect our proprietary algorithms and source code for our software, documentation, and other written materials primarily
under trade secret and copyright laws. We license our software pursuant to agreements that impose limitations and restrictions on the licensees&#146; ability to utilize the software. We also seek to avoid disclosure of certain of our trade secrets
and other confidential information by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements. These agreements may not effectively prevent disclosure of confidential information and may
not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently develop trade secrets and confidential information that are equivalent to our trade secrets and confidential
information, and in these cases we may not be able to assert the relevant trade secret rights against those parties. Our intellectual property rights may be inadequate for numerous reasons, including: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">laws and contractual restrictions in the U.S. and internationally may not prevent misappropriation, or unauthorized use or disclosure of our technologies or
deter others from developing technologies similar to our own; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">competitors may independently develop similar technologies and software; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">26 </FONT></P>


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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">federal U.S. trademark protection may be unavailable to us for some of our marks, should we choose to seek such protection for our marks;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our trademarks may not be protected, able to be registered, or otherwise able to be protected in some foreign jurisdictions, should we choose to seek such
protection; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">policing infringement and misappropriation of our intellectual property and intellectual property rights is difficult, expensive, and time consuming, and we may
be unable to determine the extent of any unauthorized use. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Costly and time-consuming litigation could be necessary to
enforce and determine the scope of our intellectual property rights, and failure to obtain or maintain trade secret and other intellectual property protection could adversely affect our ability to compete and grow our business. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In order to protect our trade secrets and other confidential information, we rely in part on confidentiality agreements with our employees,
consultants, and third parties with whom we have relationships. These agreements may not effectively prevent disclosure of trade secrets and other confidential information and may not provide an adequate remedy in the event of misappropriation of
trade secrets or any unauthorized disclosure of trade secrets and other confidential information. In addition, others may independently discover trade secrets and confidential information, and in such cases we could not assert any trade secret
rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and nondisclosure provisions, and failure to obtain or maintain trade
secret protection, or our competitors being able to obtain our trade secrets or to independently develop unpatented technology similar to ours or competing technologies, could harm our business, financial condition, and operating results.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our use of open source software could negatively impact the value of our proprietary software and our ability to sell our products. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The products, services or technologies we acquire, license, provide or develop may incorporate or use open source software. The use of certain open
source software may be subject to license terms requiring us to grant reciprocal licenses, disclose or distribute our proprietary software in source code form, license our proprietary software for the purpose of making modifications and derivative
works or make our proprietary software available at no or minimal charge. While we monitor our use of open source software in an effort to avoid the imposition of these consequences, there are very few or no legal precedents for interpreting the
terms of some of these open source licenses, and we cannot be certain that our programmers have not incorporated open source software into our proprietary products and technologies or that they will not do so in the future. If portions of our
proprietary technology are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the
licensing of our technologies, and may otherwise be subject to unanticipated obligations regarding our products that incorporate open source software. Each of these could reduce or eliminate the value of our technologies and software and materially
and adversely affect our business, financial condition, and operating results. In addition, disclosing the content of our source code could limit the intellectual property protection we can obtain or maintain for that source code or the products
containing that source code and could facilitate intellectual property infringement claims against us. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">27 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Some of our products incorporate technology we license from third parties, and if we do not maintain these
licenses, if a licensor terminates our license to use its technology, or if a licensor has difficulties keeping up with technological changes or stops supporting our products, our ability to develop and license our products could be materially
delayed, reduced or prevented. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Some of our products incorporate technology that we license from third parties. This exposes us to
risks over which we may have little or no control. For example, if we fail to maintain these licenses, the licensor terminates our license to use its technology, or a licensor has difficulties keeping up with technological changes or stops
supporting its products, our ability to develop and sell licenses to our products could be materially delayed, reduced or prevented, as we seek to develop or acquire rights to alternative technologies, if they exist. Any of these events could harm
our business, financial conditions, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We may face intellectual property infringement claims or other litigation, which can be
costly to defend, can take the time of our management and employees away from day-to-day operations and could result in our losing important rights and paying significant damages. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Participants in the markets in which we operate have been highly litigious with other competitors in these markets. Many of our competitors have
litigated with other competitors over intellectual property infringement or misappropriation claims. This litigation is typically very expensive to defend and time consuming, often taking several years to resolve. Parties may assert intellectual
property infringement claims against us or our customers. While we have not received formal written notice of our infringement of the rights of any third party, we cannot assure you that we are not infringing or violating any third-party
intellectual property rights, nor that we have not done so in the past. Questions of infringement in the semiconductor and software fields involve highly technical analyses. Litigation or proceedings before the U.S. Patent and Trademark Office or
other governmental authorities and administrative bodies in the United States and abroad may be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the
intellectual property rights of others or to defend against claims of infringement or invalidity, and we may not prevail in any litigation. In addition, we may have acquired or may acquire software products and other technology through acquisitions,
and we could be subject to claims that the acquired software products and other technology infringe third-party intellectual property rights. We also license technology, including software, from third parties and could be subject to claims that the
licensed technology infringes the rights of others. We could also be threatened with or face commercial litigation unrelated to intellectual property infringement claims such as labor litigation and contract claims, and we may acquire companies that
could be threatened with or are actively engaged in similar litigation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our products may be found to infringe third-party intellectual
property rights, including third-party patents. In addition, most of our contracts contain provisions in which we agree to indemnify our customers and distributors against third-party intellectual property infringement claims that are brought
against them based on their use or distribution of our products. Also, we may be unaware of filed patent applications that relate to our software products or other technology that we use. We believe that the patent portfolios of our competitors
generally are larger than ours. This disparity between our patent portfolio and the patent portfolios of our competitors may increase the risk that they may sue us for patent infringement and may limit our ability to counterclaim for patent
infringement or settle through patent cross-licenses. Additionally, patent litigation may involve patent holding companies or other adverse patent owners who have no relevant product revenue, and therefore our own issued and pending patents may
provide little or no deterrence to these patent owners in bringing intellectual property rights claims against us. We cannot assure you that we are not infringing or violating any third-party intellectual property rights. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">28 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The outcome of intellectual property litigation and other types of litigation could result in our
loss of critical intellectual property rights and unexpected operating costs and substantial monetary damages. Intellectual property litigation and other types of litigation are expensive and time-consuming and could divert our management&#146;s
attention from our business. If there is a successful claim against us for infringement, we may be ordered to pay substantial monetary damages, including punitive damages, be prevented from distributing all or some of our products and be required to
develop non-infringing technology or enter into royalty or license agreements, which may not be available on acceptable terms, if at all. Our failure to develop non-infringing technologies or license any required intellectual property rights on a
timely basis could harm our business, financial condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We expect that acquisitions will continue to be an important part
of our strategy. If we are unable to effectively complete and integrate acquisitions, this could materially and adversely affect our business, financial condition, and results of operations. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">A significant part of our growth strategy is to continue to pursue acquisitions. We have made four acquisitions to date, two of which involved
technology and personnel acquisitions but not product acquisitions, and two of which involved product, technology, customer, and personnel acquisitions. The environment for acquisitions in the markets in which we operate is very competitive,
acquisition candidate purchase prices will likely exceed what we would prefer to pay, but may choose to pay in order to make an acquisition. Achieving the anticipated benefits of past and possible future acquisitions will depend in part upon whether
we can integrate acquired operations, products, and technology in a timely and cost-effective manner. The acquisition and integration process is complex, expensive, and time consuming, and may cause an interruption of, or loss of momentum in,
product development and sales activities and operations of both companies. In addition, if we use earnout arrangements to consummate an acquisition, pursuant to which we agree to pay additional amounts of contingent consideration based on the
achievement of certain revenue, bookings or product development or other milestones, our integration efforts can become more complicated. We may not find suitable acquisition candidates, and acquisitions we complete may be unsuccessful. We may not
consummate any particular transaction, but may nonetheless incur significant management time and effort and acquisition-related costs, as has occurred with two relatively recent unsuccessful acquisition attempts. If we consummate a transaction, we
may be unable to integrate and manage acquired products and businesses effectively. Assimilating previously acquired companies or companies we may seek to acquire, involves numerous risks, including but not limited to: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">adverse effects on existing customer relationships, such as order cancellations or key customer losses; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">adverse effects on existing licensor or supplier relationships, such as license terminations; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">difficulties in integrating or retaining acquired company key employees; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">potential downward pressure on operating margins due to lower operating margins of acquired businesses, increased headcount costs, and other expenses associated
with adding and supporting new products; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">difficulties in integrating acquired company operations, such as IT resources, manufacturing processes, and financial and operational data;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">difficulties in integrating acquired company technologies into our products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">difficulties managing different revenue models; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">29 </FONT></P>


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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">diversion of our management&#146;s attention from day-to-day business when evaluating and negotiating these transactions and integrating an acquired business;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">potential incompatibility of business cultures; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">difficulties managing different business models; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">post-acquisition discovery of previously unknown liabilities assumed with the acquired business; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">marketplace confusion regarding acquired products that may be competitive with our existing products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the failure to understand and compete in markets where we have limited experience; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">unanticipated litigation in connection with or as a result of an acquisition; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the potentially negative impact on our earnings per share; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the risk that earnouts based on revenue will prove difficult to administer due to accounting complexities; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the risk that actions incentivized by earnout provisions will ultimately not to be in our best interests if our interests change; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">potential dilution to existing stockholders if we issue equity securities to finance acquisitions and potential increased debt either assumed in the acquisition
or used to finance the acquisition; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">additional expenses associated with the amortization of intangible assets and its impact on our operating results. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">If we are unable to effectively execute acquisitions, our business, financial condition, and operating results could be adversely affected. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We rely on our international operations for a significant portion of our revenue and revenue growth, and international operations and expansion involve numerous
risks that could adversely impact our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In 2008, 2009, and 2010, we generated
40%, 40%, and 43%, respectively, of our revenue from sales outside the United States, based on the regions to which we shipped our products, and we anticipate that international operations will account for a significant portion of our revenue in the
foreseeable future. Our business and operating results therefore significantly depend upon our international operations and our ability to continue expanding in our existing international markets and enter into new international markets. In
expanding our business internationally, we have entered and intend to continue to enter markets in which we have limited or no experience and in which our brand may be less recognized. We may fail to anticipate competitive conditions in new markets
that are different from those in our existing markets. These competitive conditions may make it difficult or impossible for us to effectively operate in these markets. If our expansion efforts in existing and new markets are unsuccessful, our
business, financial condition, and operating results would be materially and adversely affected. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have been and continue to be
exposed to other risks associated with international operations, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">difficulties and costs of staffing and managing international operations across different geographic areas; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">30 </FONT></P>


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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in currency exchange rates and controls; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">potentially higher tax rates or additional tax liabilities; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">uncertainty regarding tax and regulatory requirements in multiple jurisdictions; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the lack of financial and political stability in foreign countries, preventing overseas sales growth; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to comply with customs, import/export, and other trade compliance regulations of the countries in which we do business, together with any unexpected
changes in such regulations; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">language and cultural barriers; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">longer payment cycles; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">greater difficulty in accounts receivable collection; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">limitations on repatriation of earnings or on the conversion of foreign currencies; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">ineffective or non-existent legal protection of our intellectual property rights; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">greater risk of business interruption as a result of terrorist acts or military conflicts; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">inadequate local infrastructure that could result in business disruptions; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any related conflicts or similar events worldwide. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In addition, our global operations are subject to numerous U.S. and foreign laws and regulations, including those related to anti-corruption, tax, corporate governance, imports and exports, financial and other
disclosures, privacy, and labor relations. These laws and regulations are complex and may have differing or conflicting legal standards, making compliance difficult and costly. If we violate these laws and regulations, we could be subject to fines,
penalties or criminal sanctions, and may be prohibited from conducting business in one or more countries. Any violation could have a material adverse effect on our business, financial condition, and operating results. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Policy changes by the United States or foreign governments could negatively affect our operating results due to increased duties, increased
regulatory requirements, higher taxation, currency conversion limitations, restrictions on the transfer of funds, the imposition of or increase in tariffs, and limitations on imports or exports. Also, we could be negatively affected if our host
countries revise their policies away from encouraging foreign investment or foreign trade, including tax holidays. Any difficulties experienced in connection with international operations could materially and adversely affect our business, financial
condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We are subject to risks associated with changes in foreign currency exchange rates, foreign currency exchange
controls, and other matters that may impact our financial condition and results of operations. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">While most of our international sales
to date have been denominated in U.S. dollars, a substantial majority of our international operating expenses have been denominated in foreign currencies. As a result, a decrease in the value of the U.S. dollar relative to such foreign currencies
could increase the relative costs of our overseas operations, which could reduce our operating margins. This exposure is primarily and currently related to a portion of revenue in Japan and operating expenses in Europe, Israel, Japan, and
Asia-Pacific, which are denominated in the respective local currencies. As of December&nbsp;31, 2010, we had $8.5 million of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">31 </FONT></P>


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cash and money market funds in foreign currencies. We have not previously used financial instruments to hedge our exposure to foreign currency exchange rates. While we assess the need to utilize
financial instruments to hedge currency exposures, our assessments may prove incorrect. Therefore, movements in exchange rates could negatively impact our business, operating results, and financial condition. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Operations in foreign countries also present risks associated with currency exchange and convertibility, inflation, and repatriation of earnings.
In some countries, economic and monetary conditions and other factors could affect our ability to convert our cash distributions into U.S. dollars or other freely convertible currencies, or to move funds to our accounts in these countries.
Furthermore, the central bank of any of these countries may have the authority to suspend, restrict or otherwise impose conditions on foreign exchange transactions or to approve distributions to foreign investors. Our exposure to the risks
associated with foreign exchange could materially and adversely affect our financial condition and results of operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Failure to obtain export
licenses or our failure to comply with U.S. export laws could harm our business by preventing us from licensing or transferring our technology outside of the United States. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We are required to comply with U.S. Department of Commerce regulations when shipping our software products and/or transferring our technology outside of the United States or to certain foreign nationals. These
regulations are subject to change, and future difficulties in obtaining export licenses for current products or future developed and acquired products and technology, or any failure by us to comply with such requirements, could harm our business,
financial condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We structure most of our license agreements such that customers pay us in installments over the license
period. In addition, in some of our license agreements, payments are weighted toward the latter part of the contract term, potentially exposing us to the increased likelihood that our customers will default on their payment obligations, which could
materially and adversely affect our business, financial condition, and operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We structure most of our license
agreements such that customers pay us in installments over the license period. In addition, in some of our license agreements, payments are weighted toward the latter part of the license term which create additional credit risk. These payment terms
could increase the likelihood that our customers will default on their payment obligations to us, which could materially adversely affect our business, financial condition, and operating results. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, for those license agreements where payments are weighted toward the latter part of the contract term, we do not recognize revenue
evenly over the contract term, but recognize the lesser of the cumulative amounts due and payable or ratably. Revenue recognized under these arrangements will be higher in the latter part of the contract term, may place our future revenue
recognition at greater risk of our customers&#146; continued credit-worthiness. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>If our security measures are perceived or deemed insufficient or are
breached and an unauthorized party obtains access to customer data, we may face civil liability and customers may curtail or stop using our products and services. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our products and services may involve the collection, storage, and transmission of customers&#146; confidential information, and other information that we are required to protect. Breaches of our security measures
that protect such information could expose us to substantial </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">32 </FONT></P>


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liability from the misuse of this information, including litigation. Our customers may also require us to agree that in the event of a security breach, they would have the right to terminate
their existing agreements with us. Some of our key customers may also require us to maintain specified security measures. Because techniques used to obtain unauthorized access or to sabotage information systems change frequently and generally are
not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security measures occurs, the market perception of the
effectiveness of our security measures could be harmed, we could lose existing customers and our ability to obtain new customers, and in the event of an actual breach, we could be exposed to significant liability. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Product errors or defects could expose us to liability and harm our reputation and we could lose market share. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Despite extensive testing prior to releasing our products, software products frequently contain errors or defects, especially when first introduced,
when new versions are released or when integrated with technologies developed by acquired companies. Product errors could affect the performance or interoperability of our products, could delay the development or release of new products or new
versions of products, and could adversely affect market acceptance or perception of our products. In addition, allegations of IC manufacturability issues resulting from use of our products could, even if untrue, adversely affect our reputation and
our customers&#146; willingness to license products from us. Any such errors or delays in releasing new products or new versions of products or allegations of unsatisfactory performance could: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">cause us to lose customers; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">increase our service costs; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">subject us to liability for damages; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">divert our resources from other tasks; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">delay license sales; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">cause us to fail to attract new customers or achieve market acceptance. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Any of the above could materially and adversely affect our business, financial condition, and operating results. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Moreover, because our software is used in connection with other vendors&#146; products that are used to design complex nanometer-scale
semiconductors, significant liability claims may be asserted against us if our software does not work properly individually or with other vendors&#146; products.&nbsp;Our agreements with customers typically contain provisions intended to limit our
exposure to liability claims.&nbsp;However, these limitations may be unenforceable and may not preclude or limit all potential claims.&nbsp;Regardless of their merit, liability claims could require us to spend significant time and expense in
litigation and divert management&#146;s attention from other business pursuits.&nbsp;If successful, a product liability claim could require us to pay significant damages.&nbsp;Any claims, whether or not successful, could seriously damage our
reputation and our business. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">33 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We may be unable to make payments to satisfy our indemnification obligations or in the event of improper use or
disclosure of confidential information, which would harm our customer relationships and our business. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We enter into license
agreements and non-disclosure agreements in the ordinary course of business. Pursuant to these agreements, we typically agree to indemnify our customers and strategic partners for losses suffered or incurred by them as a result of any patent,
copyright or other third-party intellectual property infringement claim with respect to our products, and we agree to confidentiality provisions that restrict our use and disclosure of our customers&#146; confidential information. In some of our
customer agreements, we agree to additional indemnification obligations, such as indemnifying the customer for losses suffered or incurred by the customer as a result of our breach of certain warranties regarding our products. These indemnification
and confidentiality obligations typically have perpetual terms and are unlimited in amount. Many of our customer agreements do not limit our indemnification obligations, so we may be required to make indemnification payments that greatly exceed the
amount received from the customer. Similarly, many of our customer agreements do not limit our liability for improper use or disclosure by our employees of our customers&#146; confidential information. If an indemnification event were to occur, we
may have insufficient funds to pay our indemnification obligations. If we are held to have improperly used or disclosed confidential information, we may have insufficient funds to pay any damages and other amounts that may be awarded. Further, any
material indemnification payment or material liability for improper use or disclosure of confidential information could have a material adverse effect on our financial condition and our results of operations. Any claim or judgment that we improperly
used or disclosed confidential information, in addition to involving significant financial obligations, could hurt our relations with our customers and strategic partners and hurt our reputation, each of which could have a material adverse effect on
our financial condition and our results of our operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have entered into certain indemnification agreements whereby we indemnify
certain of our and our subsidiaries&#146; executive officers and all of our directors for certain events or occurrences while the executive officer or director is, or was, serving at our request in such capacity. The maximum potential future
payments we could be required to make under these indemnification agreements is unlimited. We have not recorded any liabilities for these agreements. Therefore, if an indemnification event occurs, we may have insufficient funds to pay our
indemnification obligations. Further, any material indemnification payment could have a material adverse effect on our business, financial condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Accounting principles, standards or guidance changes, specifically changes affecting software revenue recognition, could cause unexpected adverse revenue fluctuations for us, negatively impacting our business,
operating results, and stock price. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We prepare our consolidated financial statements in conformity with U.S. GAAP. These principles
are subject to interpretation by the Securities and Exchange Commission and various bodies formed to interpret and create appropriate accounting principles, standards, and guidance. A change in or a difference in interpretation of these principles,
standards or guidance could have a significant effect on our reported operating results and may retroactively affect our previously reported operating results. Additional proposed accounting standards could have a significant impact on our
operational processes, revenue, and expenses, and could cause unexpected financial reporting fluctuations and make comparability between periods less meaningful or not at all. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Accounting standards changes and related interpretations, specifically those changes affecting software revenue recognition, could require us to change our revenue recognition
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">34 </FONT></P>


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methods. Specifically, in June 2010, the Financial Accounting Standards Board proposed new accounting standard <I>Revenue from Contracts with Customers</I>. These changes could result in deferral
of revenue recognized in current periods to subsequent periods or in accelerated recognition of deferred revenue to current periods, each of which could negatively impact our business and operating results, cause us to fail to meet investors and
securities analysts expectations, and negatively impact our stock price. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Future capital needs may require us to seek debt financing or additional
equity funding that, if not available on acceptable terms or at all, could cause our financial condition to deteriorate and materially harm our business. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our liquidity and capital requirements depend in part on numerous factors, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the costs and timing of product development efforts and their relative success; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the costs of retaining management and key employees; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the costs and timing of international expansion; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the costs and timing of future acquisitions, if any; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">economic conditions generally and the markets that our customers serve in particular; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">technological and market developments; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the costs of pursuing, maintaining, and enforcing intellectual property rights and defending against any intellectual property infringement claims.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We do not currently maintain any revolving lines of credit. We may therefore be unable to acquire debt financing if
and when needed or desired on acceptable terms or at all. In addition, we may be unable to complete an equity funding on acceptable terms or at all. Our inability to obtain additional funds through debt financing or equity funding could cause our
financial condition to deteriorate and materially harm our outlook. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>If we become subject to unfair hiring claims, we could be prevented from hiring
needed employees, incur liability for damages, and incur substantial costs in defending ourselves. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Companies in our industry that
lose employees to competitors frequently claim that these competitors have engaged in unfair hiring practices or that the employment of these persons would involve the disclosure or use of trade secrets. If we become subject to unfair hiring claims
or misappropriation of trade secret claims, we may be prevented from hiring or retaining needed employees. We could also incur substantial costs in defending ourselves or our employees against these claims, regardless of their merits. Defending
ourselves from these claims could also divert management&#146;s attention from our operations, and an adverse determination of any such claims could result in our incurring substantial liability for damages. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Catastrophic events may disrupt our business and harm our operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We rely on our network infrastructure and enterprise applications, and technology systems for our development, marketing, operations, support, and sales activities. A disruption or failure of these systems in the
event of a major natural disaster, telecommunications failure, cyber-attack, civil unrest in various parts of the world, acts of war, terrorist attack or other catastrophic event could cause system interruptions, delays in our product development
and loss of critical data and could prevent us from fulfilling our customers&#146; orders. Our corporate headquarters, a significant portion of our research and development activities, our data centers and certain
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">35 </FONT></P>


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other critical business operations are located in California, near major earthquake faults. A catastrophic event that results in the destruction or disruption of any of our data centers or our
critical business or IT systems would severely affect our ability to conduct normal business operations and, as a result, our operating results would be adversely affected. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Risks Related to our Common Stock and this Offering </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>An active trading market for our common stock may not
develop and the market price for our common stock may decline below the initial public offering price. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Prior to this offering, there
has been no public market for our common stock. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that market may become. If an active public market for our common
stock does not develop, the market price and liquidity of our common stock may be adversely affected. The initial public offering price for our common stock will be determined by negotiation among us, our selling stockholders, and the underwriters
based upon several factors, and may not be indicative of prices that will prevail in the open market after this offering. Consequently, you may be unable to sell your shares of our common stock at prices equal to or greater than the price you paid
for them. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Market prices of technology-related companies have fluctuated widely in recent years, and the market price of our common stock is likely
to be volatile, which could result in substantial losses to investors and litigation. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The market price of our common stock is likely
to be volatile and could fluctuate widely in response to factors beyond our control. In particular, the market prices for shares of technology-related companies often reach levels that may bear no established relationship to the past operating
performance of these companies. The market prices of technology-related companies have been especially volatile. These broad market and industry factors may significantly affect the market price of our common stock regardless of our actual operating
performance. In addition to market and industry factors, the market price and trading volume for our common stock may be highly volatile for specific business reasons. Factors that could cause the market price of our common stock to fluctuate
significantly include: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our operating and financial performance and prospects; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our quarterly or annual earnings or those of other companies in our industry; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">conditions that impact demand for our products and services; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the public&#146;s reaction to our press releases, other public announcements, and filings with the Securities and Exchange Commission;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in earnings estimates or recommendations by securities or research analysts who track our common stock; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">market and industry perception of our success, or lack thereof, in pursuing our growth strategy; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">strategic actions by us or our competitors, such as acquisitions or restructurings; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in government and other regulations; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in accounting standards, policies, guidance, interpretations or principles; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">arrival and departure of key personnel; </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the number of shares to be publicly traded after this offering; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">sales of common stock by us, our investors or members of our management team; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in general market, economic, and political conditions in the United States and global economies or financial markets, including those resulting from
natural disasters, telecommunications failure, cyber attack, civil unrest in various parts of the world, acts of war, terrorist attacks or other catastrophic events. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">Any of these factors may result in large and sudden changes in the trading volume and market price of our common stock, and may prevent you from being able to sell your shares at or above the price you paid for
your shares of our common stock. Following periods of volatility in the market price of a company&#146;s securities, stockholders often institute securities class action litigation against that company. Our involvement in a class action suit could
divert our senior management&#146;s attention and, if adversely determined, could have a material adverse effect on our business, financial condition, and results of operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>The sale or availability for sale of substantial amounts of our common stock could adversely affect its market price. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Sales of substantial amounts of shares of our common stock in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of our
common stock and could materially impair our future ability to raise capital through common stock offerings. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We will have
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock outstanding immediately after this offering, or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock if the underwriters exercise their option to purchase
additional shares of common stock in full. All of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, unless held by our &#147;affiliates&#148; as that
term is defined in Rule 144 under the Securities Act. The 17,190,188 shares of common stock outstanding as of February&nbsp;28, 2011, assuming the conversion of all shares of our preferred stock into shares of our common stock, will be eligible for
resale under Rule 144 or Rule 701 of the Securities Act, subject to volume limitations and applicable holding period requirements. We have also provided registration rights to holders of 9,953,885 shares of our common stock. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, as of February&nbsp;28, 2011, there were 2,210,483 outstanding options to purchase shares of our common stock, all of which are
immediately exercisable. Immediately following this offering, we intend to file a registration statement registering the shares issuable upon the exercise of these existing options, and for the 2,400,000 shares reserved for issuance under our 2011
Equity Incentive Plan and 600,000 shares reserved for issuance under our 2011 Employee Stock Purchase Plan. Assuming effectiveness of the registration statement on Form S-8, these shares will be freely tradable, although they will be subject to the
lock-up arrangements we describe below and elsewhere in this prospectus and vesting limitations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with this offering, we,
our directors and officers, and substantially all of our stockholders and holders of options to purchase our stock, have agreed, subject to certain limited exceptions, not to offer, sell, contract to sell or otherwise dispose of, or enter into, any
transaction that is designed to, or could be expected to, result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our common stock for 180 days after the date of
this prospectus without the written consent of Deutsche Bank Securities Inc. However, Deutsche Bank Securities Inc. may release these securities from these restrictions at any time without notice. We cannot predict what effect, if
</FONT></P>
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any, market sales of securities held by our stockholders or the availability of these securities for future sale will have on the market price of our common stock. See &#147;Underwriting&#148;
and &#147;Shares Eligible for Future Sale&#148; for a more detailed description of the restrictions on selling our securities after this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We may also issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of
shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of our common stock or other
securities in connection with any such acquisitions and investments. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our executive officers, directors, and other key employees will significantly
influence our activities, and their interests may differ from your interests as a stockholder. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Following this offering, our
executive officers, directors, and other key employees will beneficially own, collectively, &nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common stock, or &nbsp;&nbsp;&nbsp;&nbsp;% if the underwriters exercise in full their option to purchase
additional shares of our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Accordingly, these stockholders have had, and will continue to have, significant influence in
determining the outcome of any corporate transaction or other matter submitted for approval to our stockholders, including mergers, consolidations, and the sale of our assets, director elections, and other significant corporate actions. They will
also have significant influence in preventing or causing a change in control of our company. In addition, without the consent of these stockholders, we could be prevented from entering into transactions that could be beneficial to us. The interests
of these stockholders may differ from your interests as a stockholder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>The initial public offering price for shares of our common stock is
substantially higher than the pro forma net tangible book value per share, and, as such, you will incur immediate and substantial dilution. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">If you purchase common stock in this offering, you will pay more for your common stock than the amount paid by existing stockholders for their common stock. As a result, you will experience immediate and
substantial dilution of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share of common stock, assuming no exercise of outstanding options to acquire common stock, representing the difference between our pro forma net tangible
book value per share of common stock of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, after giving effect to this offering and the assumed initial public offering price per share of common stock of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, the midpoint of the estimated offering range set forth on the cover page of this prospectus. In addition, you may experience further dilution to the extent that our common stock is issued upon the
exercise of stock options. All of the shares of common stock issuable upon the exercise of currently outstanding stock options will be issued at a purchase price that is less than the initial public offering price per share in this offering. See
&#147;Dilution&#148; for a more complete description of how the value of your investment in our common stock will be diluted upon the completion of this offering. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect at or upon consummation of this offering, and Delaware corporate law as well as certain of our
contracts contain provisions which could delay or prevent a change in control even if the change in control would be beneficial to our stockholders. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Delaware law, as well as our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect at or upon consummation of this offering,
</FONT></P>
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contains anti-takeover provisions that could delay or prevent a change in control of our company, even if the change in control would be beneficial to the stockholders. These provisions could
lower the price that future investors might be willing to pay for shares of our common stock. These anti-takeover provisions: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">authorize our board of directors to create and issue, without stockholder approval, preferred stock that can be issued, increasing the number of outstanding
shares and deter or prevent a takeover attempt; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">establish a three-tiered classified board of directors requiring that not all members of the board be elected at one time; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">establish limitations on the removal of directors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">empower the board of directors to fill any vacancy on the board of directors, whether such vacancy occurs as a result of an increase in the number of directors
or otherwise; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at
stockholder meetings; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">limit the ability of stockholders to call special meetings of stockholders. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;203 of the Delaware General Corporation Law, the terms of our stock incentive plans, and other contractual provisions also may
discourage, delay or prevent a change in control of our company. Section&nbsp;203 generally prohibits a Delaware corporation from engaging in a business combination with an interested stockholder for three years after the date the stockholder became
an interested stockholder. Our stock incentive plans include change-in-control provisions that allow us to grant options or stock purchase rights that may become vested immediately upon a change in control. We may also enter into contractual
restrictions with third parties, the terms of which may discourage a change in control of our company. For example, we have agreed with one of our largest customers that, under certain circumstances, if we divest or assign any of our patents, then
the customer will be entitled to an irrevocable, worldwide, nonexclusive license to such patents to make or have made such customer&#146;s products. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Together, these charter, statutory and contractual provisions could make the removal of management and directors more difficult and may discourage transactions that otherwise could involve payment of a premium over
prevailing market prices for our common stock. Furthermore, the existence of the foregoing provisions, as well as the significant common stock beneficially owned by our executive officers, key non-executive officer employees, and members of our
board of directors, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium
for your common stock in an acquisition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors also has the power to adopt a stockholder rights plan that could delay
or prevent a change in control of us even if the change in control is generally beneficial to our stockholders. These plans, sometimes called &#147;poison pills,&#148; are oftentimes criticized by institutional investors or their advisors and could
affect our rating by such investors or advisors. </FONT></P>
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If our board of directors adopts such a plan, it might have the effect of reducing the price that new investors are willing to pay for shares of our common stock. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We have not determined a specific use for a portion of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have not determined a specific use for the net proceeds of this offering. Our management will have considerable discretion in the
application of these proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the
application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our profitability or increase our common stock price. The net proceeds from this offering may also be placed in investments
that do not produce income or that lose value. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We have never paid cash dividends and do not anticipate paying any cash dividends on our common
stock. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently intend to retain any earnings to finance our operations and growth. The decision whether to pay dividends will
be made by our board of directors in light of conditions then existing, including but not limited to factors such as our financial condition, operating results, capital requirements, business conditions, and covenants under any applicable
contractual arrangements. Because we have never paid cash dividends and do not anticipate paying any cash dividends on our common stock in the foreseeable future, any short-term return on your investment will depend on the market price of our common
stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>If equity research analysts do not publish research or reports about our business, or if they issue unfavorable commentary or downgrade our
common stock, the market price of our common stock will likely decline. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The trading market for our common stock will rely in part on
the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The market price of our stock could decline if one or more equity analysts downgrade our stock or if those analysts issue
unfavorable commentary or cease publishing reports about us or our business. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">40 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_3"></A>FORWARD-LOOKING STATEMENTS AND </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>STATISTICAL DATA AND MARKET INFORMATION </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">This prospectus contains &#147;forward-looking statements&#148; within the meaning of the federal securities laws, which involve substantial risks and uncertainties. You can identify forward-looking statements
because they contain words such as &#147;believes,&#148; &#147;projects,&#148; &#147;might,&#148; &#147;expects,&#148; &#147;may,&#148; &#147;will,&#148; &#147;should,&#148; &#147;seeks,&#148; &#147;approximately,&#148; &#147;intends,&#148;
&#147;plans,&#148; &#147;estimates,&#148; or &#147;anticipates&#148; or similar expressions that concern our strategy, plans or intentions. All statements we make in this prospectus relating to our estimated and projected revenue, margins, costs,
expenditures, cash flows, growth rates, financial results, and prospects are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may
differ materially from those we expect. We derive many of our forward-looking statements from our operating budgets and forecasts, which we base upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it
is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We disclose important factors that could cause actual results to differ materially from our expectations under &#147;Risk Factors&#148; and elsewhere in this prospectus, including, without limitation, in
conjunction with the forward-looking statements included in this prospectus. Some of the factors that we believe could affect our revenue, margins, costs, expenditures, cash flows, growth rates, financial results, business, condition, and prospects
include: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our dependence on a small number of customers for a significant portion of our revenue; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">if customers terminate their licenses, delay orders or fail to renew licenses; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a deterioration in the financial condition of any of our key customers or their end-user customers; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">customer consolidation, which could lead to reduced selling prices and license sales and customer loss; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our reliance on a limited number of products that focus exclusively on power-efficient and noise-immune solutions; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to effectively develop and commercialize or acquire new and enhanced products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to maintain and expand relationships with existing customers and develop relationships with new customers; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our need to continue to make significant research and development investments; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">competition in the markets in which we operate; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to attract, retain, and train necessary personnel; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our dependence on and ability to retain our senior executives and other key personnel; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the lack of experience our senior executives have in managing a public reporting company; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">continued consolidation among our competitors and potential customers; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">lack of growth in new IC design starts and industry consolidation; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">41 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">industry-wide downturns and other cyclical effects that have affected or affecting our customers&#146; research and development budgets;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">structural barriers and our customers&#146; internal capabilities, which make gaining market share difficult; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the limited size of our addressable market; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">technological innovations that could reduce or eliminate demand for our products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">if IC designers and manufacturers do not integrate our software into existing or future design flows; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">if software companies, including competitors, do not cooperate in working with us to interface our products with their design flows;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">if our customers do not adopt, or are slow to adopt smaller design geometries on a large scale; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our lengthy and unpredictable sales cycle; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to effectively manage our recent and anticipated growth; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in tax provisions or additional tax liability; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our limited operating history and the rapidly evolving nature of the markets in which we operate; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the high costs of customer engagement and support; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our limited ability to quickly and significantly reduce our operating costs; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the significant costs of both becoming and being a public company; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the significant costs of, and potential impact on compliance efforts and obligations from, our upgrading of our internal resources and systems;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the ability of our disclosure controls and procedures and our internal control over financial reporting to adequately allow us to report information accurately
to investors or to detect and prevent errors or fraud, and the costs associated with implementing and maintaining these controls and procedures; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any failures by our disclosure controls and procedures and internal control over financial reporting; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to obtain sufficient patent protection and protect our other proprietary rights; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our reliance on certain third parties and open source software for technology incorporated into our products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the costs associated with, and the outcomes of, any intellectual property or other claims and litigation; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">whether we undertake any acquisitions and our ability to integrate any acquired operations, products, and technology; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the risks associated with our reliance on international operations, including foreign exchange risk; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our exposure to customer credit risk; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our failure to obtain export licenses or to comply with U.S. export laws; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">insufficient security measures or security breaches; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">42 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our liability exposures from product errors or defects; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our potential indemnification obligations; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any accounting principles, standards or guidance changes; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to satisfy future capital needs; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">if we become subject to unfair hiring claims; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the effect of local and national economic, credit, and capital market conditions on the economy in general, and the markets that our customers serve in
particular. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We caution you that the foregoing list of important factors may not contain all of the material factors
that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this prospectus may not in fact occur. We undertake no obligation to publicly update or revise
any forward-looking statement as a result of new information, future events or otherwise, except as required by law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">This prospectus
also contains statistical data, estimates, and forecasts that we obtained from industry publications and reports generated by third-party market research firms, including iSuppli Corporation, or iSuppli, Gartner, Inc., or Gartner, International
Technology Roadmap for Semiconductors, or ITRS, and International Data Corporation, or IDC. Although we believe that these third-party sources are reliable, neither we nor the underwriters have independently verified the data provided by these third
parties, and neither we nor the underwriters take any further responsibility for this data. While we are not aware of any misstatements regarding any third-party data presented in this prospectus, their estimates, in particular as they relate to
projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under &#147;Risk Factors.&#148; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Gartner Report described herein, &#147;What to Consider When Designing Next-Generation Data Centers,&#148; David Cappucio, September 10, 2010,
or the Gartner Report, represents data, research, opinion or viewpoints published as part of a syndicated subscription service by Gartner, and are not representations of fact. The Gartner Report speaks as of its original publication date and not as
of the date of this filing, and the opinions expressed in the Gartner Report are subject to change without notice. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The IDC reports
described herein are Worldwide Quarterly Media Tablet and eReader Tracker, December 2010, and Worldwide Smartphone 2010-2014 Forecast Update: December 2010, IDC #226107. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">43 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_4"></A>USE OF PROCEEDS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We estimate that the net proceeds to us from the sale of the common stock that we are offering will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, based on an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the estimated offering range set forth on the cover
page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Our net proceeds will increase by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million if the
underwriters exercise in full their option to purchase additional shares from us. Each $1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the
estimated offering range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us of this offering by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming the number of shares
offered by us, as listed on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The principal purposes of this offering are to obtain additional capital, create a public market for our common stock, and to facilitate our future
access to the public equity markets. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently intend to use the net proceeds from our sale of shares of common stock in this
offering for working capital and other general corporate purposes, which may include hiring additional personnel and investing in sales, marketing, and research and development. In addition, we may use a portion of the proceeds received by us from
this offering for acquisitions of complementary businesses, technologies or other assets. We have no agreements with respect to any material acquisitions at this time. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Pending the use of the proceeds from this offering as described above, we plan to invest the net proceeds in short-term, investment grade, interest-bearing securities. We will not receive any of the proceeds from
shares sold by the selling stockholders. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">44 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_5"></A>DIVIDEND POLICY </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have never paid cash dividends on our capital stock. We currently intend to retain any future earnings to fund business development and growth,
and we do not anticipate paying cash dividends in the foreseeable future. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">45 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_6"></A>CAPITALIZATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth our cash and cash equivalents and capitalization as of December&nbsp;31, 2010: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">on an actual basis; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">on a pro forma basis to reflect the automatic conversion of all of our preferred stock into common stock; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">on a pro forma as adjusted basis to reflect the conversion referred to above and the sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common
stock by us in this offering at an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus, after
deducting estimated underwriting discounts and commissions and our estimated offering expenses. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">You should read this
table in conjunction with our consolidated financial statements and related notes and the sections entitled &#147;Selected Consolidated Financial and Other Data,&#148; &#147;Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations,&#148; &#147;Use of Proceeds,&#148; and &#147;Description of Capital Stock&#148; appearing elsewhere in this prospectus. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="69%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>As of December&nbsp;31, 2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Actual</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro&nbsp;forma</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro&nbsp;forma&nbsp;as<BR>adjusted</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands, except share data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,175</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,175</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term debt, including current portion</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Redeemable and convertible preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Preferred stock Series A, $0.0001 par value; 3,633,665 shares authorized and 3,633,665 shares outstanding, actual; no shares outstanding,
pro forma and pro forma as adjusted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,741</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Preferred stock Series B, $0.0001 par value; 2,300,000 shares authorized and 2,300,000 shares outstanding, actual; no shares outstanding,
pro forma and pro forma as adjusted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,255</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,996</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stockholders&#146; equity:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Common stock, $0.0001 par value; 20,000,000 shares authorized and 11,099,815 shares issued and outstanding, actual; 20,000,000 shares
authorized and 17,033,480 shares issued and outstanding, pro forma; 20,000,000 shares authorized and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares outstanding, pro forma as
adjusted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Additional paid-in capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,133</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,128</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,576</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,576</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,576</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Retained earnings</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">161</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">161</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">161</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total stockholders&#146; equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,871</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,867</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total capitalization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,867</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,867</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">46 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our capitalization information presented above excludes: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">2,293,410 shares of common stock subject to options outstanding as of December&nbsp;31, 2010 (and 2,210,483 shares of common stock subject to options outstanding
as of February&nbsp;28, 2011) issued under our 2001 Stock Option/Stock Issuance Plan; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">2,400,000 shares of common stock reserved for issuance pursuant to our 2011 Equity Incentive Plan and 600,000 shares of common stock reserved for issuance
pursuant to our 2011 Employee Stock Purchase Plan; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock issuable upon the exercise of the underwriters&#146; over-allotment option; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">an increase in authorized shares of common stock in 2011 from 20,000,000 to 21,000,000 in January 2011. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">47 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_7"></A>DILUTION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of
common stock you pay and the as adjusted net tangible book value per share of our common stock after this offering. Our net tangible book value as of December&nbsp;31, 2010 was $1.3 million, or $0.08 per share of common stock. We calculate net
tangible book value per share by calculating the total assets less goodwill and other intangible assets and total liabilities, and dividing by the number of shares of common stock outstanding and assuming the conversion of all of our outstanding
shares of preferred stock into shares of common stock in connection with this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net tangible book value dilution per share
represents the difference between the amount per share paid by new investors who purchase shares from us in this offering and the as adjusted net tangible book value per share of common stock immediately after completion of this offering. As of
December&nbsp;31, 2010, after giving effect to this offering, our as adjusted net tangible book value would have been $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, assuming
that the shares offered under this prospectus are sold at a public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus.
This represents an immediate increase in net tangible book value of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to existing stockholders, and an immediate dilution in net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to new investors in the offering. The table below illustrates this per share dilution as of December&nbsp;31, 2010: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="84%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Per&nbsp;Share</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Assumed initial public offering price per share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net tangible book value per share of common stock as of December&nbsp;31, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.08</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase in net tangible book value per share attributable to new investors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">As adjusted net tangible book value per share after this offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dilution in net tangible book value per share to new investors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">A $1.00 increase (decrease) in the assumed public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share would increase (decrease) our as adjusted net tangible book value per share after this offering by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and the dilution to new investors by
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">If the underwriters exercise their over-allotment option in full, our as adjusted net
tangible book value will increase to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, representing an increase to existing holders of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, and there will be an immediate dilution of $
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to new investors. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">48 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth, on an as adjusted basis as of December&nbsp;31, 2010, the number of
shares of common stock purchased or to be purchased from us, the total consideration paid or to be paid and the average price per share paid or to be paid by existing holders of common stock and by new investors, at an assumed initial public
offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="55%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares Purchased</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total Consideration </B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Average<BR>Price</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Per<BR>Share</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percent</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percent</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Existing stockholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,033,480</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,071,167</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.42</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">New investors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The above table excludes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">2,293,410 shares of common stock subject to options outstanding as of December&nbsp;31, 2010 (and 2,210,483 shares of common stock subject to options outstanding
as of February 28, 2011) issued under our 2001 Stock Option/Stock Issuance Plan; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">2,400,000 shares of common stock reserved for issuance pursuant to our 2011 Equity Incentive Plan and 600,000 shares of common stock reserved for issuance
pursuant to our 2011 Employee Stock Purchase Plan; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock issuable upon the exercise of the underwriters&#146;
over-allotment option. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">To the extent any of options to purchase shares of common stock are granted or exercised, or
the underwriters&#146; exercise their over-allotment option, there will be further dilution to new investors. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">49 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_8"></A>SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth our selected consolidated financial and other data for the years ended December&nbsp;31, 2006, 2007, 2008, 2009, and
2010. The selected consolidated financial data for the years ended December&nbsp;31, 2008, 2009, and 2010 were derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated financial data
for the periods ended December&nbsp;31, 2006 and December&nbsp;31, 2007 were derived from our audited consolidated financial statements not included in this prospectus. You should read the financial data set forth below in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations,&#148; and our consolidated financial statements and related notes included elsewhere in this prospectus. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="65%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2006</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands, except per share data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Statements of Operations:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD COLSPAN="17" VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14,652</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18,733</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,695</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,601</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44,047</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,241</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,609</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,812</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,662</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,999</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,411</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,883</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,939</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35,048</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating expenses:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales and marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,087</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,312</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,529</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,839</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,203</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,797</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,588</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,516</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,242</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,019</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,903</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,926</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:4.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,168</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,534</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,229</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,955</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,372</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,243</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(410</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(346</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,984</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,676</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(129</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(93</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income (loss) before income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,114</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(392</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,891</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,042</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Provision (benefit) for income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">565</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">843</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,507</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,622</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,738</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">549</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,235</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) per share:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.06</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(0.12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.03</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(0.12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted average common shares outstanding:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,738</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,480</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,882</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,016</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,480</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,253</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,237</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,631</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Other Consolidated Financial Data (Unaudited):</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Non-GAAP net income (loss) (1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">938</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(338</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,735</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,971</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,372</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="66%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>As of December 31, 2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Actual</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro&nbsp;Forma&nbsp;(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro&nbsp;Forma&nbsp;As<BR>Adjusted&nbsp;(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Balance Sheet Data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,175</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,175</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Working capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,646</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,646</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,711</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,711</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term debt obligations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Redeemable convertible preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,996</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total stockholders&#146; equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,871</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,867</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">50 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. We define non-GAAP net income (loss) as GAAP net
income (loss) plus amortization of intangible assets and stock-based compensation expense, and giving effect to the tax impact of these adjustments to GAAP net income (loss). </FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">We believe that non-GAAP net income (loss) is useful to investors and other users of our financial information in evaluating our operating
performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">non-GAAP net income (loss) provides investors and other users of our financial information consistency and comparability with our past financial performance,
facilitates period-to-period comparisons of operations, and facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">adding back certain non-cash charges, such as amortization of intangible assets and stock-based compensation expense, to net income is useful because these
non-cash expenses in any specific period may not directly correlate to the underlying performance of our business operations, and these non-cash expenses can vary significantly between periods as a result of full amortization of previously acquired
intangible assets and the timing of new stock-based awards. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">Non-GAAP net income (loss) is adjusted by the tax impact
of excluding amortization of intangible assets and stock-based compensation from our GAAP net income (loss) results, using a blended tax rate of 40%. During the periods presented, there was no tax impact from stock-based compensation expense on our
GAAP net income (loss) or our non-GAAP net income (loss) because of the tax attributes of our historical equity awards. However, we expect that in future periods there may be a tax impact depending on the tax attributes of the equity awards we issue
in the future. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">We use non-GAAP net income (loss) in conjunction with traditional GAAP measures as part of our overall assessment of our
performance, for planning purposes, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial
performance. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">We do not, and you should not, place undue reliance on non-GAAP net income (loss) as our only measure of operating
performance. You should not consider non-GAAP net income (loss) as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies
may calculate these measures differently than we do. We compensate for the inherent limitations associated with using non-GAAP net income (loss) through disclosure of these limitations, presentation of our financial statements in accordance with
GAAP, and reconciliation of non-GAAP net income (loss) to the most directly comparable GAAP measure, net income (loss). </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:3%"><FONT STYLE="font-family:ARIAL" SIZE="1">The following
provides a reconciliation of GAAP net income (loss) to non-GAAP net income (loss): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="58%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2006</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">GAAP net income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">549</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(1,235</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Amortization of intangible assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">431</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,083</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,470</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2,244</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Stock-based compensation expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">389</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">638</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">911</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">819</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">720</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Tax impact adjustments</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(172</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(433</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(587</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(896</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Non-GAAP net income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">938</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(338</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">4,735</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">4,971</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">5,372</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The unaudited pro forma data as of December&nbsp;31, 2010, assumes the conversion of all of our outstanding shares of preferred stock into shares of common stock upon the closing
of this offering. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The unaudited pro forma as adjusted data gives effect to the conversion referred to in note 2 above and to the sale of shares of common stock by us in this offering at an assumed
initial offering price to the public at $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the range on the cover of this prospectus, after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share would increase (decrease) cash and cash equivalents, working capital, total
assets, and total stockholders&#146; equity by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting
estimated underwriting discounts and commissions and estimated offering expenses payable by us. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">51 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_9"></A>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>You should read the following discussion of our financial condition and results of operations in conjunction with &#147;Selected Consolidated Financial and Other Data&#148; and our consolidated financial
statements and notes thereto appearing elsewhere in this prospectus. This discussion and analysis of our business, financial condition, and results of operations includes forward-looking statements based upon current expectations that involve
substantial risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements for many reasons, including those set forth under the caption &#147;Risk Factors&#148; or in other parts of this
prospectus. </I></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are
a leading provider of innovative power analysis and optimization software solutions that enable the design of power-efficient, high-performance, noise-immune integrated circuits, or ICs, and electronic systems. Our solutions consist of a suite of
software tools and methodologies that enable design engineers to reduce power consumption, ensure reliable delivery of power to ICs and electronic system components, and mitigate power-induced signal interference, or noise. We believe our solutions
are critical to the design of our customers&#146; products and allow our customers to deliver power-efficient ICs and electronic systems that are resistant to the impact of noise, or noise-immune, at lower costs and with a faster time to market than
with alternative solutions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We were founded in 2001 with the vision of solving critical power analysis and optimization challenges
encountered by designers of ICs and electronic systems. Following intensive research and development, we introduced our RedHawk platform in 2002, which we believe was the first dynamic power and noise analysis platform for the design of complex ICs.
Since releasing our RedHawk platform, we have added three new platforms and have continued to expand our suite of solutions, developing several first-to-market products for various aspects of power and noise analysis. We introduced our Sentinel
platform in 2007, our Totem platform in 2009, and our PathFinder product in 2010. In addition, we have expanded our product portfolio through strategic acquisitions. In 2007, we acquired Optimal Corporation, through which we obtained certain
products and technologies used in our Sentinel platform, and in 2009, we acquired the assets and certain foreign subsidiaries of Sequence Design, Inc., through which we obtained our PowerArtist platform. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We depend upon the sales of licenses to a limited number of products for substantially all of our revenue, and expect that a limited number of
products will continue to account for a large percentage of our revenue in the foreseeable future. We currently offer four platforms that focus exclusively on solutions for the design of power-efficient and noise-immune ICs and electronic systems,
and our flagship platform, RedHawk, has accounted and continues to account for a majority of our revenue. Our dependence on RedHawk, and our limited platforms, make us highly susceptible to changes in demand. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We generate substantially all of our revenue through the sale of time-based software licenses, typically ranging from one to three years. Assuming
all other revenue recognition criteria are met, we recognize revenue at the lesser of the pro rata portion of the license fee for the applicable period, or as payments from the customer become due. As of December&nbsp;31, 2010, the average length of
our time-based licenses was two and one half years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">A significant portion of our revenue depends on sales to a small number of
customers. In 2008, 2009, and 2010, our largest customers, which was a different customer in each year, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">52 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
accounted for 8%, 12%, and 11%, respectively, of our revenue, and our ten largest customers accounted for more than 62%, 68%, and 59%, respectively, of our revenue. We expect that we will
continue to depend upon a relatively small number of customers for a substantial portion of our revenue for the foreseeable future. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In
2010, we sold licenses to 125 companies globally and we frequently sell licenses to multiple business units within these companies. Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli.
Our customers also include leading electronic system companies serving market segments such as mobile devices, high-performance computing and networking, consumer electronics, and automotive and medical electronics. These customers include, among
others, ARM Limited, Hynix Semiconductor Inc., Intel Corporation, LSI Corporation, MediaTek Inc., QUALCOMM Incorporated, Samsung Electronics Co., Ltd., Sony Corporation, STMicroelectronics N.V., Texas Instruments Incorporated, and Toshiba
Corporation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We sell licenses primarily through a direct sales and support organization located in our customers&#146; key
international regions. We intend to continue leveraging our sales force&#146;s domain expertise to further penetrate our existing customer base, and sell solutions to our customers&#146; customers. We will also continue to focus on expanding our
customer base. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We conduct our research and development activities primarily through our team of engineers and developers with expertise
and degrees in computer science, semiconductor physics, electrical engineering, and other engineering disciplines. As of December&nbsp;31, 2010, we had 127 employees engaged in research and development activities. Our research and development
expense was $7.8 million, $8.6 million, and $11.5 million in 2008, 2009, and 2010, respectively, and we plan to continue investing in research and development activities to further enhance our core technologies and expand our product offerings.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our revenue was $25.7 million, $34.6 million, and $44.0 million in 2008, 2009, and 2010 respectively. In the same periods, we had net
income of $3.2 million, $3.3 million, and $3.3 million, respectively. Also in the same periods, we had non-GAAP net income of $4.7 million, $5.0 million, and $5.4 million, respectively. For a discussion of non-GAAP net income and a reconciliation of
GAAP net income to non-GAAP net income, see note 1 to &#147;Selected Consolidated Financial and Other Data.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect that the
demand for our solutions will continue to grow with the proliferation of increasingly complex high-performance mobile devices, miniaturization and increased wireless connectivity of these devices, and the rising costs of electricity for data
centers. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Key Business Indicators </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to financial measures set forth in our consolidated financial statements, we monitor our operating performance using the following key
business indicators: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Customer retention</I>.&nbsp;&nbsp;&nbsp;&nbsp;Retaining our customers is one of the keys to the success of our
business.&nbsp;One of the primary drivers of our revenue growth is license renewals and increased license purchases by existing customers.&nbsp;We remain actively engaged with our customers throughout their license terms and seek to secure license
renewals and increase the number of licenses our customers purchase significantly in advance of license expiration. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers today.</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">53 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Existing customer license growth</I>.&nbsp;&nbsp;&nbsp;&nbsp;Increasing license sales to existing
customers is a significant driver of our revenue growth. We often initially sell licenses for a single platform to a single business unit, and then expand the sale of licenses to additional business units and for additional platforms. We monitor and
continuously seek to expand the number of business units to which we sell within each of our customers and the number of licenses and platforms we could potentially sell to them. <I> </I></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Customer base growth.</I>&nbsp;&nbsp;&nbsp;&nbsp;We view our ability to acquire new customers as an important element of our growth strategy,
and our sales organization expends a considerable portion of its efforts on expanding our customer base. We seek to leverage our brand, technology leadership, and customer support to add new customers and expand our revenue base. We grew our
customer base by over 118% in the last three years, from 53 customers at the beginning of 2008 to 116 customers at the end of 2010. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Non-GAAP net income.&nbsp;&nbsp;&nbsp;&nbsp;</I>In addition to GAAP financial measures, we also use non-GAAP net income as an important
indicator of our operating performance.&nbsp;We define non-GAAP net income as GAAP net income plus amortization of intangible assets and stock-based compensation expense, and giving effect to the tax impact of these adjustments.&nbsp;We believe that
the use of non-GAAP net income provides useful information to gain an overall understanding of our current financial performance and prospects for the future&nbsp;because it excludes certain non-cash expenses which may not reflect the underlying
performance of our business operations. For a discussion of non-GAAP net income and a reconciliation of GAAP net income to non-GAAP net income, see note 1 to &#147;Selected Consolidated Financial and Other Data.&#148; </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Acquisitions </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Between 2007 and 2010, we
completed two acquisitions for total cash consideration of $12.8&nbsp;million. These acquisitions have contributed additional product offerings to our existing product line. In November 2007, we acquired all of the outstanding equity of Optimal
Corporation for total cash consideration of $7.5 million. In September 2009, we acquired the assets and certain foreign subsidiaries of Sequence Design, Inc. for total cash consideration of $5.3&nbsp;million, plus certain assumed liabilities. We
recorded the acquired assets and liabilities for each of these acquisitions at fair value, and recorded the excess of the purchase price over the fair value of the acquired net assets as goodwill. We are amortizing the acquired intangible assets on
a straight-line basis over their estimated useful lives, which range between two to seven&nbsp;years. The amortization expense of the acquired intangible assets from these acquisitions was $1.1 million, $1.5 million, and $2.2 million for 2008, 2009,
and 2010, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We accounted for each of these acquisitions as a purchase transaction, and therefore our consolidated financial
statements include the results of operations of the acquired companies commencing on their respective acquisition dates. Following each acquisition, we integrated the combined companies by bundling acquired products with our existing products and
cross selling products to our customers and to the customers of the acquired companies. We have sought to reduce the costs associated with the operation of the acquired businesses by consolidating sales and marketing efforts, eliminating redundant
administrative resources, and rationalizing research and development expense. As a result of the foregoing, we have not separately assessed the impact of these acquisitions on our consolidated financial statements. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">54 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Components of Results of Operations </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Revenue </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We derive substantially all of our revenue from licensing our solutions and generate
substantially all of our sales through our direct sales force. Customers typically purchase our solutions under time-based licenses, or TBLs. A TBL is a license valid for a finite term, generally one to three years, where the license expires at the
end of the term. The software licenses are generally bundled with post-contract customer support, which we refer to as maintenance, for the license term. Assuming all other revenue recognition criteria are met, we recognize revenue at the lesser of
the pro rata portion of the license fee for the applicable period or as the payment from the customer becomes due. See &#147;&#151;Critical Accounting Policies.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Costs and Expenses</I> </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Cost of revenue</I>. Cost of revenue includes costs associated with
licensing our solutions, and consists primarily of employee compensation, benefits, and other employee-related costs for our customer support personnel, as well as the amortization of acquired intangibles, the cost of technical documentation, and
royalty payments to third-party vendors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Sales and marketing expense.</I> Sales and marketing expense consists primarily of
compensation, commissions, benefits, and other employee-related costs for sales and marketing personnel, as well as expenses related to trade shows, promotion, travel, and allocated facilities costs. We expect our sales and marketing expense to
increase as we intend to hire additional sales and support personnel for our global sales and support organization, particularly in the Asia Pacific region. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Research and development expense.</I> Research and development expense consists primarily of compensation, benefits, and other employee-related costs for our engineers engaged in product design and development,
as well as allocated facilities costs. We expect to continue to incur significant research and development expense. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>General and
administrative expense.</I> General and administrative expense consists primarily of compensation, benefits, and other employee-related costs for executive management, finance, human resources, and other administrative personnel, including
third-party professional fees, and allocated facilities costs. We anticipate that in 2011, general and administrative expense will increase significantly as we incur the costs associated with becoming a public company, including related personnel
increases, third-party professional services fees, director compensation increases due to our larger board of directors, directors and officers liability insurance, and investor relations. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Other income (expense).</I> Other income (expense) consists primarily of interest income (expense), foreign currency gains (losses), and other
miscellaneous items. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Provision (benefit) for income taxes.</I> Provision (benefit) for income taxes is comprised of U.S. federal,
state, and foreign taxes. Our effective tax rate has varied and may continue varying year-to-year based on numerous factors, including our overall profitability, the geographical mix of income before taxes, the related tax rates in the jurisdictions
where we operate and withholding taxes, and changes in valuation allowances, as well as discrete events.</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">55 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Results of Operations </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Year Ended December&nbsp;31, 2010 Compared to Year Ended December&nbsp;31, 2009 </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following
tables set forth our results of operations for the years ended December&nbsp;31, 2009 and December&nbsp;31, 2010: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="48%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended<BR>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom" STYLE="border-bottom:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom" STYLE="border-bottom:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended<BR>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>$&nbsp;Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>%&nbsp;Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(percentage&nbsp;of&nbsp;revenue)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,601</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44,047</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,446</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,662</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,999</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,337</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,939</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35,048</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,109</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">81</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">80</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating expenses:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales and marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,136</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">32</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,588</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,516</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,928</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,926</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,353</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">38</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,955</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,372</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,417</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">64</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">67</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,984</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,676</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(308</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(93</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">459</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income before income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,891</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,042</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">151</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Provision for income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,622</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,738</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">116</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Revenue</I>.&nbsp;&nbsp;&nbsp;&nbsp;Revenue increased $9.4 million, or 27%, from $34.6 million in 2009 to $44.0
million in 2010. The increase was due to increased sales of licenses to our products to existing customers and new customers, and includes the contribution of the Sequence acquisition. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We market our products in four geographic regions: United States; Europe; the Middle East and Africa, or EMEA; Asia Pacific, excluding Japan; and
Japan. Revenue based on the regions to which we shipped our products was as follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="80%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Percentage of revenue</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percentage<BR>Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">United States</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">57</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Europe, Middle East and Africa</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Asia Pacific, excluding Japan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Japan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our percentage of revenue by geography was relatively stable in 2010 compared to 2009, with the exception of
growth in Japan, which was primarily due to increased sales of licenses to existing customers. The modest decrease in the percentage of revenue from the United States in 2010 was due to sales in other geographies growing more quickly than in the
United States. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Cost of revenue</I>.&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue increased $2.3 million, or 35%, from $6.7 million in 2009
to $9.0 million in 2010. Cost of revenue increased primarily due to increased employee-related costs of $1.4 million related to increased headcount required to service our growing customer </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">56 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
base and additional headcount from the Sequence acquisition, increases in amortization of acquired intangible assets of $0.7 million, and royalty payments to third-party vendors of $0.2 million
related to the Sequence acquisition. As a percentage of revenue, cost of revenue increased slightly, from 19% in 2009 to 20% in 2010. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Sales and marketing expense</I>.&nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing expense increased $3.1 million, or 32%, from $9.8 million in 2009 to
$12.9 million in 2010. Sales and marketing expense increased primarily due to increased employee-related costs of $2.5 million resulting from increased commissions and additional headcount, including from the Sequence acquisition, and increased
travel-related expense of $0.3 million. As a percentage of revenue, sales and marketing expense increased slightly, from 29% in 2009 to 30% in 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Research and development expense</I>.&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense increased $2.9 million, or 34%, from $8.6 million in 2009 to $11.5 million in 2010. Research and development expense
increased primarily due to increased employee-related costs of $2.8 million related to additional headcount, including from the Sequence acquisition. As a percentage of revenue, research and development expense increased slightly, from 25% in 2009
to 26% in 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>General and administrative expense</I>.&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expense increased $1.3
million, or 38%, from $3.6 million in 2009 to $4.9 million in 2010. General and administrative expense increased primarily due to increased employee-related costs of $0.9 million, including additional headcount from the Sequence acquisition, and
increased third-party professional service fees of $0.4 million. As a percentage of revenue, general and administrative expense increased slightly from 10% in 2009 to 11% in 2010. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Other income (expense)</I>.&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense) increased $0.5 million, from an expense of $0.1 million in 2009 to
income of $0.4 million in 2010. The increase was primarily attributable to foreign currency exchange gains and interest income. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Provision for income taxes</I>.&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes increased $0.1 million, from $2.6 million in 2009 to $2.7
million in 2010. Our effective tax rate was 45% in each of 2009 and 2010. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">57 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Year Ended December&nbsp;31, 2009 Compared to Year Ended December&nbsp;31, 2008 </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following tables set forth the results of operations for the years ended December&nbsp;31, 2009 and December&nbsp;31, 2008: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="48%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended<BR>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended<BR>December 31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>$&nbsp;Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>%&nbsp;Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(percentage&nbsp;of&nbsp;revenue)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,695</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,601</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,906</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,812</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,662</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">850</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,883</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,939</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,056</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">41</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">77</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">81</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating expenses:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales and marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,529</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">265</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">37</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,797</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,588</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">791</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,903</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">670</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,229</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,955</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,726</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">78</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">64</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(346</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,984</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,330</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(93</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(106</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income (loss) before income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,891</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,224</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Provision (benefit) for income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,507</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,622</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,129</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">95</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3 </FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Revenue</I>.&nbsp;&nbsp;&nbsp;&nbsp;Revenue increased $8.9 million, or 35%, from $25.7 million in 2008 to $34.6
million in 2009. The increase was primarily due to growth from sales of licenses to an expanding customer base and increased use of our platforms by existing customers, as well as the impact of a partial year of financial contribution from the
Sequence acquisition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue based on the regions to which we shipped our products was as follows: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="77%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended<BR>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Percentage of revenue</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2008&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2009&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percentage<BR>Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">United States</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Europe, Middle East and Africa</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Asia Pacific, excluding Japan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Japan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our percentage of revenue by geography was relatively stable in 2009 compared to 2008, other than Japan,
which decreased four percent in 2009 as a percentage of total revenue, primarily due to revenue from other geographies growing more quickly. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Cost of revenue</I>.&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue increased $0.9 million, or 15%, from $5.8 million in 2008 to $6.7 million in 2009. Cost of revenue increased in absolute dollars primarily due to the
amortization of intangible assets of $0.4 million, and $0.3 million of additional headcount from the Sequence acquisition. As a percentage of revenue, costs of revenue decreased from 23% in 2008 to 19% in 2009, primarily due to lower growth in
customer support personnel expense relative to revenue growth. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">58 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Sales and marketing expense</I>.&nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing expense increased $0.3
million, or 3%, from $9.5 million in 2008 to $9.8 million in 2009. Sales and marketing expense increased in absolute dollars primarily due to additional headcount from the Sequence acquisition. As a percentage of revenue, sales and marketing expense
decreased from 37% in 2008 to 29% in 2009, primarily due to lower growth in customer support and sales and marketing personnel expense relative to revenue growth.<I> </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Research and development expense</I>. Research and development expense increased $0.8 million, or 10%, from $7.8 million in 2008 to $8.6 million in 2009. Research and development expense increased in absolute
dollars primarily due to increased additional headcount from the Sequence acquisition. As a percentage of revenue, research and development expense decreased from 30% in 2008 to 25% in 2009, primarily due to lower growth in research and development
personnel expense relative to revenue growth. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>General and administrative expense</I>.&nbsp;&nbsp;&nbsp;&nbsp;General and
administrative expense increased $0.7 million, or 23%, from $2.9 million in 2008 to $3.6 million in 2009. General and administrative expense increased in absolute dollars primarily due to increased third-party professional fees of $0.4 million. As a
percentage of revenue, general and administrative expense decreased from 11% in 2008 to 10% in 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Other income
(expense)</I>.&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense) remained relatively flat from 2008 to 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Provision (benefit) for
income taxes</I>.&nbsp;&nbsp;&nbsp;&nbsp;Provision (benefit) for income taxes went from a benefit of $3.5 million in 2008 to an expense of $2.6 million in 2009. The increase in income taxes was primarily attributable to our conclusion in 2008 that
it was more likely than not that substantially all of our deferred tax assets, except certain foreign tax credits, will be realized and as a result, a valuation allowance of $4.6 million was released during 2008, of which $4.1 million was recorded
as a deferred tax benefit, and $0.5 million was recorded as a goodwill adjustment. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">59 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Quarterly Results (Unaudited) </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following table presents our unaudited quarterly consolidated statement of operations data for the eight quarters ended December&nbsp;31, 2010. We have prepared our unaudited quarterly financial information on
a consistent basis with our audited consolidated financial statements included in this prospectus, and the financial information reflects all normal, recurring adjustments that we consider necessary for a fair statement of such information in
accordance with GAAP for the quarters presented. The results for any quarter are not necessarily indicative of future results. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="48%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="30" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Three Months Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Mar.&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>June&nbsp;30,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Sept.&nbsp;30,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Dec.&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Mar. 31,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>June&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Sept.&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Dec. 31,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="30" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,106</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,880</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,439</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,176</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,417</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,723</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,747</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,160</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,502</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,541</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,620</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,999</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,099</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,200</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,305</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,395</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,339</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,819</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,177</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,318</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,523</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,442</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,765</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales and marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,042</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,915</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,357</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,480</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,827</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,040</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,941</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,122</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,031</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,954</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,058</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,545</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,688</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,798</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,972</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,058</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">603</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">783</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">983</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,204</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">962</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">979</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,510</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,475</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,676</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,652</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,398</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,229</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,477</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,817</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,423</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,655</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,928</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,687</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,421</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(52</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,841</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,706</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,019</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(70</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(58</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">65</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">318</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income before income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,858</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,637</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,363</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">33</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,823</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,771</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,337</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,111</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Provision for income tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">390</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,309</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">676</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">247</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">862</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">831</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">684</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">361</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,468</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,328</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">687</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(214</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">961</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">940</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">653</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Revenue.&nbsp;&nbsp;&nbsp;&nbsp;</I>Historically, our revenue has fluctuated quarter-to-quarter due to the timing
of new customer acquisitions, existing customer renewals, and the related timing of delivery of licenses to our customers, which impacts when we can begin to recognize revenue in accordance with our revenue recognition policies. License delivery
timing has primarily been impacted by our customers&#146; project schedules and the timing of new and enhanced product releases by us. To date, we have not experienced any significant impact on our results of operations due to seasonality. See
&#147;Risk Factors&#151;Risks Related to Our Business&#151;Our operating results have fluctuated from quarter-to-quarter and may continue doing so, which may cause our business and operating results to be materially and adversely affected and the
market price of our common stock to decline or be volatile.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Cost of revenue.&nbsp;&nbsp;&nbsp;&nbsp;</I>Our cost of revenue
has increased relatively steadily over the eight quarters reported above due to increasing employee-related expenses for increased headcount of customer support personnel and the amortization of acquired intangible assets. The increase in cost of
revenue in the fourth quarter of 2009 was primarily due to the amortization of acquired intangible assets related to the Sequence acquisition in September 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Sales and marketing expense.&nbsp;&nbsp;&nbsp;&nbsp;</I>Our sales and marketing expense has fluctuated quarter-to-quarter primarily due to marketing tradeshow expense and commission expense for our sales and
support team. Our commission program is tiered such that achievement of certain sales thresholds during the year increases sales commission rates. As a result, our sales and marketing expense increased in the fourth quarters of 2009 and 2010
primarily due to higher </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">60 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
commission expenses that were the result of members of our sales and support team exceeding their sales targets and reaching higher commission tiers. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>General and administrative expense</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our general and administrative expense has typically increased over the last
eight quarters as we have grown our business. We experienced a larger than usual increase in our general and administrative expense during the third quarter of 2009 due primarily to the third-party professional services fees related to our
acquisition of Sequence. Our general and administrative expense increased significantly in the third quarter and fourth quarter of 2010 primarily due to an increase in third-party professional services fees. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Net income (loss)</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our net income (loss) has fluctuated over the eight quarters reported above primarily as a result
of the factors described above. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Liquidity and Capital Resources </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our short-term and long-term liquidity requirements primarily arise from working capital requirements and capital expenditures, as well as acquisitions from time to time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that our cash on hand and anticipated cash flows from operations will provide sufficient liquidity to fund our current obligations,
projected working capital requirements, and capital spending in the ordinary course of business for at least the next 12 months. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In
summary, our cash flows were as follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="48%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by operating activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,225</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,248</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,996</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,748</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by (used in) investing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,751</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">953</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,704</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,339</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,292</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by (used in) financing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,925</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,974</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(439</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,486</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net increase in cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,523</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,276</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,753</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">942</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Cash Flows for the Years Ended December&nbsp;31, 2008, 2009, and 2010 </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Operating Activities </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net
cash provided by operating activities increased by $1.7 million in 2010 compared to 2009 primarily due to a decrease in accounts receivable of $4.7 million and an increase in amortization and depreciation expense of $0.5 million, partially offset by
an increase in deferred revenue of $2.3 million and a decrease in deferred tax assets of $0.9 million. Net cash provided by operating activities increased slightly in 2009 compared to 2008. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Investing Activities </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Investing activities primarily include cash paid for acquisitions and cash invested in or proceeds from the sale of short-term investments. Net cash
provided by (used in) investing activities was $(3.8) million, $1.0 million, and $(1.3) million in 2008, 2009, and 2010, respectively. Net cash paid for short-term investments accounted for $3.4 million and $1.1 million in 2008 and
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">61 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
2010, respectively. Cash paid for the Sequence acquisition accounted for $4.3 million of cash used for investing activities in 2009, offset by $6.0 million in net proceeds from short-term
investments. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Financing Activities </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Cash provided by (used in) financing activities consists of net proceeds from common stock purchases from option exercises and installment payments related to acquisitions. Net cash provided by (used in) financing
activities was $49 thousand, $(1.9) million, and $(0.4) million in 2008, 2009, and 2010, respectively. Cash paid for purchase price holdbacks for the Sequence and Optimal acquisitions accounted for $2.0 million and $0.5 million in 2009 and 2010,
respectively. No installment payments for acquisitions were made in 2008. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Indebtedness </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We had no long-term indebtedness in 2008, 2009, or 2010. We do not maintain any lines of credit. See &#147;Risk Factors&#151;Risks Related to Our
Business&#151;Future capital needs may require us to seek debt financing or additional equity funding that, if not available on acceptable terms or at all, could cause our financial condition to deteriorate and materially harm our business.&#148;
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Contractual Commitments </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our
cash flows from operations depend on several factors, including fluctuations in our operating results, accounts receivable collections, and the timing of payments. As a result, the impact of contractual obligations on our liquidity and capital
resources in future periods should be analyzed in conjunction with such factors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth our contractual
commitments as of December&nbsp;31, 2010, for the periods noted: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="65%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2012-<BR>2013</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2014-<BR>2015</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Thereafter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating leases (1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">980</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">780</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">200</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Capital leases</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">64</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">56</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Royalty and license payment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">653</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">653</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term accrued income taxes (2)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,713</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,410</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,489</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">208</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The lease for our corporate headquarters expires on October&nbsp;31, 2011. We expect that our operating lease commitments will increase once we either renew or expand the lease
for our current headquarters or enter into a lease for new headquarters. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Long-term accrued income taxes represent unrecognized tax benefits as of December&nbsp;31, 2010. Currently, a reasonably reliable estimate of timing of payments in individual
years beyond fiscal 2011 cannot be made due to uncertainties in the timing of the commencement and settlement of potential audits. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Off-Balance Sheet Arrangements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We had no
off-balance sheet arrangements at December&nbsp;31, 2010, as defined in Item&nbsp;303(a)(4)(ii) of Regulation S-K promulgated by the Securities and Exchange Commission. We do not have any relationships with unconsolidated entities or financial
partners, such as entities often referred to as structured finance or special purpose entities. In addition, we have not entered into any synthetic leases. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">62 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Critical Accounting Policies </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an ongoing basis, including those related
to our revenue, income taxes, asset impairments, and stock-based compensation. We base our estimates on experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates. Different assumptions or judgments, and the resulting estimates, would likely affect our consolidated financial statements.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe the following critical accounting policies are the most significant to the presentation of our consolidated financial
statements and require difficult, subjective, and complex judgments. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Revenue recognition </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We license our software products and solutions primarily under time-based licenses, or TBL, agreements. A TBL is a license valid for a finite term,
generally one to three years, in which the license expires at the end of the term. The software licenses are generally bundled with post-contract customer support (maintenance) for the license term. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We recognize revenue when: (1)&nbsp;persuasive evidence of an arrangement exists, (2)&nbsp;delivery of software or services has occurred,
(3)&nbsp;the fee for such software or services is fixed or determinable, and (4)&nbsp;collectability of the full license or service fee is probable. We apply these revenue recognition criteria as follows: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Persuasive evidence of an arrangement exists</I>.&nbsp;&nbsp;&nbsp;&nbsp;Prior to recognizing revenue on an arrangement, our customary policy is to have a
purchase order from customers that have previously negotiated a master end user license arrangement or purchase agreement, signed by both the customer and us. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Delivery has occurred</I>.&nbsp;&nbsp;&nbsp;&nbsp;We deliver our products to our customers electronically, and the delivery occurs when we provide the
customer access codes, or &#147;license keys,&#148; that allows the customer to access a fully functioning version of the software product. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Certain of our license agreements provide our customers the right to adjust their licenses to cover other specified software. Because these agreements provide access to a specified set of software products, we do
not consider delivery to have occurred until access to at least one copy of each of the products specified in the agreement has been granted to the customer. We will begin to recognize revenue ratably over the remaining license term once delivery of
all software products covered by a license agreement occurs. Differences in the timing of delivery of software licenses and the start of license terms have caused period-to-period fluctuations in our revenue and are expected to continue to do so.
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Fee is fixed or determinable.&nbsp;&nbsp;&nbsp;&nbsp;</I>Our determination of whether an arrangement fee is fixed or determinable depends principally on the
arrangement&#146;s payment terms. For customers where payments are weighted toward the latter part of the contract term, we recognize revenue that represents the lesser of the fee that is due and payable, or the portion of the entire fee that would
be recognized under a straight line method over the term of the license. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">63 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Collectability is probable.&nbsp;&nbsp;&nbsp;&nbsp;</I>We judge collectability of the arrangement fee on a customer by customer basis pursuant to our credit
review policy. When we acquire a new customer, we evaluate the customer&#146;s financial position and ability to pay prior to selling a TBL to that customer. We generally only sell additional licenses to, or enter into license renewals with,
existing customers with which we have a history of successful collection. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have analyzed all of the elements
included in our multiple element software arrangements and determined that as of December&nbsp;31, 2008, 2009, and 2010, we did not have sufficient vendor specific objective evidence to allocate revenue to the maintenance components, as all current
license arrangements come packaged with a combination of a term-based license and maintenance. Accordingly, assuming all other revenue recognition criteria are met, we recognize revenue ratably over the license term or as customer installments
become due and payable, whichever is later. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We classify deferred revenue on our consolidated balance sheet as current and long term
deferred revenue based upon whether we expect to recognize the revenue within the next 12 months or after the next 12 months. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Stock-based compensation </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In
connection with the grant of stock options to employees, we recorded stock-based compensation using the grant date fair value determined by the Black-Scholes-Merton option pricing model. Using the Black-Scholes-Merton option pricing model, we valued
stock options taking into account the stock price at the grant date, exercise price, expected life of the option, expected dividend, and the risk free interest rate over the expected life of the option. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Option-pricing models require the input of highly subjective assumptions, including the option&#146;s expected life and the price volatility of the
underlying stock. We estimated volatility by reference to the volatilities of comparable public companies. Judgment is also required in estimating the expected term of options and the number of stock-based awards that are expected to be forfeited.
For stock-based compensation, the fair value of the stock is a significant factor in determining the amount of stock-based compensation expense. Prior to this offering, our shares have not been publicly traded and the fair value of our common stock
has been determined by our board of directors. In determining the fair value of our common stock, our board of directors considers a number of factors, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">contemporaneous studies of our common stock value performed by valuation specialists commencing in December 2006; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">key milestones achieved in our business, including forecasted revenue, expense and cash flows, product development, and market acceptance; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">comparable company trading multiples. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our board of directors also considered a variety of other factors including the book value per share of our outstanding capital stock, the price at which shares of our outstanding capital stock had previously been
issued by us, the liquidation rights and other preferences to which the holders of those shares were entitled, the liquidation rights and other preferences which we may be required to grant to subsequent purchasers of one or more series of our
preferred stock, the lack of marketability of our common stock, our industry revenue multiplier, the value of our assets, our actual and potential future cash flows, risk factors impacting us, exit alternatives and valuations for companies in our
industry, values of similar entities in the industry, our results of operations and the potential for success of our competitors in the market and the competitive landscape. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">64 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Determining the fair value of our stock requires making complex and subjective judgments and
estimates. There is inherent uncertainty in making these judgments and estimates. Our board of directors reviewed external studies of our common stock value prepared in accordance with applicable elements of the practice aid issued by the American
Institute of Certified Public Accountants entitled <I>Valuation of Privately Held Company Equity Securities Issued as Compensation</I>, primarily using a probability weighted expected return method which derives the per share value of common stock
under four future outcomes. The enterprise fair values under the various scenarios rely on both an income approach and a market multiple approach. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The income approach involves applying appropriate discount rates to estimated cash flows that are based on forecasts of our revenue and costs. The projections used for each valuation date were based on our expected
operating performance through the forecast periods. The assumptions underlying the estimates were consistent with our business plan. The future cash flows were determined by subtracting taxes, future capital spending and future changes in working
capital and adding future depreciation and amortization to earnings before interest and taxes. The interim cash flows and resulting terminal value were then discounted at a rate based on the weighted average cost of capital of comparable companies,
as adjusted for our specific risk profile. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The market multiple approach was based on our historical and projected revenue, projected
earnings over a particular period, which amounts were multiplied by a range of appropriate risk-adjusted multiples. The market multiples were obtained through the market comparison method, where companies having their stock traded in the public
market were selected for comparison purposes and used as a basis for choosing reasonable market multiples for us. Revenue and earnings multiples were derived from publicly traded companies deemed to be comparable to us. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">After estimating our value based on the income and market approaches, the external studies of our common stock value then utilized a
probability-weighted expected return method. Under the probability-weighted expected return method, the value of our common stock on a per share basis was estimated based upon an analysis of values for us assuming various outcomes, such as an
initial public offering, merger or sale, liquidation or remaining private, and the estimated probability of each outcome on a per share basis. There is inherent uncertainty in these estimates. If different assumptions and estimates had been used,
the valuations would have been different. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Since the beginning of 2009, we granted options to purchase shares of our common stock as
follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:51pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Date of Grant</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of<BR>Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Exercise&nbsp;Price<BR>and&nbsp;Estimated<BR>Fair Value</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">February&nbsp;26, 2009</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">36,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">May&nbsp;18, 2009</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">August&nbsp;26, 2009</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35,050</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">December&nbsp;2, 2009</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">346,200</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">January&nbsp;27, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14,800</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">April&nbsp;8, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">123,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">August&nbsp;23, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">222,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.55</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">November&nbsp;16, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">58,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4.55</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">February&nbsp;3, 2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">88,875</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">March&nbsp;7, 2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">938,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.80</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">65 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors was regularly apprised that each valuation was being conducted, and considered
the relevant objective and subjective factors deemed important by our board of directors in each valuation conducted. Our board of directors determined that the assumptions and inputs used in connection with these valuations reflected our board of
directors&#146; best estimate of our business condition, operating performance, and prospects at each valuation date. The deemed fair value per common share underlying our stock option grants was determined by our board of directors with input from
management at each grant date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;26, 2009,&nbsp;May&nbsp;18, 2009, and August&nbsp;26, 2009, we granted options to
purchase an aggregate of 86,550 shares of our common stock with an exercise price of $1.75 per share. The fair value of our common stock was determined by our board of directors to be $1.75 per share based in part on an external study of our common
stock value as of October&nbsp;31, 2008, and on certain of the factors set forth above. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On December&nbsp;2, 2009,&nbsp;January&nbsp;27,
2010, and April&nbsp;8, 2010, we granted options to purchase an aggregate of 484,300 shares of our common stock with an exercise price of $2.25 per share. The fair value of our common stock was determined by our board of directors to be $2.25 per
share based in part on an external study of our common stock value as of September&nbsp;4, 2009, and on certain of the factors set forth above. The increase in fair value from $1.75 per share in the October&nbsp;31, 2008 valuation to $2.25 per share
in the September&nbsp;4, 2009 valuation was primarily the result of achieving our projected revenue growth, an increase in our revenue projections, as well as the following events during the intervening period: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we introduced two new RedHawk products. We also announced another new product, Sentinel-PI, which received the &#147;Best New Product&#148; award at the Design
Automation Conference; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we secured significant new customers; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we completed our acquisition of the assets and certain foreign subsidiaries of Sequence Design in September 2009 to expand our business into the register
transfer level design-for-power solutions, secure broader customer reach, and secure a capable employee base as well as potential valuable synergies. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">On August&nbsp;23, 2010, we granted options to purchase an aggregate of 222,000 shares of our common stock with an exercise price of $3.55 per share. The fair value of our common stock was determined by our board
of directors to be $3.55 per share, based in part on an external study of our common stock value as of June&nbsp;30, 2010, and on certain of the factors set forth above. The increase in fair value from $2.25 per share in the September&nbsp;4, 2009
valuation to $3.55 per share in the September&nbsp;30, 2010 valuation was primarily the result of increased revenue, as well as the introduction of several new products, including PowerArtist, PathFinder, and a new substrate analysis capability
option for the Totem platform. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On November&nbsp;16, 2010, we granted options to purchase an aggregate of 58,300 shares of our common
stock with an exercise price of $4.55 per share. The fair value of our common stock was determined by our board of directors to be $4.55 per share based in part on an external study of our common stock value as of September&nbsp;30, 2010, and on
certain of the factors set forth above. The increase in fair value from $3.55 per share in the June&nbsp;30, 2010 valuation to $4.55 per share in the September&nbsp;30, 2010 valuation was primarily the result of continued strong financial
performance as well as our contemplating the possibility of an initial public offering of our common stock. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">66 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;3, 2011, we granted options to purchase an aggregate of 88,875 shares of our common
stock with an exercise price of $5.35 per share. The fair value of our common stock was determined by our board of directors to be $5.35 per share based in part on an external study of our common stock value as of December&nbsp;31, 2010, and on
certain of the factors set forth above. The increase in fair value from $4.55 per share in the September&nbsp;30, 2010 valuation to $5.35 per share in the December&nbsp;31, 2010 valuation was primarily the result of the following events during the
intervening period: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we released an enhanced application, RedHawk 10.2; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we experienced positive results with respect to our research and development testing; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our estimate that the possibility an initial public offering of our common stock had become more likely. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On March&nbsp;7, 2011, we granted options to purchase an aggregate of 938,300 shares of our common stock with an exercise price of $6.80 per share.
The fair value of our common stock was determined by our board of directors to be $6.80 per share based in part on an external study of our common stock value as of February&nbsp;28, 2011, and on certain of the factors set forth above. The increase
in fair value from $5.35 per share in the December&nbsp;31, 2010 valuation to $6.80 per share in the February&nbsp;28, 2011 valuation was primarily the result of the following events during the intervening period: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the market for our RedHawk 10.2 product continued to develop; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we achieved research and development milestones; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we continued our efforts toward completing an initial public offering. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table presents the intrinsic value of all options outstanding
at&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, based on the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the
midpoint of the estimated offering range set forth on the cover page of this prospectus. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="68%"></TD>
<TD VALIGN="bottom" WIDTH="13%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="13%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of&nbsp;Options<BR>Outstanding</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Intrinsic<BR>Value</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Vested options</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Unvested options</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to the estimates for the value of our common stock price discussed above, the following are additional key
assumptions used to determine the fair value of options granted using the Black-Scholes-Merton option pricing model: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Expected stock
price volatility</I>.&nbsp;&nbsp;&nbsp;&nbsp;The computation of expected volatility is based on the volatility of comparable companies from a representative peer group based on industry and market capitalization data. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Expected term of option</I>.&nbsp;&nbsp;&nbsp;&nbsp;The expected term represents the period that stock-based awards are expected to be
outstanding, giving consideration to the contractual terms of the stock-based awards, vesting schedules, and expectations of future employee behavior as influenced by changes to the terms of our stock-based awards. We determined the expected term in
accordance with the &#147;simplified method&#148; for a &#147;plain vanilla&#148; employee stock option for which the value was estimated using a Black-Scholes-Merton formula. Under this approach, the expected term would be presumed to be the
midpoint between the vesting date and the end of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">67 </FONT></P>


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the contractual term. The use of this approach was permitted as we did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the
fact that our equity shares have not been publicly traded. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Expected dividend yield</I>.&nbsp;&nbsp;&nbsp;&nbsp;The dividend yield
assumption is based on our history and expectation of dividend payouts. We use a dividend yield of zero, as we have never paid cash dividends and do not expect to pay cash dividends in the future. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Expected risk free interest rate</I>.&nbsp;&nbsp;&nbsp;&nbsp;The risk-free interest rate is based on the U.S. Treasury yield curve in effect at
the time of grant for the expected term of the option. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Forfeiture rate</I>.&nbsp;&nbsp;&nbsp;&nbsp;The forfeiture rate is based on a
review of recent forfeiture activity and expected future employee turnover. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Income Taxes </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We provide for income taxes using the asset and liability method.&nbsp;We recognize deferred tax assets and liabilities for future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.&nbsp;We measure deferred tax assets and liabilities
using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled.&nbsp;We recognize the effect on deferred tax assets and liabilities of a change in tax rates as
income in the period that includes the enactment date.&nbsp;We provide a valuation allowance to reduce deferred tax assets to the amount of future tax benefits that we are more likely than not to realize. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We recognize the effect of income tax positions only if those positions are more likely than not to be sustained.&nbsp;We measure recognized income
tax positions at the largest amount that is greater than 50% likelihood of being sustained.&nbsp;We reflect changes in recognition or measurement in the period in which the change in judgment occurs.</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The calculation of tax liabilities involves the inherent uncertainties associated with the application of complex tax laws.&nbsp;We are also
subject to examination by various taxing authorities.&nbsp;We believe we have adequately provided in our financial statements for potential additional taxes related to unrecognized tax benefits.&nbsp;If we ultimately determine that these amounts are
not owed, we would reverse the liability and recognize the tax benefit in the period in which we determine that the liability is no longer necessary.&nbsp;If an ultimate tax assessment exceeds our estimate of tax liabilities, we would record an
additional charge to income. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our assumptions, judgments, and estimates relative to the current provision for income taxes take into
account current tax laws, our interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We have established reserves for income taxes to address potential exposures
involving tax positions that could be challenged by tax authorities. Although we believe our assumptions, judgments, and estimates are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of the current and any future
tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our assumptions,
judgments, and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category of future taxable income, such as foreign source income. Specifically, during the year ended December&nbsp;31, 2008,
based on our historical taxable income and projections for future taxable income over the periods for which the deferred </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">68 </FONT></P>


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tax assets are deductible, we believed that it was more likely than not that that all of our deferred tax assets except certain foreign tax credits and acquired net operating losses subject to
limitations will be realized and as a result, valuation allowance of $4.6 million was released during the year, of which $4.1 million was recorded as deferred tax benefit, and $0.5 million was recorded as goodwill adjustment. Actual operating
results and the underlying amount and category of income in future years could render our current assumptions, judgments, and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments, and estimates mentioned above
could cause our actual income tax obligations to differ from our estimates, thus materially impacting our business, financial condition, and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Goodwill and Intangible Assets </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Goodwill represents the excess of the aggregate purchase price
over the fair value of the tangible and identifiable intangible assets we acquire. We test the carrying amount of goodwill for impairment annually or more frequently if facts and circumstances warrant a review. A two-step evaluation process is
conducted to assess whether an impairment charge related to goodwill is required. First, we compare the fair value of each reporting unit to its carrying value. If the fair value equals or exceeds the carrying value, we do not consider goodwill
impaired, and we do not proceed to the second step. If the carrying value of any reporting unit exceeds its fair value, then we must determine the implied fair value of the reporting unit&#146;s goodwill and compare this to the carrying value of its
goodwill and other intangible assets. If the carrying value of a reporting unit&#146;s goodwill exceeds its implied fair value, we record an impairment charge equal to the difference. In 2008, 2009, and 2010, we operated as one reporting unit and
there were no impairments to goodwill. The fair value of our reporting unit exceeded the carrying value by a significant amount. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Intangible assets consist of purchased technology, patent, customer relationships, and contract backlog. We amortize intangible assets on a
straight line basis over their estimated useful lives, which range from two to seven years. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Recent Accounting Pronouncements </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In October 2009, the FASB issued new standards for revenue recognition with multiple deliverables. These new standards impact the determination of
when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting for non-software transactions. Additionally, these new standards modify the manner in which the transaction consideration is
allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. These new standards are required to be adopted in the first quarter of 2011. We will adopt the guidance on a
prospective basis effective the first quarter of fiscal 2011. We do not believe the adoption of the guidance will have a material impact on our consolidated financial statements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In October 2009, the FASB issued new standards for the accounting for certain revenue arrangements that include software elements. These new
standards amend the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. These new standards are required to be adopted in
the first quarter of 2011. We will adopt the guidance on a prospective basis effective the first quarter of fiscal 2011. We do not believe the adoption of the guidance will have a material impact on our consolidated financial statements. </FONT></P>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">69 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Quantitative and Qualitative Disclosures About Market Risk </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Currency Exchange Rates </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Although a majority of our revenue and operating expenses is denominated in U.S. dollars, and we prepare our financial statements in U.S. dollars in
accordance with GAAP, a portion of our revenue and operating expenses is in foreign currencies. Our revenue, costs, expenses and monetary assets and liabilities are exposed to changes in currency exchange rates as a result of our global operating
and financing activities, none of which is currently material. Although we have not previously done so, to mitigate the exposures resulting from the changes in the exchange rates of foreign currencies, we may enter into foreign exchange forward
contracts. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">70 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_10"></A>BUSINESS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are a leading provider of innovative power analysis and optimization software
solutions that enable the design of power-efficient, high-performance, noise-immune integrated circuits, or ICs, and electronic systems. Our solutions consist of a suite of software tools and methodologies that enable design engineers to reduce
power consumption, ensure reliable delivery of power to ICs and electronic system components, and mitigate power-induced signal interference, or noise. We believe our solutions are critical to the design of our customers&#146; products and allow our
customers to deliver power-efficient ICs and electronic systems that are resistant to the impact of noise, or noise-immune, at lower costs and with a faster time to market than with alternative solutions. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The demand for more power-efficient and noise-immune ICs and electronic systems is being driven primarily by the proliferation of high-performance
mobile devices, miniaturization of these devices, and the rising costs of electricity for data centers. Developing these ICs and electronic systems, however, is increasingly difficult due to industry trends including growing design complexity,
smaller geometries for ICs, and the increased integration of various components of an electronic system onto a single IC. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our singular
focus on power analysis and optimization, backed by our more than ten years of research and development exclusively dedicated to these areas, strongly positions us to address these market trends and design challenges. We have introduced several
products that have been first to market in various aspects of power and noise analysis. Our products address power and noise challenges throughout various phases of the IC and electronic system design process, from initial prototyping to design
completion. The accuracy, efficiency, capacity, and comprehensiveness of our solutions provide engineers with the confidence in their analyses to progress a design to the next phase in the process, which is known as sign-off. Highly accurate and
reliable sign-off solutions are critical to engineers due to the costly and highly visible consequences of design flaws that can lead to product failures and recalls. We believe that our RedHawk platform is the sign-off solution of choice for the
analysis of reliable delivery of power to ICs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In 2010, we sold licenses to 125 companies globally and we frequently sell licenses to
multiple business units within these companies. Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli. Our customers also include leading electronic system companies serving market
segments such as mobile devices, high-performance computing and networking, consumer electronics, and automotive and medical electronics. These customers include, among others, ARM Limited, Hynix Semiconductor Inc., Intel Corporation, LSI
Corporation, MediaTek, Inc., QUALCOMM Incorporated, Samsung Electronics Co., Ltd., Sony Corporation, STMicroelectronics N.V., Texas Instruments Incorporated, and Toshiba Corporation. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We sell licenses primarily through a direct sales and support organization located in our customers&#146; key domestic and international regions.
Our global support organization is comprised of application engineers who are specialists in power-efficient and noise-immune design and analysis methodologies. We view our support team as a competitive differentiator that, along with the compelling
value delivered by our products, has driven our high software license renewal rate. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers today. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We generate substantially all of our revenue through the sale of time-based software licenses, typically ranging from one to three years. As of December&nbsp;31, 2010, the average length
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">71 </FONT></P>


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of our time-based licenses was two and one half years. Our revenue was $25.7 million, $34.6 million, and $44.0 million in 2008, 2009, and 2010, respectively, and we were profitable in each of
these years. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Industry </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Design engineers use a variety of software tools for the development of power-efficient and noise-immune ICs and electronic systems. Increasing
design complexity and enhanced IC and system functionality are making power-efficient, noise-immune design and analysis one of the most critical and complex challenges affecting the price, performance, reliability, and time to market of ICs and
electronic systems. Highly-sophisticated software solutions are thus required to comprehensively address power efficiency and noise immunity for both the design of ICs and electronic systems. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Growth in Demand for More Power-Efficient and Noise-Immune ICs and Electronic Systems </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Several factors are driving increasing demand for more power-efficient and noise-immune ICs and electronic systems, including: </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>High-Performance Mobile and Other Electronic Device Proliferation </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The demand for high-performance mobile devices, such as smartphones and media tablets, is driving growth in the semiconductor industry. Media tablet and smartphone unit sales are projected to increase 163% and 44%,
respectively, in 2011 over 2010, according to IDC. Consumers are using their mobile devices for a growing number of applications, for more hours every day, and are demanding extended battery life. IC and electronic system manufacturers are
developing more power-efficient electronic components to meet this demand and have begun marketing extended battery life as a key differentiating product feature. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Device Miniaturization </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The increased demand for smaller electronic systems, such as
smartphones, media tablets, and digital cameras, along with the trend toward smaller geometries for ICs, has required semiconductor manufacturers to significantly increase circuit density and the number of transistors on ICs. When the space between
circuits is reduced, power is condensed into a smaller area, which can cause overheating, impacting IC performance, reliability, and overall system efficiency. In addition, smaller devices constrain the size of cooling systems and batteries, which
reduces available power. As a result, design engineers must develop products that consume less power in order to extend battery life and manage heat dissipation. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Increased Wireless Connectivity </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The ubiquity of wireless protocols, including cellular, WiFi
and Bluetooth, is enabling enhanced connectivity between a wide variety of electronic devices. For example, consumers are now using their smartphones to wirelessly connect to and control their televisions and home entertainment centers, printers,
personal computers, thermostats, lighting and security systems, and even to monitor the energy output of solar panels on their roofs. This explosion in system-to-system wireless communication is amplifying the amount of noise within and between ICs,
causing systems to sometimes malfunction or fail. IC and electronic system designs must be adapted to reduce the impact of noise in order to facilitate the ongoing trend towards increased wireless connectivity. </FONT></P>
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 <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>IT Infrastructure Power Consumption and Electricity Costs </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Reducing power consumption and electricity costs for information technology, or IT, infrastructure has become a high priority for enterprises and
data centers. Gartner estimates that at current pricing, the energy expense to support a typical data center server will exceed the cost of that server within three years. As a result, data center operators are seeking solutions that reduce IT
infrastructure power consumption and electricity costs while also enhancing performance. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>The Challenges of Power-Efficient and
Noise-Immune IC and Electronic System Design </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">To meet the rising demand for more power-efficient and noise-immune ICs and
electronic systems, engineers require power analysis and optimization solutions to develop and test new designs. The design challenges that these solutions must address include: </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Power Budgeting </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Engineers
who design ICs must meet power specification limits, or power budgets, that are dictated by the electronic system companies who buy their products. Demand for enhanced functionality and performance in ICs and electronic systems is rapidly increasing
the amount of power required by these products. However, power budgets are expected to remain at current levels in order to meet extended battery life demands of end users. The combination of increasing power requirements and constant power budgets
is creating a significant challenge for design engineers. According to the International Technology Roadmap for Semiconductors, or ITRS, the power consumption requirements of mobile devices will be approximately six times greater than their power
budgets by 2015 and ten times greater by 2020 unless power-efficiency design, analysis, and optimization solutions are used in the design process. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Design engineers must meet power budgets for a wide variety of operating conditions. For example, an IC for a smartphone must be tested to ensure that it meets power budget requirements in active, standby, dormant,
charging, and shutdown modes. A comprehensive power budgeting solution is required to accurately analyze power values in all operating modes and while running all potential applications of the system. If engineers fail to meet power budgets, their
products may be rejected by electronic system designers, or the end product may experience reduced battery life or other detrimental performance issues. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Power Delivery Integrity </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Power delivery integrity is the reliable delivery of power to all
components of ICs and electronic systems while meeting power budgets. Power delivery integrity is analogous to the way in which an electric power grid operator ensures that electricity is delivered to end users reliably, consistently, and in
adequate amounts while minimizing loss in the transmission network. ICs and electronic systems designed with inadequate power delivery integrity may experience large fluctuations in supply voltage and operating power that can cause system failure.
These fluctuations particularly impact ICs used in mobile handsets and high-performance computers, where they may cause an application or program to freeze or crash. Ensuring power delivery integrity requires accurate modeling of multiple individual
components that are designed by different engineering teams, as well as comprehensive analysis of the interactions between these components. Organizational boundaries between these engineering teams often prevent them from interacting effectively
and sharing data, which can lead to design errors and development delays. </FONT></P>
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 <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Power-Induced Noise </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The flow of electric current within an IC or electronic system can interfere with the operation of other components in the product, as well as with nearby systems. This interference is referred to as power-induced
noise. Depending on its severity, this noise may cause products to fail and can prevent mobile devices, high-performance computing and networking equipment, consumer electronics, and automotive and medical electronics from meeting regulatory
requirements or mission critical operational and safety requirements. Power-induced noise can also cause unpredictable fluctuations in the input/output data transfer rate in high-performance electronic systems, which may corrupt the data transfer
and result in, for example, a digital video stream becoming pixilated. To satisfy regulatory requirements, and prevent failures or performance degradation caused by power-induced noise, early detection using comprehensive software simulation and
modeling tools is required. The costs and complexity of resolving power-induced noise issues are significantly higher if these issues are not identified early in the design process at the IC, package, or printed circuit board, or PCB, level. This
requires effective coordination across the design process to generate representative power and noise models of the ICs, packages, and PCBs that will be integrated into an electronic system. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Limitations of Alternative Solutions </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Design engineers use power analysis to predict the power consumption in an IC or the fluctuations in the power supply in an electronic system. These predictions are used to make design change decisions that impact
the performance, cost, and development time of ICs and electronic systems, and must be highly accurate. The accuracy of the power analysis results depends on the sophistication of the simulation models created by the power analysis software, as well
as the ability of the power analysis software to model an IC in its entirety as well as its package, the PCB on which it is mounted, and in its interactions with other nearby ICs. These analyses must also be executed efficiently to enable rapid
design cycles and time to market and must be comprehensive enough to cover the various phases of the design process and each component of the electronic system. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">To achieve their design goals and meet requirements set by their customers, design engineers use a number of third party or internally developed tools. However, many of these tools only address power analysis needs
of one or a few phases of the design process. These tools do not enable the efficient sharing of data and models between the various teams working on separate design phases. Also, because they lack the capability to efficiently simulate an entire
IC, many of these tools adopt a &#147;divide-and-conquer&#148; approach whereby a design is partitioned into sub-blocks and those sub-blocks are analyzed separately. As a result, we believe the interactions that happen inside an IC, between an IC
and its package and PCB, and between various ICs on the PCB are not captured and the analyses are often inaccurate. As a result of the foregoing, we believe design processes that use these third-party or internally-developed tools result in extended
design cycles and are more at risk of design failure than if they used our solutions. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Benefits of Our Solutions </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We offer a suite of software tools and methodologies that provide innovative power analysis and optimization capabilities through various phases of
the design process, from initial prototyping to full electronic system design completion. Our solutions deliver the following benefits: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Accuracy</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our solutions analyze design models and provide results that are closely correlated to power and noise
measurements of the manufactured ICs and electronic systems. </FONT></P>
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The predictability, consistency, and reliability of our analyses provide valuable input for engineering teams during various phases in the design process. Our tools help our customers meet
increasingly stringent power budgets, and avoid costly over-designs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Capacity</I><I></I>.&nbsp;&nbsp;&nbsp;&nbsp;Our solutions can
simultaneously analyze an entire IC or electronic system, instead of using the traditional &#147;divide-and-conquer&#148; approach of partitioning a design or a system into its sub-blocks and analyzing those sub-blocks separately. Our tools can use
techniques such as hierarchical modeling to simultaneously analyze an IC, package, and PCB design, whereas other power analysis tools need to analyze individual components separately. By analyzing an entire design, we can model the interactions
inside an IC, between an IC and its package and PCB, and between the various ICs. This avoids the errors and inaccuracies that commonly occur when performing the analysis only at the sub-block level. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Efficiency</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our solutions deliver rapid turnaround for power analysis. For example, our solutions are able to
complete analyses significantly faster than many alternative power analysis tools, if these alternative tools are able to complete the analyses at all. This reduced turnaround time increases engineering team productivity, especially for those
working on complex, power-sensitive designs. We believe that the efficiency of our tools delivers a higher return on computing resources, reduces time between, and the number of, design iterations, and helps our customers achieve lower costs and
faster time to market than many alternative solutions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Comprehensiveness</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our solutions enable power
analyses at the various phases of the design process for electronic systems, from the initial IC prototyping process to full electronic system design completion, leading to quicker design convergence. Engineering teams who work on the various
components of ICs and electronic systems, or on the different phases in the design process, are often separated by organizational boundaries and may not interact or share data, which can lead to design errors or missed schedules. Our solutions
create user-friendly, compact models that enable data sharing among these different design teams, such as between automotive or communications system companies and their IC suppliers. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Our Strengths </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our core competitive strengths include: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Exclusive focus on power</I>.&nbsp;&nbsp;&nbsp;&nbsp;We focus exclusively on providing solutions that enable high-performance, power-efficient,
and noise-immune IC and electronic system designs. This focus has enabled us to dedicate significant resources towards developing what we believe are the most advanced, effective power analysis solutions available on the market. We believe we have
more research and development personnel focused on solving power and noise challenges than any of our competitors. As ICs continue their migration to smaller geometries, the design and analysis challenges we address will evolve, and we believe that
our exclusive focus on power will enable us to remain at the forefront of power analysis technology development. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Diverse and growing
blue chip customer base</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli. Our customers also include leading electronic system companies serving market
segments such as mobile devices, high-performance computing and networking, consumer electronics, and automotive and medical electronics. Our customers include, among others, ARM Limited, Hynix Semiconductor Inc., Intel Corporation, LSI Corporation,
MediaTek Inc, QUALCOMM Incorporated, Samsung Electronics Co., Ltd., Sony Corporation, STMicroelectronics N.V., Texas Instruments Incorporated, and Toshiba Corporation. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers
today. We grew our customer base by over 118% in the </FONT></P>
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last three years, from 53 customers at the beginning of 2008 to 116 customers at the end of 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Critical solution for power sign-off</I>.&nbsp;&nbsp;&nbsp;&nbsp;We believe that our flagship product, RedHawk, is the sign-off tool of choice for the analysis of reliable delivery of power to ICs. Software
design and analysis solutions achieve sign-off status by becoming a highly trusted product for the problems they solve. As a result, sign-off solutions often enjoy significant competitive advantages such as product longevity, structural barriers to
entry, and substantial market share. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Comprehensive power analysis solutions</I>.&nbsp;&nbsp;&nbsp;&nbsp;We provide engineers a
unified environment to address the design challenges associated with power efficiency and noise immunity throughout various phases of the IC and electronic system design process. Additionally, by generating compact, user-friendly models, our
solutions facilitate effective coordination among the multiple engineering teams that work on the design of ICs and complex electronic systems but are separated by organizational boundaries. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Power-focused global customer support team</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our customer support team consists of application engineers who typically
have significant and relevant industry experience who are exclusively focused on helping our customers with their power-efficiency and noise-immunity design challenges. Our support engineers analyze and resolve customer problems, gain technical
insight that enables future product development, and enhances customer loyalty. We provide direct support to our customers and view our support team as a competitive differentiator that, along with the high value of our products, helps maintain our
high license renewal rate. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Strategy </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our goal is to enhance our leadership position as a provider of software tools and methodologies that enable power-efficient, noise-immune IC and electronic system designs. Key components of our strategy include:
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Extend our core technology leadership</I>.&nbsp;&nbsp;&nbsp;&nbsp;We have established ourselves as a market and technology leader
for power analysis in the design of ICs and electronic systems. We believe that our RedHawk platform is the sign-off tool of choice for the analysis of reliable delivery of power to ICs. We plan to continue to invest in research and development to
maintain and extend our core technology leadership position. For example, we recently introduced our newest product, PathFinder, which is a simulation-based electro-static discharge, or ESD, event analysis solution. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Increase deployment of our products to existing customers</I>.&nbsp;&nbsp;&nbsp;&nbsp;As the demand for lower power and higher performance
electronic systems continues to rise, and as our customers continue to increase their focus on delivering power-efficient solutions, we plan to increase the number of licenses we sell to our existing customer base. We also plan to increase the
number of products we sell to our existing customers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Broaden our customer base</I>.&nbsp;&nbsp;&nbsp;&nbsp;We plan to continue to
increase our market share among leading IC and electronic system companies. Our ability to acquire new customers is an important element of our growth strategy, and our sales organization expends a considerable portion of its efforts on expanding
our customer base. We seek to leverage our brand, technology leadership, and customer support to add new customers. In addition to focusing on markets in which we currently have significant penetration, such as mobile devices and high-performance
consumer electronics, we also intend to target additional market leaders in high-value IC and electronic systems markets, such as memory and automotive. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Leverage existing partnerships with market leaders to penetrate their
customers</I>.&nbsp;&nbsp;&nbsp;&nbsp;We plan to leverage our relationships with leading semiconductor customers to expand our sales to their end customers. Because each of our four platforms targets different parts of the IC and electronic system
design process and generates models which can be shared with our other platforms, we can improve our customers&#146; ability to collaborate with their customers to deliver more power-efficient ICs and electronic systems. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Expand our addressable market with new products and enter new markets</I>.&nbsp;&nbsp;&nbsp;&nbsp;We plan to develop new products that target
adjacent and related end markets where we can leverage our strong brand and our core underlying technology in power analysis to deliver an even broader suite of solutions. For example, in 2010, we introduced PathFinder, our ESD analysis product. We
may also extend our product offering through selective strategic acquisitions. For example, in 2009, we acquired the assets and certain foreign subsidiaries of Sequence Design, Inc. through which we acquired PowerArtist, our platform for power
analysis in the initial design stage of an IC. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Solutions </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>The IC and Electronic System Design and Analysis Process </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The design process for an
electronic system, which typically consists of multiple packaged ICs placed on one or more PCBs within a chassis, case or enclosure, follows a series of discrete steps starting from the initial concept definition to the design and development of
individual components, leading to the final assembly of the integrated electronic system. Each component of an electronic system is separately analyzed and must receive sign-off at every design phase to ensure that it meets its power budget and
power delivery integrity requirements. The specificity of the power analysis done at each design phase requires a simulation software platform that can address the requirements of that design phase. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">During the initial design stage of an IC, the operation of the circuit as well as the interconnection of various inputs and outputs is typically
described in a high-level format known as register transfer level, or RTL. Power analysis on this RTL description of the IC enables engineers to efficiently explore design changes that help them reduce the power consumption in their circuits and
meet power budget requirements of the electronic system. During the physical design stage, the sub-blocks and the intellectual property, or IP, cores of the IC are designed first. These are integrated into an IC that is then placed inside a package
and attached to a PCB. In some applications such as mobile phones, multiple ICs may be incorporated into a single package or stacked three dimensional IC configurations to save space. Accurate and comprehensive power analyses are required to ensure
that the design of these sub-blocks, IP cores, IC, package, and PCB meet the prescribed power delivery integrity goals. Power-induced noise analysis is done on the electronic system to predict the interaction and coupling that occur between the
components present in the system. This analysis helps to predict failures from effects such as electromagnetic emission or input/output signal transmission interference. To increase the comprehensiveness and accuracy of these analyses,
representative models must be created at each phase of the design process and passed to the analysis done in the subsequent design phase. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our Product Platforms </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We organize our products into four broad platforms based on their application in the specific phase of the electronic system design process. These
four product platforms span our customers&#146; IC and electronic system design processes, providing them with comprehensive </FONT></P>
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power budgeting, power delivery integrity, and power-induced noise analysis capabilities that they need to design and deliver their complex electronic products. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>PowerArtist</I>.&nbsp;&nbsp;&nbsp;&nbsp;This software platform, used on the RTL description of an IC, helps design engineers meet their power
budget requirements through power analysis, power reduction, and design optimization early in the design cycle, when the flexibility to undertake design changes to increase the power-efficiency of the IC is highest. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Totem</I>.&nbsp;&nbsp;&nbsp;&nbsp;This software platform targets power budgeting and power delivery integrity analysis of memory components such
as Flash and DRAM, input/output IPs such as HDMI and DDR circuits, and analog IPs such as power management circuits. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>RedHawk</I>.&nbsp;&nbsp;&nbsp;&nbsp;This software platform is used for power budgeting, power delivery integrity, and power-induced noise
analysis of digital logic circuits, system-on-a-chip designs, ASICs, and microprocessor designs. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Sentinel</I>.&nbsp;&nbsp;&nbsp;&nbsp;This software platform is used for power delivery integrity and power-induced noise analysis of an
electronic system consisting of ICs, packages, and PCBs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to these four product platforms, we offer PathFinder, a
simulation-based ESD event analysis solution. An ESD event results from the creation and discharge of a large amount of electrical energy. When this electrical energy is transferred to or from an IC, it severely impacts the critical wiring and logic
circuitry of the IC. PathFinder analyzes ESD events for an entire IC, highlighting weaknesses in the design that can make it susceptible to failure from an ESD event. It operates with our RedHawk and Totem platforms to perform ESD-related
verification for digital and analog designs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The table below illustrates where our customers use each of our product platforms in the
IC design process. </FONT></P>
 <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center">

<IMG SRC="g156870g18z18.jpg" ALT="LOGO"> </P>
 <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our Design Flows </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our solutions create user-friendly, compact models that enable data sharing among different design teams, such as between automotive or communications system companies and their IC suppliers. These models enable
integrated design flows that link together disjointed design phases fostering closer collaboration among teams working on each of these design steps. These integrated design flows eliminate iterative and time-consuming design closure that results
when these design steps are undertaken separately. The end result is faster design convergence and lower product costs. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">78 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our product platforms enable three key design flows: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>RTL-to-silicon ultra-low-power design flow</I>.&nbsp;&nbsp;&nbsp;&nbsp;The combination of our PowerArtist and RedHawk platforms enables
efficient data sharing, from the initial RTL description phase to the physical design state of the IC. Analysis performed by PowerArtist at the RTL stage results in information that enhances the quality and coverage of the analyses performed by
RedHawk subsequently in the physical design process. This integrated ultra-low-power analysis flow helps design engineers meet power budget and power delivery integrity requirements by ensuring a consistent analysis methodology throughout the IC
design process. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Analog-to-digital single-chip design flow</I>.&nbsp;&nbsp;&nbsp;&nbsp;The combination of our Totem and RedHawk
platforms enables a consistent power analysis flow for complex ICs by enabling efficient data sharing between the design engineer of the sub-blocks or IPs and the IC design engineers. This data sharing mechanism, which is enabled through the
creation of compact and accurate models of the sub-blocks or IPs, helps the IC design engineer analyze an entire IC efficiently and to model and predict the interactions between these sub-blocks and IPs that impact the power budget, power delivery
integrity, and power-induced noise in the electronic system. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Chip-to-package/PCB design flow</I>.&nbsp;&nbsp;&nbsp;&nbsp;The
combination of our RedHawk and Sentinel platforms provides a comprehensive chip-package-PCB/system, or CPS, analysis and optimization environment to meet power delivery, signal integrity, thermal cooling, and electromagnetic interference design
goals. In this CPS design flow, compact models are created for all relevant components in an electronic system and then simulated concurrently for its different operating modes to ensure immunity from power-induced noise. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Customers </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our top 20 customers, based
on 2010 revenue contribution, include 14 of the 20 largest semiconductor companies, as measured by 2010 semiconductor revenue according to iSuppli. All of the iSuppli top 20 semiconductor companies were our customers in 2010. Our customers also
included leading electronic system companies serving market segments such as mobile devices, high-performance computing and networking, consumer electronics, and automotive and medical electronics. Our customers include, among others: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="26%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="35%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="35%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">ARM&nbsp;Limited</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">MediaTek Inc.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">STMicroelectronics N.V.</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Hynix&nbsp;Semiconductor&nbsp;Inc.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">QUALCOMM Incorporated</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Texas Instruments Incorporated</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Intel Corporation</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Samsung Electronics Co., Ltd.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Toshiba Corporation</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">LSI Corporation</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Sony Corporation</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">While our primary focus is on working with leading companies, we also focus significant effort on selling our
products to emerging companies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We had 116 active customers as of December 31, 2010. In 2009, two customers accounted for 10% or more
of our revenue, with Texas Instruments Incorporated accounting for 12% of our revenue and QUALCOMM Incorporated accounting for 10% of our revenue. In 2010, only one customer accounted for over 10% of our revenue, with Intel Corporation accounting
for 11% of our revenue. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our customers are also broadly distributed across geographic and product sectors. Based on the regions to which
we shipped our products, in 2010 the United States accounted for 57% of our revenue, Europe, Middle East and Africa accounted for 15% of our revenue, Asia Pacific, excluding Japan accounted for 14% of our revenue, and Japan accounted for 14% of our
revenue. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">79 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our customers often initially purchase licenses for a single location, department or division. Based
upon the initial success of the products, many of our customers have expanded their use of our products into other parts of their organizations. We believe that we can sell our existing products more extensively within our existing customers and
sell such customers new and enhanced products as we expand our product lines. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Sales and Marketing </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We generate substantially all of our revenue through our direct sales force. Our direct sales force consists of sales personnel, product
specialists, and application engineers. Application engineers primarily provide technical pre-sales and post-sales support. These engineers work with our sales team. The complexity of our products requires us to spend substantial time and effort to
assist potential customers in evaluating our software and in benchmarking our products against those of our competitors. Therefore, our sales cycle typically ranges between three and nine months but can be longer. During the sales cycle, our direct
sales force generally provides technical presentations, product demonstrations, and support for on-site customer evaluation of our platforms. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In the United States, we have sales offices located in Northern and Southern California and Texas and sales personnel in Washington. Internationally, we have sales offices located in China, France, Japan, South
Korea, and Taiwan and sales personnel located in Germany and Israel. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We typically license our products under non-exclusive license
agreements. The majority of our licenses allow a number of individual users to use our products. Substantially all of our licenses are time-based and typically range from one to three year terms. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We focus our marketing efforts on creating and increasing product demand and brand awareness based on our products and technologies, and generating
sales leads. Our strategy is to distinguish ourselves as an innovation leader by delivering products that solve mission-critical challenges and enable our customers to differentiate their products from their competitors. Our marketing programs
promote and communicate our track record of first-in-class product introductions, our leading position in power analysis for the design of ICs and electronic systems, and our electronics ecosystem design flow initiatives. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We employ various marketing communications channels to inform existing and potential customers about our products. These channels include our
website, quarterly newsletters, technology forums (live seminars), web-based seminars, on-site product training sessions, tradeshows, user workshops, whitepaper/conference papers, sponsored newsletters, blog postings, and other public relations
initiatives, with an emphasis on user experience sharing and successes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have historically spent little on direct advertising.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Research and Development </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We
primarily conduct research and development on existing and new technologies within our research and development team. We have also used acquisitions to augment our own research and development efforts, such as our acquisition of Optimal Corporation
in 2007 and our acquisition of the assets and certain foreign subsidiaries of Sequence Design, Inc. in 2009. We have received significant industry recognition for our research and development efforts, including being an EDN Innovation of the Year
Awards recipient in 2003 and 2007, and a finalist for the award in 2005, 2009, and 2010. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">80 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We operate within sectors that typically combine rapid innovation with increasing design and
manufacturing complexity. Our future performance depends in part on our ability to meet and exceed increasingly demanding productivity, quality, predictability, and cost requirements on a schedule that keeps pace with our customers&#146; technology
developments and foundry process advancements. This requires us to make significant investments to further enhance our core technologies and expand our product offerings. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We actively recruit engineers and developers with expertise and degrees in computer science, semiconductor physics, electrical engineering, and other engineering disciplines. As of December&nbsp;31, 2010, we had
127 employees engaged in research and development activities. Our research and development expenses were $7.8 million, $8.6 million, and $11.5 million in 2008, 2009, and 2010, respectively. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Customer Support </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We maintain direct customer support at various strategic locations throughout
the world and provide support on initial analysis and design flow setup in the customer design environment, training on use of our products, tracking of issues, result qualification assistance, and silicon debug. Domestically we have application
engineers based in Northern and Southern California, Colorado, Texas, and North Carolina. Internationally, we have direct customer support centers in China, France, India, Japan, South Korea, Taiwan, and customer support personnel in Israel,
Germany, and the United Kingdom. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We hire application engineers and product specialists that typically have significant and relevant
industry experience who can analyze customer needs and gain technical insight that enables future product development and enhancement. Our application engineers have deep cross-domain expertise enabling the sale and use of our products in our key
design flows. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We continually seek to achieve total customer satisfaction on the use of all of our products in the entire design flow.
Our application engineering team enables customers to successfully use our products not only for sign-off, but also for in-design optimization and for early prototyping and planning. The combination of deployment throughout the design chain and
expanded use within each design step ensures continuous and robust use of our products in a customer design environment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We also
continually seek to enhance our customers&#146; success by assisting with their critical, time-sensitive projects through early planning and continuous tracking, by identifying and jointly solving complex, next-generation problems, and by enabling
knowledge sharing and expertise build-up within and across organizations. By setting up and coordinating user groups that operate within a customer organization and across the industry, we help define standards on data sharing and analysis
guidelines that in turn enable our customers to be successful in delivering products to their customers. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Competition </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The markets in which we operate are highly competitive. We compete principally on the basis of technology leadership, product quality and features
(including ease-of-use), license terms, post-contract customer support, interoperability with our products and other vendors&#146; products, and price and payment terms. Our competitors include ANSYS, Inc., Cadence Design Systems, Inc., Magma Design
Automation Inc., Mentor Graphics Corp., and Synopsys, Inc. We also compete with many privately held companies. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">81 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Many of our competitors have, and future competitors may have, competitive advantages, including but
not limited to closer integration with design implementation tools, greater resources that can be devoted to the development, promotion, and sale of their products, more established sales channels, greater development experience, larger intellectual
property rights portfolios, and/or greater name recognition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Gaining market share in the markets in which we operate is difficult
because it often takes years for a customer to move from a competitor. The products our competitors offer are generally difficult to master. This difficulty often results in customers being disinclined to make changes once their employees, as well
as others in the industry, have developed familiarity with a particular product. Many of our competitors have established relationships with our current and potential customers and can devote substantial resources aimed at preventing us from
establishing or enhancing our customer relationships. Many of our competitors currently sell products that our customers and potential customers have broadly adopted, providing them a substantial advantage when they sell products that perform
functions substantially similar to some of our products. These structural barriers may prevent us from obtaining new customers and gaining market share, may require us to reduce product pricing and cause us to lose existing customers, which could
harm our business, financial condition, and operating results. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We also compete with the internal IC design automation development
groups of our existing and potential customers. Therefore, these customers may not require, or may be reluctant to purchase, products offered by independent vendors such as us. See &#147;Risk Factors&#151;Risks Related to Our Business&#151;The
markets in which we operate are highly competitive, and these competitive pressures may prevent us from obtaining new customers and gaining market share, may require us to reduce our product and services pricing or cause us to lose existing
customers, which could materially harm our business, financial condition, and operating results.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Intellectual Property </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We rely upon a combination of copyright, patent, trademark and trade secret laws, license and nondisclosure agreements, and technical measures to
establish and protect our intellectual property and our rights to such intellectual property. Our intellectual property portfolio includes 32 issued U.S. patents, one issued non-U.S. patent, two pending U.S. patent applications, and one pending
non-U.S. patent application. Generally, the term of patent protection is 20 years from the earliest effective filing date of the patent application. Our issued patents are scheduled to expire at various times between 2017 and 2028, subject to any
applicable patent term adjustments and our timely payment of applicable maintenance fees. Our patents generally relate to our products and the technology used in connection with our products. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">While our patent portfolio is a significant component of our intellectual property strategy, patents afford only limited protection for our
technology, may be difficult, expensive, and time consuming to enforce, and may not prevent our competitors from designing around our patents or developing competing non-infringing technologies. See &#147;Risk Factors&#151;Risks Related to Our
Business&#151;We may not obtain sufficient patent protection, which could harm our competitive position and increase our expenses.&#148; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently have six registered trademarks in the United States, and one registered trademark in non-U.S. jurisdictions. We also have rights in
other trademarks that are important to our business but that are not the subject of federal trademark registrations. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">82 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to patents and trademarks, to protect our intellectual property rights, we rely
significantly upon a combination of copyright laws, trade secret laws, non-disclosure agreements with our customers, employees, and suppliers, our internal security systems, confidentiality procedures, and employee/contractor confidentiality
agreements. Although we take steps to protect our intellectual property, infringement and misappropriation may still occur. See &#147;Risk Factors&#151;Risks Related to Our Business&#151;In addition to patents, we rely on trademark, copyright, and
trade secret laws and contractual rights to protect our intellectual property, and the failure to sufficiently protect our intellectual property could harm our ability to compete and grow our business.&#148; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are also party to various license agreements with third parties which typically grant us the right to use certain technology in conjunction with
our software products. This exposes us to risks over which we may have little or no control. See &#147;Risk Factors&#151;Risks Related to Our Business&#151;Some of our products incorporate technology we license from third parties, and if we do not
maintain these licenses, if a licensor terminates our license to use its technology, or if a licensor has difficulties keeping up with technological changes or stops supporting our products, our ability to develop and license our products could be
materially delayed, reduced or prevented.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our industry is characterized by vigorous protection and pursuit of intellectual
property rights or positions. There are numerous patents in the markets in which we operate and new patents are frequently issued rapidly. We expect that software suppliers and their customers will be subject to an increasing risk of intellectual
property claims. Any such claims, with or without merit, could be time consuming, result in costly litigation, distract management and employees, cause product shipment delays, obligate us to indemnify our customers and resellers, or require us to
enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us. See &#147;Risk Factors&#151;Risks Related to Our Business&#151;We may face intellectual property
infringement claims or other litigation, which can be costly to defend, can take the time of our management and employees away from day-to-day operations and could result in our losing important rights and paying significant damages.&#148;
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We enter into standard license and non-disclosure agreements in the ordinary course of business. Pursuant to these agreements, we agree
to indemnify our customers and resellers for losses suffered or incurred by them as a result of any patent, copyright or other third-party intellectual property infringement claim directly or indirectly caused by our products or for improper
disclosures by our employees. These indemnification obligations typically have perpetual terms. Based upon our historical lack of product and patent infringement claims and improper disclosure claims, we have not recorded any such liabilities in our
financial statements. See &#147;Risk Factors&#151;We may be unable to make payments to satisfy our indemnification obligations or in the event of improper use or disclosure of confidential information, which would harm our customer relationships and
our business.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have also agreed with one of our largest customers not to assert our patents against such customer, and also
agreed that, under certain circumstances, if we divest or assign any of our patents, then the customer will be entitled to an irrevocable, worldwide, nonexclusive license to such patents to make or have made such customer&#146;s products. See
&#147;Certain Relationships and Related Party Transactions&#151;Business Agreements with Intel Corporation.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Employees </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of December&nbsp;31, 2010, we had 257 full-time employees, including 127 in research and development, 109 in sales and marketing, and 21 in
general and administrative. As of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">83 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
December&nbsp;31, 2010, we had 97 employees located in the United States, 63 located in China, 58 located in India, 29 located in Asia, and 10 located in Europe. None of our employees are covered
by collective bargaining agreements. We believe our employee relations are good and we have never experienced work stoppages. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Facilities
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our corporate headquarters are located in San Jose, California, where we occupy approximately 25,500 square feet under a lease
expiring on October&nbsp;31, 2011. We expect our corporate headquarters will be adequate for our space requirements until the expiration of the lease, but we are currently looking for new office space. Adequate space may be unavailable on
commercially reasonable terms. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We maintain leased domestic sales and support offices occupying less than 1,200 square feet each in
Southern California and Texas. Internationally, we maintain leased research and development and sales and application engineering support offices occupying less than 6,000 square feet each in China (Shanghai, Beijing, and Chengdu), France, India
(Noida and Bangalore), Japan, South Korea, and Taiwan. Lease termination dates range from May 2011 to November 2013. We periodically evaluate the adequacy of our existing facilities and expect our current sales and support offices will be adequate
for at least the next 12 months. However, if we require additional space, adequate space may be unavailable on commercially reasonable terms. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We also maintain three data centers and 26 remote locations where we provide support. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Legal </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are not currently a party to any legal proceedings. We are not aware of any threatened litigation, unasserted claims or assessments that could,
if determined adversely to us, have a material adverse effect on our business, operating results or financial condition. We may be subject to various claims and legal actions arising in the ordinary course of business. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">84 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_11"></A>MANAGEMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Executive Officers and Directors </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following sets forth information about our executive
officers and directors as of February&nbsp;28, 2011: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="28%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="66%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:22pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Age</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Position(s)</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Andrew T. Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Co-Founder, Chief Executive Officer, Chair of the Board and Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Emily Chang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">46</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Chief Financial Officer</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dian Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">51</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">General Manager of Asia and Senior Vice President of Product Management</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Steven (Craig) Shirley</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">47</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Vice President of Worldwide Sales</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Aveek Sarkar</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">36</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Vice President of Product Engineering and Support</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Ping Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">59</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Lori Holland</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Andrew T. Yang,
Ph.D.</I><B>&nbsp;&nbsp;&nbsp;&nbsp;</B>Andrew T. Yang co-founded our company in January 2001 and has served as the chair of our board of directors since our inception and as our chief executive officer since January 2002. Dr.&nbsp;Andrew Yang
founded Anagram Design Inc. in 1993, a high-capacity simulation solutions provider for deep-submicron ICs. Anagram Design Inc. merged with Avant! Corp. in 1997, where he served as the Vice President of the Analysis Product Division responsible for
all extraction and analysis products until 1998. Since 1998, Dr.&nbsp;Andrew Yang has been an investor and a director of several electronic design automation companies, including CadMOS Design Technology, Inc. (acquired by Cadence Design Systems,
Inc.), Ultima Interconnect Technology, Inc. (acquired by Cadence Design Systems, Inc.), InnoLogic Systems, Inc. (acquired by Synopsys, Inc.), and Mojave Inc. (acquired by Magma Design Automation, Inc.). Dr.&nbsp;Andrew Yang received a B.S. in
Electrical Engineering and Computer Science from the University of California, Berkeley, and M.S. and Ph.D. in Electrical Engineering from the University of Illinois, Urbana-Champaign, and was a tenured professor at the University of Washington from
1989 to 1996. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Emily Chang.&nbsp;&nbsp;&nbsp;&nbsp;</I>Emily Chang has served as our chief financial officer since July 2010. Ms.
Chang served as our corporate controller from October 2004 to July 2010. From 2001 to 2004, Ms.&nbsp;Chang held numerous positions at Cadence Design Systems, Inc., where she performed various finance and Securities and Exchange reporting-related
functions. From 1999 to 2001, she held numerous positions at Silicon Perspective Corporation (acquired by Cadence Design Systems, Inc.), where she performed various financial reporting and finance functions. Ms.&nbsp;Chang received a B.A. in
Business from the University of California, Los Angeles. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Dian Yang, Ph.D.&nbsp;&nbsp;&nbsp;&nbsp;</I>Dian Yang has served as our
senior vice president of product management and general manager of Asia since January 2008. From July 2005 to January 2008, Dr. Dian Yang was our general manager of Asia and senior vice president of business development. Prior to joining us in July
2005, Dr. Dian Yang co-founded InnoLogic Systems, Inc., a provider of formal verification solutions for full-custom designs, in August 1998.&nbsp;InnoLogic Systems, Inc. was acquired by Synopsys, Inc. in 2003, where he continued as a senior director
in the implementation business unit from June 2003 to July 2005.&nbsp;Prior to InnoLogic, Dr.&nbsp;Dian Yang held various management positions at Silicon Graphics, Inc., LSI Corporation, and Avant! Corp.&nbsp;Dr. Dian Yang received a B.S. in Applied
Mathematics from Shanghai University of Science and Technology and M.S. and Ph.D. in Computer Science from Stanford University. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">85 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Steven (Craig) Shirley</I>.&nbsp;&nbsp;&nbsp;&nbsp;Steven (Craig) Shirley has served as our vice
president of worldwide sales since March 2006.&nbsp;From 2004 to 2006, Mr.&nbsp;Shirley was vice president of worldwide sales and support at Jasper Design Automation, Inc.&nbsp;From 2001 to 2004, Mr.&nbsp;Shirley was vice president of North American
Sales at Verisity Design, Inc. (acquired by Cadence Design Systems, Inc.).&nbsp;Between 1987 and 2000, Mr.&nbsp;Shirley held various positions at Avant! Corp., Aspect Development, Inc., Quickturn Design Systems, Inc., Ready Systems Corporation,
Verisity Design, Inc., and Viewlogic Systems, Inc.&nbsp;Mr.&nbsp;Shirley began his career at Intergraph Corporation, as an applications engineer.&nbsp;Mr.&nbsp;Shirley received a B.S. in Computer Engineering from Auburn University. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Aveek Sarkar</I>.&nbsp;&nbsp;&nbsp;&nbsp;Aveek Sarkar has served as our vice president, product engineering and support since July
2006.&nbsp;From March 2005 to June 2006, Mr.&nbsp;Sarkar was our director of product engineering.&nbsp;From October 2003 to February 2005, Mr.&nbsp;Sarkar was our senior product engineer.&nbsp;From December 1998 to October 2003, Mr.&nbsp;Sarkar was
a member of the technical staff at Sun Microsystems, Inc, a company selling computers, computer components, computer software, and information technology services.&nbsp;From April 1998 to December 1998, Mr.&nbsp;Sarkar was a device engineer at
Cadence Design Systems, Inc.&nbsp;Mr.&nbsp;Sarkar received a B.Tech from the Indian Institute of Technology, Kanpur, a M.S. in Electrical Engineering from Oregon State University, and a M.B.A. from Santa Clara University. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Ping Yang, Ph.D.&nbsp;&nbsp;&nbsp;&nbsp;</I>Ping Yang has served as one of our directors since April 2006 and as a member of the audit committee
of the board of directors since February 2011. Dr.&nbsp;Ping Yang currently operates an independent consulting practice serving semiconductor companies, providing expertise in the areas of very large-scale integration, technology development and
manufacturing, computer-aided design, circuits and systems, large-scale ICs, and solid-state electronics. Dr.&nbsp;Ping Yang served as Vice President of Research and Development at Taiwan Semiconductor Manufacturing Company (TSMC), a semiconductor
manufacturer, from June 2001 to November 2005. Prior to joining TSMC, Dr.&nbsp;Ping Yang held various management positions at TSMC North America, Vanguard International, and Texas Instruments Incorporated. Dr.&nbsp;Ping Yang currently serves as a
director of LTX-Credence Corporation and is a member of its compensation committee. Dr.&nbsp;Ping Yang also currently serves as a director, a member of the audit committee, and the chair of the nominating and corporate governance committee of
Intervac, Inc. Dr. Ping Yang served as a director of Global Unichip Corporation and was a member of its audit committee from 2003 to 2007. Dr.&nbsp;Ping Yang is a fellow of the Institute of Electrical and Electronics Engineers and a recipient of the
Institute&#146;s Third Millennium Medal. Dr. Ping Yang received a B.S. in Physics from the National Taiwan University, and a M.S. and a Ph.D. in Electrical Engineering from the University of Illinois, Urbana-Champaign. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Lori Holland</I><I>.</I>&nbsp;&nbsp;&nbsp;&nbsp;Lori Holland has served as one of our directors and as the chair of the audit committee of our
board of directors since February 2011. Ms. Holland has operated an independent financial consulting practice serving as an advisor to various technology companies, including startups since January 2001. From November 1999 to December 2000,
Ms.&nbsp;Holland was the chief financial officer of Zaffire, Inc., a telecommunication company headquartered in California. Prior to that, Ms.&nbsp;Holland served as the chief financial officer of Read-Rite Corporation, a manufacturer of components
to the disc drive industry, and NeoMagic Corporation, a fabless semiconductor company and supplier of low-power audio and video integrated circuits for mobile use. Ms.&nbsp;Holland also held senior financial posts at other technology start-ups
including NeXT Computer, Inc. and Seagate Technology, Inc. From September 2004 to August 2008, Ms. Holland served as a director of Credence Systems Corporation. Following the merger of Credence Systems with LTX Corp. in 2008, she has served as a
director and an audit committee member of LTX-Credence Corporation. From June 2005 to December 2006, Ms. Holland served on the board of directors and the chair of the audit </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">86 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
committee of WiderThan Co., Ltd., a Korean company listed on the Nasdaq National Market. Ms.&nbsp;Holland served as a director and the chair of the audit committee of Bookham Technology plc from
April 1999 until it was acquired by Avanex Corporation and became Oclaro, Inc. in 2009. Ms.&nbsp;Holland has served as a director and the chair of the audit committee of Oclaro, Inc. since the merger. Ms.&nbsp;Holland received a B.A. in Economics
from California Polytechnic State University. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">There are no family relationships among any of our directors or executive officers.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Code of Business Conduct and Ethics </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Before completion of this offering, our board of directors will adopt a code of business conduct and ethics that will apply to all of our officers, directors, and employees, including our principal executive
officer and principal financial officer, and is intended to comply with the applicable rules and regulations of the Securities and Exchange Commission and the Nasdaq Global Market listing requirements. This code is designed to deter wrongdoing and
to promote: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">honesty and integrity, including the ethical handling of any actual or apparent conflict of interest between personal and professional relationships;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">full, fair, accurate, timely, and understandable disclosure in the reports and documents that we file with, or submit to, the Securities and Exchange Commission
and in other public communications made by our company; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">professional integrity in all aspects of our organization and eliminate barriers to responsible behavior, such as coercion, fear of reprisal or alienation from
our company; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">education of all members of our company about applicable laws, rules, and regulations and applicable stock exchange rules, relevant to the performance of their
duties; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">compliance with applicable governmental laws, rules, and regulations and applicable stock exchange rules; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prompt internal reporting of violations of the code of business conduct and ethics, including any violations of governmental laws, rules or regulations, and
applicable stock exchange rules; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">ethical and honest behavior in the workplace. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Waivers of the policies set forth in the code of business conduct and ethics will be granted on a case-by-case basis and only in extraordinary circumstances. Any waiver of the policies may only be granted by the
chief financial officer for employees other than executive officers. Any waiver of the policies for executive officers or directors requires approval of the board of directors or our audit committee and will be promptly disclosed to the public. Upon
completion of this offering, our code of business conduct and ethics will be available on our website. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Board Composition </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, our board of directors will consist of four members. Our board of directors has determined that all of the members
of our board of directors, except our chief executive officer, Andrew Yang, are &#147;independent directors&#148; as defined in applicable rules of the Securities and Exchange Commission and the Nasdaq Global Market. All directors are elected to
hold office until their successors have been elected. Officers are elected and serve at the discretion of the board of directors. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">87 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Staggered Board </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Pursuant to our amended and restated certificate of incorporation, our board of directors will be divided into three classes. The members of each class will serve for a staggered, three-year term. Upon the
expiration of the term of a class of directors, a director in that class will be elected for three-year terms at the annual meeting of stockholders in the year in which their term expires. The classes will be composed as follows: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Lori Holland will be a Class I director, whose term will expire at the fiscal 2012 annual meeting of stockholders; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Ping Yang will be a Class II director, whose term will expire at the fiscal 2013 annual meeting of stockholders; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Andrew Yang will be a Class III director, whose term will expire at the fiscal 2014 annual meeting of stockholders. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly
as possible, each class will consist of one-third of our directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Board Committees </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors has
established the committees described below and may establish others from time to time. The charters for each of our committees will be available on our website once our company is public. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Audit Committee </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon
completion of this offering, our audit committee will be comprised of Ping Yang, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and Lori Holland, who is the chairperson of
the committee. Our board of directors has determined that each member of the audit committee, is &#147;independent&#148; for audit committee purposes as that term is defined in the applicable rules of the Securities and Exchange Commission and the
Nasdaq Global Market. Our board of directors has designated each of Ms.&nbsp;Holland and Dr.&nbsp;Ping Yang as an &#147;audit committee financial expert,&#148; as defined under the applicable rules of the Securities and Exchange Commission. The
audit committee&#146;s responsibilities will include: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing annually a report by the independent registered public accounting firm regarding the independent registered public accounting firm&#146;s internal
quality control procedures and various issues relating thereto; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related
disclosures; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">coordinating the oversight and reviewing the adequacy of our internal control over financial reporting with both management and the independent registered public
accounting firm; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">88 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">establishing policies and procedures for the receipt and retention of accounting related complaints and concerns, including a confidential, anonymous mechanism
for the submission of concerns by employees; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">periodically reviewing legal compliance matters, including securities trading policies, periodically reviewing significant accounting and other financial risks
or exposures to our company, reviewing and, if appropriate, approving all transactions between our company or its subsidiaries and any related party (as described in Item&nbsp;404 of Regulations S-K); </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">periodically reviewing our code of business conduct and ethics; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">establishing policies for the hiring of employees and former employees of the independent registered public accounting firm; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing the audit committee report required by Securities and Exchange Commission rules to be included in our annual proxy statement.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The audit committee will also have the power to investigate any matter brought to its attention within the scope of
its duties. It will also have the authority to retain counsel and advisors to fulfill its responsibilities and duties. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Compensation
Committee </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, our compensation committee will be comprised of Lori Holland and Ping Yang, who is the
chairperson of the committee. Our board of directors has determined that each member of the compensation committee is an independent director for compensation committee purposes as that term is defined in the applicable rules of the Nasdaq Global
Market, is a &#147;non-employee director&#148; within the meaning of Rule 16b-3(d)(3) promulgated under the Securities Exchange Act of 1934 and is an &#147;outside director&#148; within the meaning of Section&nbsp;162(m) of the Internal Revenue
Code, as amended. The compensation committee&#146;s responsibilities will include, among other things: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">annually reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">annually evaluating the performance of our chief executive officer in light of such corporate goals and objectives and recommending the compensation of our chief
executive officer to the board of directors for its approval; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">annually reviewing and approving the compensation of our other executive officers; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">annually reviewing our compensation, welfare, benefit and pension plans, and similar plans; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">annually reviewing succession planning; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">annually reviewing and making recommendations to the board of directors with respect to director compensation; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing for inclusion in our proxy statement the report of the compensation committee required by the Securities and Exchange Commission.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The compensation committee will also have the power to investigate any matter brought to its attention within the
scope of its duties. It will also have the authority to retain counsel and advisors to fulfill its responsibilities and duties. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">89 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Nominating and Corporate Governance Committee </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, our nominating and corporate governance committee, or nominating committee, will be comprised of Lori Holland and
Ping Yang, who is the interim chairperson of the committee. Our board has determined that each of the committee members is an independent director for nominating committee purposes as that term is defined in the applicable rules of the Nasdaq Global
Market. The nominating committee&#146;s responsibilities will include, among other things: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">developing and recommending to the board of directors criteria for board of directors and committee membership; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">identifying individuals qualified to become board of directors members; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">recommending to the board of directors the persons to be nominated for election as directors and to each of the board of directors&#146; committees;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">annually reviewing our corporate governance guidelines; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">monitoring and evaluating the performance of the board of directors and leading the board in an annual self-assessment of its practices and effectiveness.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The nominating and corporate governance committee will also have the power to investigate any matter brought to its
attention within the scope of its duties. It will also have the authority to retain counsel and advisors to fulfill its responsibilities and duties. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Director Compensation for 2010 </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The
following table presents information regarding the compensation paid for 2010 to members of our board of directors in 2010 who were not also executive officers. The compensation paid to our director Dr.&nbsp;Andrew Yang, who is also our chief
executive officer, for 2010 is presented below under &#147;Compensation Discussion and Analysis&#148; and the related explanatory tables. Dr.&nbsp;Andrew Yang is not entitled to receive additional compensation for his service as a director.
Ms.&nbsp;Holland was not a member of the board of directors until 2011. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

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<TD VALIGN="bottom" WIDTH="7%"></TD>
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<TD></TD>
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<TD VALIGN="bottom" WIDTH="7%"></TD>
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<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
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<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:22pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fees<BR>Earned&nbsp;or<BR>Paid in<BR>Cash</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option<BR>Awards&nbsp;(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>All Other<BR>Compensation</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Shen Lin, Ph.D. (2)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Ping Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The following table presents the number of outstanding and unexercised option awards held by Dr. Lin and Dr.&nbsp;Ping Yang as of December&nbsp;31, 2010. No equity awards were
granted to our directors in 2010. In February 2011, Dr.&nbsp;Ping Yang was granted options to purchase 21,875 shares of our common stock at an exercise price of $5.35 per share, which is scheduled to vest in monthly installments over the one-year
period after the grant date. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="26%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:22pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of&nbsp;Shares&nbsp;Subject&nbsp;to<BR>Outstanding Options as of<BR>December&nbsp;31, 2010</B></FONT></TD>

<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Shen Lin, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">11,538</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Ping Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">130,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Dr.&nbsp;Lin is one of our employees but he is not an executive officer. He was a member of our board of directors during 2010. He did not receive any additional compensation for
his service as a director during 2010. See &#147;Certain Relationships and Related Party Transactions&#151;Compensation Arrangements&#148; for a description of his compensation for his services as an employee for 2010. Dr.&nbsp;Lin resigned as a
director in February 2011. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">90 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Director Compensation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In January 2011, our board of directors approved a compensation program for directors who are not also employed by us or any of our subsidiaries (&#147;non-employee directors&#148;). Under the program, each
non-employee director receives an annual retainer of $40,000 in cash. A non-employee director serving as chairperson of the board (or lead independent director if the chairperson of the board is not a non-employee director) receives an additional
annual retainer of $5,000 in cash, and a non-employee director serving as chair of a board committee receives an additional annual retainer of $10,000 in cash. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The director compensation program provides that a newly elected or appointed non-employee director will be granted an option to purchase 25,000 shares of our common stock, with the option being scheduled to vest in
monthly installments over the four-year period following the grant date. The program also provides for non-employee directors to receive annual option grants. Each non-employee director who was in office on February&nbsp;3, 2011 or joined the board
of directors after that date and prior to this offering received an option to purchase 12,500 shares of our common stock, with the option being scheduled to vest in monthly installments over the one-year period following the later of
February&nbsp;3, 2011 or the date the director joined the board of directors. After the consummation of this offering, each non-employee director then serving on the board will be granted, on or about February&nbsp;3, 2012, an option to purchase
4,200 shares of our common stock, with the option being scheduled to vest in full on the day immediately prior to our first annual meeting of stockholders following the completion of the offering. On the date of the annual meeting and each annual
meeting date thereafter, each non-employee director who continues in office immediately following the annual meeting will be granted an additional option to purchase 12,500 shares of common stock, with the option being scheduled to vest in full on
the day immediately prior to the next annual meeting. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Each of the option grants made under our non-employee director compensation
program has an exercise price equal to the fair market value of our common stock on the grant date, a maximum term of ten years, and will fully vest upon the occurrence of a change in control. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">91 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_11a"></A>COMPENSATION DISCUSSION AND ANALYSIS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>This section describes the material elements of compensation awarded to, earned by or paid to the individuals who served as our executive
officers during fiscal 2010. These individuals are listed in the &#147;Summary Compensation Table&#148; below and are referred to as the named executive officers in this prospectus. </I></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Prior to this offering, our executive compensation programs were determined and approved by our board of directors. After the consummation of this
offering, our executive compensation programs will be determined and approved by the compensation committee of our board of directors as described below. None of the named executive officers will be members of the compensation committee. None of our
named executive officers had or will have any role in determining the compensation of other named executive officers, although Dr.&nbsp;Andrew Yang will make recommendations to the compensation committee as to the compensation of named executive
officers other than himself. Following this offering, the compensation committee will recommend, and the independent members of the board of directors will approve, the compensation of the chief executive officer. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Executive Compensation Program Objectives and Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The board of directors has in the past conducted, and it is anticipated that the compensation committee will continue to conduct, an annual review of our executive compensation programs to help ensure that:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the program is designed to achieve our goals of promoting financial and operational success by attracting, motivating, and facilitating the retention of key
employees with outstanding talent and ability; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the program adequately rewards performance that is tied to creating stockholder value. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have entered into employment letters with each of the named executive officers that were individually negotiated with the executive. Each of
these letters provides that the executive is an at-will employee and further provides for the executive to receive a base salary (subject to an annual review by the compensation committee) and other benefits generally available to our employees. The
material terms of each of these employment letters is described below in the sections titled &#147;Description of Employment Letters&#151;Cash Compensation&#148; and &#147;Potential Payments Upon Termination or Change in Control.&#148; Each named
executive officer is also eligible to receive annual incentive compensation in the form of performance bonuses and/or commissions. As described below, the named executive officers have also been granted equity-based awards from time to time as
determined by the board of directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In structuring executive compensation packages, the board of directors considers (and, following
this offering, the compensation committee will consider) how each component promotes retention and/or motivates performance by the executive. Base salaries and benefit programs are primarily intended to attract and retain qualified executives. These
are the elements of our executive compensation program where the value of the benefit in any given year is not dependent on performance (although base salary amounts and benefits determined by reference to base salary may increase from year to year
depending on performance, among other things). We believe that in order to attract and retain top executives, we need to provide them with predictable compensation amounts that reward their continued service. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our annual incentive and commissions opportunities are primarily intended to motivate our named executive officers to achieve specific strategies
and operating objectives, although we </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">92 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
believe it also helps us attract and retain top executives. Our long-term equity incentives are primarily intended to align named executive officers&#146; long-term interests with
stockholders&#146; long-term interests. We also believe long-term equity incentives help motivate performance and help us attract and retain top executives. These are the elements of our executive compensation program that are designed to reward
performance and thus the creation of stockholder value. Each named executive officer&#146;s annual bonus opportunity is paid out on an annual basis and is designed to reward performance for that year. Long-term equity incentives are generally paid
out or earned over a period of years and are designed to reward performance on a long-term basis. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The board of directors generally
reviews executive compensation survey data for companies in our industry. The board of directors does not &#147;benchmark&#148; executive compensation at any particular level in comparison with other companies. Rather, the board of directors
considers this data as background information and relies primarily on a range of factors as identified below in setting executive compensation. We expect that our compensation committee will continue this practice following this offering.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">From time to time as the compensation committee deems appropriate, it may retain independent compensation consultants to help identify
appropriate peer group companies and to obtain and evaluate current executive compensation data. In 2011, the compensation committee retained the compensation consulting firm Compensia and recently engaged Compensia to begin a comprehensive review
of our compensation programs. Compensia does not perform any other consulting services for us or our management. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Current Executive Compensation
Program Elements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Base Salaries </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Salaries for our named executive officers are set forth in the executives&#146; employment letters and historically reviewed by the board of directors on at least an annual basis. It is anticipated that the
compensation committee will also review such base salaries on an annual basis following this offering. In setting specific salary levels for each named executive officer, the board of directors assesses the executive&#146;s past performance and
expected future contributions to us, the executive&#146;s salary and responsibilities relative to the other executive officers and the salaries of similarly situated executives with comparable companies and we expect that the compensation committee
will continue to assess these factors following this offering. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Annual Incentive Bonuses </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Historically, annual incentive bonuses have been awarded to certain of the named executive officers based upon the achievement of performance goals
established by the board of directors for the fiscal year. The amount of the executive&#146;s actual bonus is determined based on the performance factors specified for that year. In determining the annual incentive opportunities for our chief
executive officer and chief financial officer for 2010, the board of directors believed that it was important to reward them for increasing sales and controlling expenses. Therefore, the board of directors developed bonus formulas based upon our
meeting sales targets specified by our board of directors and our adjusted operating margin (defined as operating income excluding stock-based compensation expense, amortization of intangible assets, and other non-recurring expenses divided by
revenue). For Dr.&nbsp;Andrew Yang, the board of directors determined that he would be eligible for a bonus equal to $140,000 for meeting sales targets specified by the board of directors plus $7,000 for each 1% of our adjusted operating margin for
2010. This formula resulted in a bonus of $320,749 for Dr.&nbsp;Andrew Yang (based on the sales </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">93 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
targets being met and an adjusted operating margin of approximately 25.8%). For Ms.&nbsp;Chang, the board of directors determined that she would be eligible for a bonus equal to 1% of our
adjusted operating margin for 2010. This formula resulted in a bonus of $113,777 for Ms.&nbsp;Chang. In 2010, Dr. Dian Yang was also awarded a special bonus of $30,000 in connection with achieving certain performance goals. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In July 2010, our board of directors also decided to pay a special bonus on a company-wide basis to any employee that had been employed by us for
five years. The board of directors approved a total pool of $1.5 million for these bonuses. Each of our named executive officers (other than Mr.&nbsp;Shirley who was not eligible because he has not been employed by us for five years) was eligible
for this bonus. Payments were made in two installments, in July 2010 and December 2010, subject to the employee&#146;s remaining employed with us through the payment date. The percentage of the bonus pool awarded to each employee was generally
determined by dividing the number of vested stock options held by the employee by the total number of vested stock options held by all eligible employees, subject to certain limited discretionary adjustments by the chief executive officer.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The bonus amounts awarded to each of our named executive officers for 2010 are reflected in the &#147;Summary Compensation Table for
Fiscal 2010&#148; below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Sales and Application Engineer Commission Plans </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Two of our named executive officers, Mr.&nbsp;Shirley and Dr.&nbsp;Dian Yang, have significant sales responsibilities for us. Mr.&nbsp;Sarkar has
significant pre-sales and customer support responsibilities. As a result, they are each entitled to earn commissions under our sales and application engineer commission plans. Under these plans, the executive is entitled to receive a specified
percentage of their related sales up to a sales quota established by the board of directors and a higher percentage for sales in excess of the quota. The commissions for these executives for 2010 are reflected in the &#147;Summary Compensation Table
for Fiscal 2010&#148; below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Long-Term Incentive Equity Awards </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our policy is that the long-term compensation of our named executive officers should be directly linked to the value provided to stockholders.
Therefore, we have historically made grants of stock options to provide further incentives to our executives to increase stockholder value. The board of directors based their award grants to executives each year on a number of factors (and following
this offering, the compensation committee is expected to continue to consider these factors), including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the executive&#146;s position with us and total compensation package; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the executive&#146;s performance of his or her individual responsibilities; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the equity participation levels of comparable executives at comparable companies; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our financial performance; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the executive&#146;s contribution to the success of our financial performance. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, the size, frequency, and type of long-term incentive grants may be determined on the basis of tax consequences of the grants to the
individual and us, accounting impact, and potential dilution effects. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our long-term incentive grants to named executive officers have
historically been made in the form of stock options. The exercise price of each of these grants is not less than the fair </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">94 </FONT></P>


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market value of our common stock on the grant date. Thus, the named executive officers realize value on their stock options only if our stockholders realize value on their shares. The stock
options also function as a retention incentive for our executives as they generally vest ratably over the four-year period after the commencement of service. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In August 2010, our board of directors approved the grant of an option to Ms.&nbsp;Chang to purchase 70,000 shares of our common stock in connection with her promotion to the position of our chief financial
officer. Prior to this grant, we had not granted any equity awards to any of our named executive officers since 2008 and had not granted any equity awards to Dr. Andrew Yang since 2005. Please see &#147;&#151;Subsequent Compensation Actions&#148;
below for the terms of certain option grants to our named executive officers approved by the compensation committee on March&nbsp;7, 2011. Following this offering, the compensation committee may also approve, in its sole discretion, additional
equity grants to our named executive officers from time to time. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As described below under &#147;Management Incentive Plans,&#148; we
have adopted a new stock incentive plan in connection with this offering to provide the compensation committee greater flexibility in the types of incentives it may grant to employees. The compensation committee intends to review our equity grant
program and consider any changes that may be appropriate following the consummation of this offering. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Severance and Other Benefits
Upon Termination of Employment </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We did not have severance arrangements with any of our named executive officers in 2010. As described
below under &#147;Grants of Plan-Based Awards&#148; and &#147;Potential Payments Upon Termination or Change in Control,&#148; outstanding options and other equity-based awards granted to our named executive officers may accelerate on a change in
control of us. Although this vesting will occur whether or not a named executive officer&#146;s employment terminates, we believe it is appropriate to fully vest equity awards in these change in control situations and allow the award-holder to
benefit from any gain under the award at the time of the transaction. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Please see &#147;&#151;Subsequent Compensation Actions&#148;
below for the terms of change in control severance arrangements for Dr. Andrew Yang and Ms. Chang approved by the board of directors on March 7, 2011. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Policy with Respect to Section&nbsp;162(m) </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;162(m)&nbsp;of the Internal Revenue Code generally disallows public companies a tax deduction for compensation in excess of $1,000,000
paid to their chief executive officers and certain other executive officers unless certain performance and other requirements are met. Our intent generally is to design and administer executive compensation programs in a manner that will preserve
the deductibility of compensation paid to our executive officers. However, we reserve the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may
not be deductible. The compensation committee will monitor the tax and other consequences of our executive compensation program as part of its primary objective of ensuring that compensation paid to our executive officers is reasonable,
performance-based, and consistent with the goals of us and our stockholders. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Subsequent Compensation Actions </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On March 7, 2011, the board of directors approved our entering into change in control severance agreements with Dr. Andrew Yang and Ms. Chang. Under
these agreements, if we </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">95 </FONT></P>


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undergo a change in control and the executive&#146;s employment is terminated by us without cause (and, in the case of Ms. Chang, also by her for good reason) in connection with or following the
transaction, the executive will be entitled to receive cash severance of twelve months of the executive&#146;s base salary plus his or her target bonus for the year of termination. The executive would also be entitled to payment by us of his or her
COBRA premiums for twelve months and accelerated vesting of the executive&#146;s outstanding equity awards. The executive&#146;s right to receive these benefits is subject to the executive&#146;s executing a release of claims and complying with
certain restrictive covenants set forth in the agreement. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On March 7, 2011, the compensation committee approved option grants to each of
the named executive officers as follows: Dr. Andrew Yang - 75,000 options; Ms. Chang - 35,000 options; Mr.&nbsp;Shirley - 20,000 options; Dr. Dian Yang - 20,000 options; and Mr. Sarkar - 20,000 options. Each of these options has an exercise price of
$6.80 per share, which the compensation committee determined represents 100% of the fair market value of a share of our common stock on the grant date, and is scheduled to vest over a four-year period following the grant date. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On March&nbsp;8, 2011, the compensation committee approved increases in the annual base salaries of Dr. Andrew Yang and Ms. Chang to $250,000 and
$200,000, respectively, and increases in the annual base salaries for each of Mr.&nbsp;Shirley, Dr.&nbsp;Dian Yang, and Mr.&nbsp;Sarkar to $160,000. The compensation committee also approved a new executive bonus program under which each of the named
executive officers will be eligible to receive a bonus for 2011. Bonuses under the program will be determined based on our bookings and operating margin in comparison with performance goals established by the compensation committee and such other
performance criteria as may be determined by the compensation committee. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Compensation Committee Interlocks and Insider Participation </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We did not have a compensation committee for fiscal 2010. Our board of directors determined compensation decisions for our named executive officers
in 2010. Dr.&nbsp;Andrew Yang, our chief executive officer, was a member of our board of directors in 2010 and made recommendations to the board of directors as to the compensation of named executive officers other than himself. No member of our
board of directors had any relationships requiring disclosure by us under the Securities and Exchange Commission&#146;s rules requiring disclosure of certain relationships and related-party transactions. None of our executive officers served as a
director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity that has one or more executive officers who served on our board of directors during 2010. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">96 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Summary Compensation Table for Fiscal 2010 </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table presents information regarding compensation of each of our named executive officers for services rendered during fiscal 2010.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="37%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
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<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
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<TD VALIGN="bottom" WIDTH="2%"></TD>
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<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:104pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name&nbsp;and&nbsp;Principal&nbsp;Position</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Salary<BR>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Bonus<BR>($)(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Stock<BR>Awards</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Awards</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>($)(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Non-Equity<BR>Incentive
Plan<BR>Compensation</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Change in<BR>Pension<BR>Value&nbsp;and<BR>Nonqualified<BR>Deferred<BR>Compensation<BR>Earnings</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>All<BR>Other<BR>Compen-<BR>sation</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Andrew T. Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">135,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">307,905</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">320,749</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">763,654</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Chief Executive Officer</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Emily Chang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">135,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">33,103</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">137,452</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">113,777</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">419,332</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Chief Financial Officer</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Steven (Craig) Shirley</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">150,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">227,079</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">377,079</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Vice President Worldwide Sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Dian Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">135,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">64,255</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">146,739</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">345,994</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">General Manager and Senior Vice President, Product Management</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Aveek Sarkar</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">135,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">33,328</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">168,622</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">336,950</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Vice President of Product Engineering and Support</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">As described in &#147;Compensation Discussion and Analysis&#148; above, certain named executive officers were awarded bonuses and received commissions during 2010. This column
includes the following special bonuses: Dr.&nbsp;Andrew Yang, $307,905; Ms.&nbsp;Chang, $33,103; Dr.&nbsp;Dian Yang, $34,255; and Mr.&nbsp;Sarkar, $33,328. This column also reflects a bonus of $30,000 for Dr.&nbsp;Dian Yang.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The amounts reported in the &#147;Option Awards&#148; column of the table above for 2010 reflect the fair value on the grant date of the option awards granted to our named
executive officers during 2010. These values have been determined under the principles used to calculate the value of equity awards for purposes of our consolidated financial statements. For a discussion of the assumptions and methodologies used to
calculate the amounts referred to above, please see the discussion of option awards contained in note 11 to our consolidated financial statements for the year ended December&nbsp;31, 2010 included elsewhere in this prospectus. For information about
the option awards granted to our named executive officers for fiscal 2010, please see the discussion under &#147;&#151;Grants of Plan-Based Awards in Fiscal 2010&#148; below. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">This column reflects bonuses awarded to Dr.&nbsp;Andrew Yang and Ms.&nbsp;Chang for 2010 based on our financial performance during the year, and commissions earned by
Mr.&nbsp;Shirley, Dr.&nbsp;Dian Yang and Mr.&nbsp;Sarkar under our sales and application engineer commission plans. Please see &#147;&#151;Current Executive Compensation Program Elements&#151;Sales and Application Engineer Commission Plans&#148;
above for a description of the material terms of these arrangements. </FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Compensation of Named Executive Officers </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Summary Compensation table above quantifies the value of the different forms of compensation earned by or awarded to our named executive
officers for fiscal 2010. The primary elements of our named executive officers&#146; total compensation reported in the table can be composed of base salary, bonuses and commissions, and long-term equity incentives consisting of stock options.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The summary compensation table should be read in conjunction with the tables and narrative descriptions that follow. The Grants of
Plan-Based Awards table, and the accompanying description of the material terms of our stock option grants, provides information regarding the long-term equity incentives awarded to our named executive officers.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">97 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
The sections entitled &#147;Outstanding Equity Awards at Year-End 2010&#148; and &#147;Option Exercises and Stock Vested in 2010&#148; provide further information on the named executive
officers&#146; potential realizable value and actual value realized with respect to their equity awards. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Description of Employment Letters&#151;Cash
Compensation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have entered into employment letters with each of our named executive officers. Each named executive officer is an
at-will employee. Either we or the executive officer can terminate the employment relationship at any time for any reason. Each employment letter provides for a base salary which has historically been reviewed by the board of directors at least
annually and participation in our employee benefit plans. The current base salary levels for each of our named executive officers are set forth in &#147;Summary Compensation Table for Fiscal 2010&#148; above. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Provisions of the named executive officers&#146; employment letters relating to outstanding equity incentive awards and post-termination of
employment benefits are discussed below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Grants of Plan-Based Awards in Fiscal 2010 </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table presents information regarding equity-based awards that were granted to our named executive officers in 2010. This table does
not include the non-equity incentive plan awards granted to named executive officers for 2010 and reported in &#147;Summary Compensation Table for Fiscal 2010&#148; above as such awards did not include any specific threshold, target or maximum
amounts. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:22pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Grant<BR>Date</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Awards:</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;
of</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Securities</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Underlying</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Options</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Exercise</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>or Base</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Price of</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option&nbsp;Awards</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($/Sh)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Grant&nbsp;Date&nbsp;Fair<BR>Value of Stock<BR>and&nbsp;Option<BR>Awards</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>($)(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Andrew T. Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Emily Chang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/23/2010</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.55</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">137,452</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Steven (Craig) Shirley</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dian Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Aveek Sarkar</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The amount reported in this column reflects the fair value of this award on the grant date as determined under the principles used to calculate the value of equity awards for
purposes of our consolidated financial statements. For a discussion of the assumptions and methodologies used to value this award, please see footnote (2)&nbsp;to the Summary Compensation Table. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Description of Plan-Based Awards </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We granted one stock option to a named executive officer in 2010. As described below, most of our option grants, including this grant to Ms.&nbsp;Chang, have been made under, and are subject to, the terms of our
2001 Stock Option/Stock Issuance Plan (the &#147;2001 Stock Plan&#148;). After the consummation of this offering, the 2001 Stock Plan will be administered by the compensation committee. Prior to February&nbsp;3, 2011, our board of directors
administered the plan. The compensation committee will have authority to interpret the plan provisions and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding awards upon
the occurrence of certain corporate events such as reorganizations, mergers, and stock splits, and making provision to ensure that any tax withholding obligations incurred in respect of awards are satisfied. Awards granted
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">98 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
under the plan are generally only transferable to a beneficiary of a named executive officer upon his or her death. However, awards may be transferred under limited circumstances, provided that
such transfers comply with applicable securities laws. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Under the terms of the 2001 Stock Plan, if we undergo a change in control, the
plan administrator will generally provide for the substitution, assumption, exchange or other continuation or settlement (in cash, securities or property) of the outstanding awards granted under the plan, or, if the plan administrator does not so
provide, the outstanding awards granted under the plan will generally become fully vested and, in the case of options, exercisable, and will generally terminate or be terminated in such circumstances. See &#147;&#151;Potential Payments Upon
Termination or Change in Control&#148; for accelerated vesting that may apply to awards held by the named executive officers under their individual award agreements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The option granted to Ms.&nbsp;Chang in 2010 was granted with a per-share exercise price that was not less than the fair market value of a share of our common stock on the grant date as determined by the board of
directors. The option is subject to a four-year vesting schedule, with 25% of the option vesting on the first anniversary of the grant date and the remaining 75% of the option vesting in monthly installments over the three-year period thereafter,
and would fully vest upon a change in control of the company. Once vested, the option will generally remain exercisable until its normal expiration date which is ten years after the grant date. Subject to any accelerated vesting that may apply in
the circumstances, the unvested portion of the option will immediately terminate upon a termination of the named executive officer&#146;s employment. The named executive officer will generally have 90 days to exercise the vested portion of the
option following a termination of employment. This period is extended to twelve months if the termination is a result of the named executive officer&#146;s death or disability. The options granted to the named executive officers do not include any
dividend rights. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Outstanding Equity Awards At Year-End 2010 </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following table presents information regarding the outstanding stock options held by each of our named executive officers as of December&nbsp;31, 2010, including the vesting dates for the portions of these
awards that had not vested as of that date. We have not granted any equity awards other than stock options to any of the named executive officers. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option Awards&nbsp;(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:22pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Award<BR>Grant&nbsp;Date</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number of<BR>Securities<BR>Underlying<BR>Unexercised<BR>Options (#)<BR>Exercisable</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number of<BR>Securities<BR>Underlying<BR>Unexercised<BR>Options (#)</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Unexercisable&nbsp;(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option<BR>Exercise<BR>Price ($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option<BR>Expiration<BR>Date</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Andrew T. Yang, Ph.D</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Emily Chang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11/7/06</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11/6/16</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10/10/07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,833</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,167</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10/9/17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2/27/08</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14,167</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,833</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2/26/18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/28/08</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;(3)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,538</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.70</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/27/18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/23/10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.55</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/22/20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Steven (Craig) Shirley</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5/15/07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;(4)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.45</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5/14/17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dian Yang, Ph.D</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5/10/06</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">30,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5/9/16</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11/7/06</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11/6/16</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2/27/08</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2/26/18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/28/08</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;(3)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,077</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.70</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/27/18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/28/08</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;(5)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,615</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.70</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8/27/18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Aveek Sarkar</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11/2/05</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;(4)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11/1/15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2/27/08</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2/26/18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">99 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Unless otherwise noted, each of these options is scheduled to vest with respect to 25% of the option on the first anniversary of the grant date and with respect to the remaining
75% of the option in monthly installments over the three-year period thereafter. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Each of the options reported in this column may be exercised prior to vesting. If the option is exercised prior to vesting, the shares issued upon the exercise would be subject
to the same vesting requirements that applied to the portion of the option being exercised. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Each of these options is scheduled to vest with respect to 22.2% of the option on the six month anniversary of the grant date and with respect to the remaining 77.8% of the
option in monthly installments over the 21-month period thereafter. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Each of these options was granted as fully vested. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">This option is scheduled to vest with respect to 28.6% of the option on the six month anniversary of the grant date and with respect to the remaining 71.4% of the option in
monthly installments over the 15-month period thereafter. </FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Option Exercises and Stock Vested in 2010 </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table presents information regarding the exercise of stock options by the named executive officers during fiscal 2010. As noted above,
we have not granted any equity awards other than stock options to any of the named executive officers. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="61%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option Awards</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:22pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of&nbsp;Shares<BR>Acquired&nbsp;
on<BR>Exercise</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Value&nbsp;Realized&nbsp;
on<BR>Exercise</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Andrew T. Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Emily Chang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Steven (Craig) Shirley</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dian Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">30,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">103,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Aveek Sarkar</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The dollar amounts shown in this column are determined by multiplying (i)&nbsp;the number of shares of our common stock to which the exercise of the option related, by
(ii)&nbsp;the difference between the per-share fair market value of our common stock on the date of exercise as determined by our board of directors and the exercise price of the options. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Potential Payments upon Termination or Change in Control </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The option granted to Ms.&nbsp;Chang on August&nbsp;23, 2010, to the extent then outstanding and unvested, will fully accelerate upon a change in control. Mr.&nbsp;Shirley&#146;s employment letter provides that 50%
of any then-outstanding and unvested options that Mr.&nbsp;Shirley holds upon a change in control will accelerate and vest in full. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">If
a change in control of us had occurred on December&nbsp;31, 2010, the intrinsic value of the unvested portion of Ms.&nbsp;Chang&#146;s option that would have accelerated upon the transaction was $126,000. This value is calculated by multiplying the
amount by which the per share fair market value of our common stock as of December&nbsp;31, 2010 as determined by our board of directors exceeds the exercise price of the option by the number of shares subject to the accelerated portion of the
option. Each of Mr.&nbsp;Shirley&#146;s outstanding options was fully vested as of December&nbsp;31, 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">For a discussion of
subsequent events related to potential payments upon termination or a change in control, see &#147;&#151;Subsequent Compensation Actions.&#148; </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Equity Incentive Plans </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of February 28,
2011, our employees, consultants, and directors hold outstanding stock options for the purchase of up to 2,210,483 shares of our common stock.&nbsp;Those options were granted under the 2001 Stock Plan.&nbsp;As of February 28, 2011, 1,380,375 of
those options had </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">100 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
vested and the balance were not vested.&nbsp;The exercise prices of those options ranged from $0.05 per share to $5.35 per share and substantially all of those options had a maximum term of ten
years from the applicable date of grant. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following sections provide more detailed information concerning our benefit plans and,
with respect to our equity compensation plans, the shares that are available for future awards under these plans. Each summary below is qualified in its entirety by the full text of the relevant plan document and/or option agreement, which has been
filed with the Securities and Exchange Commission as an exhibit to the registration statement of which this prospectus is a part and is available through the Securities and Exchange Commission&#146;s internet site at http://www.sec.gov. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>2001 Stock Option/Stock Issuance Plan </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We adopted the 2001 Stock Plan in 2001. Under the 2001 Stock Plan, we are generally authorized to grant options to purchase shares of our common stock to certain of our employees, directors, officers, and
consultants and certain employees, officers, and consultants of our subsidiaries. Options under the 2001 Stock Plan are either incentive stock options, within the meaning of Section&nbsp;422 of the Internal Revenue Code, or nonqualified stock
options. All options granted under the plan expire no later than ten years from their date of grant. No new awards will be granted under the 2001 Stock Plan after the consummation of this offering. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our compensation committee currently administers the 2001 Stock Plan. As is customary in incentive plans of this nature, the number of shares
subject to outstanding awards under the 2001 Stock Plan and the exercise prices of those awards, are subject to adjustment in the event of changes in our capital structure, reorganizations, and other extraordinary events. In the event of a change in
control (as defined in the plan), the plan administrator will generally provide for the substitution, assumption, exchange or other continuation or settlement (in cash, securities or property) of the outstanding awards granted under the plan, or, if
the plan administrator does not so provide, the outstanding awards will generally become fully vested and, in the case of options, exercisable, and will terminate or be terminated in such circumstances. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors may amend or terminate the 2001 Stock Plan at any time. The 2001 Stock Plan requires that certain amendments, to the extent
required by applicable law or any applicable listing agency or deemed necessary or advisable by the board of directors, be submitted to stockholders for their approval. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>2011 Equity Incentive Plan </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors adopted a 2011 Equity Incentive Plan in
March 2011 (the &#147;2011 Plan&#148;) to provide an additional means through the grant of awards to attract, motivate, retain, and reward selected employees and other eligible persons. We also intend to obtain approval of this plan from our
stockholders prior to the consummation of this offering. Employees, officers, directors, and consultants that provide services to us or one of our subsidiaries may be selected to receive awards under the 2011 Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our compensation committee will administer the 2011 Plan. The administrator of the plan has broad authority to: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">select participants and determine the types of awards that they are to receive; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or
the award and establish the vesting conditions (if applicable) of such shares or awards; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">101 </FONT></P>


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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">cancel, modify or waive our rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding awards, subject to any required consents;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">construe and interpret the terms of the 2011 Plan and any agreements relating to the 2011 Plan; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards subject to any required consent;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">subject to the other provisions of the 2011 Plan, make certain adjustments to an outstanding award and authorize the termination, conversion, substitution or
succession of an award; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">allow the purchase price of an award or shares of our common stock to be paid in the form of cash, check or electronic funds transfer, by the delivery of
previously-owned shares of our common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third-party payment or cashless exercise on such terms as the
administrator may authorize or any other form permitted by law. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">A total of 2,400,000 shares of our common stock will
be authorized for issuance with respect to awards granted under the 2011 Plan. The share limit will automatically increase on the first trading day in January of each year by an amount equal to lesser of (1)&nbsp;5.0% of the total number of
outstanding shares of our common stock on the last trading day in December in the prior year or (2)&nbsp;such lesser number as determined by our board of directors. Any shares subject to awards that are not paid, delivered or exercised before they
expire or are canceled or terminated, fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for other award grants under the 2011 Plan. As of the date of
this prospectus, no awards have been granted under the 2011 Plan, and the full number of shares authorized under the 2011 Plan is available for award purposes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Awards under the 2011 Plan may be in the form of incentive or nonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, and other forms of awards including cash awards. Awards under
the plan generally will not be transferable other than by will or the laws of descent and distribution, except that the plan administrator may authorize certain transfers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Nonqualified and incentive stock options may not be granted at prices below the fair market value of the common stock on the date of grant. Incentive stock options must have an exercise price that is at least equal
to the fair market value of our common stock, or 110% of fair market value of our common stock or incentive stock option grants to any 10% owner of our common stock, on the date of grant. These and other awards may also be issued solely or in part
for services. Awards are generally paid in cash or shares of our common stock. The plan administrator may provide for the deferred payment of awards and may determine the terms applicable to deferrals. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As is customary in incentive plans of this nature, the number and type of shares available under the 2011 Plan and any outstanding awards, as well
as the exercise or purchase prices of awards, will be subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends or other similar events that change the number or kind of
shares outstanding, and extraordinary dividends or distributions of property to the stockholders. In no case (except due to an adjustment referred to above or any repricing that may be approved by our stockholders) will any adjustment be made to a
stock option or stock appreciation right award under the 2011 Plan (by amendment, cancellation and regrant, exchange or other means) that would constitute a repricing of the per-share exercise or base price of the award. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">102 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Generally, and subject to limited exceptions set forth in the 2011 Plan, if we dissolve or undergo
certain corporate transactions such as a merger, business combination or other reorganization, or a sale of all or substantially all of our assets, the plan administrator will generally provide for the substitution, assumption, exchange or other
continuation or settlement (in cash, securities or property) of the outstanding awards granted under the plan, or, if the plan administrator does not so provide, the outstanding awards will generally become fully vested and, in the case of options,
exercisable, and will terminate or be terminated in such circumstances. The plan administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2011 Plan. For example, the administrator
could provide for the acceleration of vesting or payment of an award in connection with a corporate event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors may amend or terminate the 2011 Plan at any time, but no such action will affect any outstanding award in any manner
materially adverse to a participant without the consent of the participant. Plan amendments will be submitted to stockholders for their approval as required by applicable law or any applicable listing agency. The 2011 Plan is not exclusive&#151;our
compensation committee may grant stock and performance incentives or other compensation, in stock or cash, under other plans or authority. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The plan will terminate on March 7, 2021. However, the plan administrator will retain its authority until all outstanding awards are exercised or terminated. The maximum term of options, stock appreciation rights,
and other rights to acquire common stock under the plan is ten years after the initial date of the award. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>2011 Employee Stock
Purchase Plan </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors adopted a 2011 Employee Stock Purchase Plan (the &#147;Purchase Plan&#148;) to provide an
additional means to attract, motivate, retain, and reward employees and other eligible persons by allowing them to purchase additional shares of our common stock. We also intend to obtain approval of this plan from our stockholders prior to the
consummation of this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Purchase Plan is designed to allow our eligible employees and the eligible employees of our
participating subsidiaries to purchase shares of our common stock, at semi-annual intervals, with their accumulated payroll deductions. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I></I></B><I>Share Reserve</I><B><I></I></B>. A total of 600,000 shares of our common stock will initially be available for issuance under the
Purchase Plan. The share limit will automatically increase on the first trading day in January of each year by an amount equal to lesser of (1)&nbsp;1.0% of the total number of outstanding shares of our common stock on the last trading day in
December in the prior year, (2)&nbsp;2,000,000 shares, or (3)&nbsp;such lesser number as determined by our board of directors<B><I></I></B><B></B><B><I></I></B>. <B><I> </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Offering Periods</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Purchase Plan will have a series of successive overlapping offering periods with a new offering
period beginning on the first business day of February and August each year (commencing in August 2011) and each continuing for a period of 24 months. The initial offering period will begin on the first business day of August 2011. Each offering
period will consist of four purchase periods, each with a six-month duration. Purchase periods will commence on the first business day of February and August and will end on the last business day of the immediately following July or January,
respectively. The first purchase date will occur on the last business day of January 2012. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">103 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Eligible Employees</I>.&nbsp;&nbsp;&nbsp;&nbsp;Individuals scheduled to work more than 20 hours per
week for more than five calendar months per year may join an offering period on the start date of that period. Employees may participate in only one offering period at a time. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Payroll Deductions</I>.&nbsp;&nbsp;&nbsp;&nbsp;A participant may contribute up to 15% of his or her cash earnings through payroll deductions, and the accumulated deductions will be applied to the purchase of
shares on each semi-annual purchase date. Unless otherwise provided in advance by the plan administrator, the purchase price per share will be equal to 85% of the fair market value per share on the start date of the offering period or, if lower, 85%
of the fair market value per share on the semi-annual purchase date. In no event, however, may any participant purchase more than 5,000 shares on any purchase date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Reset Feature</I>.&nbsp;&nbsp;&nbsp;&nbsp;If the fair market value per share of our common stock on any purchase date is less than the fair market value per share on the start date of the two-year offering
period, then that offering period will automatically terminate, and participants in that offering period will automatically be enrolled in the new 24-month offering period beginning on the next business day. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Change in Control</I>.&nbsp;&nbsp;&nbsp;&nbsp;If we are acquired by merger or sale of all or substantially all of our assets or more than 50% of
our voting securities, then all outstanding purchase rights will automatically be exercised on or prior to the effective date of the acquisition, unless the plan administrator provides for the rights to be settled in cash or exchanged or substituted
on the transaction. Unless otherwise provided in advance by the plan administrator, the purchase price will be equal to 85% of the market value per share on the start date of the offering period in which the acquisition occurs or, if lower, 85% of
the fair market value per share on the purchase date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Other Plan Provisions</I>.&nbsp;&nbsp;&nbsp;&nbsp;No new offering periods
shall commence on or after the 20th anniversary of the date our stockholders approve the Purchase Plan, and the Purchase Plan shall terminate as of the purchase date on or immediately following such date unless sooner terminated in accordance with
its terms. Our board of directors may at any time amend, suspend or discontinue the Purchase Plan. However, certain amendments may require stockholder approval. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">104 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_12"></A>PRINCIPAL AND SELLING STOCKHOLDERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth certain information regarding the beneficial ownership of our common stock as of February&nbsp;28, 2011 by:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">each of our directors and executive officers; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">all directors and executive officers as a group; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">each person known by us to beneficially own more than 5% of our outstanding common stock; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">each of the selling stockholders. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities.
Under the rules of the Securities and Exchange Commission, a person is deemed to be a &#147;beneficial owner&#148; of a security if that person has or shares &#147;voting power,&#148; which includes the power to vote or to direct the voting of such
security, or &#147;investment power,&#148; which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire
beneficial ownership within 60&nbsp;days after February&nbsp;28, 2011. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no
economic interest. Except as indicated by footnote, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Applicable percentage ownership is based on 17,190,188 shares of common stock outstanding as of February&nbsp;28, 2011, assuming conversion of all
outstanding shares of our preferred stock into common stock upon the completion of this offering, but does not reflect the exercise of any options to purchase common stock. For the purposes of the table below, we have assumed that
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock will be outstanding upon completion of this offering. </FONT></P> <P><FONT SIZE="1">&nbsp;</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">105 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Unless otherwise noted below, the address of the persons listed on the table is c/o Apache Design
Solutions, Inc., 2645 Zanker Road, San Jose, California 95134. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="57%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Common Stock Beneficially Owned</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:22pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;Prior<BR>to This<BR>Offering</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percentage<BR>Prior&nbsp;to&nbsp;this<BR>Offering</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;After<BR>This Offering</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percentage<BR>After this<BR>Offering</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Executive Officers and Directors</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Andrew T. Yang, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,371,448</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Emily Chang&nbsp;(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">191,538</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dian Yang, Ph.D.&nbsp;(2)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">277,692</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Steven (Craig) Shirley&nbsp;(3)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">140,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Aveek Sarkar&nbsp;(4)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">211,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Ping Yang, Ph.D.&nbsp;(5)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">151,875</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Lori Holland&nbsp;(6)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">37,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">All executive officers and directors as a group<BR>(7 persons)&nbsp;(7)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,381,053</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>5% or More Stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Andreas V. Bechtolsheim</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,496,705</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Shen Lin, Ph.D.&nbsp;(8)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,127,348</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Yu Liu&nbsp;(9)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,143,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Intel Capital (Cayman) Corporation&nbsp;(10)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,104,995</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Norman Chang&nbsp;(11)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,050,598</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Selling Stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Less than 1.0%. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes 121,538 shares of common stock subject to outstanding stock options exercisable within 60 days of February&nbsp;28, 2011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes 87,692 shares of common stock subject to outstanding stock options exercisable within 60 days of February&nbsp;28, 2011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes 20,000 shares of common stock subject to outstanding stock options exercisable within 60 days of February&nbsp;28, 2011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes 31,000 shares of common stock subject to outstanding stock options exercisable within 60 days of February&nbsp;28, 2011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes 21,875 shares of common stock subject to outstanding stock options exercisable within 60 days of February&nbsp;28, 2011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes 37,500 shares of common stock subject to outstanding stock options exercisable within 60 days of February&nbsp;28, 2011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(7)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes 319,605 shares of common stock subject to outstanding stock options exercisable within 60 days of February&nbsp;28, 2011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(8)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Includes 11,538 shares of common stock subject to outstanding stock options exercisable within 60 days of February&nbsp;28, 2011. Shen Lin served as an executive officer and on
our board of directors. See &#147;Certain Relationships and Related Party Transactions&#151;Compensation Arrangements&#148; for a description of his relationship with us. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(9)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Yu Liu is one of our employees. See &#147;Certain Relationships and Related Party Transactions&#151;Compensation Arrangements&#148; for a description of his relationship with us.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(10)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Intel Capital (Cayman) Corporation is a subsidiary of Intel Corporation. Arvind Sodhani, the executive vice president of Intel Corporation, Ravi Jacob, the vice president and
treasurer of Intel Corporation, and Marty Linne, the general counsel of Intel Capital Corporation, a subsidiary of Intel Corporation, disclaim beneficial ownership of the shares held by Intel Capital (Cayman) Corporation except to the extent of
their pecuniary interests therein. The address for Intel Capital (Cayman) Corporation is 2200 Mission College Blvd., MS: RNB 6-59, Santa Clara, CA 95054. We have entered into certain business agreements with Intel Capital (Cayman) Corporation or its
affiliates. See &#147;Certain Relationships and Related Party Transactions&#151;Business Agreements with Intel Corporation&#148; for a description of the relationship between Intel Capital (Cayman) Corporation and us. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(11)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Norman Chang is one of our employees. See &#147;Certain Relationships and Related Party Transactions&#151;Compensation Arrangements&#148; for a description of his relationship
with us. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">106 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_13"></A>CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Since January&nbsp;1, 2008, we have been a party to several transactions in which the amount involved exceeded $120,000 and in which the following
persons had a direct or indirect material interest: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any of our directors or executive officers; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any nominee for election as one of our directors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any person or entity who is known by us to own beneficially more than 5% of our outstanding stock; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any member of the immediate family of any of the foregoing persons. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">These transactions include: </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Business Agreements with Intel Corporation </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of February&nbsp;28, 2011, Intel Capital (Cayman) Corporation held 834,725 shares of our Series A preferred stock and 270,270 shares of our
Series B preferred stock. As a result, Intel Capital (Cayman) Corporation holds in excess of 5% of our outstanding stock. Intel Capital (Cayman) Corporation is an affiliate of Intel Corporation, a customer of ours. We have entered into a series of
agreements with Intel Corporation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In 2001, we entered into a Development, Marketing &amp; License Agreement, or the development
agreement, with Intel Corporation in connection with Intel Corporation&#146;s investment in us. The development agreement generally provided a framework for us to work with Intel Corporation while designing our products. The development agreement
had a five year term, but certain provisions, including those provisions summarized below, survive the termination or expiration of the development agreement. In March 2011, we entered into an amendment to the development agreement with Intel
Corporation. Pursuant to the development agreement, as amended, we have agreed, among other things, not to assert our patents against Intel Corporation, and that, under certain circumstances, if we divest or assign any of our patents, then Intel
Corporation will be entitled to an irrevocable, worldwide, nonexclusive license to such patents to make or have made Intel Corporation&#146;s products. Further, in addition, we agreed to allow Intel Corporation, in its discretion, to be a selling
stockholder and register shares for resale pursuant to the registration statement of which this prospectus is a part. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">At the same time
that we entered into the development agreement, we also entered into a separate letter agreement with Intel Corporation in connection with its investment in us. The letter agreement provides, among other things, that Intel Corporation has the right
to have a representative attend meetings of our board of directors and also has the right to receive certain information from us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In
October 2006, we entered into a Software License Agreement with Intel Corporation. Pursuant to this agreement, Intel Corporation licensed certain of our software and services. We agreed to indemnify Intel Corporation for any damages incurred by
Intel Corporation because of actual or alleged infringement of any patent, copyright, trade secret, trademark, mask work or other proprietary right arising out of Intel Corporation&#146;s use of the licensed software or services provided by us. In
June 2008, we entered into a Purchase Agreement&#150;Software and Related Services with Intel Corporation. We subsequently amended this agreement to extend the term and amend the pricing provisions. Pursuant to this agreement, Intel Corporation
licensed certain of our products and services. The agreement provided similar indemnification terms as those in the Software License Agreement dated October 2006. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">107 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Option Exchange Program </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In June 2008, our board of directors reviewed our historical option grant practices and the fair value of our common stock at the time of the grant of stock options. After discussion and deliberation, our board of
directors determined that the fair value of a share of our common stock as of December&nbsp;31, 2005 and during 2006 was $1.20 per share. During 2006, we had issued stock options with an exercise price less than $1.20 per share. Our board of
directors adopted a program pursuant to which the holders of stock options granted by us during 2006 were permitted, under transition relief afforded by the Internal Revenue Service under Section&nbsp;409A of the Internal Revenue Code, to elect not
later than December&nbsp;31, 2008 to increase the per share exercise price of such options (to the extent still outstanding and not previously exercised) to $1.20 per share. Several optionees elected to increase the exercise prices of their
outstanding stock options pursuant to this program. The following executive officers and directors made such election with respect to the number of shares indicated below: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="43%"></TD>
<TD VALIGN="bottom" WIDTH="14%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="14%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="14%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:22pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of&nbsp;Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Old&nbsp;Exercise&nbsp;Price</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>New&nbsp;Exercise&nbsp;Price</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Emily Chang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Shen Lin</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dian Yang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Ping Yang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">80,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Compensation Arrangements </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Shen Lin is one of our employees but is not an executive officer. He previously was both an executive officer and a member of our board of
directors. Dr.&nbsp;Lin resigned as an executive officer in August 2009 and as a director in February 2011. He did not receive any additional compensation for his service as a director during 2010. As an employee, Dr.&nbsp;Lin received a base salary
of $135,000, a cash bonus of $100,000, and a special bonus of $183,412, so that his aggregate compensation in 2010 was $418,412. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Norman
Chang is one of our employees but is not an executive officer.&nbsp;As an employee, Mr.&nbsp;Chang received a base salary of $135,000, a cash bonus of $40,000, and a special bonus of $183,412, so that his aggregate compensation in 2010 was $358,412.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Yu Liu is currently one of our employees but is not an executive officer.&nbsp;As an employee, Mr.&nbsp;Liu received a base salary of
$130,000, a cash bonus of $45,000, and a special bonus of $183,412, so that his aggregate compensation in 2010 was $358,412. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Indemnification
Agreements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have entered into indemnification agreements with several of our executive officers and all of our directors. Each
indemnification agreement provides that we will indemnify the director or executive officer, as the case may be, to the fullest extent permitted by law for claims arising in his or her capacity as our director or executive officer, as the case may
be, provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe that his or her
conduct was unlawful. In the event that we do not assume the defense of a claim against a director or such officer, we will be required to advance his or her expenses in connection with his or her defense, provided that he or she undertakes to repay
all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">108 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Registration Rights </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In addition to rights of resale under Rule 144, all of the holders of our Series A preferred stock and Series B preferred stock and some holders of our common stock, including our chief executive officer and board
member, Dr. Andrew Yang, and certain other five percent stockholders, who will hold an aggregate of 9,953,885 shares of outstanding common stock after this offering, have entered into an Amended and Restated Investors&#146; Rights Agreement, or the
stockholders&#146; agreement, which entitles them to registration rights that enable them to require us to file a registration statement registering their shares for resale to the public. These registration rights include demand registration rights,
Form S-3 registration rights, and piggyback registration rights. We are also responsible for paying all registration expenses in connection with any registration pursuant to the stockholders&#146; agreement. We have also agreed to indemnify each of
these stockholders which is party to the stockholders&#146; agreement against certain liabilities under the Securities Act in connection with any registration of their registrable shares. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Review, Approval, or Ratification of Related Party Transactions </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this
offering, our audit committee will be responsible for reviewing and approving all related party transactions that are required to be disclosed under the applicable rules of the Securities and Exchange Commission and the Nasdaq Global Market, when
appropriate, and authorizing or ratifying all such transactions in accordance with written policies and procedures established by our board of directors from time to time. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">No member of our audit committee may participate in the review, approval, authorization or ratification of a transaction with respect to which he or she is a related party, except that such member can be counted
for purposes of a quorum and shall provide such information with respect to the transaction as may be reasonably requested by other members of the committee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The transactions described under &#147;Certain Relationships and Related Party Transactions&#148; were not reviewed or approved by our audit committee because they took place prior to the creation of the committee.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">109 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_14"></A>DESCRIPTION OF CAPITAL STOCK </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>General </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering,
our authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. This section refers to our amended and restated certificate of
incorporation and our amended and restated bylaws, each of which is expected to become effective upon consummation of this offering. All of our existing stock is, and the shares of common stock being offered by us in this offering will be, upon
payment therefor, validly issued, fully paid, and nonassessable. As of February&nbsp;28, 2011, there were 116 holders of our common stock, 16 holders of our Series A preferred stock, and 22 holders of our Series B preferred stock. Immediately prior
to or upon consummation of this offering, we expect that all outstanding shares of preferred stock will be converted into shares of our common stock on a one-for-one basis. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The discussion below describes the most important terms of our capital stock, amended and restated certificate of incorporation and amended and restated bylaws that will be in effect upon completion of this
offering. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, refer to our amended and restated certificate of incorporation and amended and restated bylaws, copies of which
have been filed as exhibits to the registration statement of which this prospectus is a part, and to the applicable provisions of the General Corporation Law of the State of Delaware, or the DGCL. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Common Stock </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The holders of our common
stock are entitled to one vote per share on all matters to be voted upon by stockholders. Holders of our common stock are entitled, among other things, (i)&nbsp;to share ratably in dividends if, when, and as declared by our board of directors out of
funds legally available therefor and (ii)&nbsp;in the event of liquidation, dissolution or winding-up of the company, to share ratably in the distribution of assets legally available therefor, after payment of debts and expenses. Holders of our
common stock have no subscription, redemption or conversion rights. The holders of our common stock do not have cumulative voting rights in the election of directors and have no preemptive rights to subscribe for additional shares of our capital
stock. The rights, preferences, and privileges of holders of our common stock are subject to the terms of any series of preferred stock which we may issue in the future. A vote of the holders of a majority of our common stock is generally required
to take action under our amended and restated certificate of incorporation and amended and restated bylaws. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Preferred Stock </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors has the authority, within the limitations and restrictions stated in our amended and restated certificate of incorporation,
to authorize the issuance of shares of preferred stock, in one or more classes or series, and to fix the rights, preferences, privileges, and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences, preemptive rights, and the number of shares constituting any series or the designation of such series. We currently have 3,633,665 shares of Series A convertible preferred stock and 2,300,000 shares of Series B convertible
preferred stock outstanding. These shares of Series A preferred stock and Series B preferred stock will be converted into shares of common stock on a one-to-one basis immediately prior to or upon consummation of this offering and as a result, after
this offering, we will not have designated any series of preferred stock and we will not have any outstanding shares of preferred stock. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of common </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">110 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
stock. The issuance of preferred stock, while providing flexibility in connection with possible future financings and acquisitions and other corporate purposes could, under certain circumstances,
have the effect of delaying, deferring or preventing a change in control of our company and might harm the market price of our common stock. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Registration Rights </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to rights
of resale under Rule 144, all of the holders of our Series A preferred stock and Series B preferred stock and certain holders of our common stock, who will hold an aggregate of 9,953,885 shares of outstanding common stock after this offering, have
entered into a stockholders&#146; agreement that entitles them to registration rights that enable them to require us to file a registration statement registering their shares for resale to the public. These registration rights include demand
registration rights, Form S-3 registration rights, and piggyback registration rights. We are also responsible for paying all registration expenses in connection with any registration pursuant to the stockholders&#146; agreement. We have agreed to
indemnify each of the stockholders that is a party to the stockholders&#146; agreement against certain liabilities under the Securities Act in connection with any registration of their registrable shares. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Provisions of our Certificate of Incorporation and Bylaws and Delaware Anti-Takeover Law </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are governed by the DGCL. Upon completion of this offering, our amended and restated certificate of incorporation and amended and restated bylaws
will contain provisions that could make more difficult the acquisition of the company by means of a tender offer, a proxy contest or otherwise. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Classified Board </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon the completion of this offering, our amended and restated certificate of
incorporation and amended and restated bylaws will provide for a classified board of directors, pursuant to which the board of directors will be divided into three classes whose members will serve three-year staggered terms. Our certificate of
incorporation also will prohibit cumulative voting by stockholders in connection with the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>No Written Consent of Stockholders </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Upon the completion of this offering, our amended and restated bylaws will provide that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that
stockholders may not take any action by written consent in lieu of a meeting. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Advance Notice Procedures </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon the completion of this offering, our amended and restated bylaws will provide that our chief executive officer, chairperson of the board of
directors or a majority of the members of our board of directors then in office may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of
stockholders. Our amended and restated bylaws will also limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our amended and restated bylaws will also establish an advance notice procedure for stockholders to make nominations of candidates for election as
directors, or bring other </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">111 </FONT></P>


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business before an annual or special meeting of the stockholders. This notice procedure will provide that only persons who are nominated by, or at the direction of our board of directors or by a
stockholder who has given timely written notice to the secretary of our company prior to the meeting at which directors are to be elected, will be eligible for election as directors. The procedure also requires that, in order to raise matters at an
annual or special meeting, those matters must be raised before the meeting pursuant to the notice of meeting the company delivers or by, or at the direction of our board of directors or by a stockholder who is entitled to vote at the meeting and who
has given timely written notice to the secretary of the company of his, her or its intention to raise those matters at the annual meeting. If our chairperson or other officer presiding at a meeting determines that a person was not nominated, or
other business was not brought before the meeting, in accordance with the notice procedure, that person will not be eligible for election as a director, or that business will not be conducted at the meeting. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Blank Check Preferred Stock </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon the completion of this offering, our certificate of incorporation will provide for 5,000,000 authorized shares of preferred stock. The
existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For
example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interest of us and our stockholders, our board of directors could cause shares of preferred stock to
be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our certificate of
incorporation will grant our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets
available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control
of us. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Authorized but Unissued Shares </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our authorized but unissued shares of common stock will be available for future issuance without stockholder approval. We may use these additional shares for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions, and employee benefit plans. The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control of us by means of a
proxy contest, tender offer, merger or otherwise. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Limitation of Officer and Director Liability and Indemnification Arrangements
</I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, our amended and restated certificate of incorporation and our amended and restated bylaws will
limit the liability of our officers and directors to the maximum extent permitted by Delaware law. Delaware law provides that directors will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except
liability for: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any breach of their duty of loyalty to the corporation or its stockholders; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">112 </FONT></P>


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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">unlawful payments of dividends or unlawful stock repurchases or redemptions; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">any transaction from which the director derived an improper personal benefit. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">These provisions of our amended and restated certificate of incorporation and amended and restated bylaws will have no effect on any non-monetary
remedies that may be available to us or our stockholders, nor will it relieve us or our officers or directors from compliance with federal or state securities laws. The amended and restated bylaws also will generally provide that we will indemnify,
to the fullest extent permitted by law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, investigation, administrative hearing or any other proceeding by reason of the fact
that he or she is or was our director or officer, or is or was serving at our request as a director, officer, employee or agent of another entity, against expenses incurred by him or her in connection with such proceeding. An officer or director
will not be entitled to indemnification by us if: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the officer or director acted in bad faith or in a manner he or she did not believe to be in, or not opposed to, our best interests; or
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">with respect to any criminal action or proceeding, the officer or director did not have reasonable cause to believe his or her conduct was lawful.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to the indemnification to be provided for in our amended and restated certificate of incorporation, we
have entered into indemnification agreements with certain of our executive officers and all of our directors. Each indemnification agreement provides that we will indemnify such executive officer or director to the fullest extent permitted by law
for claims arising in his or her capacity as our director or officer provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal
proceeding, had no reasonable cause to believe that his or her conduct was unlawful. In the event that we do not assume the defense of a claim against an executive officer or a director, we will be required to advance his or her expenses in
connection with his or her defense, provided that he or she undertakes to repay all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The overall effect of the foregoing provisions and indemnification agreements may be to deter a future offer to buy our company. Stockholders might
view such an offer to be in their best interest should the offer include a substantial premium over the market price of our common stock at that time. In addition, these provisions may have the effect of assisting our management to retain its
position and place it in a better position to resist changes that the stockholders may want to make if dissatisfied with the conduct of our business. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers or persons controlling our company pursuant to the foregoing provisions, the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Section&nbsp;203 of the Delaware General Corporate Law </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, we will be subject to the provisions of Section&nbsp;203 of the Delaware General Corporation Law. In general,
Section&nbsp;203 prohibits a publicly held Delaware corporation from engaging in a &#147;business combination&#148; with an &#147;interested stockholder&#148; for a three-year period following the time that this stockholder becomes an interested
stockholder, unless the business combination is approved in a prescribed manner. A &#147;business combination&#148; includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested
stockholder. An &#147;interested stockholder&#148; is a </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">113 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation&#146;s voting
stock. Under Section&nbsp;203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">before the stockholder became interested, the board of directors approved either the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some
instances; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and authorized at an
annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Transfer Agent and Registrar </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The transfer
agent and registrar for our common stock is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Listing </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We will apply to have our shares of common stock listed on the Nasdaq Global Market
under the symbol &#147;APAD.&#148; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">114 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_15"></A>SHARES ELIGIBLE FOR FUTURE SALE </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Prior to this offering, there has been no market for our common stock, and we cannot assure you that a liquid trading market for our common stock
will develop or be sustained after this offering. Future sales of substantial numbers of shares of our common stock, including shares issued upon exercise of options, in the public market after this offering, or the anticipation of those sales,
could adversely affect market prices of our common stock prevailing from time to time and could impair our ability to raise capital through sales of our equity securities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, we will have outstanding &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock, assuming the conversion of all
outstanding shares of our preferred stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">All of the shares sold in this offering will be freely tradable without restriction under
the Securities Act unless purchased by our &#147;affiliates,&#148; as that term is defined in Rule&nbsp;144 under the Securities Act. All of the remaining
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock to be outstanding after this offering will be deemed &#147;restricted securities,&#148; as that term is defined under Rule 144,
and will be subject to the 180-day lock-up period, which may be extended in specified circumstances described below. Within 180&nbsp;days of the date of this prospectus, all of these shares will qualify for resale under Rule&nbsp;144, excluding any
shares held by affiliates. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Restricted securities may be sold in the public market only if they have been registered or if they qualify
for an exemption from registration under Rule&nbsp;144 or 701 under the Securities Act, which are summarized below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Rule&nbsp;144 </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In general, under Rule&nbsp;144 under the Securities Act, beginning 90 days after the effective date of the registration statement of which this
prospectus is a part, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning
of Rule&nbsp;144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A
non-affiliated person who has beneficially owned restricted securities within the meaning of Rule&nbsp;144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule&nbsp;144. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities
within the meaning of Rule&nbsp;144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding shares of our common stock or the average
weekly trading volume of our common stock reported through the Nasdaq Global Market during the four calendar weeks preceding such sale. Such sales are also subject to certain manner of sale provisions, notice requirements, and the availability of
current public information about us. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Rule&nbsp;701 </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In general, under Rule&nbsp;701 of the Securities Act, most of our employees, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement
are eligible to resell those shares 90&nbsp;days after the date of this prospectus in reliance on Rule&nbsp;144, but without compliance with the holding period or certain other restrictions contained in Rule&nbsp;144. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">115 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Lock-Up Agreements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We, our directors and officers and substantially all of our stockholders and holders of options to purchase our stock, have agreed, subject to certain limited exceptions, not to offer, sell, contract to sell or
otherwise dispose of, or enter into any transaction that is designed to, or could be expected to, result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our
common stock or derivatives of our common stock owned by these persons prior to this offering or common stock issuable upon exercise of options held by these persons for a period of 180 days after the effective date of the registration statement of
which this prospectus is a part without the prior written consent of Deutsche Bank Securities Inc. This consent may be given at any time without public notice. We have entered into a similar agreement with the representative of the underwriters,
except that we may be permitted to issue shares of our common stock for acquisition purposes. There are currently no agreements between the representative and any of our stockholders or affiliates releasing them from these lock-up agreements prior
to the expiration of the 180-day period. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The 180-day restricted period described in the preceding paragraph will be extended if:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of
the 180-day restricted period, </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">in which case the restrictions described in the preceding paragraph will continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Deutsche Bank Securities Inc. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Registration Rights </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to rights
of resale under Rule 144, all of the holders of our Series A preferred stock and Series B preferred stock and certain holders of our common stock, who will hold an aggregate of 9,953,885 shares of outstanding common stock after this offering, have
entered into a stockholders&#146; agreement that entitles them to registration rights that enable them to require us to file a registration statement registering their shares for resale to the public. These registration rights include demand
registration rights, Form S-3 registration rights, and piggyback registration rights. We are also responsible for paying all registration expenses in connection with any registration pursuant to the stockholders&#146; agreement. We have agreed to
indemnify each of the stockholders that is a party to the stockholders&#146; agreement against certain liabilities under the Securities Act in connection with any registration of their registrable shares. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Equity Plans </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Following this offering, we
intend to file registration statements on Form&nbsp;S-8 under the Securities Act to register all of the shares of common stock issued or issuable under our 2001 Stock Option/Stock Issuance Plan, our 2011 Equity Incentive Plan, and our 2011 Employee
Stock Purchase Plan. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">116 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_15a"></A>MATERIAL U.S. FEDERAL TAX CONSEQUENCES FOR </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NON-U.S. HOLDERS OF COMMON STOCK </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following is a general discussion of the material U.S. federal income and estate tax consequences relating to the ownership and disposition of our common stock by non-U.S. holders (as defined below) who
purchase our common stock in this offering and hold such common stock as capital assets (generally for investment). This discussion is based on currently existing provisions of the Internal Revenue Code of 1986, as amended, applicable U.S. Treasury
regulations promulgated thereunder, judicial decisions, and rulings and pronouncements of the U.S. Internal Revenue Service, or the IRS, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or
subject to different interpretation. This discussion does not address all the tax consequences that may be relevant to specific holders in light of their particular circumstances or to holders subject to special treatment under U.S. federal income
or estate tax laws (such as financial institutions, insurance companies, tax-exempt organizations, controlled foreign corporations, passive foreign investment companies, retirement plans, partnerships or entities treated as such for U.S. federal
income tax purposes and their partners, dealers in securities, brokers, certain former U.S. citizens or long-term residents or persons who have acquired our common stock as part of a straddle, hedge, conversion transaction or other integrated
investment). This discussion does not address the state, local or foreign tax or U.S. federal non-income or estate tax consequences relating to the ownership and disposition of our common stock. You are urged to consult your own tax advisor
regarding the U.S. federal tax consequences of owning and disposing of our common stock, as well as the applicability and effect of any state, local or foreign tax laws. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">As used in this discussion, the term &#147;non-U.S. holder&#148; refers to a beneficial owner of our common stock that for U.S. federal income tax purposes is not: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">an individual who is a citizen or resident of the United States; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of
Columbia; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">an estate the income of which is subject to U.S. federal income tax regardless of the source thereof; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a trust (a)&nbsp;with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S.
persons have the authority to control all its substantial decisions or (b)&nbsp;that has in effect a valid election under applicable U.S. Treasury regulations to be treated as a U.S. person. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax
treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common stock, we urge you to consult your own tax advisor. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Dividends </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We do not anticipate paying
dividends on our common stock in the foreseeable future. See &#147;Dividend Policy.&#148; If we make a distribution of cash or property, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or
accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first
reduce a non-U.S. holder&#146;s basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">117 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Dividends paid by us to a non-U.S. holder, to the extent treated as dividends for U.S. federal income
tax purposes, generally will be subject to U.S. federal withholding tax at a 30% rate, unless (i)&nbsp;an applicable income tax treaty reduces or eliminates such tax, and a non-U.S. holder provides us with an IRS Form W-8BEN (or successor form)
certifying its entitlement to the benefit of such treaty or (ii)&nbsp;the dividends are effectively connected with a non-U.S. holder&#146;s conduct of a trade or business in the United States and the non-U.S. holder provides us with an IRS Form
W-8ECI (or successor form). In the latter case, a non-U.S. holder generally will be subject to U.S. federal income tax with respect to such dividends in the same manner as a U.S. person, unless otherwise provided in an applicable income tax treaty.
Additionally, a non-U.S. holder that is a corporation may be subject to a branch profits tax on its after-tax effectively connected dividend income at a rate of 30% (or at a reduced rate under an applicable income tax treaty). If a non-U.S. holder
is eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty, such non-U.S. holder may obtain a refund of any excess amount withheld by filing an appropriate claim for refund with the IRS. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Sale, Exchange or Other Disposition </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Generally, a non-U.S. holder will not be subject to U.S. federal income tax on gain realized upon the sale, exchange or other disposition of our
common stock unless (i)&nbsp;such non-U.S. holder is an individual present in the U.S. for 183 days or more in the taxable year of the sale, exchange or other disposition and certain other conditions are met, (ii)&nbsp;the gain is effectively
connected with such non-U.S. holder&#146;s conduct of a trade or business in the United States and, where a tax treaty so provides, the gain is attributable to a U.S. permanent establishment of such non-U.S. holder or (iii)&nbsp;we are or have been
a &#147;U.S. real property holding corporation&#148; for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held our common stock and
either (a)&nbsp;our common stock has ceased to be traded on an &#147;established securities market&#148; prior to the beginning of the calendar year in which the sale, exchange or other disposition occurs or (b)&nbsp;the non-U.S. holder owns
(actually or constructively) more than five percent of our common stock. We believe that we are not a U.S. real property holding corporation, and we do not anticipate becoming a U.S. real property holding corporation. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">A non-U.S. holder described in (i)&nbsp;above will be required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset by
U.S. source capital losses. A non-U.S. holder described in (ii)&nbsp;above will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in
(ii)&nbsp;may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. holders should consult any applicable income tax or other treaties that may provide for different
rules. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Federal Estate Tax </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Common stock owned or treated as owned by an individual who is a non-U.S. holder at the time of his or her death generally will be included in the
individual&#146;s gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Information Reporting and Backup Withholding </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Information reporting and backup withholding (at
the then applicable rate) may apply to certain payments made to a non-U.S. holder on or with respect to our common stock, unless the non-U.S. holder certifies as to its status as a non-U.S. holder under penalties of perjury or
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">118 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
otherwise establishes an exemption and certain other conditions are satisfied. Pursuant to applicable income tax treaties or other agreements, the IRS may also make these information reports
available to tax authorities in the non-U.S. holder&#146;s country of residence. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder will be allowed as a refund or
a credit against such non-U.S. holder&#146;s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS and other applicable requirements are satisfied. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Recently Enacted Legislation Affecting Taxation of our Common Stock Held by or Through Foreign Entities </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Recently enacted legislation generally will impose a U.S. federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our
common stock paid after December&nbsp;31, 2012 to a &#147;foreign financial institution&#148; (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to
collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign
entities with U.S. owners). The legislation also will generally impose a U.S. federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our common stock paid after December&nbsp;31, 2012 to a non-financial foreign entity
unless such entity provides the withholding agent with a certification identifying the direct and indirect U.S. owners of the entity. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. Prospective
investors are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in our common stock. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">119 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_16"></A>UNDERWRITING </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Subject to the terms and conditions of the underwriting agreement, the underwriters named below, through their representative Deutsche Bank
Securities Inc., have severally agreed to purchase from us and the selling stockholders the following respective number of shares of common stock at a public offering price less the underwriting discounts and commissions set forth on the cover page
of this prospectus: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:50pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Underwriters</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number<BR>of&nbsp;Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deutsche Bank Securities Inc.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Needham &amp; Company, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Canaccord Genuity Inc.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">ThinkEquity LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">D.A. Davidson &amp; Co.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The underwriting agreement provides that the obligations of the several underwriters to purchase the shares of common
stock offered hereby are subject to certain conditions precedent and that the underwriters will purchase all of the shares of common stock offered by this prospectus, other than those covered by the over-allotment option described below, if any of
these shares are purchased. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have been advised by the representative of the underwriters that the underwriters propose to offer the
shares of common stock to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share under the
public offering price. The underwriters may allow, and these dealers may re-allow, a concession of not more than $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share to other dealers. After the initial public offering, the representative of
the underwriters may change the offering price and other selling terms. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have granted to the underwriters an option, exercisable not
later than 30 days after the date of this prospectus, to purchase up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares of common stock at the public offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus. The underwriters may exercise this option only to cover over-allotments made in connection with the sale of the common stock offered by this prospectus. To the extent that the underwriters exercise this option, each of
the underwriters will become obligated, subject to conditions, to purchase approximately the same percentage of these additional shares of common stock as the number of shares of common stock to be purchased by it in the above table bears to the
total number of shares of common stock offered by this prospectus. We will be obligated, pursuant to the option, to sell these additional shares of common stock to the underwriters to the extent the option is exercised. If any additional shares of
common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares are being offered. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">120 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The underwriting discounts and commissions per share are equal to the public offering price per share
of common stock less the amount paid by the underwriters to us or the selling stockholders per share of common stock. The underwriting discounts and commissions are &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; percent of the initial public
offering price. We and the selling stockholders have agreed to pay the underwriters the following discounts and commissions, assuming either no exercise or full exercise by the underwriters of the underwriters&#146; over-allotment option:
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="46%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total Fees</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fee&nbsp;per&nbsp;share</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Without&nbsp;Exercise&nbsp;of<BR>Over-Allotment&nbsp;Option</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>With&nbsp;Full&nbsp;Exercise&nbsp;of<BR>Over-Allotment&nbsp;Option</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Discounts and commissions paid by us</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Discounts and commissions paid by the selling stockholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, we estimate that our share
of the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We and the selling stockholders have agreed to indemnify the underwriters against some specified types of liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters
may be required to make in respect of any of these liabilities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We, each of our officers and directors, and substantially all of our
stockholders and holders of options to purchase our stock, have agreed, subject to certain limited exceptions, not to offer, sell, contract to sell or otherwise dispose of, or enter into any transaction that is designed to, or could be expected to,
result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our common stock or derivatives of our common stock owned by these persons prior to this offering or common
stock issuable upon exercise of options held by these persons for a period of 180 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of Deutsche Bank Securities Inc. This
consent may be given at any time without public notice. We have entered into a similar agreement with the representative of the underwriters. There are no agreements between the representative and any of our stockholders or affiliates releasing them
from these lock-up agreements prior to the expiration of the 180-day period. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The 180-day restricted period described in the preceding
paragraph will be extended if: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of
the 180-day restricted period, </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">in which case the restrictions described in the preceding paragraph will continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Deutsche Bank Securities Inc. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The representative of the underwriters have advised us that the underwriters do not intend to confirm sales to any account over which they exercise
discretionary authority. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with the offering, the underwriters may purchase and sell shares of our common stock in the open
market. These transactions may include short sales, purchases to cover positions created by short sales, and stabilizing transactions. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">121 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Short sales involve the sale by the underwriters of a greater number of shares than they are required
to purchase in the offering. Covered short sales are sales made in an amount not greater than the underwriters&#146; option to purchase additional shares of common stock from us in the offering. The underwriters may close out any covered short
position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the
price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Naked short sales are any sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be
created if underwriters are concerned that there may be downward pressure on the price of the shares in the open market prior to the completion of the offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Stabilizing transactions consist of various bids for or purchases of our common stock made by the underwriters in the open market prior to the completion of the offering. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The underwriters may impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting
discount received by it because the representative of the underwriters have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Purchases to cover a short position and stabilizing transactions may have the effect of preventing or slowing a decline in the market price of our
common stock. Additionally, these purchases, along with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that
might otherwise exist in the open market. These transactions may be effected on the Nasdaq Global Market, in the over-the-counter market, or otherwise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We will apply to have our shares of common stock listed on the Nasdaq Global Market under the symbol &#147;APAD.&#148; </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Pricing of this Offering </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Prior to this
offering, there has been no public market for our common stock. Consequently, the initial public offering price of our common stock will be determined by negotiation among us, the selling stockholders, and the representative of the underwriters.
Among the primary factors that will be considered in determining the public offering price are: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prevailing market conditions; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our results of operations in recent periods; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the present stage of our development; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the market capitalizations and stages of development of other companies that we and the representative of the underwriters believe to be comparable to our
business; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">estimates of our business potential. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Electronic Distribution </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">A prospectus in
electronic format is being made available on Internet web sites maintained by the lead underwriter of this offering and may be made available on web sites maintained by other underwriters. Other than the prospectus in electronic format, the
information on any </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">122 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
underwriter&#146;s web site and any information contained in any other web site maintained by an underwriter is not part of the prospectus or the registration statement of which the prospectus
forms a part. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Relationships with Underwriters </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Some of the underwriters or their affiliates may provide investment banking services to us in the future. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">123 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_17"></A>LEGAL MATTERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">O&#146;Melveny&nbsp;&amp; Myers LLP, Menlo Park, California, will pass upon the validity of the shares of common stock offered hereby. As of the
date of this prospectus, an attorney at O&#146;Melveny&nbsp;&amp; Myers LLP beneficially owned an aggregate of less than 0.1% of our outstanding shares of common stock. Wilson Sonsini Goodrich&nbsp;&amp; Rosati, P.C., Palo Alto, California, is
representing the underwriters in this offering. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_17a"></A>EXPERTS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The consolidated financial statements as of December&nbsp;31, 2009 and 2010 and for each of the years in the three-year period ended
December&nbsp;31, 2010 are included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_18"></A>WHERE YOU CAN FIND MORE INFORMATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We filed a registration statement on Form&nbsp;S-1 with the Securities and Exchange Commission with respect to the registration of the common stock
offered for sale with this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits to the registration statement. For further information about us, the common stock we are offering
by this prospectus and related matters, you should review the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus about the contents of any contract or any other
document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration
statement and the exhibits that were filed with the registration statement may be inspected without charge at the public reference facilities maintained by the Securities and Exchange Commission at 100 F. Street, N.E., Washington, D.C. 20549, and
copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the prescribed fee. Information on the operation of the public reference facilities may be obtained by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the
Securities and Exchange Commission. The address of the site is http://www.sec.gov. You may also request copies of these filings, at no cost, by telephone at (408)&nbsp;457-2000 or by mail to: Apache Design Solutions, Inc., 2645 Zanker Road, San
Jose, California 95134, Attention: Chief Financial Officer; http://www.apache-da.com. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, we will become
subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance with such requirements, will file periodic reports, proxy statements, and other information with the Securities and
Exchange Commission. These periodic reports, proxy statements, and other information will be available for inspection and copying at the regional offices, public reference facilities, and web site of the Securities and Exchange Commission referred
to above. We intend to furnish our stockholders with annual reports containing consolidated financial statements audited by our independent registered accounting firm. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">124 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="index"></A>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="bc156870_19"></A>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="94%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom">&nbsp;<FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin156870_1">Report of Independent Registered Public Accounting Firm</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin156870_3">Consolidated Balance Sheets as of December&nbsp;31,&nbsp;2009 and 2010</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin156870_4">Consolidated Statements of Operations for the three years ended December&nbsp;31,&nbsp;2008, 2009, and
2010</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin156870_5">Consolidated Statements of Stockholders&#146; Equity (Deficit) and Comprehensive Income for the three years ended December&nbsp;31,&nbsp;2008,
 2009, and 2010</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin156870_6">Consolidated Statements of Cash Flows for the three years ended December&nbsp;31,&nbsp;2008, 2009, and
2010</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin156870_7">Notes to Consolidated Financial Statements</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-1 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin156870_1"></A>Report of Independent Registered Public Accounting Firm </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board of Directors </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Apache Design Solutions, Inc.: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have audited the accompanying consolidated balance sheets of Apache Design Solutions, Inc. and subsidiaries (the&nbsp;Company) as of
December&nbsp;31, 2009 and 2010, and the related consolidated statements of operations, stockholders&#146; equity (deficit) and comprehensive income and cash flows for each of the years in the three-year period ended December&nbsp;31, 2010. These
consolidated financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Apache Design Solutions, Inc. and subsidiaries as of December&nbsp;31, 2009 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December&nbsp;31,
2010, in conformity with U.S.&nbsp;generally accepted accounting principles. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ KPMG LLP </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2">Mountain View, California </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">March&nbsp;14, 2011 </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-2 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin156870_3"></A>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Balance Sheets </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(In thousands, except par value) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December 31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro Forma<BR>Equity&nbsp;as&nbsp;of<BR>December&nbsp;31,</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>2010 </B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Assets</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Current assets:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,957</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,175</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Short-term investments</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,052</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts receivable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,828</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred tax assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,263</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Prepaid expenses and other current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">878</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,905</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28,188</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">37,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Property and equipment, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,114</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">857</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Intangible assets, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,257</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Goodwill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,531</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,531</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term deferred tax assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,441</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,916</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">538</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">499</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44,069</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,711</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Liabilities, Redeemable Convertible Preferred Stock, and Stockholders&#146; Equity</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Current liabilities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts payable and accrued expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,916</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,946</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred revenue, current portion</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,196</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,303</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total current liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,112</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">33,249</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred revenue, net of current portion</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,684</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,874</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term purchase consideration</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term tax liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,242</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,713</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other long-term liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">57</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">37,345</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">41,844</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Redeemable convertible preferred stock:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Series A redeemable convertible preferred stock, ($0.0001 par value, 3,634 shares authorized, issued, and outstanding)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,741</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,741</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Series B redeemable convertible preferred stock, ($0.0001 par value, 2,300 shares authorized, issued, and outstanding)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,255</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,255</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total redeemable convertible preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,996</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,996</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stockholders&#146; equity:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Common stock ($0.0001 par value, 20,000 shares authorized, 10,968, and 11,100 issued and outstanding at December 31, 2009 and 2010,
respectively)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Additional paid-in capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,870</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,709</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,704</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Retained earnings (accumulated deficit)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,143</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">161</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">161</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total stockholders&#146; equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">728</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,871</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,867</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total liabilities, redeemable convertible preferred stock, and stockholders&#146; equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44,069</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,711</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">See accompanying notes to consolidated financial statements. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-3 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin156870_4"></A>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Statements of Operations </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>(In thousands, except per share data) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December 31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009 </B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,695</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,601</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44,047</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,812</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,662</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,999</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,883</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,939</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35,048</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating expenses:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales and marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,529</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,797</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,588</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,516</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,903</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,926</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,229</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,955</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,372</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating income (loss)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(346</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,984</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,676</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(93</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income (loss) before income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,891</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,042</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Provision (benefit) for income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,507</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,622</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,738</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income per share:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted-average shares used in computing net income per share:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,882</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,016</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,253</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,237</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,631</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Pro forma net income per share (unaudited):</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted-average shares used in computing pro forma net income per share (unaudited):</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,950</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,631</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:204px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">See accompanying notes to consolidated
financial statements. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin156870_5"></A>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Statements of Stockholders&#146; Equity (Deficit) and Comprehensive Income </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(In thousands) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="41%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Common Stock</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Additional<BR>Paid-in</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Capital</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Retained<BR>Earnings<BR>(Accumulated</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Deficit)</B>
</FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Accumulated</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Other<BR>Comprehensive</B></FONT><br>
<FONT STYLE="font-family:ARIAL" SIZE="1"><B>Income (Loss)</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Stockholders&#146;</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Equity</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Deficit)</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balance, December 31, 2007</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,845</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,076</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(9,586</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(7,511</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Comprehensive income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Unrealized investment gain, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total comprehensive income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,176</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Issuance of common stock upon exercise of stock options for cash</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">65</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Repurchase of common<BR>stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">911</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">911</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accretion of preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(87</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(87</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balances, December 31, 2008</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,906</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,949</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(6,412</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>(3,462</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Issuance of common stock upon exercise of stock options for cash</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">62</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">102</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">102</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">819</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">819</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balances, December 31, 2009</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,968</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,870</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,143</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>728</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Issuance of common stock upon exercise of stock options for cash</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">132</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">119</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">119</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">720</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">720</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balances, December 31, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,709</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">161</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>4,871</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B></B>&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:120px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">See accompanying notes to consolidated financial statements. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin156870_6"></A>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Statements of Cash Flows </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>(In thousands) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December 31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008 </B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009 </B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash flows from operating activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Adjustments to reconcile net income to net cash provided by operating activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Depreciation and amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,650</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,315</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,788</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Loss on disposal of property and equipment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">911</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">819</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">720</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5,078</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">666</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(213</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Changes in operating assets and liabilities, net of effects of acquisition:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts receivable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,742</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(4,330</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">328</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Prepaid expenses and other current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">540</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,026</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(212</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts payable and accrued expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(432</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,543</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,288</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,751</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,622</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,297</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long term tax liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,385</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,146</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,471</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other long-term liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">189</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(142</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:9.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by operating activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,225</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,248</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,996</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash flows from investing activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash paid for acquisition, net of cash acquired</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(4,321</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds from sales and maturities of short-term investments</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,629</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,026</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Purchases of short-term investments</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(6,026</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,055</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Purchase of property and equipment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(354</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(752</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(287</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:9.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by (used in) investing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,751</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">953</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,339</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash flows from financing activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Holdback payments related to acquisitions</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds from issuance of common stock, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">102</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">119</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Payment on capital lease obligations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(27</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(58</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:9.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by (used in) financing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,925</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(439</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:9.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net increase in cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B>&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,523<B></B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B>&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B>&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B>8,276</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B>&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents, beginning of year</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,158</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,681</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,957</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents, end of year</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,681</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,957</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,175</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Supplemental disclosures of cash flow information:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash paid for income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">234</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">479</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,368</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash paid for interest</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">111</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">90</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:50px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">See accompanying notes to consolidated financial
statements. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin156870_2"></A><A NAME="fin156870_7"></A>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>(1) Business Description </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Apache Design Solutions, Inc. (the&nbsp;Company) was incorporated in
Delaware in 2001. The Company is a provider of innovative power analysis and optimization software solutions that enable the design of power-efficient, noise-immune high performance integrated circuits, or ICs, and electronic systems. The
Company&#146;s solutions consist of a suite of software tools and methodologies that enable IC and electronic system designers to reduce power consumption, deliver reliable power to all circuit and system components and mitigate power-induced signal
interference, or noise. Revenue is derived primarily from software license and maintenance agreements with customers in the United States, Europe, and Asia. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>(2) Significant Accounting Policies </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(a) Principles of Consolidation </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries in France, Taiwan, Japan,
Korea, China, India, Israel, and the United Kingdom. All significant intercompany accounts and transactions have been eliminated. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(b) Use of Estimates </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The
preparation of consolidated financial statements in conformity with the U.S.&nbsp;generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(c) Foreign Currency Translation </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The functional currency of each of the Company&#146;s active foreign subsidiaries is the U.S.&nbsp;dollar. Assets and liabilities that are not denominated in U.S.&nbsp;dollars are remeasured with any related gain
or loss recorded in earnings. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(d) Cash, Cash Equivalents, and Short-Term Investments </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company classifies investments with original maturities of three&nbsp;months or less when acquired as cash equivalents. Cash and cash
equivalents consist primarily of cash and money market accounts. Investments with maturities greater than three&nbsp;months and less than one&nbsp;year are classified as short-term investments. As of December&nbsp;31, 2010, short-term investments
consisted of investment in certificate of deposits totaling $1.1 million, which approximates fair value. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(e) Accounts Receivable
</I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company evaluates the collectibility of
accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer&#146;s ability to meet its financial obligations, the Company records a specific allowance against
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
amounts due, and thereby reduces the net recognized receivable to the amount the Company reasonably believes will be collected. If all collection efforts have been exhausted, the receivable is
written off against the allowance. The uncollectible amount written off was $103,000 and $31,000 in fiscal years 2008 and 2010 respectively. No uncollected amount was written off in fiscal year 2009. No allowances for doubtful accounts have been
recorded as of December&nbsp;31, 2009 and 2010. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(f) Property and Equipment </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method
over the estimated useful lives of the related assets, generally three to five&nbsp;years. Leasehold improvements are recorded at cost and amortized using the straight-line method over the lesser of the estimated useful lives or the remaining lease
term. Maintenance and repair costs are charged to operations as incurred. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(g) Revenue Recognition </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company licenses its software products and solutions primarily under time-based licenses (TBL) agreements. A TBL is a license valid for a finite
term, generally one to three&nbsp;years, in which the license expires at the end of the term. The software licenses are generally bundled with postcontract customer support (maintenance) for the license term. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company recognizes revenue when: (1)&nbsp;persuasive evidence of an arrangement exists, (2)&nbsp;delivery of software or services has occurred,
(3)&nbsp;the fee for such software or services is fixed or determinable, and (4)&nbsp;collectibility of the full license or service fee is probable. The Company applies these revenue recognition criteria as follows: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Persuasive Evidence of an Arrangement Exists</I>.&nbsp;&nbsp;&nbsp;&nbsp;Prior to recognizing revenue on an arrangement, the Company&#146;s customary policy
is to have a purchase order from customers that have previously negotiated a master end-user license arrangement or purchase agreement, signed by both the customer and the Company. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Delivery Has Occurred</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Company delivers its products to its customers electronically, and the delivery occurs when the Company
provides the customer access codes, or &#147;license keys,&#148; that allow the customer to access a fully functioning version of the software. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:7%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Certain of the Company&#146;s license agreements provide its customers the right to adjust their license to cover other specific software. Because these agreements provide access to a specified set of software
products, the Company does not consider delivery to have occurred until access to at least one copy of each of the products specified in the license agreement has been granted to the customer. </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Fee is Fixed or Determinable</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s determination of whether an arrangement fee is fixed or determinable depends
principally on the arrangement&#146;s payment terms. For contracts where payments are weighted toward the latter part of the contract term, the Company recognizes revenue that represents the lesser of the fee that is due and payable, or the portion
of the entire fee that would be recognized under a straight-line method over the term of the license. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-8 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Collectibility is Probable</I>.&nbsp;&nbsp;&nbsp;&nbsp;The Company judges collectibility of the arrangement fee on a customer-by-customer basis pursuant to
our credit review policy. When a new customer is acquired, the Company evaluates the customer&#146;s financial position and ability to pay prior to selling a TBL to that customer. The Company generally only sells additional licenses to, or enters
into license renewals with, existing customers with which it has a history of successful collection. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company has
analyzed all of the elements included in its multiple-element software arrangements and determined that it does not have sufficient vendor-specific objective evidence (VSOE) to allocate revenue to the maintenance components as all current license
arrangements come packaged with a combination of a term-based license and maintenance. Accordingly, assuming all other revenue recognition criteria are met, the Company recognizes revenue at the lesser of the pro rata portion of the license fee for
the applicable period, or as the payment from the customer becomes due. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred revenue is classified on the consolidated balance sheet
as current and long-term deferred revenue based upon whether the revenue is expected to be recognized within the next 12&nbsp;months, or after the next 12 months. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>(h) Income Taxes </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Income taxes have been provided for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefits that are more likely
than not to be realized. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company recognizes the effect of income tax positions only if those positions are more likely than not to
be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likelihood of being sustained. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(i) Concentrations of Credit Risk </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The Company sells its products worldwide primarily to customers in the global semiconductor market. The Company performs ongoing credit evaluations of its customers&#146; financial condition and does not require
collateral. The Company evaluates the need to establish reserves for any potential credit losses. Such losses have been within management&#146;s expectations and have not been material in any year presented. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-9 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue from major customers as a percentage of total revenue were as follows: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="77%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year&nbsp;Ended&nbsp;December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer B</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer C</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Customers accounting for 10% or more of
accounts receivable were as follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="85%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer D</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer E</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Amounts were less than 10% for the respective period. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Customer C is also a shareholder that owned 1,104,995 shares of the Company&#146;s redeemable convertible preferred stock as of December&nbsp;31, 2010. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(j) Goodwill and Intangible Assets </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Goodwill represents the excess of the aggregate purchase price over the fair value of the tangible and identifiable intangible assets acquired by the Company. The carrying amount of goodwill is tested for
impairment annually or more frequently if facts and circumstances warrant a review. A two-step evaluation to assess goodwill for impairment is required. First, the fair value of each reporting unit is compared to its carrying value. If the fair
value equals or exceeds the carrying value, goodwill is not considered to be impaired and proceeding to the second step is not required. If the carrying value of any reporting unit exceeds its fair value, then the implied fair value of the reporting
unit&#146;s goodwill must be determined and compared to the carrying value of its goodwill and other intangible assets. If the carrying value of a reporting unit&#146;s goodwill exceeds its implied fair value, then an impairment charge equal to the
difference is recorded. For the years presented, the Company operated as one reporting unit and there were no impairments of goodwill as the fair value equaled or exceeded the carrying value. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Intangible assets consist of purchased technology, patents, customer relationships, and contract backlog. Intangible assets are amortized on a
straight-line basis over their estimated useful lives, which range from two to seven&nbsp;years. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(k) Accounting for Impairment of
Long-Lived Assets </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company reviews long-lived assets for impairment whenever events or changes in circumstance indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value, less
cost to sell. The Company did not recognize any long-lived asset impairment charges in fiscal years 2008, 2009, and 2010. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-10 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(l) Stock-Based Compensation </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation expense for stock options is estimated at the grant date based on each award&#146;s fair value as calculated using the
Black-Scholes-Merton (BSM) option pricing model. This fair value is amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(m) Net Income Per Share </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the
period. Diluted net income per share gives effect to equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock method of accounting. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(n) Segment Information </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The
Company operates in one reportable segment. The Company&#146;s chief operating decision-maker, its chief executive officer, reviews its operating results on an aggregate basis and manages its operations as a single operating segment. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(o) Unaudited Pro Forma Stockholders&#146; Equity and Net Income Per Share </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">If the offering contemplated by this prospectus is consummated, all of the redeemable convertible preferred stock outstanding will automatically
convert into 5,933,665 shares of common stock, based on the shares of redeemable convertible preferred stock outstanding at December&nbsp;31, 2010. Unaudited pro forma stockholders&#146; equity and pro forma net income per share, as adjusted for the
assumed conversion of the convertible preferred stock, are reflected in the consolidated financial statements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(p) Comprehensive
Income </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company is required to display comprehensive income and its components as part of the Company&#146;s consolidated
financial statements. Comprehensive income comprises net income and other comprehensive income, including unrealized gain from investments. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>(q) Recently Issued Accounting Standards </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In October 2009, the Financial Accounting Standards
Board (FASB) issued new standards for revenue recognition with multiple deliverables. These new standards impact the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of
accounting. Additionally, these new standards modify the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration.
These new standards are required to be adopted in the first quarter of 2011. The Company will adopt the guidance on a prospective basis effective the first quarter of fiscal year 2011. The Company does not believe the adoption of the guidance will
have a material impact on its consolidated financial statements. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-11 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In October 2009, the FASB issued new standards for the accounting for certain revenue arrangements
that include software elements. These new standards amend the scope of preexisting software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. These new
standards are required to be adopted in the first quarter of 2011. The Company will adopt the guidance on a prospective basis effective the first quarter of fiscal year 2011. The Company does not believe the adoption of the guidance will have a
material impact on its consolidated financial statements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(3) Business Combination </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On September&nbsp;4, 2009, the Company acquired, in a taxable transaction, certain assets and foreign subsidiaries of Sequence Design, Inc.
(Sequence), a provider of the Register Transfer Level (RTL) design for power solutions, for cash consideration of approximately $5.3&nbsp;million plus the assumption of certain specified liabilities. A total of $0.8&nbsp;million of the cash
consideration was held back to cover any potential indemnity claims, out of which $0.5&nbsp;million was paid on the first anniversary of the acquisition, and the remaining $0.3&nbsp;million is payable on the second anniversary, provided that such
amount shall be subject to the Company&#146;s rights to indemnification as set forth in the purchase agreement related to such acquisition. Additionally, approximately $0.6&nbsp;million is payable over a 24-month period to certain former Sequence
employees should they satisfy certain performance criteria as employees of the Company which is recorded as compensation as earned. The Company included the operating results of Sequence in the consolidated statement of operations starting as of the
closing date of the acquisition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The financial information in the table below summarizes the combined results of operations of the
Company and Sequence, on a pro forma basis, as though the companies had been combined as of the beginning of fiscal 2008 and fiscal 2009. The pro forma financial information is presented for informational purposes only and is not indicative of the
results of operations that would have been achieved if the acquisition had taken place on January 1, 2008 or January&nbsp;1, 2009 or of results that may occur in the future: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro Forma Results<BR>(unaudited)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended<BR>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">32,728</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39,221</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,629</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The pro forma financial information for all periods presented also includes the business combination accounting effect
on historical Sequence deferred revenues, adjustments to amortization charges from acquired intangible assets, and related tax impacts. In addition, during the year ended December 31, 2009, the Company incurred $0.2 million of third-party
acquisition-related costs. These expenses are included in general and administrative expense in the Company&#146;s consolidated statement of operations for the year ended December&nbsp;31, 2009. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-12 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Following the acquisition of Sequence, the Company sought to integrate the combined companies by
bundling acquired products with Apache&#146;s existing products and cross selling to the combined customer base. The Company also sought to reduce the costs associated with the operation of the acquired business by consolidating sales and marketing
efforts and by eliminating redundant administrative resources and rationalizing research and development. As a result of the foregoing, the Company has not separately assessed the impact of this acquisition on the Company&#146;s consolidated
financial statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The assets acquired and liabilities assumed were recorded at fair value, and the excess of the purchase price
over the fair value of the net assets acquired was recorded as goodwill, which resulted primarily from our expectation of synergies from the integration of the acquired company&#146;s technology with our technology. The $3.0&nbsp;million goodwill
recorded in connection with this acquisition is deductible for income tax purposes over 15&nbsp;years. The Company accounted for acquisition-related costs as expenses in the periods where the costs were incurred and the services were received.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The initial consideration has been allocated as follows (in thousands): </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="87%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Tangible assets acquired</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"> 915</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Intangible assets acquired:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Developed technology</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,690</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Patents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">160</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer relationships</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">230</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Contract backlog</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,090</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Goodwill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,994</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total intangible assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,164</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net of liabilities assumed</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,829</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net assets acquired</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The fair values of Sequence&#146;s intangible assets were determined using the income approach with significant inputs
that are not observable in the market. Key assumptions include the expected future cash flows, the timing of the expected future cash flows and the discount rates consistent with the level of risk associated with those expected from cash flows.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The acquired intangible assets are being amortized on a straight-line basis over their estimated useful lives, which are two to
five&nbsp;years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company acquired all of the outstanding shares of Optimal in the year ended December&nbsp;31, 2007, for which it
paid $7.5 million in cash. A total of $2.0&nbsp;million of the cash consideration was held back from the purchase price for a period of two years to cover any potential indemnity claims. During the year ended December&nbsp;31, 2009, the
$2.0&nbsp;million holdback was paid out in full. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(4) Financial Instruments </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company measures at fair value its cash equivalents using a valuation hierarchy based on whether the inputs to those valuation techniques are
observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-13 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
inputs reflect the Company&#146;s own assumption. These two types of inputs have created the following fair value hierarchy: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Level&nbsp;1&#151;Valuations based on quoted prices in inactive markets for identical assets that the Company has the ability to access.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Level&nbsp;2&#151;Valuations based on inputs other than quoted prices included within Level&nbsp;1, for which all significant inputs are observable, either
directly or indirectly. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Level&nbsp;3&#151;Valuations based on inputs that are unobservable and significant to the overall fair value measurement. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company&#146;s short-term investments consist of certificates of deposit. The Company estimates the fair value of its certificates of deposit
using Level&nbsp;1 inputs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The carrying value of accounts receivable and accounts payable approximates fair value because of the
short-term nature of these instruments. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(5) Property and Equipment </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Property and equipment consisted of the following (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="80%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December 31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Computer hardware</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,807</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Furniture and fixtures</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">290</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">275</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Software</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">256</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">256</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Leasehold improvements</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">586</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">582</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,632</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,920</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less: accumulated depreciation and amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,518</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,063</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,114</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">857</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Depreciation and amortization expense was $568,000, $845,000, and $580,000 in fiscal years 2008, 2009, and 2010,
respectively. The Company had no capital lease obligation in fiscal year 2008. The cost of equipment acquired under capital leases was $131,000 as of December&nbsp;31, 2009 and 2010. Depreciation of assets reported under capital leases was included
with depreciation expense. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-14 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(6) Intangible Assets </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>(a) Acquired Intangible Assets </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of December&nbsp;31, 2009, the major classes of amortizable
intangible assets were as follows (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="59%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Gross<BR>Carrying<BR>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Accumulated<BR>Amortization</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Net</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Weighted<BR>Average<BR>Remaining<BR>Life&nbsp;(months)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Developed technology</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,090</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,086</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,004</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">45</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Patents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">160</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">150</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">56</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer relationships</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,650</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(455</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,195</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">58</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Contract backlog</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,090</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(182</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">908</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,990</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,733</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,257</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of December&nbsp;31, 2010, the major classes of amortizable intangible assets were as follows (in
thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="59%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Gross<BR>Carrying<BR>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Accumulated<BR>Amortization</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Net</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Weighted<BR>Average<BR>Remaining<BR>Life&nbsp;(months)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Developed technology</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,090</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,504</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,586</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Patents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">160</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">117</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Customer relationships</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,650</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(704</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">946</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Contract backlog</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,090</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(726</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">364</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,990</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(4,977</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Total amortization expense for intangible assets was $1.1 million, $1.5&nbsp;million, and $2.2&nbsp;million
in fiscal years 2008, 2009, and 2010, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Estimated amortization expense for the following five&nbsp;years and thereafter (in
thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,062</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2012</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,552</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2013</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">819</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2014</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">580</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2015</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2016 and thereafter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-15 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(7) Accounts Payable and Accrued Expenses </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts payable and accrued expenses consisted of the following (in thousands): </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="80%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2009&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2010&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">692</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,019</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Payroll, bonus, and commission</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,687</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,240</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Vacation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">681</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Holdback payments related to Sequence acquisition</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,431</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,756</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,916</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,946</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(8) Redeemable Convertible Preferred Stock </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following table summarizes the redeemable convertible preferred stock authorized, issued, and outstanding as of December&nbsp;31, 2008, 2009, and 2010: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="61%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Par<BR>Value</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares<BR>Authorized</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares<BR>Issued and<BR>Outstanding</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Series A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.0001</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,633,665</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,633,665</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Series B</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.0001</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,300,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,300,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,933,665</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,933,665</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The rights, privileges, and preferences for Series&nbsp;A and Series&nbsp;B are as follows: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(a)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Holders of Series&nbsp;A and Series&nbsp;B are entitled to receive noncumulative dividends at an annual rate of $0.038336 and $0.148 per share, respectively, when and if declared
by the Board of Directors, prior to and in preference to holders of common stock. No dividends have been declared through December&nbsp;31, 2010. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(b)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">In the event of the liquidation or dissolution of the Company, holders of Series&nbsp;B are entitled to receive an amount equal to $1.85 per share, plus all accrued and unpaid
dividends, prior and in preference to any distributions made to the holders of Series&nbsp;A and common stock. The holders of Series&nbsp;A are entitled to receive an amount equal to $0.4792 per share, prior and in preference to any distributions
made to the holders of common stock. If after making the above distribution, the remaining assets of the Company legally available for distribution, if any, shall be distributed ratably to the holders of Series&nbsp;A, Series&nbsp;B, and common
stock on an as-if-converted basis. At December&nbsp;31, 2010, the aggregate liquidation preference of Series&nbsp;A and Series&nbsp;B was $1.7&nbsp;million and $4.3&nbsp;million, respectively. </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(c)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Series&nbsp;A and Series&nbsp;B shares are convertible, one-for-one, into common stock at the option of the holder, at any time after the date of issuance. This conversion rate
is subject to adjustment for stock splits, stock dividends, and certain other events. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(d)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Each share of Series&nbsp;A and Series&nbsp;B is automatically converted into one share of common stock, upon the earliest to occur of: (i)&nbsp;an initial
public offering with proceeds of not less than $20&nbsp;million, and an offering price of at least $3.70 per share; (ii)&nbsp;the closing of a liquidation event with an aggregate consideration equal to the sum of
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-16 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:ARIAL" SIZE="2">
$60&nbsp;million and three times the aggregate proceeds from all issuances of Series&nbsp;B ($12.8&nbsp;million at December&nbsp;31, 2010); and (iii)&nbsp;approval by the holders of a majority of
the then outstanding preferred stock, voting together as a class. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(e)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Holders of Series&nbsp;A and Series&nbsp;B are entitled to vote, with each preferred share having the voting rights equal to the number of common stock shares into which it is
convertible, on all matters submitted to a vote of the Company&#146;s stockholders. The holders of Series&nbsp;A, voting separately as a class, are entitled to elect one member to the Board of Directors. The holders of Series&nbsp;A and
Series&nbsp;B, voting together as a class, are entitled to elect one member to the Board of Directors. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(f)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Each share of Series&nbsp;A and Series&nbsp;B is redeemable at any time after the fifth anniversary of Series&nbsp;B issuance date, if requested by holders of at least 75% of the
then, outstanding shares of Series&nbsp;A and Series&nbsp;B, voting as separate classes. The redemption price for the Series&nbsp;A and Series&nbsp;B is $0.4792 per share and $1.85 per share, respectively, subject to adjustment for stock splits,
stock dividends, and certain other events, plus declared and unpaid dividends. As a result, the Company has accounted for Series A and Series B outside of permanent equity. </FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>(9) Common Stock </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company is authorized to issue 20,000,000&nbsp;shares of common stock
with a par value of $0.0001 per share. At December&nbsp;31, 2009 and 2010, 10,968,287&nbsp;and 11,099,815 shares were issued and outstanding, respectively. The holders of common stock, voting separately as a class, are entitled to elect one member
to the Board of Directors. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(10) Employee Benefit Plan </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The Company has a 401(k) retirement plan to provide defined contribution retirement benefits for all eligible employees. Participants may contribute a portion of their compensation to the plan, subject to
limitations under the Internal Revenue Code. The Company does not have any matching plan and has not made any contribution to the 401(k) Plan. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(11)
Stock Option Plan </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In October&nbsp;2001, the Company adopted the 2001 Stock Option/Stock Issuance Plan (the&nbsp;Plan). The Company
has reserved a total of 9,200,000&nbsp;shares of common stock for issuance under the Plan. Under the Plan, the Board of Directors may grant incentive stock options to U.S. employees and directors and nonstatutory stock options to employees,
directors, and consultants. The exercise price of an option cannot be less than the fair value of one share of common stock on the date of grant for incentive stock options or 85% of the fair value of one share of common stock for nonstatutory stock
options (not less than 110% of the fair value for stockholders owning greater than 10% of all classes of stock who receive an incentive stock option) as determined by the Board of Directors. Options expire after 10&nbsp;years or less as provided in
the option agreement (5&nbsp;years for stockholders owning greater than 10% of all classes of stock who receive on incentive stock option). Employee options generally vest over 4&nbsp;years, but options with shorter vesting periods can be granted by
the Board of Directors. The Plan allows for exercise of unvested options with repurchase rights over the restricted common stock issued at the original exercise price. The repurchase rights lapse at the same rate as the original option vesting
schedule. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-17 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The fair value of awards granted under the stock option plan is measured at the grant date using
the BSM option pricing model. The BSM option pricing model incorporates various subjective assumptions, including expected volatility, expected term and the risk-free interest rates, as well as the fair value of the common stock on the grant date as
determined by management. These input factors are subjective and are determined using management&#146;s judgment. If a difference arises between the assumptions used in determining stock-based compensation expense and the actual factors that become
known over time, the Company may change the input factors used in determining future stock-based compensation expense. Any such changes could materially impact the results of operations in the period in which the changes are made and in periods
thereafter. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The fair value of awards is recognized on a straight-line basis over the vesting period. The compensation expense for
share-based awards is based on awards that are expected to vest and is reduced for estimated forfeitures. The Company applies an annual forfeiture rate that is determined based on historical forfeitures and represents the awards expected to be
forfeited each year. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As the Company does not have a trading history for the common stock, the expected stock price volatility for the
common stock is estimated by taking the average of the historical volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of several public
companies in the technology and software industry. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company determines the expected term in accordance with the &#147;simplified
method&#148; for a plain vanilla employee stock option for which the value is estimated using a BSM formula. Under this approach, the expected term would be presumed to be the midpoint between the vesting date and the end of the contractual term.
The use of this approach is permitted as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the lack of trading history for its common stock. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The risk-free interest rate is based upon interest rates that match the expected term of the option granted. The dividend yield is zero as the
Company does not expect to be paying cash dividends on the common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Valuation assumptions: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December 31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Expected dividend yield</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Expected volatility</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">51.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">61.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">54.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Expected term (in years)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Risk-free interest rate</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.2%-3.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.4%-2.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.7-3.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Average common stock fair value</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.98</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-18 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">At the respective grant dates, the exercise price was determined by the Board of Directors by
reference to, among other things, the estimated fair value of the underlying common stock, which ranged from: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="64%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December 31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Exercise price</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.75-2.70</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.75-2.25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.25-4.55</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation expense included
in the consolidated statements of operations was as follows (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2008&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2009&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2010&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">178</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">184</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">190</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales and marketing</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">305</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">302</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">192</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">337</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">230</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">229</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">91</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">103</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">109</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">911</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">819</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">720</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock option activity under the Plan is as follows: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Available&nbsp;for<BR>Grant</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number of<BR>Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Weighted<BR>Average<BR>Exercise<BR>Price</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Weighted<BR>Average<BR>Remaining<BR>Contractual<BR>Terms&nbsp;(years)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Aggregate<BR>Intrinsic<BR>Value</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balances, December&nbsp;31, 2007</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,662</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,379,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.52</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Authorized</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,000,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Granted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(967,308</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">967,308</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.96</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Canceled</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">239,273</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(239,273</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.84</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Repurchased</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,209</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.31</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Exercised</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(64,935</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balances, December&nbsp;31, 2008</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">296,836</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,042,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.06</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8.05</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Granted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(432,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">432,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Canceled</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">284,995</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(284,995</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.77</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Exercised</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(62,480</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.64</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balances, December&nbsp;31, 2009</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">149,081</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,127,675</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7.47</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Authorized</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,000,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Granted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(418,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">418,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Canceled</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">120,700</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(120,700</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Repurchased</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">437</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Exercised</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(131,965</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.91</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balances, December&nbsp;31, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">851,818</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,293,410</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7.12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,083,997</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Options vested as of December&nbsp;31, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,474,656</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.93</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,030,943</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Options expected to vest after December&nbsp;31, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">706,354</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.58</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8.81</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,771,208</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-19 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value
based on stock options with an exercise price less than the fair value of the Company&#146;s common stock on December&nbsp;31, 2010 of $5.35. The total intrinsic value of options exercised during the year ended December&nbsp;31, 2009 and 2010 was
$22&nbsp;thousand and $0.4&nbsp;million, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table summarizes additional information about stock options
outstanding at December&nbsp;31, 2010: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Options Outstanding and<BR>Exercisable</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:52pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Exercise Price</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number<BR>Outstanding</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Weighted-<BR>Remaining<BR>Contractual<BR>Life&nbsp;(in&nbsp;years)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;0.05</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">105,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.95</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;0.18</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">104,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.95</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;0.35</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4.84</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;1.20</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">349,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;1.75</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85,127</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;2.25</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">464,200</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.01</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;2.45</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">285,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;2.70</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">106,733</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7.66</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;2.75</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">161,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.78</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;3.10</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">366,650</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7.18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;3.55</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">201,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.65</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;4.55</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">58,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.88</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,293,410</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The weighted average grant date fair value of options granted during the years 2009 and 2010 was $1.24 and
$1.82, respectively. The Company had total unrecognized compensation expense, net of estimated forfeitures, related to stock option grants of $1.0&nbsp;million as of December&nbsp;31, 2010, which will be recognized over the remaining weighted
average vesting period of 2.63 years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">From 2002 through 2010, the Company granted 954,969 options to purchase common stock at exercise
prices from zero to $3.10 per share to outside advisors or consultants. Compensation expense related to unvested shares held by non-employees is remeasured each reporting period. As of December&nbsp;31, 2010, options to purchase 107,500&nbsp;shares
are still outstanding of which 11,667 remain unvested. Stock-based compensation expense related to these options was not material during fiscal years 2008, 2009, and 2010. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-20 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(12) Net Income Per Share </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(In thousands, except per<BR>share&nbsp;data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Numerator:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,174</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,269</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,304</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Denominator:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted average common stock&#151;basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,882</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,016</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Effect of potentially dilutive securities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Add convertible preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,934</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,934</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,934</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Add diluted effect of share options</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">437</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">373</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">681</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted average common stock&#151;diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,253</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,237</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,631</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income per share:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">For fiscal years 2008, 2009 and 2010, options to purchase approximately 850,000, 1,158,000 and 433,000 shares of common
stock, respectively, with exercise prices greater than the average fair value of our stock, were not included in the calculation of diluted net income per share because the effect would have been anti-dilutive. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(13) Income Taxes </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) from
continuing operations before income taxes is as follows (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2008&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2009&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2010&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">United States</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(757</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,416</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,168</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Foreign</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">424</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">475</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">874</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,891</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,042</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-21 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(a) Income Taxes </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Income tax provision (benefit) attributable to income from continuing operations consisted of (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2008&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2009&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2010&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Current expense:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Federal</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">541</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">644</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">State</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">407</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">209</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Foreign</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,479</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,099</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,102</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,566</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,047</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,955</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred expense (benefit):</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Federal</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,921</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(235</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">State</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,173</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(219</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Foreign</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5,073</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">575</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(217</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Provision (benefit) for income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,507</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,622</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,738</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(b) Tax Rate Reconciliation </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Income tax expense (benefit) attributable to income from continuing operations differed from the amounts computed by applying the U.S.&nbsp;federal income tax rate of 34% to pretax income from continuing operations
as a result of the following (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2008&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2009&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;2010&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax expense (benefit) at federal statutory rate</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(113</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,003</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,054</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Nondeductible items and other</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">377</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">288</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">State taxes, net of federal benefit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(155</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">98</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">155</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Foreign rate differential</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">149</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">67</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Foreign withholding tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">636</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">488</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">726</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Research and development credits</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(294</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(295</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(295</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Valuation allowance</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(4,107</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total income tax expense (benefit)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,507</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,622</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,738</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-22 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(c) Significant Components of Deferred Taxes </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at
December&nbsp;31, 2009 and 2010 are presented below (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="77%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2009&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2010&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred tax assets:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Property, plant, and equipment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accruals and reserves</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">610</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">533</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">660</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">908</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">State taxes, net of federal benefit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">159</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">118</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net operating losses and credit carryfowards</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,943</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,754</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(138</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross deferred tax assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,410</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,203</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less valuation allowance</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,259</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total deferred tax assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,151</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,678</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred tax liabilities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Intangible assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,185</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(499</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net deferred tax assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,966</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,179</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company concluded that a full valuation allowance was required against all net deferred tax assets as of
December&nbsp;31, 2007. During 2008, the Company concluded that it is more likely than not that all of its deferred tax assets except certain foreign tax credits and acquired net operating losses subject to limitations will be realized and as a
result, valuation allowance of $4.6&nbsp;million was released during the year, of which $4.1&nbsp;million was recorded as deferred tax benefit, and $0.5&nbsp;million was recorded as an adjustment to goodwill. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Management considers various sources of taxable income and all available positive and negative evidence about these possible sources of taxable income. The Company gives
significant weight to evidence that can be objectively verified. Taxable income for the years ended December&nbsp;31, 2008, 2009, and 2010 was $1.0 million, $6.9&nbsp;million, and $7.5&nbsp;million, respectively, for federal purposes before applying
any credit carryforwards. Based on the level of historical taxable income and projections for future taxable income over the periods for which the deferred tax assets are deductible, management believes that it is more likely than not that the
Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December&nbsp;31, 2010. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The valuation allowance of $1.3&nbsp;million and $1.5 million at December&nbsp;31, 2009 and 2010, respectively, was primarily related to foreign
tax credit carryforwards that, in the judgment of management, are not more likely than not to be realized due to the annual limitation based on the Company&#146;s foreign source income. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-23 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of December&nbsp;31, 2010, the Company has federal and state net operating loss carryforwards
of approximately $5.0&nbsp;million and $6.6&nbsp;million, respectively, which expire on various dates through 2028. The Company&#146;s ability to utilize the loss carryforwards is subject to limitations pursuant to the ownership change rules of
Internal Revenue Code Section&nbsp;382. As of December&nbsp;31, 2010, the Company has California state research and development credits carryforwards of approximately $1.0&nbsp;million. California state research and development credits may be
carried forward indefinitely. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company has not provided for U.S. federal income taxes on its non-U.S. subsidiaries&#146;
undistributed earnings as of December&nbsp;31, 2010, because each earnings are intended to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to applicable U.S. federal
and state income taxes. There are no significant cumulative unremitted foreign earnings as of December&nbsp;31, 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The changes in
the Company&#146;s gross amount of unrecognized tax benefits during the year ended December&nbsp;31, 2010 are as follows (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="92%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Unrecognized tax benefits at the beginning of the fiscal year</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,798</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Decrease in unrecognized tax benefits of tax positions taken during a prior year</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(136</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase in unrecognized tax benefits as a result of tax positions taken during the current year</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,964</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Unrecognized tax benefits at the end of the fiscal year</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,626</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of December&nbsp;31, 2010, $2.3 million of unrecognized tax benefits would, if recognized, reduce the effective tax
rate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company&#146;s policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense.
As of December&nbsp;31, 2009 and 2010, the Company had $1.7&nbsp;million and $2.4 million of accrued income tax related interest and penalties on unrecognized tax benefits, respectively. Interest included in the Company&#146;s provision for income
taxes was an expense of $0.1 million and $0.4&nbsp;million for fiscal years 2009 and 2010, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company files
U.S.&nbsp;federal, California and other U.S.&nbsp;states, and other foreign jurisdictions income tax returns. The Company&#146;s major taxing jurisdictions are U.S.&nbsp;federal and California. Fiscal years 2004 to 2009 remain open to examination by
the Internal Revenue Service and California Franchise Tax Board. Because the Company uses historical net operating loss carryforward and other tax attributes to offset its federal and state taxable income in current and future years&#146; tax
returns, such attributes can be adjusted by the taxing authorities until the statute of limitations closes on the year in which such attributes were utilized. The Company is not currently under examination in any of its major taxing jurisdictions.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of December&nbsp;31, 2010, the Company does not currently expect significant changes in the total unrecognized tax benefits within
the next 12&nbsp;months. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-24 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(14) Segment Information </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The Company operates in one reportable segment. The Company&#146;s chief operating decision-maker, its chief executive officer, reviews its operating results on an aggregate basis and manages its operations as a
single operating segment. Revenue by region is classified based on the regions to which the products are shipped, which may differ from the location of customer&#146;s principal offices. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company operates in four main geographic areas: the United States (U.S.); Europe, the Middle East, and Africa (EMEA); Japan; and Asia Pacific,
excluding Japan. The Company&#146;s long-lived assets included property and equipment, purchased technology, and goodwill. Long-lived assets are attributed to geographic areas based on the country where the assets are located. As of
December&nbsp;31, 2009 and 2010, long-lived assets of approximately $12.7 million and $10.2 million, respectively, are domiciled in the United States. Long-lived assets for all other locations are not material to the consolidated financial
statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth the Company&#146;s revenue by geographic region (in thousands): </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">U.S.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,422</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,898</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,192</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">EMEA</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,413</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,166</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,484</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Asia Pacific, excluding Japan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,317</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,978</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,340</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Japan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,543</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,559</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,031</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,695</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,601</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44,047</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(15) Commitments </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(a) Leases </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company
leases its facilities under several noncancelable operating and capital lease agreements, which expire at various dates. Approximate future minimum lease payments as of December&nbsp;31, 2010, under operating leases are as follows (in thousands):
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="79%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Operating</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Capital</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Fiscal year:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">780</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">56</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2012</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">132</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2013</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">68</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">980</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">64</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Rental expenses for certain operating lease agreements with scheduled rent increases and other lease incentives are
recognized on a straight-line basis over the term of the lease. Total rental expense under operating leases was $1.0 million, $1.1 million, and $1.3 million in 2008, 2009, and 2010, respectively. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-25 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued) </B></FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>(b) Other Contingencies </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company warrants to licensees that for 90&nbsp;days following delivery, the licensed product will substantially conform to its users guide as
exists at the date of delivery. The Company&#146;s obligation under this warranty is to use reasonable efforts to correct any nonconformity and supply the licensee with a corrected version of the licensed product as soon as practical after being
notified by the licensee of any nonconformity. If the correction is commercially unreasonable, the Company may terminate the license and return to licensee a pro rata portion of the license fee paid. The Company typically provides customers limited
indemnities with respect to claims that their use of the Company&#146;s analysis and optimization software products infringe on patents, copyrights, trademarks, or trade secrets. To date, there have been no significant expenses related to indemnity
claims. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(16) Legal Matters </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">The
Company and its subsidiaries are, from time to time, party to legal proceedings arising in the normal course of business. In management&#146;s opinion, there are no pending claims or litigation, the outcome of which would have a material adverse
effect on the Company&#146;s consolidated results of operations, financial position, or cash flows. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(17) Subsequent Events </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On January&nbsp;27, 2011, the Board of Directors approved an amendment to the Company&#146;s amended and restated certificate of incorporation that
increased the authorized common stock to 21,000,000 shares and increased the size of the Board of Directors to five members. The holders of common stock, series A and series B, voting together as a class, are entitled to elect these two additional
directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;3, 2011 and March 7, 2011, the Board of Directors granted stock options to employees, directors, and
consultants to purchase an aggregate of 88,875 and 938,300 shares of the Company&#146;s common stock with an exercise price of $5.35 and $6.80 per share, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">On March&nbsp;7, 2011, the Board of Directors approved the 2011 Equity Incentive Plan to grant equity awards of up to 2,400,000 shares to its employees, directors, and consultants. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On March 7, 2011, the Board of Directors approved the 2011 Employee Stock Purchase Plan to issue and sell up to 600,000 shares to the
Company&#146;s employees. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">On March 7, 2011, the Board of Directors approved an increase to its 2001 Stock Option/ Stock Incentive Plan
by another 600,000 shares for a total of 9,800,000 shares. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-26 </FONT></P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

<DIV STYLE="position:relative;float:left; margin-right:1%; width:47%;padding-right:9px;padding-bottom:8px;overflow:hidden">
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>You should rely only on the information contained in this prospectus. We have not authorized anyone to provide
information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. </B></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc"></A>TABLE OF CONTENTS </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="87%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_1">Prospectus Summary</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_2">Risk Factors</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_3">Forward-Looking Statements and Statistical Data and Market Information</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">41</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_4">Use of Proceeds</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">44</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_5">Dividend Policy</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">45</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_6">Capitalization</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_7">Dilution</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_8">Selected Consolidated Financial and Other Data</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_9">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_10">Business</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">71</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_11">Management</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_11a">Compensation Discussion and Analysis</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">92</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_12">Principal and Selling Stockholders</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">105</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_13">Certain Relationships and Related Party Transactions</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">107</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_14">Description of Capital Stock</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_15">Shares Eligible for Future Sale</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">115</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_15a">Material U.S. Federal Tax Consequences for Non-U.S. Holders of Common Stock </A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">117</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_16">Underwriting</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">120</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_17">Legal Matters</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_17a">Experts </A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_18">Where You Can Find Additional Information</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#bc156870_19">Index to Consolidated Financial Statements</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Until
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer&#146;s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
</B></FONT></P></DIV><DIV STYLE="position:relative;float:right; width:49%;padding-right:9px;padding-bottom:8px;overflow:hidden">

 <P STYLE="margin-top:36px;margin-bottom:0px">

<IMG SRC="g156870g20l76.jpg" ALT="LOGO"> </P>
 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Apache Design Solutions, Inc. </B></FONT></P>
<P STYLE="margin-top:60px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shares </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="4"><B>Common Stock </B></FONT></P> <P STYLE="margin-top:160px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="3"><B>Deutsche Bank Securities </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="3"><B>Needham &amp; Company, LLC </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="3"><B>Canaccord Genuity
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="3"><B>ThinkEquity LLC </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="3"><B>D.A. Davidson &amp; Co.
</B></FONT></P> <P STYLE="margin-top:160px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Prospectus </B></FONT></P>
<P STYLE="margin-top:20px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011
</B></FONT></P></DIV><div style="clear:both; height:0px; font-size:0px">&nbsp;</div>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>PART&nbsp;II </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>INFORMATION NOT REQUIRED IN PROSPECTUS </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;13.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B><I>Other Expenses of Issuance and Distribution.</I></B><B> </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following table sets forth the costs and expenses, other than the underwriting discount and commissions, payable by us in connection with the sale of common stock being registered. All amounts are estimated
except the Securities and Exchange Commission (the &#147;SEC&#148;) registration fee and the FINRA filing fees. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="90%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">SEC registration fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,708</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">FINRA filing fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Nasdaq Global Market listing fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Printing and engraving expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Legal fees and expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounting fees and expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Blue Sky fees and expenses (including legal fees)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Transfer agent and registrar fees and expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Miscellaneous</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">To be filed by amendment. </FONT></TD></TR></TABLE> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;14.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B><I>Indemnification of Directors and Officers</I></B><B> </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;145(a) of the Delaware General Corporation Law (the &#147;DGCL&#148;) provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), because he or she is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys&#146; fees),
judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;145(b) of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its favor because the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys&#146; fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit
if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made with respect to any claim, issue or matter as to which he
or she shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of
the case, he or she is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or other adjudicating court shall deem proper. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-1 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;145(g) of the DGCL provides, in general, that a corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify the
person against such liability under Section&nbsp;145 of the DGCL. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect that the certificate of incorporation adopted by us prior
to the consummation of this offering (the &#147;Charter&#148;) will provide that no director of our company shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for
liability (1)&nbsp;for any breach of the director&#146;s duty of loyalty to us or our stockholders, (2)&nbsp;for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3)&nbsp;in respect of
unlawful dividend payments or stock redemptions or repurchases or other distributions pursuant to Section&nbsp;174 of the DGCL, or (4)&nbsp;for any transaction from which the director derived an improper personal benefit. In addition, our Charter
will provide that if the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of our company shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We also expect our Charter will further provide that any repeal or modification of such article by our stockholders or an
amendment to the DGCL will not adversely affect any right or protection existing at the time of such repeal or modification with respect to any acts or omissions occurring before such repeal or modification of a director serving at the time of such
repeal or modification. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect that our amended and restated bylaws adopted by us prior to the consummation of this offering, will
provide that we will indemnify each of our directors and officers, certain employees, and agents, to the fullest extent permitted by the DGCL as the same may be amended (except that in the case of an amendment, only to the extent that the amendment
permits us to provide broader indemnification rights than the DGCL permitted us to provide prior to such the amendment) against any and all expenses, judgments, penalties, fines, and amounts reasonably paid in settlement that are incurred by the
director, officer or such employee or on the director&#146;s, officer&#146;s or employee&#146;s behalf in connection with any threatened, pending or completed proceeding or any claim, issue or matter therein, to which he or she is or is threatened
to be made a party because he or she is or was serving as a director, officer or employee of our company, or at our request as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of our company and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. We expect the amended and restated bylaws will further provide for the advancement of expenses to each of our directors and, in the discretion of the board of directors, to certain officers and
employees. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, we expect the amended and restated bylaws will provide that the right of each of our directors and officers to
indemnification and advancement of expenses shall be a contract right and shall not be exclusive of any other right now possessed or hereafter acquired under any statute, provision of the amended and restated certificate of incorporation or the
amended and restated bylaws, agreement, vote of stockholders or otherwise. Furthermore, our amended and restated bylaws will authorizes us to provide insurance for our directors, officers, and employees, against any liability, whether or not we
would have the power to indemnify such person against such liability under the DGCL or the amended and restated bylaws. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-2 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Some of our officers, along with other stockholders, are parties to an Amended and Restated
Investors&#146; Rights Agreement that provides for, among other things, the rights of these stockholders to cause us to register shares of our common stock held by these stockholders. We have agreed with these stockholders, including some of our
officers, that, in the event any of their shares of our common stock are included in an underwritten registration statement, then, to the extent permitted by law, we will indemnify and hold harmless these stockholders, any underwriter for these
stockholders, and each person, if any, who controls these stockholders or underwriters, against any losses, claims, damages or liabilities (joint or several) to which they may become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations: (i)&nbsp;any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii)&nbsp;the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii)&nbsp;any violation or alleged violation by us of any securities laws. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have entered into
indemnification agreements with certain of our executive officers and all of our directors. Each indemnification agreement provides that we will indemnify the director or executive officer, as the case may be, to the fullest extent permitted by law
for claims arising in his or her capacity as our director or executive officer, as the case may be, provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and,
with respect to any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. In the event that we do not assume the defense of a claim against a director or such officer, we will be required to advance his or her
expenses in connection with his or her defense, provided that he or she undertakes to repay all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We also maintain a directors&#146; and officers&#146; insurance policy which covers certain liabilities of directors and officers of our company
arising out of claims based on acts or omissions in their capacities as directors or officers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">In any underwriting agreement we enter
into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers, and persons who control us within the meaning of the Securities Act,
against certain liabilities. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;15.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B><I>Recent Sales of Unregistered Securities</I></B><B> </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">During the past three years, we have issued to directors, officers, employees, and consultants options to purchase 2,150,733 shares of our common stock with a per share exercise price ranging from $1.75 to $6.80
under our 2001 Stock Option/Stock Issuance Plan and have issued 82,719 shares of our common stock upon exercise of such options.&nbsp;The issuances of such securities were exempt from registration under the Securities Act, pursuant to Rule 701
thereof on the basis that the transactions were pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. All recipients had access, through their relationship
with our company, to information about us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">There were no underwritten offerings employed in connection with any of the transactions
described above. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-3 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;16.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B><I>Exhibits</I></B><B> </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) See the
Exhibit&nbsp;Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this registration statement on Form&nbsp;S-1, which Exhibit&nbsp;Index is incorporated herein by reference. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements
or the notes thereto. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;17.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B><I>Undertakings</I></B><B> </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">(1) The
undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery
to each purchaser. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">(2) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">(3) The undersigned registrant hereby undertakes that: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(a)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance
upon Rule&nbsp;430A and contained in a form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(b)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial <I>bona fide </I>offering thereof. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-4 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>SIGNATURES </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose,
State of California on March&nbsp;14, 2011. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

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<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="91%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:ARIAL" SIZE="2">APACHE DESIGN SOLUTIONS, INC.</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">/<SMALL>S</SMALL>/&nbsp;&nbsp;&nbsp;&nbsp;A<SMALL>NDREW</SMALL> T. Y<SMALL>ANG</SMALL></FONT></P></TD></TR>
<TR>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Name: Andrew T. Yang, Ph.D.</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Title: Chief Executive Officer</FONT></TD></TR></TABLE></DIV> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>SIGNATURES AND POWER
OF ATTORNEY </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">We, the undersigned directors and officers of Apache Design Solutions, Inc. (the &#147;Company&#148;), hereby severally
constitute and appoint Andrew T. Yang and Emily Chang, and each of them individually, our true and lawful attorneys, with full power to them, and to each of them individually, to sign for us and in our names in the capacities indicated below, the
registration statement on Form&nbsp;S-1 filed herewith, and any and all pre-effective and post-effective amendments to said registration statement, and any registration statement filed pursuant to Rule&nbsp;462(b) under the Securities Act, in
connection with the registration under the Securities Act, of equity securities of the Company, and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said
attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of them might or could do in person, and
hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shall do or cause to be done by virtue of this Power of Attorney. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:ARIAL" SIZE="2">Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities
indicated on the date indicated: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="35%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD WIDTH="31%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:37pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Signature</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:16pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Title</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:17pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Date</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/<SMALL>S</SMALL>/&nbsp;&nbsp;&nbsp;&nbsp;A<SMALL>NDREW</SMALL> T.
Y<SMALL>ANG&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Andrew T. Yang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Chief Executive Officer and Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">March&nbsp;14, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/<SMALL>S</SMALL>/&nbsp;&nbsp;&nbsp;&nbsp;E<SMALL>MILY</SMALL>
C<SMALL>HANG&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Emily Chang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Chief Financial Officer (principal financial and accounting officer)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">March&nbsp;14, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/<SMALL>S</SMALL>/&nbsp;&nbsp;&nbsp;&nbsp;P<SMALL>ING</SMALL>
Y<SMALL>ANG&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Ping Yang</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">March&nbsp;14, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/<SMALL>S</SMALL>/&nbsp;&nbsp;&nbsp;&nbsp;L<SMALL>ORI</SMALL>
H<SMALL>OLLAND&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SMALL></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Lori Holland</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">March&nbsp;14, 2011</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-5 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>EXHIBIT INDEX </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

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<TD></TD>
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<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:31pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;Exhibit<BR>Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:43pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;1.1*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Underwriting Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;2.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Asset Purchase Agreement, dated as of August&nbsp;19, 2009, by and between Apache Design Solutions, Inc. and Sequence Design, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;3.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Amended and Restated Certificate of Incorporation of the Company to be effective upon consummation of this offering</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;3.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Amended and Restated Bylaws of the Company to be effective upon consummation of this offering</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;4.1*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Common Stock Certificate</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;4.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Amended and Restated Investors&#146; Rights Agreement, dated as of January&nbsp;21, 2004, among Apache Design Solutions, Inc. and the stockholders party thereto</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;5.1*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Opinion of O&#146;Melveny&nbsp;&amp; Myers LLP</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">2001 Stock Option/Stock Issuance Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">2011 Equity Incentive Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">2011 Employee Stock Purchase Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.4</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Software License Agreement, dated as of October&nbsp;30, 2006, by and between Apache Design Solutions, Inc. and Intel Corporation</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.5**</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Purchase Agreement&#151;Software and Related Services, dated as of June&nbsp;30, 2008, by and between Apache Design Solutions, Inc. and Intel Corporation</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.6**</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Amendment No.&nbsp;1 to Purchase Agreement&#151;Software and Related Services, dated as of September&nbsp;30, 2009, by and between Apache Design Solutions, Inc. and Intel
Corporation</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.7**</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Intel Side Letter, dated as of August&nbsp;27, 2001, by and between Apache Design Solutions, Inc. and Intel Capital Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.8**</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Development, Marketing &amp; License Agreement, dated as of August 14, 2001, by and between Intel Corporation and Apache Design Solutions, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.9</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Amendment No. 1 to Development, Marketing &amp; License Agreement, dated as of March&nbsp;11, 2011, by and between Intel Corporation and Apache Design Solutions, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.10</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Lease Agreement, dated as of August&nbsp;13, 2007, by and between Apache Design Solutions, Inc. and Zanker Investment Group, LLC</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.11</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Indemnification Agreement with Executive Officers and Directors</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.12*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Amended and Restated Employment Letter, dated as of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, by and
between Apache Design Solutions, Inc. and Andrew T. Yang</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.13*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Amended and Restated Employment Letter, dated as of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, by and
between Apache Design Solutions, Inc. and Emily Chang</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.14</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Offer Letter, dated as of February&nbsp;8, 2006, by and between Apache Design Solutions, Inc. and Steven (Craig) Shirley</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.15</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Offer Letter, dated as of March&nbsp;18, 2005, by and between Apache Design Solutions, Inc. and Dian Yang</FONT></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD WIDTH="89%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:31pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;Exhibit<BR>Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:43pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.16</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Salary Raise Letter, dated as of January&nbsp;1, 2007, by and between Apache Design Solutions, Inc. and Dian Yang</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.17</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Offer Letter, dated as of February&nbsp;19, 2001, by and between Apache Design Solutions, Inc. and Norman Chang</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.18</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Salary Raise Letter, dated as of February&nbsp;1, 2008, by and between Apache Design Solutions, Inc. and Norman Chang</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.19</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Offer Letter, dated as of February&nbsp;5, 2001, by and between Apache Design Solutions, Inc. and Shen Lin</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.20</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Salary Raise Letter, dated as of February&nbsp;1, 2008, by and between Apache Design Solutions, Inc. and Shen Lin</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.21</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Offer Letter, dated as of March&nbsp;1, 2002, by and between Apache Design Solutions, Inc. and Yu Liu</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.22</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Salary Raise Letter, dated as of February&nbsp;1, 2008, by and between Apache Design Solutions, Inc. and Yu Liu</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.23</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Offer Letter, dated as of September 11, 2003, by and between Apache Design Solutions, Inc. and Aveek Sarkar</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.24</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Letter Agreement, dated as of January&nbsp;14, 2011, by and between Apache Design Solutions, Inc. and Ping Yang</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.25</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Letter Agreement, dated as of January&nbsp;14, 2011, by and between Apache Design Solutions, Inc. and Lori Holland</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.26</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of 2010 AE Compensation Policy</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">10.27</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of 2010 Sales Compensation Policy</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">14.1*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Code of business conducts and ethics</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">21.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">List of Subsidiaries of the Registrant</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">23.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Consent of KPMG LLP, independent registered public accounting firm</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">23.2*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Consent of O&#146;Melveny&nbsp;&amp; Myers LLP (included in Exhibit&nbsp;5.1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">24.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Power of Attorney (included in signature page)</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">To be filed by amendment. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">**</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from the Registration Statement and submitted separately to the
Securities and Exchange Commission. </FONT></TD></TR></TABLE>
</BODY></HTML>
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Form S-1
Table of Contents
As filed with the Securities and Exchange Commission on March 14, 2011
Registration Number 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
APACHE DESIGN SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware
7372
94-3385111
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
2645 Zanker Road
San Jose, California 95134
(408) 457-2000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Andrew T. Yang, Ph.D.
Chief Executive Officer
Apache Design Solutions, Inc.
2645 Zanker Road
San Jose, California 95134
(408) 457-2000
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
With copies to:
Warren T. Lazarow, Esq.
Brian E. Covotta, Esq.
Scott A. Graziano, Esq.
O'Melveny & Myers LLP
2765 Sand Hill Road
Menlo
Park, California 94025
Telephone: (650) 473-2600
Fax: (650) 473-2601
Robert P. Latta, Esq.
Robert G. Day, Esq.
Rezwan D. Pavri, Esq.
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Telephone: (650) 493-9300
Fax: (650) 493-6811
Approximate date of
commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any
of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.
¨
If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x
(Do not check if a
smaller reporting company)
Smaller reporting company
¨
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF
SECURITIES TO BE REGISTERED
PROPOSED MAXIMUM
AGGREGATE OFFERING
PRICE (1)(2)
AMOUNT OF
REGISTRATION FEE
Common Stock, $0.0001 par value per share
$75,000,000
$8,707.50
(1)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act.
(2)
Includes shares that the underwriters have the option to purchase to cover over-allotments, if any.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents
The information in this preliminary prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion, Dated March 14, 2011
Apache Design Solutions, Inc.
Shares
Common Stock
This is the initial public offering of Apache
Design Solutions, Inc. We are offering                    shares of our common stock. Selling stockholders are offering an additional
                 shares of our common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. We anticipate that the initial public
offering price will be between $         and $         per share. We will apply to list our common stock on the Nasdaq Global Market under the symbol "APAD."
Investing in our common stock involves a high degree of risk. See "
Risk Factors
" beginning on page 10.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share
Total
Public offering price
$
$
Underwriting discounts and commissions
$
$
Proceeds, before expenses, to Apache Design Solutions, Inc.
$
$
Proceeds, before expenses, to the selling stockholders
$
$
We have
granted the underwriters the right to purchase up to                    additional shares of common stock to cover over-allotments.
Deutsche Bank Securities
Needham & Company, LLC
Canaccord Genuity
ThinkEquity LLC
D.A. Davidson & Co.
The date of this prospectus is
                    , 2011.
Table of Contents
Advancing
Low-Power Innovation
Software solutions enabling power-efficient,
high-performance, noise-immune electronic designs
Table of Contents
PROSPECTUS SUMMARY
This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary does not contain all of the
information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed under "Risk Factors" and our consolidated financial
statements and related notes included elsewhere in this prospectus, before making an investment decision. Unless otherwise noted or indicated by the context, the term "Apache" refers to Apache Design Solutions, Inc., and "we,"
"us," and "our" refer to Apache and its consolidated subsidiaries.
Our Company
Overview
We are a leading provider of
innovative power analysis and optimization software solutions that enable the design of power-efficient, high-performance, noise-immune integrated circuits, or ICs, and electronic systems. Our solutions consist of a suite of software tools and
methodologies that enable design engineers to reduce power consumption, ensure reliable delivery of power to ICs and electronic system components, and mitigate power-induced signal interference, or noise. We believe our solutions are critical to the
design of our customers' products and allow our customers to deliver power-efficient ICs and electronic systems that are resistant to the impact of noise, or noise-immune, at lower costs and with a faster time to market than with alternative
solutions.
Our singular focus on power analysis and optimization enables us to address growing market demand for more power-efficient
and noise-immune ICs and electronic systems. This demand is being driven primarily by the proliferation of high-performance mobile devices, miniaturization and wireless connectivity of these devices, and the rising costs of electricity for data
centers.
Our solutions address the challenges posed by increasing design complexity, smaller geometries for ICs, and the integration of
various components of an electronic system onto a single IC. The accuracy, efficiency, capacity, and comprehensiveness of our solutions provide design engineers with the confidence in their analyses to progress a design to the next phase in the
process, which is known as sign-off. Highly accurate and reliable sign-off solutions are critical to engineers due to the costly and highly visible consequences of design flaws that can lead to product failures and recalls. We believe that our
RedHawk platform is the sign-off solution of choice for the analysis of reliable delivery of power to ICs.
We generate substantially
all of our revenue through the sale of time-based software licenses. Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli, as well as leading electronic system companies serving a broad
range of end markets. These customers include, among others, ARM Limited, Intel Corporation, Hynix Semiconductor Inc., LSI Corporation, MediaTek Inc., QUALCOMM Incorporated, Samsung Electronics Co., Ltd., Sony Corporation, STMicroelectronics N.V.,
Texas Instruments Incorporated, and Toshiba Corporation. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers today.
Our revenue was $25.7 million, $34.6 million, and $44.0 million in 2008, 2009, and 2010, respectively, and we were profitable in each of these years.
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Our Industry
Several factors are driving the growing demand for more power-efficient and noise-immune ICs and electronic systems, including:
•
the proliferation of high-performance mobile and other electronic devices with increased functionality, which is requiring manufacturers to develop more
power-efficient electronic components to extend battery life;
•
the trend towards smaller electronic systems, which constrains the size of batteries and cooling systems, requiring engineers to design ICs that consume less
power while satisfying higher performance requirements;
•
the explosion in system-to-system wireless communication that is amplifying the amount of noise within and between ICs, causing systems to sometimes malfunction
or fail; and
•
rising power consumption and electricity costs for information technology, or IT, infrastructure, such as data centers, compelling operators to seek more
power-efficient products that consume less energy.
Meeting this growing demand for more power-efficient and
noise-immune ICs and electronic systems poses significant challenges for design engineers. These engineers must create designs that meet increasingly stringent power specification limits, or power budgets, while reliably and consistently delivering
power to all components of ICs and electronic systems. They must also create designs that mitigate adverse effects caused by power-induced noise to prevent failures or performance degradation.
To solve these challenges, design engineers use a collection of third-party products and internally developed tools. However, many of these tools
only address power analysis for specific phases of the design flow, and lack the ability to share data between the various teams working on separate design phases. Further, many of these tools also lack the capability to efficiently simulate the
interaction of an IC with its entire electronic system, which adversely affects the quality and accuracy of the analysis.
Our
Solutions
We offer a suite of software tools and methodologies that provide innovative power analysis and optimization capabilities
throughout various phases of the design process, from initial prototyping to full electronic system design completion. We have introduced several products that have been first to market in various aspects of power and noise analysis. We believe our
solutions deliver the following benefits:
Accuracy
Our solutions analyze design models and provide results that are closely correlated to power and noise measurements of the manufactured ICs and electronic systems. We believe our solutions deliver predictable,
consistent, and reliable analysis results that help our customers reduce costs and meet increasingly stringent power budget requirements.
Capacity
Our solutions can
simultaneously analyze an entire IC and electronic system design to model the interactions inside an IC and between the various ICs in an electronic system. Our
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approach contrasts with the "divide-and-conquer" approach of other solutions, whereby a design is partitioned into sub-blocks and these sub-blocks are analyzed separately, which can
result in overlooked design errors.
Efficiency
Our solutions deliver rapid analyses and increase engineering team productivity. We believe our solutions are able to complete analyses significantly faster than many alternative power analysis tools, if these
alternative tools are able to complete the analyses at all.
Comprehensiveness
Our solutions enable power analyses at various phases of the design of ICs and electronic systems and allow the sharing of data across design
process phases. As a result, our solutions reduce the likelihood of costly design errors and development delays that can be caused by the use of incompatible analysis tools and methodologies by engineering teams working on different components of an
electronic system.
Our Strengths
Our core competitive strengths include:
Exclusive focus on power
We focus exclusively on providing solutions that enable high-performance, power-efficient, and noise-immune IC and electronic system designs. This
focus has enabled us to develop what we believe are the most advanced, effective power analysis solutions available on the market.
Diverse and growing blue chip customer base
Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli, as well as leading electronic system companies serving market segments such as mobile devices,
high-performance computing and networking, consumer electronics, and automotive and medical electronics. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers today. We grew our customer base by over 118% in the last three
years, from 53 customers at the beginning of 2008 to 116 customers at the end of 2010.
Critical solution for power sign-off
We believe that our flagship product, RedHawk, is the sign-off solution of choice for the analysis of reliable delivery of power to ICs.
Sign-off solutions often enjoy significant competitive advantages, such as product longevity, structural barriers to entry, and substantial market share.
Comprehensive power analysis solutions
We provide engineers with a unified environment to
address the challenges associated with power efficiency and noise immunity throughout various phases of the IC and electronic system design process. Additionally, by generating compact, user-friendly models, our solutions facilitate effective
coordination among the multiple engineering teams that work on the design of ICs and complex electronic systems.
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Power-focused global customer support team
Our customer support team consists of application engineers who typically have significant and relevant industry experience and are exclusively
focused on helping our customers with their power-efficiency and noise-immunity design challenges.
Our Strategy
Our goal is to enhance our leadership position as a provider of software tools and methodologies that enable power-efficient, noise-immune IC and
electronic system designs. Key components of our strategy include:
Extend our core technology leadership
We have established ourselves as a market and technology leader for power analysis in the design of ICs and electronic systems. We believe that our
RedHawk product is the sign-off tool of choice for the analysis of reliable delivery of power to ICs. We plan to continue to invest in research and development to maintain and extend our technology leadership position.
Increase deployment of our products to existing customers
As the demand for lower power and higher performance electronic systems continues to rise, and as our customers continue to increase their focus on delivering power-efficient solutions, we plan to increase the
number of licenses and products we sell to our existing customer base.
Broaden our customer base
We plan to continue to increase our market share among leading IC and electronic system companies. Our ability to acquire new customers is an
important element of our growth strategy, and our sales organization expends a considerable portion of its efforts on expanding our customer base. We intend to leverage our brand, technology leadership, and customer support to add new customers.
Leverage existing partnerships with market leaders to penetrate their customers
We plan to leverage our relationships with leading semiconductor customers to expand our sales to their end customers and thus improve their ability
to collaborate with their end customers to deliver more power-efficient and noise-immune ICs and electronic systems.
Expand our
addressable market with new products and enter new markets
We plan to develop new products that target adjacent and related markets
in which we can leverage our strong brand and our core underlying technologies in power analysis to deliver an even broader suite of software tools and methodologies. We may also extend our product offering through selective strategic acquisitions.
Risks Associated with Our Business
Our business, financial condition, results of operations, and prospects are subject to numerous risks. These risks include, among others, that:
•
we rely on a small number of customers for a significant portion of our revenue;
•
we depend on the continued financial strength of our customers;
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•
we could lose customers to ongoing industry consolidation;
•
we rely on a small number of products for substantially all of our revenue;
•
our addressable market is limited because we rely exclusively on solutions addressing power-efficient and noise-immune design analysis and optimization;
•
we may fail to develop, commercialize or acquire new and enhanced products;
•
we must continue making significant investments in research and development efforts that may be unsuccessful;
•
the markets in which we operate are highly competitive and competitive pressures may prevent us from obtaining new customers and gaining market share, may
require us to reduce our pricing or cause us to lose existing customers;
•
we rely on our senior management and other key employees, and may not be able to retain such personnel or attract new personnel;
•
our senior management does not have experience in managing a public reporting company; and
•
we have a small internal accounting and finance staff which does not have significant experience in complying with the reporting obligations of a public company,
which could negatively impact the timely and accurate reporting of our financial results.
If we are unable to adequately address these and other risks we face, our business, financial condition, results of operations, and prospects may
be materially and adversely affected. In addition, there are additional risks related to an investment in our common stock.
You should
carefully read "Risk Factors" beginning on page 10 for an explanation of the foregoing risks before investing in our common stock.
Our Corporate Information
We were incorporated in Delaware in 2001. Our principal executive
offices are located at 2645 Zanker Road, San Jose, California 95134. The telephone number of our principal executive offices is (408) 457-2000, and our main corporate website is www.apache-da.com. The information on, or that can be accessed
through, our website is not part of this prospectus.
We have rights to a number of marks used in this prospectus
that are important to our business, including, without limitation, Apache, Apache Design Solutions, RedHawk, Sentinel, PowerArtist, Totem, and PathFinder. We have omitted the
®
and ™ designations, as applicable, for the trademarks we name in this prospectus.
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The Offering
Common stock offered by us
shares
Common stock offered by selling stockholders
shares
Common stock to be outstanding after this offering
shares
Over-allotment option
We have granted the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional
             shares of common stock to cover over-allotments.
Use of proceeds
We estimate that the net proceeds from this offering will be approximately $         million (or approximately
$             million if the underwriters exercise their over-allotment option in full), after deducting the estimated underwriting discounts and commissions and our estimated offering
expenses, assuming the shares are offered at $             per share, the midpoint of the estimated offering range set forth on the cover page of this prospectus. We will not receive any of
the proceeds from shares sold by the selling stockholders.
We intend to use the net proceeds from our sale of shares of common stock in this offering for working capital and other general corporate purposes, which may include hiring
additional personnel and investing in sales, marketing, and research and development. In addition, we may use a portion of the proceeds received by us from this offering for acquisitions of complementary businesses, technologies or other assets. We
have no agreements with respect to any material acquisitions at this time.
Pending the use of the proceeds from this offering as described above, we plan to invest the net proceeds in short-term, investment grade, interest-bearing securities.
Dividends
We have never paid cash dividends on our common stock. We currently intend to retain any future earnings to fund business development and growth, and we do not anticipate paying any cash dividends for the
foreseeable future.
Proposed Nasdaq Global Market symbol
"APAD"
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Unless otherwise noted, the number of shares of common stock to be outstanding after this offering used in this prospectus is based on 17,190,188 shares outstanding as of February 28, 2011, excluding:
•
2,210,483 shares of common stock subject to options outstanding as of February 28, 2011, at a weighted-average exercise price of $2.42 per share issued
under our 2001 Stock Option/Stock Issuance Plan;
•
2,400,000 shares of common stock reserved for issuance pursuant to our 2011 Equity Incentive Plan, and 600,000 shares of common stock reserved for issuance
pursuant to our 2011 Employee Stock Purchase Plan; and
•
shares of common stock issuable upon the exercise of the underwriters' over-allotment option.
Unless otherwise expressly stated or the context otherwise requires, all information contained in this prospectus
assumes that the amendment of our amended and restated certificate of incorporation and amended and restated bylaws, and the conversion of all outstanding shares of preferred stock into shares of common stock, all of which are expected to occur
immediately prior to or upon the closing of this offering, have occurred.
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Summary Consolidated Financial and Other Data
The following table sets forth our summary consolidated financial and other data for the years ended December 31, 2008, 2009, and 2010. The
summary consolidated financial data for the years ended December 31, 2008, 2009, and 2010 were derived from our audited consolidated financial statements included elsewhere in this prospectus. You should read this summary consolidated financial
data in conjunction with "Selected Consolidated Financial and Other Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes
included elsewhere in this prospectus.
Year Ended December 31,
2008
2009
2010
(in thousands, except per share data)
Consolidated Statements of Operations:
Revenue
$
25,695
$
34,601
$
44,047
Cost of revenue
5,812
6,662
8,999
Gross profit
19,883
27,939
35,048
Operating expenses:
Sales and marketing
9,529
9,794
12,930
Research and development
7,797
8,588
11,516
General and administrative
2,903
3,573
4,926
Total operating expenses
20,229
21,955
29,372
Operating income (loss)
(346
)
5,984
5,676
Other income (expense)
13
(93
)
366
Income (loss) before income tax
(333
)
5,891
6,042
Provision (benefit) for income tax
(3,507
)
2,622
2,738
Net income
$
3,174
$
3,269
$
3,304
Net income per share:
Basic
$
0.29
$
0.30
$
0.30
Diluted
$
0.18
$
0.19
$
0.19
Weighted average common shares outstanding:
Basic
10,882
10,930
11,016
Diluted
17,253
17,237
17,631
Other Consolidated Financial Data (Unaudited):
Non-GAAP net income (1)
$
4,735
$
4,971
$
5,372
As of December 31, 2010
Actual
Pro Forma (2)
Pro Forma
As Adjusted (3)
(unaudited)
(unaudited)
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents
$
26,175
$
26,175
$
Working capital
4,646
4,646
Total assets
52,711
52,711
Long-term debt obligations
—
—
—
Redeemable convertible preferred stock
5,996
—
—
Total stockholders' equity
4,871
10,867
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(1)
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. We define non-GAAP net income as GAAP net income
plus amortization of intangible assets and stock-based compensation expense, and giving effect to the tax impact of these adjustments to GAAP net income. For a reconciliation of GAAP net income to non-GAAP net income, as well as a discussion
regarding the reasons for our presentation of non-GAAP net income, see note 1 to "Selected Consolidated Financial and Other Data."
(2)
The unaudited pro forma data as of December 31, 2010 assumes the conversion of all of our outstanding shares of preferred stock into common stock.
(3)
The unaudited pro forma as adjusted data gives effect to the conversion referred to in note 2 above and to the sale of          shares of
common stock by us in this offering at an assumed initial offering price to the public of $         per share, which is the midpoint of the estimated offering range set forth on the cover page of this
prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $        
per share would increase (decrease) cash and cash equivalents, working capital, total assets, and total stockholders' equity by $         million, assuming that the number of shares offered by us, as set
forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information
contained in this prospectus before purchasing our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may
become important factors that affect us.
If any of the following risks occur, our business, financial condition, and operating
results could be materially and adversely affected. In that case, the market price of our common stock could decline, and you could lose some or all of your investment
.
Risks Related to Our Business
We rely on a small number of customers for a significant portion of our
revenue, and our revenue could decline if customers terminate their licenses, delay orders or fail to renew licenses, if we are unable to maintain or expand relationships with our major customers, or if we are unable to develop relationships with
new customers.
A significant portion of our revenue and the strength of our business depends on sales to a small number of
customers, and our customers often have significant bargaining power in negotiations with us. In 2008, 2009, and 2010, our largest customer, which was a different customer in each year, accounted for 8%, 12%, and 11%, respectively, of our revenue,
and our ten largest customers accounted for more than 62%, 68%, and 59%, respectively, of our revenue. We expect that we will continue depending upon a relatively small number of customers for a substantial portion of our revenue for the foreseeable
future. Substantially all of our licenses are time-based licenses with 12- to 36-month terms that automatically expire at the end of their term unless the customer renews the license with us by executing a new time-based license agreement. Most of
our customer licenses may be terminated by a customer without penalty on 30 days' notice. If our customers terminate their licenses, do not renew their licenses or renew their licenses with shorter terms or in smaller quantities, or we are
unable to collect under these licenses, we may not generate additional revenue, our revenue may decline, and we may have reduced ability to forecast our revenue. We also rely on developing relationships with potential customers to increase our
revenue. If we fail to maintain or expand our relationships with existing customers, or if we fail to develop relationships with new customers, our business, financial condition, and revenue would be materially and adversely affected.
A deterioration in the financial condition of any of our key customers or their end-user customers, or the perceived or actual financial deterioration of our
business could adversely affect our business, financial condition, and operating results.
We currently depend on a small number of
customers, and expect to continue to depend on a small number of customers for the foreseeable future, and any material deterioration in the business or financial condition of our customers or their end-user customers could have a material and
adverse effect on our business, financial condition, and results of operations. Previously, some of our customers have gone out of business or become unable to pay for the licenses or services we have provided them or were to provide to them.
Moreover, existing customers may seek to renegotiate pre-existing contractual commitments due to adverse changes in their own businesses or for other reasons. One or more of our customers going out of business or otherwise being unable to pay for
the license or services we provide them could
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have a material adverse effect on our business, financial condition, and operating results. Conversely, if our customers believe that we are not financially sound, or if we suffer an actual
deterioration in our financial condition, our customers may choose to stop doing business with us, which would materially adversely affect our business, financial condition, and operating results.
Consolidation among our customers could lead to a reduction in selling prices and license sales, and customer loss, which would harm our business, financial
condition, operating margins, and operating results.
Our reliance on a small number of customers for a significant portion of our
revenue, combined with our limited addressable market, makes us particularly vulnerable to the effects of customer consolidation. Consolidation in the industries in which our customers operate occurs frequently, and we believe it has been increasing
in recent years. Customer consolidation could lead to the loss of customers and reduced license purchases, and a reduction in our addressable market. In addition, customer consolidation could increase our existing and potential customers'
bargaining power, requiring us to reduce the price of our products and offer more attractive sales terms. Ongoing consolidation could therefore harm our business, financial condition, operating margins, and operating results.
We generate our revenue from a limited number of products that focus exclusively on power-efficient and noise-immune solutions, and we are highly susceptible to
changes in demand for our products and to any decline in the size of our addressable market.
We generate our revenue from a limited
number of products that focus exclusively on power-efficient and noise-immune design solutions for integrated circuits, or ICs, and electronic systems. We expect these existing products to continue accounting for a large percentage of our revenue in
the foreseeable future. We currently offer four platforms that focus exclusively on power-efficient and noise-immune solutions. Our flagship platform, RedHawk, accounted for a majority of our revenue in 2008, 2009 and 2010. Our dependence on RedHawk
and our limited number of platforms make us highly susceptible to changes in demand for our solutions and also to changes in demand within our addressable market. Continued market acceptance of, and demand for, RedHawk in particular are critical to
our future operating results. If our competitors introduce new products or offer aggressive pricing or terms on products that compete with our RedHawk platform or any of our other products, our revenue could decline materially and our business,
financial condition, and operating results could be materially harmed. Any factors adversely affecting the overall demand for our products, including competition or technological change, could cause our revenue to decline materially and our business
to suffer significantly.
We may fail to effectively develop and commercialize or acquire new and enhanced products, which would materially and
adversely affect our business, financial condition, and operating results.
The markets in which our customers and their end-user
customers compete tend to be rapidly developing, with constantly evolving technology trends. This results in frequent new product introductions, relatively short product life cycles, and significant price competition. Consequently, our ability to
compete in these markets depends in part on our ability to maintain our technological advantage, anticipate technology development trends, and identify, develop, and commercialize or acquire new and enhanced products and technologies that customers
demand in a timely and cost-effective manner. New products have contributed significantly to our revenue growth in the past, and may continue to do so in the future. We expect the markets in which we operate to continue evolving toward newer and
more advanced products. We may
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not have the financial resources necessary to fund all required future innovations. Expanding into new technologies or extending our product lines into areas we have not previously addressed may
be more costly or difficult than we presently anticipate. For example, our Sahara product, which extended into a new area, failed to gain market acceptance, and we decided to discontinue its sale. Also, any revenue that we receive from enhancements
or new generations of our software products may be less than the costs that we incur to develop or acquire those technologies and products. Even if we successfully develop or acquire new and enhanced products, it may take an extended period of time
for our new products to gain market acceptance, if at all. If we fail to develop or acquire and market new and enhanced products in a timely manner, or if new products do not meet performance features as marketed, our reputation, business, and
results of operations could suffer. To effectively develop and commercialize new and enhanced products, we must, among other things:
•
accurately assess technology trends and our customer and their end-customer needs and meet market demands;
•
develop and deliver products that sufficiently address technical advances and the increasing complexity of our customers' integrated circuits, or ICs,
including as a result of smaller geometries in ICs and electronic systems;
•
optimize our development processes;
•
develop and deliver products in a timely and cost-effective manner;
•
develop products offering both a high level of integration into a comprehensive platform and a high level of individual product performance;
•
increase customer awareness and acceptance of our products;
•
price our products competitively;
•
effectively integrate customer feedback into our research and development planning; and
•
create and maintain interoperability with our competitors' products.
Furthermore, our competitors may develop or acquire new products or technologies that have the potential to replace our existing or new product
offerings. The introduction of these new or additional products by competitors may cause potential customers to defer purchases of our products or decide against purchasing our products, and may cause our existing customers to choose to terminate or
not to renew licenses to use our products. If we fail to effectively develop and commercialize or acquire new or enhanced products, our business, financial condition, and operating results will be materially and adversely harmed.
Our research and development expenditures have increased in recent years, and we may be unable to develop new products or enhance existing products unless we
continue making significant investments in research and development, which could negatively impact our business, financial condition, and operating results.
Developing our technology for current, enhanced, and new products and integrating acquired technology and products into existing platforms is expensive, and these investments often require a long time to generate
returns. We make significant investments developing new products and enhancing our existing products, conducting product testing and quality assurance testing, improving our core technology, and strengthening our technological expertise in markets
in which we operate. We believe that we must continue investing significant resources to our research and development efforts to maintain and improve our
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technological advantage and competitive position. Our research and development expenditures in 2008, 2009, and 2010 were $7.8 million, $8.6 million, and $11.5 million, respectively. If we decide
to invest significantly greater resources than currently anticipated in research and development efforts, our operating expenses would increase. Our increased investments in research and development may not result in a corresponding increase in
revenue. Conversely, if we decrease our research and development investments, this could result in corresponding or larger revenue decreases due to decreased product enhancement and development and eroding competitive position. Further, research and
development expenses are likely to fluctuate over time, and these investments may be independent of our revenue, which could negatively affect our business, financial condition, and operating results.
The markets in which we operate are highly competitive, and these competitive pressures may prevent us from obtaining new customers and gaining market share,
may require us to reduce our product and services pricing or cause us to lose existing customers, which could materially harm our business, financial condition, and operating results.
We currently compete with companies that hold dominant shares in the markets in which we operate, such as ANSYS, Inc., Cadence Design Systems, Inc.,
Magma Design Automation, Inc., Mentor Graphics Corporation, and Synopsys, Inc. Each of these companies has, among other things:
•
a longer operating history;
•
significantly greater financial, managerial, engineering, technical, sales, and marketing resources;
•
greater name recognition;
•
a stronger relationship with many of our top customers and our customers' procurement decision-makers;
•
products that we must maintain interoperability with to successfully compete in our target markets; and
•
a larger installed customer base.
Our competitors' and potential competitors' advantages may allow them to, among other things:
•
adopt our business model and devote greater resources than we can to developing and promoting offerings similar to or better than our own;
•
incorporate key functionality of our products into their products, giving them the ability to provide similar functionality with a superior user experience;
•
modify their products' interfaces, output file formats or input file formats, resulting in our product development team devoting significant time and
resources to maintaining interoperability with our competitors' products;
•
engage in more extensive research and development;
•
offer more and a broader range of products and services;
•
bundle other products and services as part of their overall sales processes;
•
adopt more aggressive pricing policies;
•
undertake more far-reaching marketing campaigns;
•
offer services that achieve greater market acceptance than ours; and
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•
make more attractive offers to our existing and potential employees, suppliers, customers, and strategic partners and acquisition targets.
Competition and corresponding pricing pressures among vendors or other factors could cause the overall market for
products in the markets in which we operate to have low growth rates, remain relatively flat or even decrease in terms of overall dollars. If our competitors offer deep discounts on certain products in an effort to recapture or gain market segment
share or to sell other products, we may then need to lower our prices or offer other favorable terms to compete. Any such changes would likely reduce our profit margins and could adversely affect our operating results. Any substantial changes to our
prices and pricing policies could cause sales and software license revenue to decline or be delayed as our sales force implements and our customers adjust to the new pricing policies. Further, some of our competitors offer or provide free or
lifetime licenses. These practices could, over time, significantly constrain the prices that we can charge for our products and reduce our operating margins. If we cannot offset price reductions with a corresponding increase in sales or with lower
spending, then the reduced license revenue resulting from lower prices could have an adverse effect on our operating results. In addition, there are generally low barriers to entry into the markets in which we operate, and a variety of privately
held companies continue to emerge, developing and introducing new products that compete or may continue to compete with our products and services and offer better functions and speed. One or more of these companies are or could become significant
competitors.
We compete principally on the basis of technology leadership, product quality and features (including ease-of-use),
license terms, post-contract customer support, interoperability with our products and other vendors' products, and price and payment terms. Many of our competitors also offer a more comprehensive product range, and, if our competitors introduce
power analysis products that they bundle with their other products, and our customers consider these bundled power analysis products sufficient to satisfy their needs, our customers may choose to no longer purchase our product licenses. Similarly,
if our customers seek to concentrate their software product purchases with a few large providers, we may be at a disadvantage. In addition, our competitors may introduce power analysis products and services that our customers consider superior to
our own. In any such event, we would likely lose business, which would result in lost revenue and would harm our business, financial condition, and operating results. If we fail to successfully compete or fail to address new competitive forces, our
business, financial condition, and operating results will be materially harmed.
We may be unable to retain or attract and train the necessary
personnel for our business, particularly management, engineering, applications support, and technical sales and other key personnel, and any inability to do so could adversely affect our ability to compete, reduce our operating margins, and harm our
business and operating results.
Competition in our industry for qualified senior management, engineering, applications support, and
technical sales and other key personnel is intense, particularly in the Silicon Valley area where our headquarters are located, and in India, China, and Taiwan, where we have significant international operations. Our business and operating results
depend in part on our ability to identify, hire, train, and retain qualified engineering personnel with experience in IC or electronic system design. Specifically, we need to continue attracting and retaining field application engineers to work with
our direct sales force to qualify new sales opportunities technically and perform design work to demonstrate our products' capabilities to customers
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during their evaluation process. We may lose engineers and other employees to our competitors and to companies outside the markets in which we operate that are larger, more established and
well-financed, have greater name recognition, and/or can offer more attractive compensation packages.
Our software requires
sophisticated sales efforts by experienced and knowledgeable personnel. Competition for these individuals is intense due to the limited number of persons with the necessary sales experience and technical understanding. Hiring customer
service and support personnel in our industry is also very competitive due to the limited number of persons with the necessary technical skills. These talented support personnel also tend to form loyal relationships over time with our top tier
customers. In addition, designing an effective incentive compensation structure for our sales and support personnel is critical to our future operating results. We have experimented, and continue to experiment, with different methods of sales and
support personnel compensation. If our incentives are not well designed, we may lose the services of a significant number of our employees or key employees, be unable to hire additional employees of the same caliber, be unable to retain our
customers, and be unable to increase our sales or implement or maintain our growth strategy. The high cost of training new employees, not fully utilizing these employees or losing trained employees to competing employers could harm product
development, our sales and support efforts, and our ability to compete, and reduce our operating margins and harm our business and operating results.
We depend on our senior executives and other key personnel, and any failure to retain such personnel could harm our business and results of operations.
We depend on our senior executives and other key personnel who are critical to our business. The equity securities held by many of
our senior executives and other key employees are substantially fully vested. As such, the equity-based compensation that is currently in place for our senior management and other key employees may not be sufficient to retain such personnel, and
they may be able to obtain superior compensation arrangements from our competitors or other employers. In addition, our cash compensation, which is comprised of salary, bonus and, in some cases, commissions, may not be adequate to retain the
services of our senior executives and other key employees. Our larger competitors and other companies may be able to offer more generous compensation packages to senior executives and other key employees, and therefore we risk losing key personnel
to those competitors and other companies. We expect that our employee compensation expenses will increase significantly in the near term. However, these expenditures may fail to maintain or improve our employee retention rates and may not enhance
our ability to attract qualified employees. If we lose the services of any of our senior executives or other key personnel, our management, product development processes, and sales efforts could be harmed. Attracting and integrating new personnel
could be expensive and disrupt our ongoing operations.
We intend to issue stock options and restricted stock units and maintain an
employee stock purchase plan as key components of our overall compensation and employee attraction and retention efforts. We may face pressure from stockholders, who must approve any increases in our equity compensation pool, to limit the use of
equity-based compensation so as to minimize its dilutive effect on stockholders. In addition, we are required under GAAP to recognize compensation expense in our operating results for employee share-based equity compensation under our equity grants
and our employee stock purchase plan, which may negatively impact our operating results and may increase the pressure to limit share-based compensation. These factors may make it more difficult or unlikely for us to continue granting attractive
equity-based compensation packages to our employees, which could adversely impact our ability to attract and retain key employees. If we lose any senior executive or other key employee, our business and operating results could be materially and
adversely affected.
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Our senior executives do not have experience in managing a public reporting company, and we have a small internal
accounting and finance staff with limited public reporting company experience, which could divert management's attention from operating our business, could negatively impact timely and accurate reporting of financial results and could harm our
business.
None of our current executive officers or other key employees has been involved in the management of a public reporting
company. For example, none of our current executive officers has management experience with respect to Securities and Exchange Commission reporting obligations, compliance with Securities and Exchange Commission and Nasdaq Global Market rules and
regulations, and experience in interacting with institutional investors or research analysts. In addition, we have a small internal accounting and finance staff with limited experience in public reporting. We also do not have any internal finance
personnel located outside of our California headquarters. This lack of experience and personnel could divert management's attention from operating our company and make it difficult for us to timely and accurately report our financial results,
which could harm our business.
Our operating results have fluctuated from quarter-to-quarter and may continue doing so, which may cause our business
and operating results to be materially and adversely affected and the market price of our common stock to decline or be volatile.
Our revenue, expenses, and operating results have fluctuated from quarter-to-quarter and may continue doing so. Reasons for the past and potential
ongoing fluctuations include:
•
the timing of new customer acquisitions, existing customer renewals, and the related timing of delivery of licenses to our customers, which impacts when we can
begin to recognize revenue in accordance with our revenue recognition policies;
•
fluctuations in demand for our products, including as a result of economic downturns or cyclicality in our served markets, particularly in the semiconductor and
electronics industries;
•
our dependence on a small number of customers for a large portion of our revenue;
•
customer consolidation, which could lead to customer loss;
•
changes in competitive and economic conditions generally or in our customers' markets;
•
our lengthy and unpredictable sales cycle and the large size of some orders;
•
order cancellations and product rescheduling;
•
changes in product mix;
•
product development delays;
•
the introduction of new products, and whether such products are adopted by our customers;
•
foreign exchange risk as we incur substantial costs in foreign currencies while we recognize revenue principally in U.S. dollars;
•
competitive factors, including actions by our competitors, such as discounting, free licensing, offering a flat rate for an unlimited number of licenses,
lifetime licenses or product bundling, and entry of new competitors into our markets;
•
our ability to innovate, introduce, and support new products, services, and markets, or effectively integrate and support products and technologies that we
acquire;
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•
pricing volatility, particularly internationally;
•
costs associated with retention of employees, including salary, equity compensation, and bonuses;
•
costs associated with the expansion of our business, including capital expenditures and expenses related to the hiring of new employees;
•
costs associated with, and the outcomes of, any intellectual property or other litigation to which we may become a party; and
•
the impact of taxes, particularly Accounting Standards Codification, or ASC, Topic ASC 740-10,
Accounting for Uncertainty in Income Taxes
, which requires
us to establish reserves for uncertain tax positions and accrue potential tax penalties and interest.
Due to the
factors noted above and other risks discussed in this section, we believe that quarter-to-quarter comparisons of our operating results may not be meaningful. You should not rely on our results for one quarter as a future performance indicator.
Quarterly variations in our operations could have a material and adverse effect on our business and operating results. These variations could make the market price of our common stock volatile, and the price of our common stock might fall below the
initial public offering price or could fluctuate, perhaps significantly. In one or more future quarters, it is likely that our operating results will be below securities analyst or investor expectations. If this occurs, the market price of our
common stock will likely decrease.
We may be unable to sustain our recent revenue growth or increase our operating income or net income, which could
have a negative impact on our stock price.
We experienced significant growth from 2006 to 2010. Our revenue increased from $14.7
million in 2006 to $44.0 million in 2010. Our net income increased from $0.5 million to $3.3 million over that same period. However, we had a net loss of $1.2 million in 2007, our operating income decreased from $6.0 million in 2009 to $5.7 million
in 2010, and our net income was relatively flat during the last three years, at $3.2 million in 2008 and $3.3 million in each of 2009 and 2010. In addition, in 2008, we had an operating loss prior to recognizing certain tax benefits, which
recognition resulted in our achieving net income for the year. We may be unable to sustain our recent revenue growth or increase or maintain our operating income or net income unless we develop and sell licenses for new and enhanced products,
increase our revenue with existing customers, develop new customers, and undertake acquisitions. We also need to manage our operating expenses. Even if we do these things, they may be insufficient to allow us to maintain our historical revenue
growth rates or operating income or net income, and our revenue, operating income, and net income could decline or our net income could become a net loss, which could have a negative impact on our stock price.
Continued consolidation among our competitors and potential competitors may harm our business, financial condition, operating margins, and operating results.
The markets in which we operate have been subject to increased consolidation in recent years. We expect this trend will continue as
our competitors and potential competitors attempt to increase or maintain market share by complementing or expanding product offerings, or as companies are acquired or are unable to continue operations. Ongoing consolidation would result in stronger
competition from companies that are better able than us to compete as single source vendors and could lead to increased price pressure. Stronger competition for customers would make it difficult to attract new customers and retain existing
customers, and could lead to losses of customers.
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Lack of growth in new IC design starts and other potential long-term trends may continue to adversely affect the
markets in which we operate, including demand for our products and services harming our business, financial condition, and operating results.
The increasing complexities of ICs and systems-on-a-chip and customer concerns about managing costs and risks have produced long-term negative trends, including:
•
the number of IC design starts has declined and may continue to decline, which may reduce demand for our products;
•
increased globalization and the recent global economic downturn, which have made cost controls among our customers more permanent and aggressive and have
adversely impacted our customers' software tools spending; and
•
the cost and complexity of IC design, which may be leading some companies to limit their design activity or to focus only on discrete phases of the design
process while outsourcing other design aspects to companies using our competitors' products.
These trends, if
sustained, could continue adversely affecting the markets in which we operate, including demand for our products and services, which in turn would materially harm our business, financial condition, and operating results.
If the industries into which we and our customers sell our products experience a downturn or other cyclical effects affecting our customers' budgets, our
revenue would likely grow more slowly than anticipated or decline.
New IC design projects drive demand for our products. The demand
from semiconductor and electronic systems companies is uncertain and difficult to predict. A downturn, such as the recent downturn in the semiconductor, systems, and other industries, a reduction in design starts, a slowdown in the pace of IC
innovation, a reduction in our customers' budgets or customer or competitor consolidation would cause a decrease in revenue growth or revenue, and would harm our business, financial condition, and operating results. Growth in the IC design
software industry typically lags the semiconductor industry. Our revenue may be adversely impacted if the expected recovery is muted for the semiconductor industry or in general.
The primary customers for our products are companies in the mobile devices, high-performance computing and networking, consumer electronics, and
automotive and medical electronics industries. A downturn in our customers' markets or in general economic conditions that results in the cutback of research and development budgets or the delay of software purchases would likely result in
lower demand for our products and services and could harm our business, financial condition, and operating results. If the global economy weakens or the economies in the countries into which we sell licenses to our products decline, existing
customers may decrease their purchases of our products or delay their implementation of our software products, and prospective customers may decide not to adopt our products, any of which could negatively impact our business, financial condition,
and operating results.
Structural barriers and our customers' internal capabilities make gaining market share difficult, and our failure to
establish or maintain a leadership position in the markets in which we compete would harm our business, financial condition, and operating results.
The markets in which we operate are characterized by companies with very strong leadership positions in specific market segments. For example, one company may have a large percentage of sales in the physical
verification segment of the market while another may have a
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similarly strong position in the mixed-signal simulation market. Gaining market share in the markets in which we operate is difficult because it often takes years for a customer to move from a
competitor. The products our competitors offer are generally difficult to master. This difficulty often results in customers being disinclined to make changes once their employees, as well as others in the industry, have developed familiarity with a
particular product. Many of our competitors, such as ANSYS, Inc., Cadence Design Systems, Inc., Magma Design Automation, Inc., Mentor Graphics Corporation, and Synopsys, Inc., have established relationships with our current and potential customers
and can devote substantial resources aimed at preventing us from establishing or enhancing our customer relationships. Many of our competitors currently sell products that our customers and potential customers have broadly adopted, providing them a
substantial advantage when they sell products that perform functions substantially similar to some of our products. These structural barriers may prevent us from obtaining new customers and gaining market share, may require us to reduce product
pricing and cause us to lose existing customers, which could harm our business and operating results. To execute our business strategy, we must maintain and increase our leadership position in power analysis for ICs and electronic systems, continue
our efforts to increase global sales, and seek to expand areas of market leadership. If we fail to do so in a timely manner or at all, we may be unable to gain market share and our business, financial condition, and operating results would suffer.
We also compete with the internal IC design automation development groups of our existing and potential customers. Therefore, these
customers may not require, or may be reluctant to purchase, products offered by independent vendors such as us.
We currently sell licenses to
products that focus exclusively on power-efficiency and noise-immunity, and therefore the size of our addressable market is limited.
Our current solutions consist exclusively of a suite of software tools and methodologies that enable IC and electronic systems design engineers to
manage and reduce power consumption, deliver reliable and consistent power to circuit and system components, and help mitigate power-induced noise. As such, our addressable market is limited by the scope of our products and methodologies. In order
to sustain our revenue or increase our revenue, we may need to enter new markets in which we have limited or no prior experience. If we are unable to develop new products or extend the use of our current products into new markets, this could
adversely affect our business, revenue, and results of operations.
Technological innovations could significantly reduce or eliminate demand for our
products, which would have a material adverse effect on our business, financial condition, and operating results.
IC and package
foundries are continuously developing new technologies and new fabrication processes. Technological innovations could reduce or eliminate our customers' need for our products. For example, the development of very low-power designs or very
low-noise power delivery networks within the IC could significantly reduce or eliminate demand for our products, which would have a material adverse effect on our business, financial condition, and operating results.
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If other software companies, including competitors, do not cooperate in working with us to interface our products
with their design flows, or IC and electronic system designers and manufacturers do not integrate our software into existing design flows, demand for our products may decrease and our business, financial condition, and operating results will suffer.
To implement our business strategy, we must provide products that interface with other companies' software. Our competitors may
not support efforts by us or by our customers to integrate our products into their existing design flows. For example, some of our competitors have in the past refused, and may in the future refuse, to design their products to allow interoperability
with our products. We must develop cooperative relationships with our competitors so that they will work with us to integrate our software into customers' design flows. Currently, our software is designed to interface with certain of the
existing software of ANSYS, Inc., Cadence Design Systems, Inc., Magma Design Automation, Inc., Synopsys, Inc., and others. In the event that our competitors refuse to design their products to allow interoperability with our products, we may need to
redesign our products to allow our customers to successfully operate our solutions in a manner that is compatible with the solutions of our competitors. Such redesigns could be costly to us, may be rejected by our customers, and may subject us to
the risk that our competitors could seek to invalidate our efforts to achieve interoperability with their products through litigation or other means. Further, if we are unable to persuade customers to adopt our software products for power analysis
instead of those of competitors (including competitors offering a broader set of products), or if we are unable to persuade other software companies to work with us to interface our software to meet the demands of IC designers and manufacturers,
demand for our products may decrease and our business, financial condition, and operating results will suffer.
Our operating results may be harmed
if our customers do not adopt, or are slow to adopt, smaller geometries for the design of ICs and electronic systems.
Our customers
are currently working on a range of design geometries, including 90-nanometer, 65-nanometer, 45-nanometer, and 22-nanometer designs. We continue to work toward developing and enhancing our product lines in anticipation of increased customer demand
for smaller design geometries. Customers may fail to adopt, or may face technical difficulties in adopting, these geometries on a large scale and we may be unable to persuade our customers to purchase our products. Accordingly, any revenue we
receive from enhancements to our products, new products or acquired products and technologies may be less than their development or acquisition costs. If customers fail to adopt or delay the adoption of smaller design geometries on a large scale,
our business, financial condition, and operating results may be harmed. In addition, if customers are not able to generate profits as they adopt smaller geometries, future demand for our products may be adversely affected, and our business,
financial condition, and operating results may be harmed.
Our lengthy and unpredictable sales cycle requires us to incur substantial efforts and
expense that may not result in revenue and could harm our operating results and our stock price.
Potential customers for our
software products typically commit significant resources to evaluate available software. Our sales cycle typically ranges between three and nine months but can be longer. The complexity of our products requires us to spend substantial time and
effort to assist potential customers in evaluating our software and in benchmarking our products against those of our competitors. As our products' complexity increases, we expect our sales cycle to lengthen. In addition, potential customers
may be limited in their current spending by existing time-based licenses with their legacy vendors. In these cases, customers typically delay a significant new commitment to our software until the existing license term expires. It is
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common in some markets in which we operate for customers to own perpetual licenses of our competitors' products. These customers pay a proportionally small annual fee or no fee for continued
license support and maintenance, making it difficult for us to displace these perpetual or free licenses. Also, because our products require our customers to invest significant time and incur significant costs, we must target those individuals
within our customers' organizations who are able to make these decisions on behalf of their companies. These individuals tend to be senior management in an organization, typically at the vice president level. We have faced and continue facing
difficulty identifying and establishing contact with such individuals. Even after those individuals decide to purchase our products, the negotiation and documentation processes have been and are likely to continue being lengthy and can lead the
decision-maker to reconsider the purchase. Consequently, we may continue to incur substantial expense and devote significant management time and effort to develop potential relationships that do not result in agreements or revenue and that may also
prevent us from pursuing other opportunities. Any failure to achieve revenue after expending substantial efforts and expense could harm our operating results and stock price.
We may be unable to effectively manage our recent and anticipated growth, which has and will continue to place significant strain on our management personnel, systems, and resources and could materially harm our
business, financial condition, and operating results.
Our revenue increased from $14.7 million in 2006 to $44.0 million in 2010, and
our headcount has increased from 92 at the end of 2006 to 257 at the end of 2010. We have also completed two acquisitions since the beginning of 2007 and currently have operations and employees in ten countries. Our rapid growth has placed and will
continue to place significant demands on our management and our administrative, operational, and financial infrastructure. In addition, the lease for our corporate headquarters expires in October 2011 and we may be required to seek another location,
which could disrupt our operations, including the development of our systems, procedures, and controls over financial reporting, and increase our operating expenses. Among the numerous challenges we continue to face are:
•
implementing, adapting, and modifying our business model and strategy;
•
developing and improving our internal administrative infrastructure, particularly our financial, operational, human resources, communications, and other internal
systems, procedures, disclosure controls, and controls over financial reporting;
•
managing a larger number of employees and customers in a greater number of industries and locations;
•
implementing and maintaining effective oversight of personnel and offices;
•
attracting, training, developing, and retaining sufficient skilled technical, sales, and management personnel;
•
continuing to sell our products and provide high quality services to our customers; and
•
integrating new personnel and expanded operations while preserving our culture and values.
Moreover, as we introduce new products and enter new markets, we may face new market, technological, and operational risks and challenges with
which we are unfamiliar, and it will require substantial management efforts and skills to mitigate these risks and challenges. As a result of any of these challenges and potential problems associated with our growth, our business, financial
condition, and operating results could be materially harmed.
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Forecasting our tax rates is complex and subject to uncertainty, and changes in our tax provisions or additional
income tax liability exposure could negatively affect our business, financial condition, and operating results.
Our management must
make significant assumptions, judgments, and estimates to determine our current provision for income taxes, deferred tax assets and liabilities, and any valuation allowance that may be recorded against our deferred tax assets. These assumptions,
judgments, and estimates are difficult to make due to their complexity, and the relevant tax law is often changing. Our future effective tax rates could be adversely affected by several factors, including the following:
•
non-tax deductible expense increases, including stock-based compensation and acquisition costs in connection with a business combination;
•
changes in the valuation of our deferred tax assets and liabilities;
•
changes in our mix of pre-tax profits and losses in jurisdictions with differing statutory tax rates;
•
additional tax assessments resulting from federal, state or foreign tax examinations;
•
changes in tax laws or interpretations of such tax laws, especially tax laws related to foreign operations and imposition of withholding taxes and the lapse of
availability of tax credits; or
•
ownership changes that may limit certain asset realizations.
We are subject to taxes in the United States and numerous foreign jurisdictions. The amounts we record in intercompany transactions for services, licenses, funding, and other items affects our tax liabilities. Tax
authorities may disagree with our intercompany charges or other matters and seek to assess additional taxes.
In addition, our
operations are subject to income and transaction taxes in the United States and in numerous foreign jurisdictions. Changes to tax laws in the jurisdictions in which we do business, such as an increase in tax rates or an adverse change in the
treatment of an item of income or expense, could result in a material increase in our tax expense. Currently, a substantial portion of our revenue is generated from customers located outside the United States, and a significant number of our
employees, are located outside the United States. United States income taxes and foreign withholding taxes have not been provided on undistributed earnings for certain non-United States subsidiaries to the extent such earnings are considered to be
indefinitely reinvested in the operations of those subsidiaries. The President of the United States and the U.S. Treasury Department have proposed changing certain U.S. tax rules for U.S. corporations doing business outside the United States,
and these U.S. tax law changes could increase our future U.S. income tax liability.
Our tax filings are subject to review or audit by
the U.S. Internal Revenue Service and state, local, and foreign taxing authorities. We exercise judgment in determining our worldwide provision for income and other taxes and, in the ordinary course of our business, there may be transactions and
calculations where the ultimate tax determination is uncertain. For example, we accrue withholding tax liability in foreign jurisdictions based on our best estimates, which may be insufficient compared to any withholding tax determinations made by
tax authorities in those jurisdictions and could result in significant tax expense. Examinations of our tax returns could result in significant proposed adjustments. An assessment of additional taxes could adversely affect our tax provision and net
income in the period or periods for which that determination is made.
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Unanticipated changes in our tax provisions or additional tax liability exposure could negatively
affect our business, financial condition, and operating results.
Our limited operating history and the rapidly evolving nature of the markets in
which we operate may make it difficult for you to evaluate our business.
We were incorporated in 2001, and since that time have been
developing products to meet the rapidly evolving demands of customers in the markets in which we operate. We shipped our initial product, RedHawk, in 2002, released two other platforms, Sentinel and Totem, in 2007 and 2009, respectively, acquired
PowerArtist in 2009, and introduced our newest product, PathFinder, in 2010. This limited operating history makes financial forecasting and evaluation of our business difficult. Furthermore, because we depend in part on our development, and industry
acceptance, of our products, it is difficult to evaluate trends that may affect our business. We have limited historic financial data, and we operate in a rapidly evolving market, and, as such, any predictions about our future revenue and expenses
may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market.
We have high customer
engagement and support costs, and our gross margins may decrease if we incur higher than expected customer support services costs or if we reduce prices.
The complexity of our products requires us to incur high field application engineering support costs to engage new customers and assist them in evaluating our products and to support our existing customers. If we
fail to manage our customer engagement and support costs, our operating results could suffer. In addition, our gross margins may decrease if we are unable to manage support costs associated with the license revenue we generate or if we reduce
prices.
We have a limited ability to quickly and significantly reduce our operating costs, making us particularly vulnerable to the cyclical nature
of the semiconductor industry and other industries we or our customers serve, and economic deterioration generally.
We operate with
a relatively small headcount, and a significant portion of our operating costs are fixed and significant, which makes it difficult for us to quickly and significantly reduce our costs. We are therefore highly vulnerable if the semiconductor or other
industries we or our customers serve or economic conditions generally deteriorate, which would have a material adverse effect on our business, financial condition, and operating results.
We make many operational and strategic decisions based upon revenue forecasts. Our longer-term forecasts are subject to significant estimation and
are impacted by many external factors, including global economic conditions and our customers' demands. A variation in actual revenue from that forecasted could cause us to plan or to budget incorrectly and, therefore, could adversely affect
our business, financial condition, and operating results. Current global economic conditions may increase the likelihood or the magnitude of variations between actual revenue and our forecasts. Our failure to properly plan for shifts in customer
demand and changes in economic conditions could adversely affect our business, financial condition, and operating results.
We will incur significant
costs as a result of being a public company and complying with Nasdaq Global Market listing and other requirements, and our failure to comply with Nasdaq Global Market listing requirements would subject us to delisting.
As a public company, we will incur significant legal, accounting, and other expenses. In addition, Sarbanes-Oxley, as well as rules subsequently
implemented by the Securities and
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Exchange Commission, the Nasdaq Global Market, and Dodd-Frank, require public company corporate governance practices that will substantially increase our legal and financial compliance costs. We
have recently added internal resources and have utilized additional outside legal, accounting, and advisory services, which have increased and will continue increasing our operating expenses. In particular, we will incur administrative and
information technology, or IT, expenses relating to compliance with Section 404 of Sarbanes-Oxley, which requires that we implement and maintain an effective system of internal control over financial reporting and annual certification of our
compliance by our independent registered public accounting firm. If we do not comply with these requirements, we could be delisted.
We will incur
significant costs as we upgrade our internal resources and systems in connection with becoming a public company, which could impact our compliance efforts and obligations and materially and adversely impact our business, financial condition, and
operating results.
Our reporting obligations as a public company will place a significant strain on our management, operational and
financial resources, and systems for the foreseeable future. Prior to this offering, we have been a private company with limited personnel and other resources with which to address our internal control over financial reporting and procedures. For
example, we currently maintain our accounts using a combination of QuickBooks, other off-the-shelf software, and manual entry. We must therefore significantly upgrade our finance and accounting systems which could significantly increase our
operating expenses and impact our ability or prevent us from timely reporting our operating results, timely filing required reports with the Securities and Exchange Commission, and complying with Section 404 of Sarbanes-Oxley. This upgrade may be
complicated by the potential relocation of our corporate headquarters, and the broad geographical reach of our operations. We must attract, train, and retain additional internal finance staff which will increase our operating costs. These additional
costs and burdens could materially and adversely impact our business, financial condition, and operating results.
An inability to establish and
maintain effective internal control over financial reporting and related systems and procedures could adversely affect the market price of our common stock, cause us to delay filing our public reports, and lead to delisting by the Nasdaq Global
Market.
Pursuant to Section 404 of Sarbanes-Oxley, we will be required to report on, and our independent registered public
accounting firm will be required to attest to, the effectiveness of our internal control over financial reporting. Following the completion of this offering, we expect that we will need to conduct an assessment of the effectiveness of our internal
control over financial reporting as of December 31, 2012. In addition, our independent registered public accounting firm must deliver an attestation report on the effectiveness of our internal control over financial reporting. Our management
may conclude that our internal controls are not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may disagree and may decline to
attest to the effectiveness of our internal control over financial reporting or may issue an adverse opinion.
During our 2007 audit,
our limited resources in our accounting and finance department were identified as a material weakness. During our 2008 and 2009 audits, our lack of adequate resources to address certain financial reporting issues and accounting for certain complex
transactions was identified as a significant deficiency. We may identify control deficiencies or weaknesses as a result of the assessment process we will undertake to comply with Section 404 of Sarbanes-Oxley. We may be unable to remediate
control deficiencies or weaknesses identified in time to meet the deadline imposed by Section 404 of Sarbanes-Oxley.
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Effective internal control over financial reporting and related systems and procedures are necessary
for us to provide timely and reliable financial reports. Establishing and maintaining effective internal control over financial reporting and related systems and procedures will continue to strain our management and may inhibit their ability to
adequately focus on our day-to-day operations. Failure to do so could lead to a loss of investor confidence in the reliability of our reporting processes, which could adversely affect the market price of our common stock. A failure to comply with
Section 404 of Sarbanes-Oxley could also cause us to delay filing our public reports, potentially resulting in delisting by the Nasdaq Global Market.
Our disclosure controls and procedures and our internal control over financial reporting may fail to adequately allow us to report information accurately to investors or to detect and prevent errors or fraud,
and any failure of such control and procedures could damage investor confidence in us, cause the market price of our common stock to decline, and materially and adversely impact our business, financial condition, and operating results.
We cannot assure you that our disclosure controls and procedures, or our internal control over financial reporting, will prevent all
errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of meeting control system objectives. The design of a control system must also reflect applicable resource
constraints, and we must consider the control system benefits relative to their costs. As a result of these inherent limitations, no evaluation of controls can provide absolute assurance that we have identified or will identify or prevent all
control issues and instances of errors or fraud, if any, within our company. The failure of our control systems to allow us to accurately report information or detect or prevent error or fraud could damage investor confidence in us, cause the market
price of our common stock to decline, and materially adversely impact our business, financial condition, and operating results.
We may not obtain
sufficient patent protection, which could harm our competitive position and increase our expenses.
Our ability to compete depends in
part upon the protection for our software and other technology. Our intellectual property portfolio includes 32 issued U.S. patents, one issued non-U.S. patent, two pending U.S. patent applications, and one pending non-U.S. patent application. We
believe that these numbers are relatively small in comparison to many of our competitors. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent
applications at a reasonable cost or in a timely manner. Given the costs, effort, risks, and downside of obtaining patent protection, including the requirement to ultimately disclose the invention to the public, we may choose not to seek patent
protection for certain innovations; however, such patent protection could later prove to be important to our business.
Further, patents
afford only limited protection for our technology. Our patent applications may not issue as granted patents, and the scope of patent protection gained may be insufficient, and issued patents may be deemed invalid or unenforceable. Competitors may
design around our present or future issued patents or may develop competing non-infringing technologies. We also cannot assure you that any of our present or future patents will not lapse or be invalidated, challenged or abandoned, or that any of
our pending or future patents will have the coverage originally sought. In addition, our patent rights may not be enforced in jurisdictions where legal protection may be weak. We may also be unable to assert our patents against potential competitors
or to settle current or future disputes because of our relationships with third parties. For business reasons, we may also agree not to assert our patents against certain customers and other third parties. For example, we have agreed not to assert
our patents against one of our largest customers.
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In addition, issuance of a patent does not guarantee that we have an absolute right to practice the
patented invention because one or more third parties may have dominant patent rights covering certain aspects of the invention. Patent applications in the U.S. are typically not published until 18 months after filing, or in some cases not
at all until issuance, and publications of discoveries in industry-related literature lag behind actual discoveries. We cannot be certain that we were the first to make the inventions claimed in our issued patents or pending patent applications or
otherwise used in our products, that we were the first to file for protection in our patent applications or that third parties do not have blocking patents that could be used to prevent us from making, marketing, selling or otherwise practicing our
patented products or technology. Moreover, rights that may be granted under any patent application that may be issued in the future may not provide competitive advantages to us because of limitations to the scope of our patent claims or the rate of
improvements or developments made to the technology since patent protection was initially sought by us. Further, patent protection in foreign jurisdictions where we may need this protection may be limited or unavailable.
We believe the patent portfolios of many of our competitors are significantly larger than ours, and this may increase the risk that they may sue us
for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross-licenses.
We
might be required to spend significant resources to monitor for potential infringement of our patents by our competitors and others. We may initiate claims or litigation against third parties for infringement of our patents to establish the validity
of our patents, or to determine the validity or scope of the patents of third parties. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management
personnel, which may adversely affect our business, operating results, and financial condition.
In addition to patents, we rely on trademark,
copyright, and trade secret laws and contractual rights to protect our intellectual property, and the failure to sufficiently protect our intellectual property could harm our ability to compete and grow our business.
In addition to patents, we continue to rely on a combination of trademark, copyright, and trade secret laws and contractual rights, such as
confidentiality agreements and licenses, to establish and protect our intellectual property rights. We seek or may seek to protect our proprietary algorithms and source code for our software, documentation, and other written materials primarily
under trade secret and copyright laws. We license our software pursuant to agreements that impose limitations and restrictions on the licensees' ability to utilize the software. We also seek to avoid disclosure of certain of our trade secrets
and other confidential information by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements. These agreements may not effectively prevent disclosure of confidential information and may
not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently develop trade secrets and confidential information that are equivalent to our trade secrets and confidential
information, and in these cases we may not be able to assert the relevant trade secret rights against those parties. Our intellectual property rights may be inadequate for numerous reasons, including:
•
laws and contractual restrictions in the U.S. and internationally may not prevent misappropriation, or unauthorized use or disclosure of our technologies or
deter others from developing technologies similar to our own;
•
competitors may independently develop similar technologies and software;
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•
federal U.S. trademark protection may be unavailable to us for some of our marks, should we choose to seek such protection for our marks;
•
our trademarks may not be protected, able to be registered, or otherwise able to be protected in some foreign jurisdictions, should we choose to seek such
protection; and
•
policing infringement and misappropriation of our intellectual property and intellectual property rights is difficult, expensive, and time consuming, and we may
be unable to determine the extent of any unauthorized use.
Costly and time-consuming litigation could be necessary to
enforce and determine the scope of our intellectual property rights, and failure to obtain or maintain trade secret and other intellectual property protection could adversely affect our ability to compete and grow our business.
In order to protect our trade secrets and other confidential information, we rely in part on confidentiality agreements with our employees,
consultants, and third parties with whom we have relationships. These agreements may not effectively prevent disclosure of trade secrets and other confidential information and may not provide an adequate remedy in the event of misappropriation of
trade secrets or any unauthorized disclosure of trade secrets and other confidential information. In addition, others may independently discover trade secrets and confidential information, and in such cases we could not assert any trade secret
rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and nondisclosure provisions, and failure to obtain or maintain trade
secret protection, or our competitors being able to obtain our trade secrets or to independently develop unpatented technology similar to ours or competing technologies, could harm our business, financial condition, and operating results.
Our use of open source software could negatively impact the value of our proprietary software and our ability to sell our products.
The products, services or technologies we acquire, license, provide or develop may incorporate or use open source software. The use of certain open
source software may be subject to license terms requiring us to grant reciprocal licenses, disclose or distribute our proprietary software in source code form, license our proprietary software for the purpose of making modifications and derivative
works or make our proprietary software available at no or minimal charge. While we monitor our use of open source software in an effort to avoid the imposition of these consequences, there are very few or no legal precedents for interpreting the
terms of some of these open source licenses, and we cannot be certain that our programmers have not incorporated open source software into our proprietary products and technologies or that they will not do so in the future. If portions of our
proprietary technology are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the
licensing of our technologies, and may otherwise be subject to unanticipated obligations regarding our products that incorporate open source software. Each of these could reduce or eliminate the value of our technologies and software and materially
and adversely affect our business, financial condition, and operating results. In addition, disclosing the content of our source code could limit the intellectual property protection we can obtain or maintain for that source code or the products
containing that source code and could facilitate intellectual property infringement claims against us.
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Some of our products incorporate technology we license from third parties, and if we do not maintain these
licenses, if a licensor terminates our license to use its technology, or if a licensor has difficulties keeping up with technological changes or stops supporting our products, our ability to develop and license our products could be materially
delayed, reduced or prevented.
Some of our products incorporate technology that we license from third parties. This exposes us to
risks over which we may have little or no control. For example, if we fail to maintain these licenses, the licensor terminates our license to use its technology, or a licensor has difficulties keeping up with technological changes or stops
supporting its products, our ability to develop and sell licenses to our products could be materially delayed, reduced or prevented, as we seek to develop or acquire rights to alternative technologies, if they exist. Any of these events could harm
our business, financial conditions, and operating results.
We may face intellectual property infringement claims or other litigation, which can be
costly to defend, can take the time of our management and employees away from day-to-day operations and could result in our losing important rights and paying significant damages.
Participants in the markets in which we operate have been highly litigious with other competitors in these markets. Many of our competitors have
litigated with other competitors over intellectual property infringement or misappropriation claims. This litigation is typically very expensive to defend and time consuming, often taking several years to resolve. Parties may assert intellectual
property infringement claims against us or our customers. While we have not received formal written notice of our infringement of the rights of any third party, we cannot assure you that we are not infringing or violating any third-party
intellectual property rights, nor that we have not done so in the past. Questions of infringement in the semiconductor and software fields involve highly technical analyses. Litigation or proceedings before the U.S. Patent and Trademark Office or
other governmental authorities and administrative bodies in the United States and abroad may be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the
intellectual property rights of others or to defend against claims of infringement or invalidity, and we may not prevail in any litigation. In addition, we may have acquired or may acquire software products and other technology through acquisitions,
and we could be subject to claims that the acquired software products and other technology infringe third-party intellectual property rights. We also license technology, including software, from third parties and could be subject to claims that the
licensed technology infringes the rights of others. We could also be threatened with or face commercial litigation unrelated to intellectual property infringement claims such as labor litigation and contract claims, and we may acquire companies that
could be threatened with or are actively engaged in similar litigation.
Our products may be found to infringe third-party intellectual
property rights, including third-party patents. In addition, most of our contracts contain provisions in which we agree to indemnify our customers and distributors against third-party intellectual property infringement claims that are brought
against them based on their use or distribution of our products. Also, we may be unaware of filed patent applications that relate to our software products or other technology that we use. We believe that the patent portfolios of our competitors
generally are larger than ours. This disparity between our patent portfolio and the patent portfolios of our competitors may increase the risk that they may sue us for patent infringement and may limit our ability to counterclaim for patent
infringement or settle through patent cross-licenses. Additionally, patent litigation may involve patent holding companies or other adverse patent owners who have no relevant product revenue, and therefore our own issued and pending patents may
provide little or no deterrence to these patent owners in bringing intellectual property rights claims against us. We cannot assure you that we are not infringing or violating any third-party intellectual property rights.
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The outcome of intellectual property litigation and other types of litigation could result in our
loss of critical intellectual property rights and unexpected operating costs and substantial monetary damages. Intellectual property litigation and other types of litigation are expensive and time-consuming and could divert our management's
attention from our business. If there is a successful claim against us for infringement, we may be ordered to pay substantial monetary damages, including punitive damages, be prevented from distributing all or some of our products and be required to
develop non-infringing technology or enter into royalty or license agreements, which may not be available on acceptable terms, if at all. Our failure to develop non-infringing technologies or license any required intellectual property rights on a
timely basis could harm our business, financial condition, and operating results.
We expect that acquisitions will continue to be an important part
of our strategy. If we are unable to effectively complete and integrate acquisitions, this could materially and adversely affect our business, financial condition, and results of operations.
A significant part of our growth strategy is to continue to pursue acquisitions. We have made four acquisitions to date, two of which involved
technology and personnel acquisitions but not product acquisitions, and two of which involved product, technology, customer, and personnel acquisitions. The environment for acquisitions in the markets in which we operate is very competitive,
acquisition candidate purchase prices will likely exceed what we would prefer to pay, but may choose to pay in order to make an acquisition. Achieving the anticipated benefits of past and possible future acquisitions will depend in part upon whether
we can integrate acquired operations, products, and technology in a timely and cost-effective manner. The acquisition and integration process is complex, expensive, and time consuming, and may cause an interruption of, or loss of momentum in,
product development and sales activities and operations of both companies. In addition, if we use earnout arrangements to consummate an acquisition, pursuant to which we agree to pay additional amounts of contingent consideration based on the
achievement of certain revenue, bookings or product development or other milestones, our integration efforts can become more complicated. We may not find suitable acquisition candidates, and acquisitions we complete may be unsuccessful. We may not
consummate any particular transaction, but may nonetheless incur significant management time and effort and acquisition-related costs, as has occurred with two relatively recent unsuccessful acquisition attempts. If we consummate a transaction, we
may be unable to integrate and manage acquired products and businesses effectively. Assimilating previously acquired companies or companies we may seek to acquire, involves numerous risks, including but not limited to:
•
adverse effects on existing customer relationships, such as order cancellations or key customer losses;
•
adverse effects on existing licensor or supplier relationships, such as license terminations;
•
difficulties in integrating or retaining acquired company key employees;
•
potential downward pressure on operating margins due to lower operating margins of acquired businesses, increased headcount costs, and other expenses associated
with adding and supporting new products;
•
difficulties in integrating acquired company operations, such as IT resources, manufacturing processes, and financial and operational data;
•
difficulties in integrating acquired company technologies into our products;
•
difficulties managing different revenue models;
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•
diversion of our management's attention from day-to-day business when evaluating and negotiating these transactions and integrating an acquired business;
•
potential incompatibility of business cultures;
•
difficulties managing different business models;
•
post-acquisition discovery of previously unknown liabilities assumed with the acquired business;
•
marketplace confusion regarding acquired products that may be competitive with our existing products;
•
the failure to understand and compete in markets where we have limited experience;
•
unanticipated litigation in connection with or as a result of an acquisition;
•
the potentially negative impact on our earnings per share;
•
the risk that earnouts based on revenue will prove difficult to administer due to accounting complexities;
•
the risk that actions incentivized by earnout provisions will ultimately not to be in our best interests if our interests change;
•
potential dilution to existing stockholders if we issue equity securities to finance acquisitions and potential increased debt either assumed in the acquisition
or used to finance the acquisition; and
•
additional expenses associated with the amortization of intangible assets and its impact on our operating results.
If we are unable to effectively execute acquisitions, our business, financial condition, and operating results could be adversely affected.
We rely on our international operations for a significant portion of our revenue and revenue growth, and international operations and expansion involve numerous
risks that could adversely impact our business, financial condition, and operating results.
In 2008, 2009, and 2010, we generated
40%, 40%, and 43%, respectively, of our revenue from sales outside the United States, based on the regions to which we shipped our products, and we anticipate that international operations will account for a significant portion of our revenue in the
foreseeable future. Our business and operating results therefore significantly depend upon our international operations and our ability to continue expanding in our existing international markets and enter into new international markets. In
expanding our business internationally, we have entered and intend to continue to enter markets in which we have limited or no experience and in which our brand may be less recognized. We may fail to anticipate competitive conditions in new markets
that are different from those in our existing markets. These competitive conditions may make it difficult or impossible for us to effectively operate in these markets. If our expansion efforts in existing and new markets are unsuccessful, our
business, financial condition, and operating results would be materially and adversely affected.
We have been and continue to be
exposed to other risks associated with international operations, including:
•
difficulties and costs of staffing and managing international operations across different geographic areas;
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•
changes in currency exchange rates and controls;
•
potentially higher tax rates or additional tax liabilities;
•
uncertainty regarding tax and regulatory requirements in multiple jurisdictions;
•
the lack of financial and political stability in foreign countries, preventing overseas sales growth;
•
our ability to comply with customs, import/export, and other trade compliance regulations of the countries in which we do business, together with any unexpected
changes in such regulations;
•
language and cultural barriers;
•
longer payment cycles;
•
greater difficulty in accounts receivable collection;
•
limitations on repatriation of earnings or on the conversion of foreign currencies;
•
ineffective or non-existent legal protection of our intellectual property rights;
•
greater risk of business interruption as a result of terrorist acts or military conflicts;
•
inadequate local infrastructure that could result in business disruptions; and
•
any related conflicts or similar events worldwide.
In addition, our global operations are subject to numerous U.S. and foreign laws and regulations, including those related to anti-corruption, tax, corporate governance, imports and exports, financial and other
disclosures, privacy, and labor relations. These laws and regulations are complex and may have differing or conflicting legal standards, making compliance difficult and costly. If we violate these laws and regulations, we could be subject to fines,
penalties or criminal sanctions, and may be prohibited from conducting business in one or more countries. Any violation could have a material adverse effect on our business, financial condition, and operating results.
Policy changes by the United States or foreign governments could negatively affect our operating results due to increased duties, increased
regulatory requirements, higher taxation, currency conversion limitations, restrictions on the transfer of funds, the imposition of or increase in tariffs, and limitations on imports or exports. Also, we could be negatively affected if our host
countries revise their policies away from encouraging foreign investment or foreign trade, including tax holidays. Any difficulties experienced in connection with international operations could materially and adversely affect our business, financial
condition, and operating results.
We are subject to risks associated with changes in foreign currency exchange rates, foreign currency exchange
controls, and other matters that may impact our financial condition and results of operations.
While most of our international sales
to date have been denominated in U.S. dollars, a substantial majority of our international operating expenses have been denominated in foreign currencies. As a result, a decrease in the value of the U.S. dollar relative to such foreign currencies
could increase the relative costs of our overseas operations, which could reduce our operating margins. This exposure is primarily and currently related to a portion of revenue in Japan and operating expenses in Europe, Israel, Japan, and
Asia-Pacific, which are denominated in the respective local currencies. As of December 31, 2010, we had $8.5 million of
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cash and money market funds in foreign currencies. We have not previously used financial instruments to hedge our exposure to foreign currency exchange rates. While we assess the need to utilize
financial instruments to hedge currency exposures, our assessments may prove incorrect. Therefore, movements in exchange rates could negatively impact our business, operating results, and financial condition.
Operations in foreign countries also present risks associated with currency exchange and convertibility, inflation, and repatriation of earnings.
In some countries, economic and monetary conditions and other factors could affect our ability to convert our cash distributions into U.S. dollars or other freely convertible currencies, or to move funds to our accounts in these countries.
Furthermore, the central bank of any of these countries may have the authority to suspend, restrict or otherwise impose conditions on foreign exchange transactions or to approve distributions to foreign investors. Our exposure to the risks
associated with foreign exchange could materially and adversely affect our financial condition and results of operations.
Failure to obtain export
licenses or our failure to comply with U.S. export laws could harm our business by preventing us from licensing or transferring our technology outside of the United States.
We are required to comply with U.S. Department of Commerce regulations when shipping our software products and/or transferring our technology outside of the United States or to certain foreign nationals. These
regulations are subject to change, and future difficulties in obtaining export licenses for current products or future developed and acquired products and technology, or any failure by us to comply with such requirements, could harm our business,
financial condition, and operating results.
We structure most of our license agreements such that customers pay us in installments over the license
period. In addition, in some of our license agreements, payments are weighted toward the latter part of the contract term, potentially exposing us to the increased likelihood that our customers will default on their payment obligations, which could
materially and adversely affect our business, financial condition, and operating results.
We structure most of our license
agreements such that customers pay us in installments over the license period. In addition, in some of our license agreements, payments are weighted toward the latter part of the license term which create additional credit risk. These payment terms
could increase the likelihood that our customers will default on their payment obligations to us, which could materially adversely affect our business, financial condition, and operating results.
In addition, for those license agreements where payments are weighted toward the latter part of the contract term, we do not recognize revenue
evenly over the contract term, but recognize the lesser of the cumulative amounts due and payable or ratably. Revenue recognized under these arrangements will be higher in the latter part of the contract term, may place our future revenue
recognition at greater risk of our customers' continued credit-worthiness.
If our security measures are perceived or deemed insufficient or are
breached and an unauthorized party obtains access to customer data, we may face civil liability and customers may curtail or stop using our products and services.
Our products and services may involve the collection, storage, and transmission of customers' confidential information, and other information that we are required to protect. Breaches of our security measures
that protect such information could expose us to substantial
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liability from the misuse of this information, including litigation. Our customers may also require us to agree that in the event of a security breach, they would have the right to terminate
their existing agreements with us. Some of our key customers may also require us to maintain specified security measures. Because techniques used to obtain unauthorized access or to sabotage information systems change frequently and generally are
not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security measures occurs, the market perception of the
effectiveness of our security measures could be harmed, we could lose existing customers and our ability to obtain new customers, and in the event of an actual breach, we could be exposed to significant liability.
Product errors or defects could expose us to liability and harm our reputation and we could lose market share.
Despite extensive testing prior to releasing our products, software products frequently contain errors or defects, especially when first introduced,
when new versions are released or when integrated with technologies developed by acquired companies. Product errors could affect the performance or interoperability of our products, could delay the development or release of new products or new
versions of products, and could adversely affect market acceptance or perception of our products. In addition, allegations of IC manufacturability issues resulting from use of our products could, even if untrue, adversely affect our reputation and
our customers' willingness to license products from us. Any such errors or delays in releasing new products or new versions of products or allegations of unsatisfactory performance could:
•
cause us to lose customers;
•
increase our service costs;
•
subject us to liability for damages;
•
divert our resources from other tasks;
•
delay license sales; and
•
cause us to fail to attract new customers or achieve market acceptance.
Any of the above could materially and adversely affect our business, financial condition, and operating results.
Moreover, because our software is used in connection with other vendors' products that are used to design complex nanometer-scale
semiconductors, significant liability claims may be asserted against us if our software does not work properly individually or with other vendors' products. Our agreements with customers typically contain provisions intended to limit our
exposure to liability claims. However, these limitations may be unenforceable and may not preclude or limit all potential claims. Regardless of their merit, liability claims could require us to spend significant time and expense in
litigation and divert management's attention from other business pursuits. If successful, a product liability claim could require us to pay significant damages. Any claims, whether or not successful, could seriously damage our
reputation and our business.
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We may be unable to make payments to satisfy our indemnification obligations or in the event of improper use or
disclosure of confidential information, which would harm our customer relationships and our business.
We enter into license
agreements and non-disclosure agreements in the ordinary course of business. Pursuant to these agreements, we typically agree to indemnify our customers and strategic partners for losses suffered or incurred by them as a result of any patent,
copyright or other third-party intellectual property infringement claim with respect to our products, and we agree to confidentiality provisions that restrict our use and disclosure of our customers' confidential information. In some of our
customer agreements, we agree to additional indemnification obligations, such as indemnifying the customer for losses suffered or incurred by the customer as a result of our breach of certain warranties regarding our products. These indemnification
and confidentiality obligations typically have perpetual terms and are unlimited in amount. Many of our customer agreements do not limit our indemnification obligations, so we may be required to make indemnification payments that greatly exceed the
amount received from the customer. Similarly, many of our customer agreements do not limit our liability for improper use or disclosure by our employees of our customers' confidential information. If an indemnification event were to occur, we
may have insufficient funds to pay our indemnification obligations. If we are held to have improperly used or disclosed confidential information, we may have insufficient funds to pay any damages and other amounts that may be awarded. Further, any
material indemnification payment or material liability for improper use or disclosure of confidential information could have a material adverse effect on our financial condition and our results of operations. Any claim or judgment that we improperly
used or disclosed confidential information, in addition to involving significant financial obligations, could hurt our relations with our customers and strategic partners and hurt our reputation, each of which could have a material adverse effect on
our financial condition and our results of our operations.
We have entered into certain indemnification agreements whereby we indemnify
certain of our and our subsidiaries' executive officers and all of our directors for certain events or occurrences while the executive officer or director is, or was, serving at our request in such capacity. The maximum potential future
payments we could be required to make under these indemnification agreements is unlimited. We have not recorded any liabilities for these agreements. Therefore, if an indemnification event occurs, we may have insufficient funds to pay our
indemnification obligations. Further, any material indemnification payment could have a material adverse effect on our business, financial condition, and operating results.
Accounting principles, standards or guidance changes, specifically changes affecting software revenue recognition, could cause unexpected adverse revenue fluctuations for us, negatively impacting our business,
operating results, and stock price.
We prepare our consolidated financial statements in conformity with U.S. GAAP. These principles
are subject to interpretation by the Securities and Exchange Commission and various bodies formed to interpret and create appropriate accounting principles, standards, and guidance. A change in or a difference in interpretation of these principles,
standards or guidance could have a significant effect on our reported operating results and may retroactively affect our previously reported operating results. Additional proposed accounting standards could have a significant impact on our
operational processes, revenue, and expenses, and could cause unexpected financial reporting fluctuations and make comparability between periods less meaningful or not at all.
Accounting standards changes and related interpretations, specifically those changes affecting software revenue recognition, could require us to change our revenue recognition
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methods. Specifically, in June 2010, the Financial Accounting Standards Board proposed new accounting standard
Revenue from Contracts with Customers
. These changes could result in deferral
of revenue recognized in current periods to subsequent periods or in accelerated recognition of deferred revenue to current periods, each of which could negatively impact our business and operating results, cause us to fail to meet investors and
securities analysts expectations, and negatively impact our stock price.
Future capital needs may require us to seek debt financing or additional
equity funding that, if not available on acceptable terms or at all, could cause our financial condition to deteriorate and materially harm our business.
Our liquidity and capital requirements depend in part on numerous factors, including:
•
the costs and timing of product development efforts and their relative success;
•
the costs of retaining management and key employees;
•
the costs and timing of international expansion;
•
the costs and timing of future acquisitions, if any;
•
economic conditions generally and the markets that our customers serve in particular;
•
technological and market developments; and
•
the costs of pursuing, maintaining, and enforcing intellectual property rights and defending against any intellectual property infringement claims.
We do not currently maintain any revolving lines of credit. We may therefore be unable to acquire debt financing if
and when needed or desired on acceptable terms or at all. In addition, we may be unable to complete an equity funding on acceptable terms or at all. Our inability to obtain additional funds through debt financing or equity funding could cause our
financial condition to deteriorate and materially harm our outlook.
If we become subject to unfair hiring claims, we could be prevented from hiring
needed employees, incur liability for damages, and incur substantial costs in defending ourselves.
Companies in our industry that
lose employees to competitors frequently claim that these competitors have engaged in unfair hiring practices or that the employment of these persons would involve the disclosure or use of trade secrets. If we become subject to unfair hiring claims
or misappropriation of trade secret claims, we may be prevented from hiring or retaining needed employees. We could also incur substantial costs in defending ourselves or our employees against these claims, regardless of their merits. Defending
ourselves from these claims could also divert management's attention from our operations, and an adverse determination of any such claims could result in our incurring substantial liability for damages.
Catastrophic events may disrupt our business and harm our operating results.
We rely on our network infrastructure and enterprise applications, and technology systems for our development, marketing, operations, support, and sales activities. A disruption or failure of these systems in the
event of a major natural disaster, telecommunications failure, cyber-attack, civil unrest in various parts of the world, acts of war, terrorist attack or other catastrophic event could cause system interruptions, delays in our product development
and loss of critical data and could prevent us from fulfilling our customers' orders. Our corporate headquarters, a significant portion of our research and development activities, our data centers and certain
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other critical business operations are located in California, near major earthquake faults. A catastrophic event that results in the destruction or disruption of any of our data centers or our
critical business or IT systems would severely affect our ability to conduct normal business operations and, as a result, our operating results would be adversely affected.
Risks Related to our Common Stock and this Offering
An active trading market for our common stock may not
develop and the market price for our common stock may decline below the initial public offering price.
Prior to this offering, there
has been no public market for our common stock. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that market may become. If an active public market for our common
stock does not develop, the market price and liquidity of our common stock may be adversely affected. The initial public offering price for our common stock will be determined by negotiation among us, our selling stockholders, and the underwriters
based upon several factors, and may not be indicative of prices that will prevail in the open market after this offering. Consequently, you may be unable to sell your shares of our common stock at prices equal to or greater than the price you paid
for them.
Market prices of technology-related companies have fluctuated widely in recent years, and the market price of our common stock is likely
to be volatile, which could result in substantial losses to investors and litigation.
The market price of our common stock is likely
to be volatile and could fluctuate widely in response to factors beyond our control. In particular, the market prices for shares of technology-related companies often reach levels that may bear no established relationship to the past operating
performance of these companies. The market prices of technology-related companies have been especially volatile. These broad market and industry factors may significantly affect the market price of our common stock regardless of our actual operating
performance. In addition to market and industry factors, the market price and trading volume for our common stock may be highly volatile for specific business reasons. Factors that could cause the market price of our common stock to fluctuate
significantly include:
•
our operating and financial performance and prospects;
•
our quarterly or annual earnings or those of other companies in our industry;
•
conditions that impact demand for our products and services;
•
the public's reaction to our press releases, other public announcements, and filings with the Securities and Exchange Commission;
•
changes in earnings estimates or recommendations by securities or research analysts who track our common stock;
•
market and industry perception of our success, or lack thereof, in pursuing our growth strategy;
•
strategic actions by us or our competitors, such as acquisitions or restructurings;
•
changes in government and other regulations;
•
changes in accounting standards, policies, guidance, interpretations or principles;
•
arrival and departure of key personnel;
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•
the number of shares to be publicly traded after this offering;
•
sales of common stock by us, our investors or members of our management team; and
•
changes in general market, economic, and political conditions in the United States and global economies or financial markets, including those resulting from
natural disasters, telecommunications failure, cyber attack, civil unrest in various parts of the world, acts of war, terrorist attacks or other catastrophic events.
Any of these factors may result in large and sudden changes in the trading volume and market price of our common stock, and may prevent you from being able to sell your shares at or above the price you paid for
your shares of our common stock. Following periods of volatility in the market price of a company's securities, stockholders often institute securities class action litigation against that company. Our involvement in a class action suit could
divert our senior management's attention and, if adversely determined, could have a material adverse effect on our business, financial condition, and results of operations.
The sale or availability for sale of substantial amounts of our common stock could adversely affect its market price.
Sales of substantial amounts of shares of our common stock in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of our
common stock and could materially impair our future ability to raise capital through common stock offerings.
We will have
         shares of common stock outstanding immediately after this offering, or          shares of common stock if the underwriters exercise their option to purchase
additional shares of common stock in full. All of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, unless held by our "affiliates" as that
term is defined in Rule 144 under the Securities Act. The 17,190,188 shares of common stock outstanding as of February 28, 2011, assuming the conversion of all shares of our preferred stock into shares of our common stock, will be eligible for
resale under Rule 144 or Rule 701 of the Securities Act, subject to volume limitations and applicable holding period requirements. We have also provided registration rights to holders of 9,953,885 shares of our common stock.
In addition, as of February 28, 2011, there were 2,210,483 outstanding options to purchase shares of our common stock, all of which are
immediately exercisable. Immediately following this offering, we intend to file a registration statement registering the shares issuable upon the exercise of these existing options, and for the 2,400,000 shares reserved for issuance under our 2011
Equity Incentive Plan and 600,000 shares reserved for issuance under our 2011 Employee Stock Purchase Plan. Assuming effectiveness of the registration statement on Form S-8, these shares will be freely tradable, although they will be subject to the
lock-up arrangements we describe below and elsewhere in this prospectus and vesting limitations.
In connection with this offering, we,
our directors and officers, and substantially all of our stockholders and holders of options to purchase our stock, have agreed, subject to certain limited exceptions, not to offer, sell, contract to sell or otherwise dispose of, or enter into, any
transaction that is designed to, or could be expected to, result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our common stock for 180 days after the date of
this prospectus without the written consent of Deutsche Bank Securities Inc. However, Deutsche Bank Securities Inc. may release these securities from these restrictions at any time without notice. We cannot predict what effect, if
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any, market sales of securities held by our stockholders or the availability of these securities for future sale will have on the market price of our common stock. See "Underwriting"
and "Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling our securities after this offering.
We may also issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of
shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of our common stock or other
securities in connection with any such acquisitions and investments.
Our executive officers, directors, and other key employees will significantly
influence our activities, and their interests may differ from your interests as a stockholder.
Following this offering, our
executive officers, directors, and other key employees will beneficially own, collectively,     % of our outstanding common stock, or     % if the underwriters exercise in full their option to purchase
additional shares of our common stock.
Accordingly, these stockholders have had, and will continue to have, significant influence in
determining the outcome of any corporate transaction or other matter submitted for approval to our stockholders, including mergers, consolidations, and the sale of our assets, director elections, and other significant corporate actions. They will
also have significant influence in preventing or causing a change in control of our company. In addition, without the consent of these stockholders, we could be prevented from entering into transactions that could be beneficial to us. The interests
of these stockholders may differ from your interests as a stockholder.
The initial public offering price for shares of our common stock is
substantially higher than the pro forma net tangible book value per share, and, as such, you will incur immediate and substantial dilution.
If you purchase common stock in this offering, you will pay more for your common stock than the amount paid by existing stockholders for their common stock. As a result, you will experience immediate and
substantial dilution of approximately $         per share of common stock, assuming no exercise of outstanding options to acquire common stock, representing the difference between our pro forma net tangible
book value per share of common stock of $        , after giving effect to this offering and the assumed initial public offering price per share of common stock of
$        , the midpoint of the estimated offering range set forth on the cover page of this prospectus. In addition, you may experience further dilution to the extent that our common stock is issued upon the
exercise of stock options. All of the shares of common stock issuable upon the exercise of currently outstanding stock options will be issued at a purchase price that is less than the initial public offering price per share in this offering. See
"Dilution" for a more complete description of how the value of your investment in our common stock will be diluted upon the completion of this offering.
Our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect at or upon consummation of this offering, and Delaware corporate law as well as certain of our
contracts contain provisions which could delay or prevent a change in control even if the change in control would be beneficial to our stockholders.
Delaware law, as well as our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect at or upon consummation of this offering,
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contains anti-takeover provisions that could delay or prevent a change in control of our company, even if the change in control would be beneficial to the stockholders. These provisions could
lower the price that future investors might be willing to pay for shares of our common stock. These anti-takeover provisions:
•
authorize our board of directors to create and issue, without stockholder approval, preferred stock that can be issued, increasing the number of outstanding
shares and deter or prevent a takeover attempt;
•
prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
•
establish a three-tiered classified board of directors requiring that not all members of the board be elected at one time;
•
prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;
•
establish limitations on the removal of directors;
•
empower the board of directors to fill any vacancy on the board of directors, whether such vacancy occurs as a result of an increase in the number of directors
or otherwise;
•
establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at
stockholder meetings; and
•
limit the ability of stockholders to call special meetings of stockholders.
Section 203 of the Delaware General Corporation Law, the terms of our stock incentive plans, and other contractual provisions also may
discourage, delay or prevent a change in control of our company. Section 203 generally prohibits a Delaware corporation from engaging in a business combination with an interested stockholder for three years after the date the stockholder became
an interested stockholder. Our stock incentive plans include change-in-control provisions that allow us to grant options or stock purchase rights that may become vested immediately upon a change in control. We may also enter into contractual
restrictions with third parties, the terms of which may discourage a change in control of our company. For example, we have agreed with one of our largest customers that, under certain circumstances, if we divest or assign any of our patents, then
the customer will be entitled to an irrevocable, worldwide, nonexclusive license to such patents to make or have made such customer's products.
Together, these charter, statutory and contractual provisions could make the removal of management and directors more difficult and may discourage transactions that otherwise could involve payment of a premium over
prevailing market prices for our common stock. Furthermore, the existence of the foregoing provisions, as well as the significant common stock beneficially owned by our executive officers, key non-executive officer employees, and members of our
board of directors, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium
for your common stock in an acquisition.
Our board of directors also has the power to adopt a stockholder rights plan that could delay
or prevent a change in control of us even if the change in control is generally beneficial to our stockholders. These plans, sometimes called "poison pills," are oftentimes criticized by institutional investors or their advisors and could
affect our rating by such investors or advisors.
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If our board of directors adopts such a plan, it might have the effect of reducing the price that new investors are willing to pay for shares of our common stock.
We have not determined a specific use for a portion of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.
We have not determined a specific use for the net proceeds of this offering. Our management will have considerable discretion in the
application of these proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the
application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our profitability or increase our common stock price. The net proceeds from this offering may also be placed in investments
that do not produce income or that lose value.
We have never paid cash dividends and do not anticipate paying any cash dividends on our common
stock.
We currently intend to retain any earnings to finance our operations and growth. The decision whether to pay dividends will
be made by our board of directors in light of conditions then existing, including but not limited to factors such as our financial condition, operating results, capital requirements, business conditions, and covenants under any applicable
contractual arrangements. Because we have never paid cash dividends and do not anticipate paying any cash dividends on our common stock in the foreseeable future, any short-term return on your investment will depend on the market price of our common
stock.
If equity research analysts do not publish research or reports about our business, or if they issue unfavorable commentary or downgrade our
common stock, the market price of our common stock will likely decline.
The trading market for our common stock will rely in part on
the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The market price of our stock could decline if one or more equity analysts downgrade our stock or if those analysts issue
unfavorable commentary or cease publishing reports about us or our business.
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FORWARD-LOOKING STATEMENTS AND
STATISTICAL DATA AND MARKET INFORMATION
This prospectus contains "forward-looking statements" within the meaning of the federal securities laws, which involve substantial risks and uncertainties. You can identify forward-looking statements
because they contain words such as "believes," "projects," "might," "expects," "may," "will," "should," "seeks," "approximately," "intends,"
"plans," "estimates," or "anticipates" or similar expressions that concern our strategy, plans or intentions. All statements we make in this prospectus relating to our estimated and projected revenue, margins, costs,
expenditures, cash flows, growth rates, financial results, and prospects are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may
differ materially from those we expect. We derive many of our forward-looking statements from our operating budgets and forecasts, which we base upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it
is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.
We disclose important factors that could cause actual results to differ materially from our expectations under "Risk Factors" and elsewhere in this prospectus, including, without limitation, in
conjunction with the forward-looking statements included in this prospectus. Some of the factors that we believe could affect our revenue, margins, costs, expenditures, cash flows, growth rates, financial results, business, condition, and prospects
include:
•
our dependence on a small number of customers for a significant portion of our revenue;
•
if customers terminate their licenses, delay orders or fail to renew licenses;
•
a deterioration in the financial condition of any of our key customers or their end-user customers;
•
customer consolidation, which could lead to reduced selling prices and license sales and customer loss;
•
our reliance on a limited number of products that focus exclusively on power-efficient and noise-immune solutions;
•
our ability to effectively develop and commercialize or acquire new and enhanced products;
•
our ability to maintain and expand relationships with existing customers and develop relationships with new customers;
•
our need to continue to make significant research and development investments;
•
competition in the markets in which we operate;
•
our ability to attract, retain, and train necessary personnel;
•
our dependence on and ability to retain our senior executives and other key personnel;
•
the lack of experience our senior executives have in managing a public reporting company;
•
continued consolidation among our competitors and potential customers;
•
lack of growth in new IC design starts and industry consolidation;
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•
industry-wide downturns and other cyclical effects that have affected or affecting our customers' research and development budgets;
•
structural barriers and our customers' internal capabilities, which make gaining market share difficult;
•
the limited size of our addressable market;
•
technological innovations that could reduce or eliminate demand for our products;
•
if IC designers and manufacturers do not integrate our software into existing or future design flows;
•
if software companies, including competitors, do not cooperate in working with us to interface our products with their design flows;
•
if our customers do not adopt, or are slow to adopt smaller design geometries on a large scale;
•
our lengthy and unpredictable sales cycle;
•
our ability to effectively manage our recent and anticipated growth;
•
changes in tax provisions or additional tax liability;
•
our limited operating history and the rapidly evolving nature of the markets in which we operate;
•
the high costs of customer engagement and support;
•
our limited ability to quickly and significantly reduce our operating costs;
•
the significant costs of both becoming and being a public company;
•
the significant costs of, and potential impact on compliance efforts and obligations from, our upgrading of our internal resources and systems;
•
the ability of our disclosure controls and procedures and our internal control over financial reporting to adequately allow us to report information accurately
to investors or to detect and prevent errors or fraud, and the costs associated with implementing and maintaining these controls and procedures;
•
any failures by our disclosure controls and procedures and internal control over financial reporting;
•
our ability to obtain sufficient patent protection and protect our other proprietary rights;
•
our reliance on certain third parties and open source software for technology incorporated into our products;
•
the costs associated with, and the outcomes of, any intellectual property or other claims and litigation;
•
whether we undertake any acquisitions and our ability to integrate any acquired operations, products, and technology;
•
the risks associated with our reliance on international operations, including foreign exchange risk;
•
our exposure to customer credit risk;
•
our failure to obtain export licenses or to comply with U.S. export laws;
•
insufficient security measures or security breaches;
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•
our liability exposures from product errors or defects;
•
our potential indemnification obligations;
•
any accounting principles, standards or guidance changes;
•
our ability to satisfy future capital needs;
•
if we become subject to unfair hiring claims; and
•
the effect of local and national economic, credit, and capital market conditions on the economy in general, and the markets that our customers serve in
particular.
We caution you that the foregoing list of important factors may not contain all of the material factors
that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this prospectus may not in fact occur. We undertake no obligation to publicly update or revise
any forward-looking statement as a result of new information, future events or otherwise, except as required by law.
This prospectus
also contains statistical data, estimates, and forecasts that we obtained from industry publications and reports generated by third-party market research firms, including iSuppli Corporation, or iSuppli, Gartner, Inc., or Gartner, International
Technology Roadmap for Semiconductors, or ITRS, and International Data Corporation, or IDC. Although we believe that these third-party sources are reliable, neither we nor the underwriters have independently verified the data provided by these third
parties, and neither we nor the underwriters take any further responsibility for this data. While we are not aware of any misstatements regarding any third-party data presented in this prospectus, their estimates, in particular as they relate to
projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under "Risk Factors."
The Gartner Report described herein, "What to Consider When Designing Next-Generation Data Centers," David Cappucio, September 10, 2010,
or the Gartner Report, represents data, research, opinion or viewpoints published as part of a syndicated subscription service by Gartner, and are not representations of fact. The Gartner Report speaks as of its original publication date and not as
of the date of this filing, and the opinions expressed in the Gartner Report are subject to change without notice.
The IDC reports
described herein are Worldwide Quarterly Media Tablet and eReader Tracker, December 2010, and Worldwide Smartphone 2010-2014 Forecast Update: December 2010, IDC #226107.
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USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the common stock that we are offering will be approximately
$        million, based on an assumed initial public offering price of $        per share, which is the midpoint of the estimated offering range set forth on the cover
page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Our net proceeds will increase by approximately $        million if the
underwriters exercise in full their option to purchase additional shares from us. Each $1.00 increase (decrease) in the assumed initial public offering price of $        per share, which is the midpoint of the
estimated offering range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us of this offering by approximately $        million, assuming the number of shares
offered by us, as listed on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The principal purposes of this offering are to obtain additional capital, create a public market for our common stock, and to facilitate our future
access to the public equity markets.
We currently intend to use the net proceeds from our sale of shares of common stock in this
offering for working capital and other general corporate purposes, which may include hiring additional personnel and investing in sales, marketing, and research and development. In addition, we may use a portion of the proceeds received by us from
this offering for acquisitions of complementary businesses, technologies or other assets. We have no agreements with respect to any material acquisitions at this time.
Pending the use of the proceeds from this offering as described above, we plan to invest the net proceeds in short-term, investment grade, interest-bearing securities. We will not receive any of the proceeds from
shares sold by the selling stockholders.
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DIVIDEND POLICY
We have never paid cash dividends on our capital stock. We currently intend to retain any future earnings to fund business development and growth,
and we do not anticipate paying cash dividends in the foreseeable future.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2010:
•
on an actual basis;
•
on a pro forma basis to reflect the automatic conversion of all of our preferred stock into common stock; and
•
on a pro forma as adjusted basis to reflect the conversion referred to above and the sale of        shares of common
stock by us in this offering at an assumed initial public offering price of $        per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus, after
deducting estimated underwriting discounts and commissions and our estimated offering expenses.
You should read this
table in conjunction with our consolidated financial statements and related notes and the sections entitled "Selected Consolidated Financial and Other Data," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Use of Proceeds," and "Description of Capital Stock" appearing elsewhere in this prospectus.
As of December 31, 2010
Actual
Pro forma
Pro forma as
adjusted
(unaudited)
(unaudited)
(in thousands, except share data)
Cash and cash equivalents
$
26,175
$
26,175
$
Long-term debt, including current portion
$
—
$
—
$
—
Redeemable and convertible preferred stock
Preferred stock Series A, $0.0001 par value; 3,633,665 shares authorized and 3,633,665 shares outstanding, actual; no shares outstanding,
pro forma and pro forma as adjusted
1,741
—
—
Preferred stock Series B, $0.0001 par value; 2,300,000 shares authorized and 2,300,000 shares outstanding, actual; no shares outstanding,
pro forma and pro forma as adjusted
4,255
—
—
5,996
—
—
Stockholders' equity:
Common stock, $0.0001 par value; 20,000,000 shares authorized and 11,099,815 shares issued and outstanding, actual; 20,000,000 shares
authorized and 17,033,480 shares issued and outstanding, pro forma; 20,000,000 shares authorized and                  shares outstanding, pro forma as
adjusted
1
2
Additional paid-in capital
1,133
7,128
Stock compensation
3,576
3,576
3,576
Retained earnings
161
161
161
Total stockholders' equity
4,871
10,867
Total capitalization
$
10,867
$
10,867
$
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Our capitalization information presented above excludes:
•
2,293,410 shares of common stock subject to options outstanding as of December 31, 2010 (and 2,210,483 shares of common stock subject to options outstanding
as of February 28, 2011) issued under our 2001 Stock Option/Stock Issuance Plan;
•
2,400,000 shares of common stock reserved for issuance pursuant to our 2011 Equity Incentive Plan and 600,000 shares of common stock reserved for issuance
pursuant to our 2011 Employee Stock Purchase Plan;
•
shares of common stock issuable upon the exercise of the underwriters' over-allotment option; and
•
an increase in authorized shares of common stock in 2011 from 20,000,000 to 21,000,000 in January 2011.
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DILUTION
If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of
common stock you pay and the as adjusted net tangible book value per share of our common stock after this offering. Our net tangible book value as of December 31, 2010 was $1.3 million, or $0.08 per share of common stock. We calculate net
tangible book value per share by calculating the total assets less goodwill and other intangible assets and total liabilities, and dividing by the number of shares of common stock outstanding and assuming the conversion of all of our outstanding
shares of preferred stock into shares of common stock in connection with this offering.
Net tangible book value dilution per share
represents the difference between the amount per share paid by new investors who purchase shares from us in this offering and the as adjusted net tangible book value per share of common stock immediately after completion of this offering. As of
December 31, 2010, after giving effect to this offering, our as adjusted net tangible book value would have been $        million, or $         per share, assuming
that the shares offered under this prospectus are sold at a public offering price of $        per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus.
This represents an immediate increase in net tangible book value of $        per share to existing stockholders, and an immediate dilution in net tangible book value of
$        per share to new investors in the offering. The table below illustrates this per share dilution as of December 31, 2010:
Per Share
Assumed initial public offering price per share
$
Net tangible book value per share of common stock as of December 31, 2010
$
0.08
Increase in net tangible book value per share attributable to new investors
As adjusted net tangible book value per share after this offering
Dilution in net tangible book value per share to new investors
$
A $1.00 increase (decrease) in the assumed public offering price of
$        per share would increase (decrease) our as adjusted net tangible book value per share after this offering by $        , and the dilution to new investors by
$        per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us.
If the underwriters exercise their over-allotment option in full, our as adjusted net
tangible book value will increase to $        per share, representing an increase to existing holders of $        per share, and there will be an immediate dilution of $
        per share to new investors.
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The following table sets forth, on an as adjusted basis as of December 31, 2010, the number of
shares of common stock purchased or to be purchased from us, the total consideration paid or to be paid and the average price per share paid or to be paid by existing holders of common stock and by new investors, at an assumed initial public
offering price of $        per share, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Shares Purchased
Total Consideration
Average
Price
Per
Share
Number
Percent
Amount
Percent
Existing stockholders
17,033,480
%
$
7,071,167
%
$
0.42
New investors
Total
%
$
%
$
The above table excludes:
•
2,293,410 shares of common stock subject to options outstanding as of December 31, 2010 (and 2,210,483 shares of common stock subject to options outstanding
as of February 28, 2011) issued under our 2001 Stock Option/Stock Issuance Plan;
•
2,400,000 shares of common stock reserved for issuance pursuant to our 2011 Equity Incentive Plan and 600,000 shares of common stock reserved for issuance
pursuant to our 2011 Employee Stock Purchase Plan; and
•
shares of common stock issuable upon the exercise of the underwriters'
over-allotment option.
To the extent any of options to purchase shares of common stock are granted or exercised, or
the underwriters' exercise their over-allotment option, there will be further dilution to new investors.
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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth our selected consolidated financial and other data for the years ended December 31, 2006, 2007, 2008, 2009, and
2010. The selected consolidated financial data for the years ended December 31, 2008, 2009, and 2010 were derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated financial data
for the periods ended December 31, 2006 and December 31, 2007 were derived from our audited consolidated financial statements not included in this prospectus. You should read the financial data set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and related notes included elsewhere in this prospectus.
Year Ended December 31,
2006
2007
2008
2009
2010
(in thousands, except per share data)
Consolidated Statements of Operations:
Revenue
$
14,652
$
18,733
$
25,695
$
34,601
$
44,047
Cost of revenue
2,241
3,609
5,812
6,662
8,999
Gross profit
12,411
15,124
19,883
27,939
35,048
Operating expenses:
Sales and marketing
6,087
8,312
9,529
9,794
12,930
Research and development
3,839
5,203
7,797
8,588
11,516
General and administrative
1,242
2,019
2,903
3,573
4,926
Total operating expenses
11,168
15,534
20,229
21,955
29,372
Operating income (loss)
1,243
(410
)
(346
)
5,984
5,676
Other income (expense)
(129
)
18
13
(93
)
366
Income (loss) before income tax
1,114
(392
)
(333
)
5,891
6,042
Provision (benefit) for income tax
565
843
(3,507
)
2,622
2,738
Net income (loss)
$
549
$
(1,235
)
$
3,174
$
3,269
$
3,304
Net income (loss) per share:
Basic
$
0.06
$
(0.12
)
$
0.29
$
0.30
$
0.30
Diluted
$
0.03
$
(0.12
)
$
0.18
$
0.19
$
0.19
Weighted average common shares outstanding:
Basic
9,738
10,480
10,882
10,930
11,016
Diluted
16,606
10,480
17,253
17,237
17,631
Other Consolidated Financial Data (Unaudited):
Non-GAAP net income (loss) (1)
$
938
$
(338
)
$
4,735
$
4,971
$
5,372
As of December 31, 2010
Actual
Pro Forma (2)
Pro Forma As
Adjusted (3)
(unaudited)
(unaudited)
(in thousands)
Balance Sheet Data:
Cash and cash equivalents
$
26,175
$
26,175
$
Working capital
4,646
4,646
Total assets
52,711
52,711
Long-term debt obligations
—
—
—
Redeemable convertible preferred stock
5,996
—
—
Total stockholders' equity
4,871
10,867
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(1)
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. We define non-GAAP net income (loss) as GAAP net
income (loss) plus amortization of intangible assets and stock-based compensation expense, and giving effect to the tax impact of these adjustments to GAAP net income (loss).
We believe that non-GAAP net income (loss) is useful to investors and other users of our financial information in evaluating our operating
performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that:
•
non-GAAP net income (loss) provides investors and other users of our financial information consistency and comparability with our past financial performance,
facilitates period-to-period comparisons of operations, and facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and
•
adding back certain non-cash charges, such as amortization of intangible assets and stock-based compensation expense, to net income is useful because these
non-cash expenses in any specific period may not directly correlate to the underlying performance of our business operations, and these non-cash expenses can vary significantly between periods as a result of full amortization of previously acquired
intangible assets and the timing of new stock-based awards.
Non-GAAP net income (loss) is adjusted by the tax impact
of excluding amortization of intangible assets and stock-based compensation from our GAAP net income (loss) results, using a blended tax rate of 40%. During the periods presented, there was no tax impact from stock-based compensation expense on our
GAAP net income (loss) or our non-GAAP net income (loss) because of the tax attributes of our historical equity awards. However, we expect that in future periods there may be a tax impact depending on the tax attributes of the equity awards we issue
in the future.
We use non-GAAP net income (loss) in conjunction with traditional GAAP measures as part of our overall assessment of our
performance, for planning purposes, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial
performance.
We do not, and you should not, place undue reliance on non-GAAP net income (loss) as our only measure of operating
performance. You should not consider non-GAAP net income (loss) as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies
may calculate these measures differently than we do. We compensate for the inherent limitations associated with using non-GAAP net income (loss) through disclosure of these limitations, presentation of our financial statements in accordance with
GAAP, and reconciliation of non-GAAP net income (loss) to the most directly comparable GAAP measure, net income (loss).
The following
provides a reconciliation of GAAP net income (loss) to non-GAAP net income (loss):
Year Ended December 31,
2006
2007
2008
2009
2010
(in thousands)
GAAP net income (loss)
$
549
$
(1,235
)
$
3,174
$
3,269
$
3,304
Amortization of intangible assets
—
431
1,083
1,470
2,244
Stock-based compensation expense
389
638
911
819
720
Tax impact adjustments
—
(172
)
(433
)
(587
)
(896
)
Non-GAAP net income (loss)
$
938
$
(338
)
$
4,735
$
4,971
$
5,372
(2)
The unaudited pro forma data as of December 31, 2010, assumes the conversion of all of our outstanding shares of preferred stock into shares of common stock upon the closing
of this offering.
(3)
The unaudited pro forma as adjusted data gives effect to the conversion referred to in note 2 above and to the sale of shares of common stock by us in this offering at an assumed
initial offering price to the public at $        per share, which is the midpoint of the range on the cover of this prospectus, after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $        per share would increase (decrease) cash and cash equivalents, working capital, total
assets, and total stockholders' equity by $        million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting
estimated underwriting discounts and commissions and estimated offering expenses payable by us.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with "Selected Consolidated Financial and Other Data" and our consolidated financial
statements and notes thereto appearing elsewhere in this prospectus. This discussion and analysis of our business, financial condition, and results of operations includes forward-looking statements based upon current expectations that involve
substantial risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements for many reasons, including those set forth under the caption "Risk Factors" or in other parts of this
prospectus.
Overview
We are
a leading provider of innovative power analysis and optimization software solutions that enable the design of power-efficient, high-performance, noise-immune integrated circuits, or ICs, and electronic systems. Our solutions consist of a suite of
software tools and methodologies that enable design engineers to reduce power consumption, ensure reliable delivery of power to ICs and electronic system components, and mitigate power-induced signal interference, or noise. We believe our solutions
are critical to the design of our customers' products and allow our customers to deliver power-efficient ICs and electronic systems that are resistant to the impact of noise, or noise-immune, at lower costs and with a faster time to market than
with alternative solutions.
We were founded in 2001 with the vision of solving critical power analysis and optimization challenges
encountered by designers of ICs and electronic systems. Following intensive research and development, we introduced our RedHawk platform in 2002, which we believe was the first dynamic power and noise analysis platform for the design of complex ICs.
Since releasing our RedHawk platform, we have added three new platforms and have continued to expand our suite of solutions, developing several first-to-market products for various aspects of power and noise analysis. We introduced our Sentinel
platform in 2007, our Totem platform in 2009, and our PathFinder product in 2010. In addition, we have expanded our product portfolio through strategic acquisitions. In 2007, we acquired Optimal Corporation, through which we obtained certain
products and technologies used in our Sentinel platform, and in 2009, we acquired the assets and certain foreign subsidiaries of Sequence Design, Inc., through which we obtained our PowerArtist platform.
We depend upon the sales of licenses to a limited number of products for substantially all of our revenue, and expect that a limited number of
products will continue to account for a large percentage of our revenue in the foreseeable future. We currently offer four platforms that focus exclusively on solutions for the design of power-efficient and noise-immune ICs and electronic systems,
and our flagship platform, RedHawk, has accounted and continues to account for a majority of our revenue. Our dependence on RedHawk, and our limited platforms, make us highly susceptible to changes in demand.
We generate substantially all of our revenue through the sale of time-based software licenses, typically ranging from one to three years. Assuming
all other revenue recognition criteria are met, we recognize revenue at the lesser of the pro rata portion of the license fee for the applicable period, or as payments from the customer become due. As of December 31, 2010, the average length of
our time-based licenses was two and one half years.
A significant portion of our revenue depends on sales to a small number of
customers. In 2008, 2009, and 2010, our largest customers, which was a different customer in each year,
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accounted for 8%, 12%, and 11%, respectively, of our revenue, and our ten largest customers accounted for more than 62%, 68%, and 59%, respectively, of our revenue. We expect that we will
continue to depend upon a relatively small number of customers for a substantial portion of our revenue for the foreseeable future.
In
2010, we sold licenses to 125 companies globally and we frequently sell licenses to multiple business units within these companies. Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli.
Our customers also include leading electronic system companies serving market segments such as mobile devices, high-performance computing and networking, consumer electronics, and automotive and medical electronics. These customers include, among
others, ARM Limited, Hynix Semiconductor Inc., Intel Corporation, LSI Corporation, MediaTek Inc., QUALCOMM Incorporated, Samsung Electronics Co., Ltd., Sony Corporation, STMicroelectronics N.V., Texas Instruments Incorporated, and Toshiba
Corporation.
We sell licenses primarily through a direct sales and support organization located in our customers' key
international regions. We intend to continue leveraging our sales force's domain expertise to further penetrate our existing customer base, and sell solutions to our customers' customers. We will also continue to focus on expanding our
customer base.
We conduct our research and development activities primarily through our team of engineers and developers with expertise
and degrees in computer science, semiconductor physics, electrical engineering, and other engineering disciplines. As of December 31, 2010, we had 127 employees engaged in research and development activities. Our research and development
expense was $7.8 million, $8.6 million, and $11.5 million in 2008, 2009, and 2010, respectively, and we plan to continue investing in research and development activities to further enhance our core technologies and expand our product offerings.
Our revenue was $25.7 million, $34.6 million, and $44.0 million in 2008, 2009, and 2010 respectively. In the same periods, we had net
income of $3.2 million, $3.3 million, and $3.3 million, respectively. Also in the same periods, we had non-GAAP net income of $4.7 million, $5.0 million, and $5.4 million, respectively. For a discussion of non-GAAP net income and a reconciliation of
GAAP net income to non-GAAP net income, see note 1 to "Selected Consolidated Financial and Other Data."
We expect that the
demand for our solutions will continue to grow with the proliferation of increasingly complex high-performance mobile devices, miniaturization and increased wireless connectivity of these devices, and the rising costs of electricity for data
centers.
Key Business Indicators
In addition to financial measures set forth in our consolidated financial statements, we monitor our operating performance using the following key
business indicators:
Customer retention
.    Retaining our customers is one of the keys to the success of our
business. One of the primary drivers of our revenue growth is license renewals and increased license purchases by existing customers. We remain actively engaged with our customers throughout their license terms and seek to secure license
renewals and increase the number of licenses our customers purchase significantly in advance of license expiration. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers today.
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Existing customer license growth
.    Increasing license sales to existing
customers is a significant driver of our revenue growth. We often initially sell licenses for a single platform to a single business unit, and then expand the sale of licenses to additional business units and for additional platforms. We monitor and
continuously seek to expand the number of business units to which we sell within each of our customers and the number of licenses and platforms we could potentially sell to them.
Customer base growth.
We view our ability to acquire new customers as an important element of our growth strategy,
and our sales organization expends a considerable portion of its efforts on expanding our customer base. We seek to leverage our brand, technology leadership, and customer support to add new customers and expand our revenue base. We grew our
customer base by over 118% in the last three years, from 53 customers at the beginning of 2008 to 116 customers at the end of 2010.
Non-GAAP net income.
In addition to GAAP financial measures, we also use non-GAAP net income as an important
indicator of our operating performance. We define non-GAAP net income as GAAP net income plus amortization of intangible assets and stock-based compensation expense, and giving effect to the tax impact of these adjustments. We believe that
the use of non-GAAP net income provides useful information to gain an overall understanding of our current financial performance and prospects for the future because it excludes certain non-cash expenses which may not reflect the underlying
performance of our business operations. For a discussion of non-GAAP net income and a reconciliation of GAAP net income to non-GAAP net income, see note 1 to "Selected Consolidated Financial and Other Data."
Acquisitions
Between 2007 and 2010, we
completed two acquisitions for total cash consideration of $12.8 million. These acquisitions have contributed additional product offerings to our existing product line. In November 2007, we acquired all of the outstanding equity of Optimal
Corporation for total cash consideration of $7.5 million. In September 2009, we acquired the assets and certain foreign subsidiaries of Sequence Design, Inc. for total cash consideration of $5.3 million, plus certain assumed liabilities. We
recorded the acquired assets and liabilities for each of these acquisitions at fair value, and recorded the excess of the purchase price over the fair value of the acquired net assets as goodwill. We are amortizing the acquired intangible assets on
a straight-line basis over their estimated useful lives, which range between two to seven years. The amortization expense of the acquired intangible assets from these acquisitions was $1.1 million, $1.5 million, and $2.2 million for 2008, 2009,
and 2010, respectively.
We accounted for each of these acquisitions as a purchase transaction, and therefore our consolidated financial
statements include the results of operations of the acquired companies commencing on their respective acquisition dates. Following each acquisition, we integrated the combined companies by bundling acquired products with our existing products and
cross selling products to our customers and to the customers of the acquired companies. We have sought to reduce the costs associated with the operation of the acquired businesses by consolidating sales and marketing efforts, eliminating redundant
administrative resources, and rationalizing research and development expense. As a result of the foregoing, we have not separately assessed the impact of these acquisitions on our consolidated financial statements.
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Components of Results of Operations
Revenue
We derive substantially all of our revenue from licensing our solutions and generate
substantially all of our sales through our direct sales force. Customers typically purchase our solutions under time-based licenses, or TBLs. A TBL is a license valid for a finite term, generally one to three years, where the license expires at the
end of the term. The software licenses are generally bundled with post-contract customer support, which we refer to as maintenance, for the license term. Assuming all other revenue recognition criteria are met, we recognize revenue at the lesser of
the pro rata portion of the license fee for the applicable period or as the payment from the customer becomes due. See "—Critical Accounting Policies."
Costs and Expenses
Cost of revenue
. Cost of revenue includes costs associated with
licensing our solutions, and consists primarily of employee compensation, benefits, and other employee-related costs for our customer support personnel, as well as the amortization of acquired intangibles, the cost of technical documentation, and
royalty payments to third-party vendors.
Sales and marketing expense.
Sales and marketing expense consists primarily of
compensation, commissions, benefits, and other employee-related costs for sales and marketing personnel, as well as expenses related to trade shows, promotion, travel, and allocated facilities costs. We expect our sales and marketing expense to
increase as we intend to hire additional sales and support personnel for our global sales and support organization, particularly in the Asia Pacific region.
Research and development expense.
Research and development expense consists primarily of compensation, benefits, and other employee-related costs for our engineers engaged in product design and development,
as well as allocated facilities costs. We expect to continue to incur significant research and development expense.
General and
administrative expense.
General and administrative expense consists primarily of compensation, benefits, and other employee-related costs for executive management, finance, human resources, and other administrative personnel, including
third-party professional fees, and allocated facilities costs. We anticipate that in 2011, general and administrative expense will increase significantly as we incur the costs associated with becoming a public company, including related personnel
increases, third-party professional services fees, director compensation increases due to our larger board of directors, directors and officers liability insurance, and investor relations.
Other income (expense).
Other income (expense) consists primarily of interest income (expense), foreign currency gains (losses), and other
miscellaneous items.
Provision (benefit) for income taxes.
Provision (benefit) for income taxes is comprised of U.S. federal,
state, and foreign taxes. Our effective tax rate has varied and may continue varying year-to-year based on numerous factors, including our overall profitability, the geographical mix of income before taxes, the related tax rates in the jurisdictions
where we operate and withholding taxes, and changes in valuation allowances, as well as discrete events.
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Results of Operations
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
The following
tables set forth our results of operations for the years ended December 31, 2009 and December 31, 2010:
Year Ended
December 31,
Year Ended
December 31,
2009
2010
$ Change
% Change
2009
2010
(in thousands)
(percentage of revenue)
Revenue
$
34,601
$
44,047
$
9,446
27
%
100
%
100
%
Cost of revenue
6,662
8,999
2,337
35
19
20
Gross profit
27,939
35,048
7,109
25
81
80
Operating expenses:
Sales and marketing
9,794
12,930
3,136
32
29
30
Research and development
8,588
11,516
2,928
34
25
26
General and administrative
3,573
4,926
1,353
38
10
11
Total operating expenses
21,955
29,372
7,417
34
64
67
Operating income
5,984
5,676
(308
)
(5
)
17
13
Other income (expense)
(93
)
366
459
N/A
—
1
Income before income tax
5,891
6,042
151
3
17
14
Provision for income tax
2,622
2,738
116
4
8
6
Net income
$
3,269
$
3,304
$
35
1
%
9
%
8
%
Revenue
.    Revenue increased $9.4 million, or 27%, from $34.6 million in 2009 to $44.0
million in 2010. The increase was due to increased sales of licenses to our products to existing customers and new customers, and includes the contribution of the Sequence acquisition.
We market our products in four geographic regions: United States; Europe; the Middle East and Africa, or EMEA; Asia Pacific, excluding Japan; and
Japan. Revenue based on the regions to which we shipped our products was as follows:
Year Ended December 31,
Percentage of revenue
2009
2010
Percentage
Change
United States
60
%
57
%
(3
)%
Europe, Middle East and Africa
15
15
—
Asia Pacific, excluding Japan
15
14
(1
)
Japan
10
14
4
Revenue
100
%
100
%
Our percentage of revenue by geography was relatively stable in 2010 compared to 2009, with the exception of
growth in Japan, which was primarily due to increased sales of licenses to existing customers. The modest decrease in the percentage of revenue from the United States in 2010 was due to sales in other geographies growing more quickly than in the
United States.
Cost of revenue
.    Cost of revenue increased $2.3 million, or 35%, from $6.7 million in 2009
to $9.0 million in 2010. Cost of revenue increased primarily due to increased employee-related costs of $1.4 million related to increased headcount required to service our growing customer
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base and additional headcount from the Sequence acquisition, increases in amortization of acquired intangible assets of $0.7 million, and royalty payments to third-party vendors of $0.2 million
related to the Sequence acquisition. As a percentage of revenue, cost of revenue increased slightly, from 19% in 2009 to 20% in 2010.
Sales and marketing expense
.    Sales and marketing expense increased $3.1 million, or 32%, from $9.8 million in 2009 to
$12.9 million in 2010. Sales and marketing expense increased primarily due to increased employee-related costs of $2.5 million resulting from increased commissions and additional headcount, including from the Sequence acquisition, and increased
travel-related expense of $0.3 million. As a percentage of revenue, sales and marketing expense increased slightly, from 29% in 2009 to 30% in 2010.
Research and development expense
.    Research and development expense increased $2.9 million, or 34%, from $8.6 million in 2009 to $11.5 million in 2010. Research and development expense
increased primarily due to increased employee-related costs of $2.8 million related to additional headcount, including from the Sequence acquisition. As a percentage of revenue, research and development expense increased slightly, from 25% in 2009
to 26% in 2010.
General and administrative expense
.    General and administrative expense increased $1.3
million, or 38%, from $3.6 million in 2009 to $4.9 million in 2010. General and administrative expense increased primarily due to increased employee-related costs of $0.9 million, including additional headcount from the Sequence acquisition, and
increased third-party professional service fees of $0.4 million. As a percentage of revenue, general and administrative expense increased slightly from 10% in 2009 to 11% in 2010.
Other income (expense)
.    Other income (expense) increased $0.5 million, from an expense of $0.1 million in 2009 to
income of $0.4 million in 2010. The increase was primarily attributable to foreign currency exchange gains and interest income.
Provision for income taxes
.    Provision for income taxes increased $0.1 million, from $2.6 million in 2009 to $2.7
million in 2010. Our effective tax rate was 45% in each of 2009 and 2010.
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Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
The following tables set forth the results of operations for the years ended December 31, 2009 and December 31, 2008:
Year Ended
December 31,
Year Ended
December 31,
2008
2009
$ Change
% Change
2008
2009
(in thousands)
(percentage of revenue)
Revenue
$
25,695
$
34,601
$
8,906
35
%
100
%
100
%
Cost of revenue
5,812
6,662
850
15
23
19
Gross profit
19,883
27,939
8,056
41
77
81
Operating expenses:
Sales and marketing
9,529
9,794
265
3
37
29
Research and development
7,797
8,588
791
10
30
25
General and administrative
2,903
3,573
670
23
11
10
Total operating expenses
20,229
21,955
1,726
9
78
64
Operating income (loss)
(346
)
5,984
6,330
N/A
(1
)
17
Other income (expense)
13
(93
)
(106
)
N/A
—
—
Income (loss) before income tax
(333
)
5,891
6,224
N/A
(1
)
17
Provision (benefit) for income tax
(3,507
)
2,622
6,129
N/A
(13
)
8
Net income
$
3,174
$
3,269
$
95
3
%
12
%
9
%
Revenue
.    Revenue increased $8.9 million, or 35%, from $25.7 million in 2008 to $34.6
million in 2009. The increase was primarily due to growth from sales of licenses to an expanding customer base and increased use of our platforms by existing customers, as well as the impact of a partial year of financial contribution from the
Sequence acquisition.
Revenue based on the regions to which we shipped our products was as follows:
Year Ended
December 31,
Percentage of revenue
2008
2009
Percentage
Change
United States
60
%
60
%
—
%
Europe, Middle East and Africa
13
15
2
Asia Pacific, excluding Japan
13
15
2
Japan
14
10
(4
)
Revenue
100
%
100
%
Our percentage of revenue by geography was relatively stable in 2009 compared to 2008, other than Japan,
which decreased four percent in 2009 as a percentage of total revenue, primarily due to revenue from other geographies growing more quickly.
Cost of revenue
.    Cost of revenue increased $0.9 million, or 15%, from $5.8 million in 2008 to $6.7 million in 2009. Cost of revenue increased in absolute dollars primarily due to the
amortization of intangible assets of $0.4 million, and $0.3 million of additional headcount from the Sequence acquisition. As a percentage of revenue, costs of revenue decreased from 23% in 2008 to 19% in 2009, primarily due to lower growth in
customer support personnel expense relative to revenue growth.
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Sales and marketing expense
.    Sales and marketing expense increased $0.3
million, or 3%, from $9.5 million in 2008 to $9.8 million in 2009. Sales and marketing expense increased in absolute dollars primarily due to additional headcount from the Sequence acquisition. As a percentage of revenue, sales and marketing expense
decreased from 37% in 2008 to 29% in 2009, primarily due to lower growth in customer support and sales and marketing personnel expense relative to revenue growth.
Research and development expense
. Research and development expense increased $0.8 million, or 10%, from $7.8 million in 2008 to $8.6 million in 2009. Research and development expense increased in absolute
dollars primarily due to increased additional headcount from the Sequence acquisition. As a percentage of revenue, research and development expense decreased from 30% in 2008 to 25% in 2009, primarily due to lower growth in research and development
personnel expense relative to revenue growth.
General and administrative expense
.    General and
administrative expense increased $0.7 million, or 23%, from $2.9 million in 2008 to $3.6 million in 2009. General and administrative expense increased in absolute dollars primarily due to increased third-party professional fees of $0.4 million. As a
percentage of revenue, general and administrative expense decreased from 11% in 2008 to 10% in 2009.
Other income
(expense)
.    Other income (expense) remained relatively flat from 2008 to 2009.
Provision (benefit) for
income taxes
.    Provision (benefit) for income taxes went from a benefit of $3.5 million in 2008 to an expense of $2.6 million in 2009. The increase in income taxes was primarily attributable to our conclusion in 2008 that
it was more likely than not that substantially all of our deferred tax assets, except certain foreign tax credits, will be realized and as a result, a valuation allowance of $4.6 million was released during 2008, of which $4.1 million was recorded
as a deferred tax benefit, and $0.5 million was recorded as a goodwill adjustment.
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Quarterly Results (Unaudited)
The following table presents our unaudited quarterly consolidated statement of operations data for the eight quarters ended December 31, 2010. We have prepared our unaudited quarterly financial information on
a consistent basis with our audited consolidated financial statements included in this prospectus, and the financial information reflects all normal, recurring adjustments that we consider necessary for a fair statement of such information in
accordance with GAAP for the quarters presented. The results for any quarter are not necessarily indicative of future results.
Three Months Ended
Mar. 31,
2009
June 30,
2009
Sept. 30,
2009
Dec. 31,
2009
Mar. 31,
2010
June 30,
2010
Sept. 30,
2010
Dec. 31,
2010
(in thousands)
Revenue
$
8,106
$
8,880
$
8,439
$
9,176
$
10,417
$
10,723
$
10,747
$
12,160
Cost of revenue
1,502
1,541
1,620
1,999
2,099
2,200
2,305
2,395
Gross profit
6,604
7,339
6,819
7,177
8,318
8,523
8,442
9,765
Operating expenses
Sales and marketing
2,042
1,915
2,357
3,480
2,827
3,040
2,941
4,122
Research and development
2,031
1,954
2,058
2,545
2,688
2,798
2,972
3,058
General and administrative
603
783
983
1,204
962
979
1,510
1,475
Total operating expenses
4,676
4,652
5,398
7,229
6,477
6,817
7,423
8,655
Operating income (loss)
1,928
2,687
1,421
(52
)
1,841
1,706
1,019
1,110
Other income (expense)
(70
)
(50
)
(58
)
85
(18
)
65
318
1
Income before income tax
1,858
2,637
1,363
33
1,823
1,771
1,337
1,111
Provision for income tax
390
1,309
676
247
862
831
684
361
Net income (loss)
$
1,468
$
1,328
$
687
$
(214
)
$
961
$
940
$
653
$
750
Revenue.
Historically, our revenue has fluctuated quarter-to-quarter due to the timing
of new customer acquisitions, existing customer renewals, and the related timing of delivery of licenses to our customers, which impacts when we can begin to recognize revenue in accordance with our revenue recognition policies. License delivery
timing has primarily been impacted by our customers' project schedules and the timing of new and enhanced product releases by us. To date, we have not experienced any significant impact on our results of operations due to seasonality. See
"Risk Factors—Risks Related to Our Business—Our operating results have fluctuated from quarter-to-quarter and may continue doing so, which may cause our business and operating results to be materially and adversely affected and the
market price of our common stock to decline or be volatile."
Cost of revenue.
Our cost of revenue
has increased relatively steadily over the eight quarters reported above due to increasing employee-related expenses for increased headcount of customer support personnel and the amortization of acquired intangible assets. The increase in cost of
revenue in the fourth quarter of 2009 was primarily due to the amortization of acquired intangible assets related to the Sequence acquisition in September 2009.
Sales and marketing expense.
Our sales and marketing expense has fluctuated quarter-to-quarter primarily due to marketing tradeshow expense and commission expense for our sales and
support team. Our commission program is tiered such that achievement of certain sales thresholds during the year increases sales commission rates. As a result, our sales and marketing expense increased in the fourth quarters of 2009 and 2010
primarily due to higher
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commission expenses that were the result of members of our sales and support team exceeding their sales targets and reaching higher commission tiers.
General and administrative expense
.    Our general and administrative expense has typically increased over the last
eight quarters as we have grown our business. We experienced a larger than usual increase in our general and administrative expense during the third quarter of 2009 due primarily to the third-party professional services fees related to our
acquisition of Sequence. Our general and administrative expense increased significantly in the third quarter and fourth quarter of 2010 primarily due to an increase in third-party professional services fees.
Net income (loss)
.    Our net income (loss) has fluctuated over the eight quarters reported above primarily as a result
of the factors described above.
Liquidity and Capital Resources
Our short-term and long-term liquidity requirements primarily arise from working capital requirements and capital expenditures, as well as acquisitions from time to time.
We believe that our cash on hand and anticipated cash flows from operations will provide sufficient liquidity to fund our current obligations,
projected working capital requirements, and capital spending in the ordinary course of business for at least the next 12 months.
In
summary, our cash flows were as follows:
December 31,
2008
December 31,
2009
Change
December 31,
2010
Change
(in thousands)
Net cash provided by operating activities
$
9,225
$
9,248
$
23
$
10,996
$
1,748
Net cash provided by (used in) investing activities
(3,751
)
953
4,704
(1,339
)
(2,292
)
Net cash provided by (used in) financing activities
49
(1,925
)
(1,974
)
(439
)
1,486
Net increase in cash and cash equivalents
$
5,523
$
8,276
$
2,753
$
9,218
$
942
Cash Flows for the Years Ended December 31, 2008, 2009, and 2010
Operating Activities
Net
cash provided by operating activities increased by $1.7 million in 2010 compared to 2009 primarily due to a decrease in accounts receivable of $4.7 million and an increase in amortization and depreciation expense of $0.5 million, partially offset by
an increase in deferred revenue of $2.3 million and a decrease in deferred tax assets of $0.9 million. Net cash provided by operating activities increased slightly in 2009 compared to 2008.
Investing Activities
Investing activities primarily include cash paid for acquisitions and cash invested in or proceeds from the sale of short-term investments. Net cash
provided by (used in) investing activities was $(3.8) million, $1.0 million, and $(1.3) million in 2008, 2009, and 2010, respectively. Net cash paid for short-term investments accounted for $3.4 million and $1.1 million in 2008 and
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2010, respectively. Cash paid for the Sequence acquisition accounted for $4.3 million of cash used for investing activities in 2009, offset by $6.0 million in net proceeds from short-term
investments.
Financing Activities
Cash provided by (used in) financing activities consists of net proceeds from common stock purchases from option exercises and installment payments related to acquisitions. Net cash provided by (used in) financing
activities was $49 thousand, $(1.9) million, and $(0.4) million in 2008, 2009, and 2010, respectively. Cash paid for purchase price holdbacks for the Sequence and Optimal acquisitions accounted for $2.0 million and $0.5 million in 2009 and 2010,
respectively. No installment payments for acquisitions were made in 2008.
Indebtedness
We had no long-term indebtedness in 2008, 2009, or 2010. We do not maintain any lines of credit. See "Risk Factors—Risks Related to Our
Business—Future capital needs may require us to seek debt financing or additional equity funding that, if not available on acceptable terms or at all, could cause our financial condition to deteriorate and materially harm our business."
Contractual Commitments
Our
cash flows from operations depend on several factors, including fluctuations in our operating results, accounts receivable collections, and the timing of payments. As a result, the impact of contractual obligations on our liquidity and capital
resources in future periods should be analyzed in conjunction with such factors.
The following table sets forth our contractual
commitments as of December 31, 2010, for the periods noted:
Total
2011
2012-
2013
2014-
2015
Thereafter
(in thousands)
Operating leases (1)
$
980
$
780
$
200
$
—
$
—
Capital leases
64
56
8
—
—
Royalty and license payment
653
653
—
—
—
Long-term accrued income taxes (2)
6,713
—
—
—
—
Total
$
8,410
$
1,489
$
208
$
—
$
—
(1)
The lease for our corporate headquarters expires on October 31, 2011. We expect that our operating lease commitments will increase once we either renew or expand the lease
for our current headquarters or enter into a lease for new headquarters.
(2)
Long-term accrued income taxes represent unrecognized tax benefits as of December 31, 2010. Currently, a reasonably reliable estimate of timing of payments in individual
years beyond fiscal 2011 cannot be made due to uncertainties in the timing of the commencement and settlement of potential audits.
Off-Balance Sheet Arrangements
We had no
off-balance sheet arrangements at December 31, 2010, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the Securities and Exchange Commission. We do not have any relationships with unconsolidated entities or financial
partners, such as entities often referred to as structured finance or special purpose entities. In addition, we have not entered into any synthetic leases.
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Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an ongoing basis, including those related
to our revenue, income taxes, asset impairments, and stock-based compensation. We base our estimates on experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates. Different assumptions or judgments, and the resulting estimates, would likely affect our consolidated financial statements.
We believe the following critical accounting policies are the most significant to the presentation of our consolidated financial
statements and require difficult, subjective, and complex judgments.
Revenue recognition
We license our software products and solutions primarily under time-based licenses, or TBL, agreements. A TBL is a license valid for a finite term,
generally one to three years, in which the license expires at the end of the term. The software licenses are generally bundled with post-contract customer support (maintenance) for the license term.
We recognize revenue when: (1) persuasive evidence of an arrangement exists, (2) delivery of software or services has occurred,
(3) the fee for such software or services is fixed or determinable, and (4) collectability of the full license or service fee is probable. We apply these revenue recognition criteria as follows:
•
Persuasive evidence of an arrangement exists
.    Prior to recognizing revenue on an arrangement, our customary policy is to have a
purchase order from customers that have previously negotiated a master end user license arrangement or purchase agreement, signed by both the customer and us.
•
Delivery has occurred
.    We deliver our products to our customers electronically, and the delivery occurs when we provide the
customer access codes, or "license keys," that allows the customer to access a fully functioning version of the software product.
Certain of our license agreements provide our customers the right to adjust their licenses to cover other specified software. Because these agreements provide access to a specified set of software products, we do
not consider delivery to have occurred until access to at least one copy of each of the products specified in the agreement has been granted to the customer. We will begin to recognize revenue ratably over the remaining license term once delivery of
all software products covered by a license agreement occurs. Differences in the timing of delivery of software licenses and the start of license terms have caused period-to-period fluctuations in our revenue and are expected to continue to do so.
•
Fee is fixed or determinable.
Our determination of whether an arrangement fee is fixed or determinable depends principally on the
arrangement's payment terms. For customers where payments are weighted toward the latter part of the contract term, we recognize revenue that represents the lesser of the fee that is due and payable, or the portion of the entire fee that would
be recognized under a straight line method over the term of the license.
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•
Collectability is probable.
We judge collectability of the arrangement fee on a customer by customer basis pursuant to our credit
review policy. When we acquire a new customer, we evaluate the customer's financial position and ability to pay prior to selling a TBL to that customer. We generally only sell additional licenses to, or enter into license renewals with,
existing customers with which we have a history of successful collection.
We have analyzed all of the elements
included in our multiple element software arrangements and determined that as of December 31, 2008, 2009, and 2010, we did not have sufficient vendor specific objective evidence to allocate revenue to the maintenance components, as all current
license arrangements come packaged with a combination of a term-based license and maintenance. Accordingly, assuming all other revenue recognition criteria are met, we recognize revenue ratably over the license term or as customer installments
become due and payable, whichever is later.
We classify deferred revenue on our consolidated balance sheet as current and long term
deferred revenue based upon whether we expect to recognize the revenue within the next 12 months or after the next 12 months.
Stock-based compensation
In
connection with the grant of stock options to employees, we recorded stock-based compensation using the grant date fair value determined by the Black-Scholes-Merton option pricing model. Using the Black-Scholes-Merton option pricing model, we valued
stock options taking into account the stock price at the grant date, exercise price, expected life of the option, expected dividend, and the risk free interest rate over the expected life of the option.
Option-pricing models require the input of highly subjective assumptions, including the option's expected life and the price volatility of the
underlying stock. We estimated volatility by reference to the volatilities of comparable public companies. Judgment is also required in estimating the expected term of options and the number of stock-based awards that are expected to be forfeited.
For stock-based compensation, the fair value of the stock is a significant factor in determining the amount of stock-based compensation expense. Prior to this offering, our shares have not been publicly traded and the fair value of our common stock
has been determined by our board of directors. In determining the fair value of our common stock, our board of directors considers a number of factors, including:
•
contemporaneous studies of our common stock value performed by valuation specialists commencing in December 2006;
•
key milestones achieved in our business, including forecasted revenue, expense and cash flows, product development, and market acceptance; and
•
comparable company trading multiples.
Our board of directors also considered a variety of other factors including the book value per share of our outstanding capital stock, the price at which shares of our outstanding capital stock had previously been
issued by us, the liquidation rights and other preferences to which the holders of those shares were entitled, the liquidation rights and other preferences which we may be required to grant to subsequent purchasers of one or more series of our
preferred stock, the lack of marketability of our common stock, our industry revenue multiplier, the value of our assets, our actual and potential future cash flows, risk factors impacting us, exit alternatives and valuations for companies in our
industry, values of similar entities in the industry, our results of operations and the potential for success of our competitors in the market and the competitive landscape.
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Determining the fair value of our stock requires making complex and subjective judgments and
estimates. There is inherent uncertainty in making these judgments and estimates. Our board of directors reviewed external studies of our common stock value prepared in accordance with applicable elements of the practice aid issued by the American
Institute of Certified Public Accountants entitled
Valuation of Privately Held Company Equity Securities Issued as Compensation
, primarily using a probability weighted expected return method which derives the per share value of common stock
under four future outcomes. The enterprise fair values under the various scenarios rely on both an income approach and a market multiple approach.
The income approach involves applying appropriate discount rates to estimated cash flows that are based on forecasts of our revenue and costs. The projections used for each valuation date were based on our expected
operating performance through the forecast periods. The assumptions underlying the estimates were consistent with our business plan. The future cash flows were determined by subtracting taxes, future capital spending and future changes in working
capital and adding future depreciation and amortization to earnings before interest and taxes. The interim cash flows and resulting terminal value were then discounted at a rate based on the weighted average cost of capital of comparable companies,
as adjusted for our specific risk profile.
The market multiple approach was based on our historical and projected revenue, projected
earnings over a particular period, which amounts were multiplied by a range of appropriate risk-adjusted multiples. The market multiples were obtained through the market comparison method, where companies having their stock traded in the public
market were selected for comparison purposes and used as a basis for choosing reasonable market multiples for us. Revenue and earnings multiples were derived from publicly traded companies deemed to be comparable to us.
After estimating our value based on the income and market approaches, the external studies of our common stock value then utilized a
probability-weighted expected return method. Under the probability-weighted expected return method, the value of our common stock on a per share basis was estimated based upon an analysis of values for us assuming various outcomes, such as an
initial public offering, merger or sale, liquidation or remaining private, and the estimated probability of each outcome on a per share basis. There is inherent uncertainty in these estimates. If different assumptions and estimates had been used,
the valuations would have been different.
Since the beginning of 2009, we granted options to purchase shares of our common stock as
follows:
Date of Grant
Number of
Shares
Exercise Price
and Estimated
Fair Value
February 26, 2009
36,000
$
1.75
May 18, 2009
15,500
1.75
August 26, 2009
35,050
1.75
December 2, 2009
346,200
2.25
January 27, 2010
14,800
2.25
April 8, 2010
123,300
2.25
August 23, 2010
222,000
3.55
November 16, 2010
58,300
4.55
February 3, 2011
88,875
5.35
March 7, 2011
938,300
6.80
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Our board of directors was regularly apprised that each valuation was being conducted, and considered
the relevant objective and subjective factors deemed important by our board of directors in each valuation conducted. Our board of directors determined that the assumptions and inputs used in connection with these valuations reflected our board of
directors' best estimate of our business condition, operating performance, and prospects at each valuation date. The deemed fair value per common share underlying our stock option grants was determined by our board of directors with input from
management at each grant date.
On February 26, 2009, May 18, 2009, and August 26, 2009, we granted options to
purchase an aggregate of 86,550 shares of our common stock with an exercise price of $1.75 per share. The fair value of our common stock was determined by our board of directors to be $1.75 per share based in part on an external study of our common
stock value as of October 31, 2008, and on certain of the factors set forth above.
On December 2, 2009, January 27,
2010, and April 8, 2010, we granted options to purchase an aggregate of 484,300 shares of our common stock with an exercise price of $2.25 per share. The fair value of our common stock was determined by our board of directors to be $2.25 per
share based in part on an external study of our common stock value as of September 4, 2009, and on certain of the factors set forth above. The increase in fair value from $1.75 per share in the October 31, 2008 valuation to $2.25 per share
in the September 4, 2009 valuation was primarily the result of achieving our projected revenue growth, an increase in our revenue projections, as well as the following events during the intervening period:
•
we introduced two new RedHawk products. We also announced another new product, Sentinel-PI, which received the "Best New Product" award at the Design
Automation Conference;
•
we secured significant new customers; and
•
we completed our acquisition of the assets and certain foreign subsidiaries of Sequence Design in September 2009 to expand our business into the register
transfer level design-for-power solutions, secure broader customer reach, and secure a capable employee base as well as potential valuable synergies.
On August 23, 2010, we granted options to purchase an aggregate of 222,000 shares of our common stock with an exercise price of $3.55 per share. The fair value of our common stock was determined by our board
of directors to be $3.55 per share, based in part on an external study of our common stock value as of June 30, 2010, and on certain of the factors set forth above. The increase in fair value from $2.25 per share in the September 4, 2009
valuation to $3.55 per share in the September 30, 2010 valuation was primarily the result of increased revenue, as well as the introduction of several new products, including PowerArtist, PathFinder, and a new substrate analysis capability
option for the Totem platform.
On November 16, 2010, we granted options to purchase an aggregate of 58,300 shares of our common
stock with an exercise price of $4.55 per share. The fair value of our common stock was determined by our board of directors to be $4.55 per share based in part on an external study of our common stock value as of September 30, 2010, and on
certain of the factors set forth above. The increase in fair value from $3.55 per share in the June 30, 2010 valuation to $4.55 per share in the September 30, 2010 valuation was primarily the result of continued strong financial
performance as well as our contemplating the possibility of an initial public offering of our common stock.
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On February 3, 2011, we granted options to purchase an aggregate of 88,875 shares of our common
stock with an exercise price of $5.35 per share. The fair value of our common stock was determined by our board of directors to be $5.35 per share based in part on an external study of our common stock value as of December 31, 2010, and on
certain of the factors set forth above. The increase in fair value from $4.55 per share in the September 30, 2010 valuation to $5.35 per share in the December 31, 2010 valuation was primarily the result of the following events during the
intervening period:
•
we released an enhanced application, RedHawk 10.2;
•
we experienced positive results with respect to our research and development testing; and
•
our estimate that the possibility an initial public offering of our common stock had become more likely.
On March 7, 2011, we granted options to purchase an aggregate of 938,300 shares of our common stock with an exercise price of $6.80 per share.
The fair value of our common stock was determined by our board of directors to be $6.80 per share based in part on an external study of our common stock value as of February 28, 2011, and on certain of the factors set forth above. The increase
in fair value from $5.35 per share in the December 31, 2010 valuation to $6.80 per share in the February 28, 2011 valuation was primarily the result of the following events during the intervening period:
•
the market for our RedHawk 10.2 product continued to develop;
•
we achieved research and development milestones;
•
we continued our efforts toward completing an initial public offering.
The following table presents the intrinsic value of all options outstanding
at                    , 2011, based on the assumed initial public offering price of $        per share, the
midpoint of the estimated offering range set forth on the cover page of this prospectus.
Number of Options
Outstanding
Intrinsic
Value
Vested options
$
Unvested options
Total
In addition to the estimates for the value of our common stock price discussed above, the following are additional key
assumptions used to determine the fair value of options granted using the Black-Scholes-Merton option pricing model:
Expected stock
price volatility
.    The computation of expected volatility is based on the volatility of comparable companies from a representative peer group based on industry and market capitalization data.
Expected term of option
.    The expected term represents the period that stock-based awards are expected to be
outstanding, giving consideration to the contractual terms of the stock-based awards, vesting schedules, and expectations of future employee behavior as influenced by changes to the terms of our stock-based awards. We determined the expected term in
accordance with the "simplified method" for a "plain vanilla" employee stock option for which the value was estimated using a Black-Scholes-Merton formula. Under this approach, the expected term would be presumed to be the
midpoint between the vesting date and the end of
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the contractual term. The use of this approach was permitted as we did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the
fact that our equity shares have not been publicly traded.
Expected dividend yield
.    The dividend yield
assumption is based on our history and expectation of dividend payouts. We use a dividend yield of zero, as we have never paid cash dividends and do not expect to pay cash dividends in the future.
Expected risk free interest rate
.    The risk-free interest rate is based on the U.S. Treasury yield curve in effect at
the time of grant for the expected term of the option.
Forfeiture rate
.    The forfeiture rate is based on a
review of recent forfeiture activity and expected future employee turnover.
Income Taxes
We provide for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities for future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. We measure deferred tax assets and liabilities
using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We recognize the effect on deferred tax assets and liabilities of a change in tax rates as
income in the period that includes the enactment date. We provide a valuation allowance to reduce deferred tax assets to the amount of future tax benefits that we are more likely than not to realize.
We recognize the effect of income tax positions only if those positions are more likely than not to be sustained. We measure recognized income
tax positions at the largest amount that is greater than 50% likelihood of being sustained. We reflect changes in recognition or measurement in the period in which the change in judgment occurs.
The calculation of tax liabilities involves the inherent uncertainties associated with the application of complex tax laws. We are also
subject to examination by various taxing authorities. We believe we have adequately provided in our financial statements for potential additional taxes related to unrecognized tax benefits. If we ultimately determine that these amounts are
not owed, we would reverse the liability and recognize the tax benefit in the period in which we determine that the liability is no longer necessary. If an ultimate tax assessment exceeds our estimate of tax liabilities, we would record an
additional charge to income.
Our assumptions, judgments, and estimates relative to the current provision for income taxes take into
account current tax laws, our interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We have established reserves for income taxes to address potential exposures
involving tax positions that could be challenged by tax authorities. Although we believe our assumptions, judgments, and estimates are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of the current and any future
tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements.
Our assumptions,
judgments, and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category of future taxable income, such as foreign source income. Specifically, during the year ended December 31, 2008,
based on our historical taxable income and projections for future taxable income over the periods for which the deferred
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tax assets are deductible, we believed that it was more likely than not that that all of our deferred tax assets except certain foreign tax credits and acquired net operating losses subject to
limitations will be realized and as a result, valuation allowance of $4.6 million was released during the year, of which $4.1 million was recorded as deferred tax benefit, and $0.5 million was recorded as goodwill adjustment. Actual operating
results and the underlying amount and category of income in future years could render our current assumptions, judgments, and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments, and estimates mentioned above
could cause our actual income tax obligations to differ from our estimates, thus materially impacting our business, financial condition, and operating results.
Goodwill and Intangible Assets
Goodwill represents the excess of the aggregate purchase price
over the fair value of the tangible and identifiable intangible assets we acquire. We test the carrying amount of goodwill for impairment annually or more frequently if facts and circumstances warrant a review. A two-step evaluation process is
conducted to assess whether an impairment charge related to goodwill is required. First, we compare the fair value of each reporting unit to its carrying value. If the fair value equals or exceeds the carrying value, we do not consider goodwill
impaired, and we do not proceed to the second step. If the carrying value of any reporting unit exceeds its fair value, then we must determine the implied fair value of the reporting unit's goodwill and compare this to the carrying value of its
goodwill and other intangible assets. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, we record an impairment charge equal to the difference. In 2008, 2009, and 2010, we operated as one reporting unit and
there were no impairments to goodwill. The fair value of our reporting unit exceeded the carrying value by a significant amount.
Intangible assets consist of purchased technology, patent, customer relationships, and contract backlog. We amortize intangible assets on a
straight line basis over their estimated useful lives, which range from two to seven years.
Recent Accounting Pronouncements
In October 2009, the FASB issued new standards for revenue recognition with multiple deliverables. These new standards impact the determination of
when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting for non-software transactions. Additionally, these new standards modify the manner in which the transaction consideration is
allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. These new standards are required to be adopted in the first quarter of 2011. We will adopt the guidance on a
prospective basis effective the first quarter of fiscal 2011. We do not believe the adoption of the guidance will have a material impact on our consolidated financial statements.
In October 2009, the FASB issued new standards for the accounting for certain revenue arrangements that include software elements. These new
standards amend the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. These new standards are required to be adopted in
the first quarter of 2011. We will adopt the guidance on a prospective basis effective the first quarter of fiscal 2011. We do not believe the adoption of the guidance will have a material impact on our consolidated financial statements.
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Quantitative and Qualitative Disclosures About Market Risk
Currency Exchange Rates
Although a majority of our revenue and operating expenses is denominated in U.S. dollars, and we prepare our financial statements in U.S. dollars in
accordance with GAAP, a portion of our revenue and operating expenses is in foreign currencies. Our revenue, costs, expenses and monetary assets and liabilities are exposed to changes in currency exchange rates as a result of our global operating
and financing activities, none of which is currently material. Although we have not previously done so, to mitigate the exposures resulting from the changes in the exchange rates of foreign currencies, we may enter into foreign exchange forward
contracts.
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BUSINESS
Overview
We are a leading provider of innovative power analysis and optimization software
solutions that enable the design of power-efficient, high-performance, noise-immune integrated circuits, or ICs, and electronic systems. Our solutions consist of a suite of software tools and methodologies that enable design engineers to reduce
power consumption, ensure reliable delivery of power to ICs and electronic system components, and mitigate power-induced signal interference, or noise. We believe our solutions are critical to the design of our customers' products and allow our
customers to deliver power-efficient ICs and electronic systems that are resistant to the impact of noise, or noise-immune, at lower costs and with a faster time to market than with alternative solutions.
The demand for more power-efficient and noise-immune ICs and electronic systems is being driven primarily by the proliferation of high-performance
mobile devices, miniaturization of these devices, and the rising costs of electricity for data centers. Developing these ICs and electronic systems, however, is increasingly difficult due to industry trends including growing design complexity,
smaller geometries for ICs, and the increased integration of various components of an electronic system onto a single IC.
Our singular
focus on power analysis and optimization, backed by our more than ten years of research and development exclusively dedicated to these areas, strongly positions us to address these market trends and design challenges. We have introduced several
products that have been first to market in various aspects of power and noise analysis. Our products address power and noise challenges throughout various phases of the IC and electronic system design process, from initial prototyping to design
completion. The accuracy, efficiency, capacity, and comprehensiveness of our solutions provide engineers with the confidence in their analyses to progress a design to the next phase in the process, which is known as sign-off. Highly accurate and
reliable sign-off solutions are critical to engineers due to the costly and highly visible consequences of design flaws that can lead to product failures and recalls. We believe that our RedHawk platform is the sign-off solution of choice for the
analysis of reliable delivery of power to ICs.
In 2010, we sold licenses to 125 companies globally and we frequently sell licenses to
multiple business units within these companies. Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli. Our customers also include leading electronic system companies serving market
segments such as mobile devices, high-performance computing and networking, consumer electronics, and automotive and medical electronics. These customers include, among others, ARM Limited, Hynix Semiconductor Inc., Intel Corporation, LSI
Corporation, MediaTek, Inc., QUALCOMM Incorporated, Samsung Electronics Co., Ltd., Sony Corporation, STMicroelectronics N.V., Texas Instruments Incorporated, and Toshiba Corporation.
We sell licenses primarily through a direct sales and support organization located in our customers' key domestic and international regions.
Our global support organization is comprised of application engineers who are specialists in power-efficient and noise-immune design and analysis methodologies. We view our support team as a competitive differentiator that, along with the compelling
value delivered by our products, has driven our high software license renewal rate. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers today.
We generate substantially all of our revenue through the sale of time-based software licenses, typically ranging from one to three years. As of December 31, 2010, the average length
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of our time-based licenses was two and one half years. Our revenue was $25.7 million, $34.6 million, and $44.0 million in 2008, 2009, and 2010, respectively, and we were profitable in each of
these years.
Our Industry
Design engineers use a variety of software tools for the development of power-efficient and noise-immune ICs and electronic systems. Increasing
design complexity and enhanced IC and system functionality are making power-efficient, noise-immune design and analysis one of the most critical and complex challenges affecting the price, performance, reliability, and time to market of ICs and
electronic systems. Highly-sophisticated software solutions are thus required to comprehensively address power efficiency and noise immunity for both the design of ICs and electronic systems.
Growth in Demand for More Power-Efficient and Noise-Immune ICs and Electronic Systems
Several factors are driving increasing demand for more power-efficient and noise-immune ICs and electronic systems, including:
High-Performance Mobile and Other Electronic Device Proliferation
The demand for high-performance mobile devices, such as smartphones and media tablets, is driving growth in the semiconductor industry. Media tablet and smartphone unit sales are projected to increase 163% and 44%,
respectively, in 2011 over 2010, according to IDC. Consumers are using their mobile devices for a growing number of applications, for more hours every day, and are demanding extended battery life. IC and electronic system manufacturers are
developing more power-efficient electronic components to meet this demand and have begun marketing extended battery life as a key differentiating product feature.
Device Miniaturization
The increased demand for smaller electronic systems, such as
smartphones, media tablets, and digital cameras, along with the trend toward smaller geometries for ICs, has required semiconductor manufacturers to significantly increase circuit density and the number of transistors on ICs. When the space between
circuits is reduced, power is condensed into a smaller area, which can cause overheating, impacting IC performance, reliability, and overall system efficiency. In addition, smaller devices constrain the size of cooling systems and batteries, which
reduces available power. As a result, design engineers must develop products that consume less power in order to extend battery life and manage heat dissipation.
Increased Wireless Connectivity
The ubiquity of wireless protocols, including cellular, WiFi
and Bluetooth, is enabling enhanced connectivity between a wide variety of electronic devices. For example, consumers are now using their smartphones to wirelessly connect to and control their televisions and home entertainment centers, printers,
personal computers, thermostats, lighting and security systems, and even to monitor the energy output of solar panels on their roofs. This explosion in system-to-system wireless communication is amplifying the amount of noise within and between ICs,
causing systems to sometimes malfunction or fail. IC and electronic system designs must be adapted to reduce the impact of noise in order to facilitate the ongoing trend towards increased wireless connectivity.
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IT Infrastructure Power Consumption and Electricity Costs
Reducing power consumption and electricity costs for information technology, or IT, infrastructure has become a high priority for enterprises and
data centers. Gartner estimates that at current pricing, the energy expense to support a typical data center server will exceed the cost of that server within three years. As a result, data center operators are seeking solutions that reduce IT
infrastructure power consumption and electricity costs while also enhancing performance.
The Challenges of Power-Efficient and
Noise-Immune IC and Electronic System Design
To meet the rising demand for more power-efficient and noise-immune ICs and
electronic systems, engineers require power analysis and optimization solutions to develop and test new designs. The design challenges that these solutions must address include:
Power Budgeting
Engineers
who design ICs must meet power specification limits, or power budgets, that are dictated by the electronic system companies who buy their products. Demand for enhanced functionality and performance in ICs and electronic systems is rapidly increasing
the amount of power required by these products. However, power budgets are expected to remain at current levels in order to meet extended battery life demands of end users. The combination of increasing power requirements and constant power budgets
is creating a significant challenge for design engineers. According to the International Technology Roadmap for Semiconductors, or ITRS, the power consumption requirements of mobile devices will be approximately six times greater than their power
budgets by 2015 and ten times greater by 2020 unless power-efficiency design, analysis, and optimization solutions are used in the design process.
Design engineers must meet power budgets for a wide variety of operating conditions. For example, an IC for a smartphone must be tested to ensure that it meets power budget requirements in active, standby, dormant,
charging, and shutdown modes. A comprehensive power budgeting solution is required to accurately analyze power values in all operating modes and while running all potential applications of the system. If engineers fail to meet power budgets, their
products may be rejected by electronic system designers, or the end product may experience reduced battery life or other detrimental performance issues.
Power Delivery Integrity
Power delivery integrity is the reliable delivery of power to all
components of ICs and electronic systems while meeting power budgets. Power delivery integrity is analogous to the way in which an electric power grid operator ensures that electricity is delivered to end users reliably, consistently, and in
adequate amounts while minimizing loss in the transmission network. ICs and electronic systems designed with inadequate power delivery integrity may experience large fluctuations in supply voltage and operating power that can cause system failure.
These fluctuations particularly impact ICs used in mobile handsets and high-performance computers, where they may cause an application or program to freeze or crash. Ensuring power delivery integrity requires accurate modeling of multiple individual
components that are designed by different engineering teams, as well as comprehensive analysis of the interactions between these components. Organizational boundaries between these engineering teams often prevent them from interacting effectively
and sharing data, which can lead to design errors and development delays.
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Power-Induced Noise
The flow of electric current within an IC or electronic system can interfere with the operation of other components in the product, as well as with nearby systems. This interference is referred to as power-induced
noise. Depending on its severity, this noise may cause products to fail and can prevent mobile devices, high-performance computing and networking equipment, consumer electronics, and automotive and medical electronics from meeting regulatory
requirements or mission critical operational and safety requirements. Power-induced noise can also cause unpredictable fluctuations in the input/output data transfer rate in high-performance electronic systems, which may corrupt the data transfer
and result in, for example, a digital video stream becoming pixilated. To satisfy regulatory requirements, and prevent failures or performance degradation caused by power-induced noise, early detection using comprehensive software simulation and
modeling tools is required. The costs and complexity of resolving power-induced noise issues are significantly higher if these issues are not identified early in the design process at the IC, package, or printed circuit board, or PCB, level. This
requires effective coordination across the design process to generate representative power and noise models of the ICs, packages, and PCBs that will be integrated into an electronic system.
Limitations of Alternative Solutions
Design engineers use power analysis to predict the power consumption in an IC or the fluctuations in the power supply in an electronic system. These predictions are used to make design change decisions that impact
the performance, cost, and development time of ICs and electronic systems, and must be highly accurate. The accuracy of the power analysis results depends on the sophistication of the simulation models created by the power analysis software, as well
as the ability of the power analysis software to model an IC in its entirety as well as its package, the PCB on which it is mounted, and in its interactions with other nearby ICs. These analyses must also be executed efficiently to enable rapid
design cycles and time to market and must be comprehensive enough to cover the various phases of the design process and each component of the electronic system.
To achieve their design goals and meet requirements set by their customers, design engineers use a number of third party or internally developed tools. However, many of these tools only address power analysis needs
of one or a few phases of the design process. These tools do not enable the efficient sharing of data and models between the various teams working on separate design phases. Also, because they lack the capability to efficiently simulate an entire
IC, many of these tools adopt a "divide-and-conquer" approach whereby a design is partitioned into sub-blocks and those sub-blocks are analyzed separately. As a result, we believe the interactions that happen inside an IC, between an IC
and its package and PCB, and between various ICs on the PCB are not captured and the analyses are often inaccurate. As a result of the foregoing, we believe design processes that use these third-party or internally-developed tools result in extended
design cycles and are more at risk of design failure than if they used our solutions.
Benefits of Our Solutions
We offer a suite of software tools and methodologies that provide innovative power analysis and optimization capabilities through various phases of
the design process, from initial prototyping to full electronic system design completion. Our solutions deliver the following benefits:
Accuracy
.    Our solutions analyze design models and provide results that are closely correlated to power and noise
measurements of the manufactured ICs and electronic systems.
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The predictability, consistency, and reliability of our analyses provide valuable input for engineering teams during various phases in the design process. Our tools help our customers meet
increasingly stringent power budgets, and avoid costly over-designs.
Capacity
.    Our solutions can
simultaneously analyze an entire IC or electronic system, instead of using the traditional "divide-and-conquer" approach of partitioning a design or a system into its sub-blocks and analyzing those sub-blocks separately. Our tools can use
techniques such as hierarchical modeling to simultaneously analyze an IC, package, and PCB design, whereas other power analysis tools need to analyze individual components separately. By analyzing an entire design, we can model the interactions
inside an IC, between an IC and its package and PCB, and between the various ICs. This avoids the errors and inaccuracies that commonly occur when performing the analysis only at the sub-block level.
Efficiency
.    Our solutions deliver rapid turnaround for power analysis. For example, our solutions are able to
complete analyses significantly faster than many alternative power analysis tools, if these alternative tools are able to complete the analyses at all. This reduced turnaround time increases engineering team productivity, especially for those
working on complex, power-sensitive designs. We believe that the efficiency of our tools delivers a higher return on computing resources, reduces time between, and the number of, design iterations, and helps our customers achieve lower costs and
faster time to market than many alternative solutions.
Comprehensiveness
.    Our solutions enable power
analyses at the various phases of the design process for electronic systems, from the initial IC prototyping process to full electronic system design completion, leading to quicker design convergence. Engineering teams who work on the various
components of ICs and electronic systems, or on the different phases in the design process, are often separated by organizational boundaries and may not interact or share data, which can lead to design errors or missed schedules. Our solutions
create user-friendly, compact models that enable data sharing among these different design teams, such as between automotive or communications system companies and their IC suppliers.
Our Strengths
Our core competitive strengths include:
Exclusive focus on power
.    We focus exclusively on providing solutions that enable high-performance, power-efficient,
and noise-immune IC and electronic system designs. This focus has enabled us to dedicate significant resources towards developing what we believe are the most advanced, effective power analysis solutions available on the market. We believe we have
more research and development personnel focused on solving power and noise challenges than any of our competitors. As ICs continue their migration to smaller geometries, the design and analysis challenges we address will evolve, and we believe that
our exclusive focus on power will enable us to remain at the forefront of power analysis technology development.
Diverse and growing
blue chip customer base
.    Our customers include all of the top 20 semiconductor companies as measured by revenue in 2010 according to iSuppli. Our customers also include leading electronic system companies serving market
segments such as mobile devices, high-performance computing and networking, consumer electronics, and automotive and medical electronics. Our customers include, among others, ARM Limited, Hynix Semiconductor Inc., Intel Corporation, LSI Corporation,
MediaTek Inc, QUALCOMM Incorporated, Samsung Electronics Co., Ltd., Sony Corporation, STMicroelectronics N.V., Texas Instruments Incorporated, and Toshiba Corporation. All of our top 20 customers in each of 2008, 2009, and 2010 remain our customers
today. We grew our customer base by over 118% in the
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last three years, from 53 customers at the beginning of 2008 to 116 customers at the end of 2010.
Critical solution for power sign-off
.    We believe that our flagship product, RedHawk, is the sign-off tool of choice for the analysis of reliable delivery of power to ICs. Software
design and analysis solutions achieve sign-off status by becoming a highly trusted product for the problems they solve. As a result, sign-off solutions often enjoy significant competitive advantages such as product longevity, structural barriers to
entry, and substantial market share.
Comprehensive power analysis solutions
.    We provide engineers a
unified environment to address the design challenges associated with power efficiency and noise immunity throughout various phases of the IC and electronic system design process. Additionally, by generating compact, user-friendly models, our
solutions facilitate effective coordination among the multiple engineering teams that work on the design of ICs and complex electronic systems but are separated by organizational boundaries.
Power-focused global customer support team
.    Our customer support team consists of application engineers who typically
have significant and relevant industry experience who are exclusively focused on helping our customers with their power-efficiency and noise-immunity design challenges. Our support engineers analyze and resolve customer problems, gain technical
insight that enables future product development, and enhances customer loyalty. We provide direct support to our customers and view our support team as a competitive differentiator that, along with the high value of our products, helps maintain our
high license renewal rate.
Our Strategy
Our goal is to enhance our leadership position as a provider of software tools and methodologies that enable power-efficient, noise-immune IC and electronic system designs. Key components of our strategy include:
Extend our core technology leadership
.    We have established ourselves as a market and technology leader
for power analysis in the design of ICs and electronic systems. We believe that our RedHawk platform is the sign-off tool of choice for the analysis of reliable delivery of power to ICs. We plan to continue to invest in research and development to
maintain and extend our core technology leadership position. For example, we recently introduced our newest product, PathFinder, which is a simulation-based electro-static discharge, or ESD, event analysis solution.
Increase deployment of our products to existing customers
.    As the demand for lower power and higher performance
electronic systems continues to rise, and as our customers continue to increase their focus on delivering power-efficient solutions, we plan to increase the number of licenses we sell to our existing customer base. We also plan to increase the
number of products we sell to our existing customers.
Broaden our customer base
.    We plan to continue to
increase our market share among leading IC and electronic system companies. Our ability to acquire new customers is an important element of our growth strategy, and our sales organization expends a considerable portion of its efforts on expanding
our customer base. We seek to leverage our brand, technology leadership, and customer support to add new customers. In addition to focusing on markets in which we currently have significant penetration, such as mobile devices and high-performance
consumer electronics, we also intend to target additional market leaders in high-value IC and electronic systems markets, such as memory and automotive.
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Leverage existing partnerships with market leaders to penetrate their
customers
.    We plan to leverage our relationships with leading semiconductor customers to expand our sales to their end customers. Because each of our four platforms targets different parts of the IC and electronic system
design process and generates models which can be shared with our other platforms, we can improve our customers' ability to collaborate with their customers to deliver more power-efficient ICs and electronic systems.
Expand our addressable market with new products and enter new markets
.    We plan to develop new products that target
adjacent and related end markets where we can leverage our strong brand and our core underlying technology in power analysis to deliver an even broader suite of solutions. For example, in 2010, we introduced PathFinder, our ESD analysis product. We
may also extend our product offering through selective strategic acquisitions. For example, in 2009, we acquired the assets and certain foreign subsidiaries of Sequence Design, Inc. through which we acquired PowerArtist, our platform for power
analysis in the initial design stage of an IC.
Our Solutions
The IC and Electronic System Design and Analysis Process
The design process for an
electronic system, which typically consists of multiple packaged ICs placed on one or more PCBs within a chassis, case or enclosure, follows a series of discrete steps starting from the initial concept definition to the design and development of
individual components, leading to the final assembly of the integrated electronic system. Each component of an electronic system is separately analyzed and must receive sign-off at every design phase to ensure that it meets its power budget and
power delivery integrity requirements. The specificity of the power analysis done at each design phase requires a simulation software platform that can address the requirements of that design phase.
During the initial design stage of an IC, the operation of the circuit as well as the interconnection of various inputs and outputs is typically
described in a high-level format known as register transfer level, or RTL. Power analysis on this RTL description of the IC enables engineers to efficiently explore design changes that help them reduce the power consumption in their circuits and
meet power budget requirements of the electronic system. During the physical design stage, the sub-blocks and the intellectual property, or IP, cores of the IC are designed first. These are integrated into an IC that is then placed inside a package
and attached to a PCB. In some applications such as mobile phones, multiple ICs may be incorporated into a single package or stacked three dimensional IC configurations to save space. Accurate and comprehensive power analyses are required to ensure
that the design of these sub-blocks, IP cores, IC, package, and PCB meet the prescribed power delivery integrity goals. Power-induced noise analysis is done on the electronic system to predict the interaction and coupling that occur between the
components present in the system. This analysis helps to predict failures from effects such as electromagnetic emission or input/output signal transmission interference. To increase the comprehensiveness and accuracy of these analyses,
representative models must be created at each phase of the design process and passed to the analysis done in the subsequent design phase.
Our Product Platforms
We organize our products into four broad platforms based on their application in the specific phase of the electronic system design process. These
four product platforms span our customers' IC and electronic system design processes, providing them with comprehensive
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power budgeting, power delivery integrity, and power-induced noise analysis capabilities that they need to design and deliver their complex electronic products.
PowerArtist
.    This software platform, used on the RTL description of an IC, helps design engineers meet their power
budget requirements through power analysis, power reduction, and design optimization early in the design cycle, when the flexibility to undertake design changes to increase the power-efficiency of the IC is highest.
Totem
.    This software platform targets power budgeting and power delivery integrity analysis of memory components such
as Flash and DRAM, input/output IPs such as HDMI and DDR circuits, and analog IPs such as power management circuits.
RedHawk
.    This software platform is used for power budgeting, power delivery integrity, and power-induced noise
analysis of digital logic circuits, system-on-a-chip designs, ASICs, and microprocessor designs.
Sentinel
.    This software platform is used for power delivery integrity and power-induced noise analysis of an
electronic system consisting of ICs, packages, and PCBs.
In addition to these four product platforms, we offer PathFinder, a
simulation-based ESD event analysis solution. An ESD event results from the creation and discharge of a large amount of electrical energy. When this electrical energy is transferred to or from an IC, it severely impacts the critical wiring and logic
circuitry of the IC. PathFinder analyzes ESD events for an entire IC, highlighting weaknesses in the design that can make it susceptible to failure from an ESD event. It operates with our RedHawk and Totem platforms to perform ESD-related
verification for digital and analog designs.
The table below illustrates where our customers use each of our product platforms in the
IC design process.
Our Design Flows
Our solutions create user-friendly, compact models that enable data sharing among different design teams, such as between automotive or communications system companies and their IC suppliers. These models enable
integrated design flows that link together disjointed design phases fostering closer collaboration among teams working on each of these design steps. These integrated design flows eliminate iterative and time-consuming design closure that results
when these design steps are undertaken separately. The end result is faster design convergence and lower product costs.
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Our product platforms enable three key design flows:
RTL-to-silicon ultra-low-power design flow
.    The combination of our PowerArtist and RedHawk platforms enables
efficient data sharing, from the initial RTL description phase to the physical design state of the IC. Analysis performed by PowerArtist at the RTL stage results in information that enhances the quality and coverage of the analyses performed by
RedHawk subsequently in the physical design process. This integrated ultra-low-power analysis flow helps design engineers meet power budget and power delivery integrity requirements by ensuring a consistent analysis methodology throughout the IC
design process.
Analog-to-digital single-chip design flow
.    The combination of our Totem and RedHawk
platforms enables a consistent power analysis flow for complex ICs by enabling efficient data sharing between the design engineer of the sub-blocks or IPs and the IC design engineers. This data sharing mechanism, which is enabled through the
creation of compact and accurate models of the sub-blocks or IPs, helps the IC design engineer analyze an entire IC efficiently and to model and predict the interactions between these sub-blocks and IPs that impact the power budget, power delivery
integrity, and power-induced noise in the electronic system.
Chip-to-package/PCB design flow
.    The
combination of our RedHawk and Sentinel platforms provides a comprehensive chip-package-PCB/system, or CPS, analysis and optimization environment to meet power delivery, signal integrity, thermal cooling, and electromagnetic interference design
goals. In this CPS design flow, compact models are created for all relevant components in an electronic system and then simulated concurrently for its different operating modes to ensure immunity from power-induced noise.
Our Customers
Our top 20 customers, based
on 2010 revenue contribution, include 14 of the 20 largest semiconductor companies, as measured by 2010 semiconductor revenue according to iSuppli. All of the iSuppli top 20 semiconductor companies were our customers in 2010. Our customers also
included leading electronic system companies serving market segments such as mobile devices, high-performance computing and networking, consumer electronics, and automotive and medical electronics. Our customers include, among others:
ARM Limited
MediaTek Inc.
STMicroelectronics N.V.
Hynix Semiconductor Inc.
QUALCOMM Incorporated
Texas Instruments Incorporated
Intel Corporation
Samsung Electronics Co., Ltd.
Toshiba Corporation
LSI Corporation
Sony Corporation
While our primary focus is on working with leading companies, we also focus significant effort on selling our
products to emerging companies.
We had 116 active customers as of December 31, 2010. In 2009, two customers accounted for 10% or more
of our revenue, with Texas Instruments Incorporated accounting for 12% of our revenue and QUALCOMM Incorporated accounting for 10% of our revenue. In 2010, only one customer accounted for over 10% of our revenue, with Intel Corporation accounting
for 11% of our revenue.
Our customers are also broadly distributed across geographic and product sectors. Based on the regions to which
we shipped our products, in 2010 the United States accounted for 57% of our revenue, Europe, Middle East and Africa accounted for 15% of our revenue, Asia Pacific, excluding Japan accounted for 14% of our revenue, and Japan accounted for 14% of our
revenue.
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Our customers often initially purchase licenses for a single location, department or division. Based
upon the initial success of the products, many of our customers have expanded their use of our products into other parts of their organizations. We believe that we can sell our existing products more extensively within our existing customers and
sell such customers new and enhanced products as we expand our product lines.
Sales and Marketing
We generate substantially all of our revenue through our direct sales force. Our direct sales force consists of sales personnel, product
specialists, and application engineers. Application engineers primarily provide technical pre-sales and post-sales support. These engineers work with our sales team. The complexity of our products requires us to spend substantial time and effort to
assist potential customers in evaluating our software and in benchmarking our products against those of our competitors. Therefore, our sales cycle typically ranges between three and nine months but can be longer. During the sales cycle, our direct
sales force generally provides technical presentations, product demonstrations, and support for on-site customer evaluation of our platforms.
In the United States, we have sales offices located in Northern and Southern California and Texas and sales personnel in Washington. Internationally, we have sales offices located in China, France, Japan, South
Korea, and Taiwan and sales personnel located in Germany and Israel.
We typically license our products under non-exclusive license
agreements. The majority of our licenses allow a number of individual users to use our products. Substantially all of our licenses are time-based and typically range from one to three year terms.
We focus our marketing efforts on creating and increasing product demand and brand awareness based on our products and technologies, and generating
sales leads. Our strategy is to distinguish ourselves as an innovation leader by delivering products that solve mission-critical challenges and enable our customers to differentiate their products from their competitors. Our marketing programs
promote and communicate our track record of first-in-class product introductions, our leading position in power analysis for the design of ICs and electronic systems, and our electronics ecosystem design flow initiatives.
We employ various marketing communications channels to inform existing and potential customers about our products. These channels include our
website, quarterly newsletters, technology forums (live seminars), web-based seminars, on-site product training sessions, tradeshows, user workshops, whitepaper/conference papers, sponsored newsletters, blog postings, and other public relations
initiatives, with an emphasis on user experience sharing and successes.
We have historically spent little on direct advertising.
Research and Development
We
primarily conduct research and development on existing and new technologies within our research and development team. We have also used acquisitions to augment our own research and development efforts, such as our acquisition of Optimal Corporation
in 2007 and our acquisition of the assets and certain foreign subsidiaries of Sequence Design, Inc. in 2009. We have received significant industry recognition for our research and development efforts, including being an EDN Innovation of the Year
Awards recipient in 2003 and 2007, and a finalist for the award in 2005, 2009, and 2010.
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We operate within sectors that typically combine rapid innovation with increasing design and
manufacturing complexity. Our future performance depends in part on our ability to meet and exceed increasingly demanding productivity, quality, predictability, and cost requirements on a schedule that keeps pace with our customers' technology
developments and foundry process advancements. This requires us to make significant investments to further enhance our core technologies and expand our product offerings.
We actively recruit engineers and developers with expertise and degrees in computer science, semiconductor physics, electrical engineering, and other engineering disciplines. As of December 31, 2010, we had
127 employees engaged in research and development activities. Our research and development expenses were $7.8 million, $8.6 million, and $11.5 million in 2008, 2009, and 2010, respectively.
Customer Support
We maintain direct customer support at various strategic locations throughout
the world and provide support on initial analysis and design flow setup in the customer design environment, training on use of our products, tracking of issues, result qualification assistance, and silicon debug. Domestically we have application
engineers based in Northern and Southern California, Colorado, Texas, and North Carolina. Internationally, we have direct customer support centers in China, France, India, Japan, South Korea, Taiwan, and customer support personnel in Israel,
Germany, and the United Kingdom.
We hire application engineers and product specialists that typically have significant and relevant
industry experience who can analyze customer needs and gain technical insight that enables future product development and enhancement. Our application engineers have deep cross-domain expertise enabling the sale and use of our products in our key
design flows.
We continually seek to achieve total customer satisfaction on the use of all of our products in the entire design flow.
Our application engineering team enables customers to successfully use our products not only for sign-off, but also for in-design optimization and for early prototyping and planning. The combination of deployment throughout the design chain and
expanded use within each design step ensures continuous and robust use of our products in a customer design environment.
We also
continually seek to enhance our customers' success by assisting with their critical, time-sensitive projects through early planning and continuous tracking, by identifying and jointly solving complex, next-generation problems, and by enabling
knowledge sharing and expertise build-up within and across organizations. By setting up and coordinating user groups that operate within a customer organization and across the industry, we help define standards on data sharing and analysis
guidelines that in turn enable our customers to be successful in delivering products to their customers.
Competition
The markets in which we operate are highly competitive. We compete principally on the basis of technology leadership, product quality and features
(including ease-of-use), license terms, post-contract customer support, interoperability with our products and other vendors' products, and price and payment terms. Our competitors include ANSYS, Inc., Cadence Design Systems, Inc., Magma Design
Automation Inc., Mentor Graphics Corp., and Synopsys, Inc. We also compete with many privately held companies.
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Many of our competitors have, and future competitors may have, competitive advantages, including but
not limited to closer integration with design implementation tools, greater resources that can be devoted to the development, promotion, and sale of their products, more established sales channels, greater development experience, larger intellectual
property rights portfolios, and/or greater name recognition.
Gaining market share in the markets in which we operate is difficult
because it often takes years for a customer to move from a competitor. The products our competitors offer are generally difficult to master. This difficulty often results in customers being disinclined to make changes once their employees, as well
as others in the industry, have developed familiarity with a particular product. Many of our competitors have established relationships with our current and potential customers and can devote substantial resources aimed at preventing us from
establishing or enhancing our customer relationships. Many of our competitors currently sell products that our customers and potential customers have broadly adopted, providing them a substantial advantage when they sell products that perform
functions substantially similar to some of our products. These structural barriers may prevent us from obtaining new customers and gaining market share, may require us to reduce product pricing and cause us to lose existing customers, which could
harm our business, financial condition, and operating results.
We also compete with the internal IC design automation development
groups of our existing and potential customers. Therefore, these customers may not require, or may be reluctant to purchase, products offered by independent vendors such as us. See "Risk Factors—Risks Related to Our Business—The
markets in which we operate are highly competitive, and these competitive pressures may prevent us from obtaining new customers and gaining market share, may require us to reduce our product and services pricing or cause us to lose existing
customers, which could materially harm our business, financial condition, and operating results."
Intellectual Property
We rely upon a combination of copyright, patent, trademark and trade secret laws, license and nondisclosure agreements, and technical measures to
establish and protect our intellectual property and our rights to such intellectual property. Our intellectual property portfolio includes 32 issued U.S. patents, one issued non-U.S. patent, two pending U.S. patent applications, and one pending
non-U.S. patent application. Generally, the term of patent protection is 20 years from the earliest effective filing date of the patent application. Our issued patents are scheduled to expire at various times between 2017 and 2028, subject to any
applicable patent term adjustments and our timely payment of applicable maintenance fees. Our patents generally relate to our products and the technology used in connection with our products.
While our patent portfolio is a significant component of our intellectual property strategy, patents afford only limited protection for our
technology, may be difficult, expensive, and time consuming to enforce, and may not prevent our competitors from designing around our patents or developing competing non-infringing technologies. See "Risk Factors—Risks Related to Our
Business—We may not obtain sufficient patent protection, which could harm our competitive position and increase our expenses."
We currently have six registered trademarks in the United States, and one registered trademark in non-U.S. jurisdictions. We also have rights in
other trademarks that are important to our business but that are not the subject of federal trademark registrations.
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In addition to patents and trademarks, to protect our intellectual property rights, we rely
significantly upon a combination of copyright laws, trade secret laws, non-disclosure agreements with our customers, employees, and suppliers, our internal security systems, confidentiality procedures, and employee/contractor confidentiality
agreements. Although we take steps to protect our intellectual property, infringement and misappropriation may still occur. See "Risk Factors—Risks Related to Our Business—In addition to patents, we rely on trademark, copyright, and
trade secret laws and contractual rights to protect our intellectual property, and the failure to sufficiently protect our intellectual property could harm our ability to compete and grow our business."
We are also party to various license agreements with third parties which typically grant us the right to use certain technology in conjunction with
our software products. This exposes us to risks over which we may have little or no control. See "Risk Factors—Risks Related to Our Business—Some of our products incorporate technology we license from third parties, and if we do not
maintain these licenses, if a licensor terminates our license to use its technology, or if a licensor has difficulties keeping up with technological changes or stops supporting our products, our ability to develop and license our products could be
materially delayed, reduced or prevented."
Our industry is characterized by vigorous protection and pursuit of intellectual
property rights or positions. There are numerous patents in the markets in which we operate and new patents are frequently issued rapidly. We expect that software suppliers and their customers will be subject to an increasing risk of intellectual
property claims. Any such claims, with or without merit, could be time consuming, result in costly litigation, distract management and employees, cause product shipment delays, obligate us to indemnify our customers and resellers, or require us to
enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us. See "Risk Factors—Risks Related to Our Business—We may face intellectual property
infringement claims or other litigation, which can be costly to defend, can take the time of our management and employees away from day-to-day operations and could result in our losing important rights and paying significant damages."
We enter into standard license and non-disclosure agreements in the ordinary course of business. Pursuant to these agreements, we agree
to indemnify our customers and resellers for losses suffered or incurred by them as a result of any patent, copyright or other third-party intellectual property infringement claim directly or indirectly caused by our products or for improper
disclosures by our employees. These indemnification obligations typically have perpetual terms. Based upon our historical lack of product and patent infringement claims and improper disclosure claims, we have not recorded any such liabilities in our
financial statements. See "Risk Factors—We may be unable to make payments to satisfy our indemnification obligations or in the event of improper use or disclosure of confidential information, which would harm our customer relationships and
our business."
We have also agreed with one of our largest customers not to assert our patents against such customer, and also
agreed that, under certain circumstances, if we divest or assign any of our patents, then the customer will be entitled to an irrevocable, worldwide, nonexclusive license to such patents to make or have made such customer's products. See
"Certain Relationships and Related Party Transactions—Business Agreements with Intel Corporation."
Employees
As of December 31, 2010, we had 257 full-time employees, including 127 in research and development, 109 in sales and marketing, and 21 in
general and administrative. As of
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December 31, 2010, we had 97 employees located in the United States, 63 located in China, 58 located in India, 29 located in Asia, and 10 located in Europe. None of our employees are covered
by collective bargaining agreements. We believe our employee relations are good and we have never experienced work stoppages.
Facilities
Our corporate headquarters are located in San Jose, California, where we occupy approximately 25,500 square feet under a lease
expiring on October 31, 2011. We expect our corporate headquarters will be adequate for our space requirements until the expiration of the lease, but we are currently looking for new office space. Adequate space may be unavailable on
commercially reasonable terms.
We maintain leased domestic sales and support offices occupying less than 1,200 square feet each in
Southern California and Texas. Internationally, we maintain leased research and development and sales and application engineering support offices occupying less than 6,000 square feet each in China (Shanghai, Beijing, and Chengdu), France, India
(Noida and Bangalore), Japan, South Korea, and Taiwan. Lease termination dates range from May 2011 to November 2013. We periodically evaluate the adequacy of our existing facilities and expect our current sales and support offices will be adequate
for at least the next 12 months. However, if we require additional space, adequate space may be unavailable on commercially reasonable terms.
We also maintain three data centers and 26 remote locations where we provide support.
Legal
We are not currently a party to any legal proceedings. We are not aware of any threatened litigation, unasserted claims or assessments that could,
if determined adversely to us, have a material adverse effect on our business, operating results or financial condition. We may be subject to various claims and legal actions arising in the ordinary course of business.
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MANAGEMENT
Executive Officers and Directors
The following sets forth information about our executive
officers and directors as of February 28, 2011:
Name
Age
Position(s)
Andrew T. Yang, Ph.D.
50
Co-Founder, Chief Executive Officer, Chair of the Board and Director
Emily Chang
46
Chief Financial Officer
Dian Yang, Ph.D.
51
General Manager of Asia and Senior Vice President of Product Management
Steven (Craig) Shirley
47
Vice President of Worldwide Sales
Aveek Sarkar
36
Vice President of Product Engineering and Support
Ping Yang, Ph.D.
59
Director
Lori Holland
52
Director
Andrew T. Yang,
Ph.D.
Andrew T. Yang co-founded our company in January 2001 and has served as the chair of our board of directors since our inception and as our chief executive officer since January 2002. Dr. Andrew Yang
founded Anagram Design Inc. in 1993, a high-capacity simulation solutions provider for deep-submicron ICs. Anagram Design Inc. merged with Avant! Corp. in 1997, where he served as the Vice President of the Analysis Product Division responsible for
all extraction and analysis products until 1998. Since 1998, Dr. Andrew Yang has been an investor and a director of several electronic design automation companies, including CadMOS Design Technology, Inc. (acquired by Cadence Design Systems,
Inc.), Ultima Interconnect Technology, Inc. (acquired by Cadence Design Systems, Inc.), InnoLogic Systems, Inc. (acquired by Synopsys, Inc.), and Mojave Inc. (acquired by Magma Design Automation, Inc.). Dr. Andrew Yang received a B.S. in
Electrical Engineering and Computer Science from the University of California, Berkeley, and M.S. and Ph.D. in Electrical Engineering from the University of Illinois, Urbana-Champaign, and was a tenured professor at the University of Washington from
1989 to 1996.
Emily Chang.
Emily Chang has served as our chief financial officer since July 2010. Ms.
Chang served as our corporate controller from October 2004 to July 2010. From 2001 to 2004, Ms. Chang held numerous positions at Cadence Design Systems, Inc., where she performed various finance and Securities and Exchange reporting-related
functions. From 1999 to 2001, she held numerous positions at Silicon Perspective Corporation (acquired by Cadence Design Systems, Inc.), where she performed various financial reporting and finance functions. Ms. Chang received a B.A. in
Business from the University of California, Los Angeles.
Dian Yang, Ph.D.
Dian Yang has served as our
senior vice president of product management and general manager of Asia since January 2008. From July 2005 to January 2008, Dr. Dian Yang was our general manager of Asia and senior vice president of business development. Prior to joining us in July
2005, Dr. Dian Yang co-founded InnoLogic Systems, Inc., a provider of formal verification solutions for full-custom designs, in August 1998. InnoLogic Systems, Inc. was acquired by Synopsys, Inc. in 2003, where he continued as a senior director
in the implementation business unit from June 2003 to July 2005. Prior to InnoLogic, Dr. Dian Yang held various management positions at Silicon Graphics, Inc., LSI Corporation, and Avant! Corp. Dr. Dian Yang received a B.S. in Applied
Mathematics from Shanghai University of Science and Technology and M.S. and Ph.D. in Computer Science from Stanford University.
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Steven (Craig) Shirley
.    Steven (Craig) Shirley has served as our vice
president of worldwide sales since March 2006. From 2004 to 2006, Mr. Shirley was vice president of worldwide sales and support at Jasper Design Automation, Inc. From 2001 to 2004, Mr. Shirley was vice president of North American
Sales at Verisity Design, Inc. (acquired by Cadence Design Systems, Inc.). Between 1987 and 2000, Mr. Shirley held various positions at Avant! Corp., Aspect Development, Inc., Quickturn Design Systems, Inc., Ready Systems Corporation,
Verisity Design, Inc., and Viewlogic Systems, Inc. Mr. Shirley began his career at Intergraph Corporation, as an applications engineer. Mr. Shirley received a B.S. in Computer Engineering from Auburn University.
Aveek Sarkar
.    Aveek Sarkar has served as our vice president, product engineering and support since July
2006. From March 2005 to June 2006, Mr. Sarkar was our director of product engineering. From October 2003 to February 2005, Mr. Sarkar was our senior product engineer. From December 1998 to October 2003, Mr. Sarkar was
a member of the technical staff at Sun Microsystems, Inc, a company selling computers, computer components, computer software, and information technology services. From April 1998 to December 1998, Mr. Sarkar was a device engineer at
Cadence Design Systems, Inc. Mr. Sarkar received a B.Tech from the Indian Institute of Technology, Kanpur, a M.S. in Electrical Engineering from Oregon State University, and a M.B.A. from Santa Clara University.
Ping Yang, Ph.D.
Ping Yang has served as one of our directors since April 2006 and as a member of the audit committee
of the board of directors since February 2011. Dr. Ping Yang currently operates an independent consulting practice serving semiconductor companies, providing expertise in the areas of very large-scale integration, technology development and
manufacturing, computer-aided design, circuits and systems, large-scale ICs, and solid-state electronics. Dr. Ping Yang served as Vice President of Research and Development at Taiwan Semiconductor Manufacturing Company (TSMC), a semiconductor
manufacturer, from June 2001 to November 2005. Prior to joining TSMC, Dr. Ping Yang held various management positions at TSMC North America, Vanguard International, and Texas Instruments Incorporated. Dr. Ping Yang currently serves as a
director of LTX-Credence Corporation and is a member of its compensation committee. Dr. Ping Yang also currently serves as a director, a member of the audit committee, and the chair of the nominating and corporate governance committee of
Intervac, Inc. Dr. Ping Yang served as a director of Global Unichip Corporation and was a member of its audit committee from 2003 to 2007. Dr. Ping Yang is a fellow of the Institute of Electrical and Electronics Engineers and a recipient of the
Institute's Third Millennium Medal. Dr. Ping Yang received a B.S. in Physics from the National Taiwan University, and a M.S. and a Ph.D. in Electrical Engineering from the University of Illinois, Urbana-Champaign.
Lori Holland
.
Lori Holland has served as one of our directors and as the chair of the audit committee of our
board of directors since February 2011. Ms. Holland has operated an independent financial consulting practice serving as an advisor to various technology companies, including startups since January 2001. From November 1999 to December 2000,
Ms. Holland was the chief financial officer of Zaffire, Inc., a telecommunication company headquartered in California. Prior to that, Ms. Holland served as the chief financial officer of Read-Rite Corporation, a manufacturer of components
to the disc drive industry, and NeoMagic Corporation, a fabless semiconductor company and supplier of low-power audio and video integrated circuits for mobile use. Ms. Holland also held senior financial posts at other technology start-ups
including NeXT Computer, Inc. and Seagate Technology, Inc. From September 2004 to August 2008, Ms. Holland served as a director of Credence Systems Corporation. Following the merger of Credence Systems with LTX Corp. in 2008, she has served as a
director and an audit committee member of LTX-Credence Corporation. From June 2005 to December 2006, Ms. Holland served on the board of directors and the chair of the audit
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committee of WiderThan Co., Ltd., a Korean company listed on the Nasdaq National Market. Ms. Holland served as a director and the chair of the audit committee of Bookham Technology plc from
April 1999 until it was acquired by Avanex Corporation and became Oclaro, Inc. in 2009. Ms. Holland has served as a director and the chair of the audit committee of Oclaro, Inc. since the merger. Ms. Holland received a B.A. in Economics
from California Polytechnic State University.
There are no family relationships among any of our directors or executive officers.
Code of Business Conduct and Ethics
Before completion of this offering, our board of directors will adopt a code of business conduct and ethics that will apply to all of our officers, directors, and employees, including our principal executive
officer and principal financial officer, and is intended to comply with the applicable rules and regulations of the Securities and Exchange Commission and the Nasdaq Global Market listing requirements. This code is designed to deter wrongdoing and
to promote:
•
honesty and integrity, including the ethical handling of any actual or apparent conflict of interest between personal and professional relationships;
•
full, fair, accurate, timely, and understandable disclosure in the reports and documents that we file with, or submit to, the Securities and Exchange Commission
and in other public communications made by our company;
•
professional integrity in all aspects of our organization and eliminate barriers to responsible behavior, such as coercion, fear of reprisal or alienation from
our company;
•
education of all members of our company about applicable laws, rules, and regulations and applicable stock exchange rules, relevant to the performance of their
duties;
•
compliance with applicable governmental laws, rules, and regulations and applicable stock exchange rules;
•
prompt internal reporting of violations of the code of business conduct and ethics, including any violations of governmental laws, rules or regulations, and
applicable stock exchange rules; and
•
ethical and honest behavior in the workplace.
Waivers of the policies set forth in the code of business conduct and ethics will be granted on a case-by-case basis and only in extraordinary circumstances. Any waiver of the policies may only be granted by the
chief financial officer for employees other than executive officers. Any waiver of the policies for executive officers or directors requires approval of the board of directors or our audit committee and will be promptly disclosed to the public. Upon
completion of this offering, our code of business conduct and ethics will be available on our website.
Board Composition
Upon completion of this offering, our board of directors will consist of four members. Our board of directors has determined that all of the members
of our board of directors, except our chief executive officer, Andrew Yang, are "independent directors" as defined in applicable rules of the Securities and Exchange Commission and the Nasdaq Global Market. All directors are elected to
hold office until their successors have been elected. Officers are elected and serve at the discretion of the board of directors.
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Staggered Board
Pursuant to our amended and restated certificate of incorporation, our board of directors will be divided into three classes. The members of each class will serve for a staggered, three-year term. Upon the
expiration of the term of a class of directors, a director in that class will be elected for three-year terms at the annual meeting of stockholders in the year in which their term expires. The classes will be composed as follows:
•
Lori Holland will be a Class I director, whose term will expire at the fiscal 2012 annual meeting of stockholders;
•
Ping Yang will be a Class II director, whose term will expire at the fiscal 2013 annual meeting of stockholders; and
•
Andrew Yang will be a Class III director, whose term will expire at the fiscal 2014 annual meeting of stockholders.
Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly
as possible, each class will consist of one-third of our directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company.
Board Committees
Our board of directors has
established the committees described below and may establish others from time to time. The charters for each of our committees will be available on our website once our company is public.
Audit Committee
Upon
completion of this offering, our audit committee will be comprised of Ping Yang,                     , and Lori Holland, who is the chairperson of
the committee. Our board of directors has determined that each member of the audit committee, is "independent" for audit committee purposes as that term is defined in the applicable rules of the Securities and Exchange Commission and the
Nasdaq Global Market. Our board of directors has designated each of Ms. Holland and Dr. Ping Yang as an "audit committee financial expert," as defined under the applicable rules of the Securities and Exchange Commission. The
audit committee's responsibilities will include:
•
appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;
•
pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;
•
reviewing annually a report by the independent registered public accounting firm regarding the independent registered public accounting firm's internal
quality control procedures and various issues relating thereto;
•
reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related
disclosures;
•
coordinating the oversight and reviewing the adequacy of our internal control over financial reporting with both management and the independent registered public
accounting firm;
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•
establishing policies and procedures for the receipt and retention of accounting related complaints and concerns, including a confidential, anonymous mechanism
for the submission of concerns by employees;
•
periodically reviewing legal compliance matters, including securities trading policies, periodically reviewing significant accounting and other financial risks
or exposures to our company, reviewing and, if appropriate, approving all transactions between our company or its subsidiaries and any related party (as described in Item 404 of Regulations S-K);
•
periodically reviewing our code of business conduct and ethics;
•
establishing policies for the hiring of employees and former employees of the independent registered public accounting firm; and
•
reviewing the audit committee report required by Securities and Exchange Commission rules to be included in our annual proxy statement.
The audit committee will also have the power to investigate any matter brought to its attention within the scope of
its duties. It will also have the authority to retain counsel and advisors to fulfill its responsibilities and duties.
Compensation
Committee
Upon completion of this offering, our compensation committee will be comprised of Lori Holland and Ping Yang, who is the
chairperson of the committee. Our board of directors has determined that each member of the compensation committee is an independent director for compensation committee purposes as that term is defined in the applicable rules of the Nasdaq Global
Market, is a "non-employee director" within the meaning of Rule 16b-3(d)(3) promulgated under the Securities Exchange Act of 1934 and is an "outside director" within the meaning of Section 162(m) of the Internal Revenue
Code, as amended. The compensation committee's responsibilities will include, among other things:
•
annually reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer;
•
annually evaluating the performance of our chief executive officer in light of such corporate goals and objectives and recommending the compensation of our chief
executive officer to the board of directors for its approval;
•
annually reviewing and approving the compensation of our other executive officers;
•
annually reviewing our compensation, welfare, benefit and pension plans, and similar plans;
•
annually reviewing succession planning;
•
annually reviewing and making recommendations to the board of directors with respect to director compensation; and
•
reviewing for inclusion in our proxy statement the report of the compensation committee required by the Securities and Exchange Commission.
The compensation committee will also have the power to investigate any matter brought to its attention within the
scope of its duties. It will also have the authority to retain counsel and advisors to fulfill its responsibilities and duties.
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Nominating and Corporate Governance Committee
Upon completion of this offering, our nominating and corporate governance committee, or nominating committee, will be comprised of Lori Holland and
Ping Yang, who is the interim chairperson of the committee. Our board has determined that each of the committee members is an independent director for nominating committee purposes as that term is defined in the applicable rules of the Nasdaq Global
Market. The nominating committee's responsibilities will include, among other things:
•
developing and recommending to the board of directors criteria for board of directors and committee membership;
•
identifying individuals qualified to become board of directors members;
•
recommending to the board of directors the persons to be nominated for election as directors and to each of the board of directors' committees;
•
annually reviewing our corporate governance guidelines; and
•
monitoring and evaluating the performance of the board of directors and leading the board in an annual self-assessment of its practices and effectiveness.
The nominating and corporate governance committee will also have the power to investigate any matter brought to its
attention within the scope of its duties. It will also have the authority to retain counsel and advisors to fulfill its responsibilities and duties.
Director Compensation for 2010
The
following table presents information regarding the compensation paid for 2010 to members of our board of directors in 2010 who were not also executive officers. The compensation paid to our director Dr. Andrew Yang, who is also our chief
executive officer, for 2010 is presented below under "Compensation Discussion and Analysis" and the related explanatory tables. Dr. Andrew Yang is not entitled to receive additional compensation for his service as a director.
Ms. Holland was not a member of the board of directors until 2011.
Name
Fees
Earned or
Paid in
Cash
Option
Awards (1)
All Other
Compensation
Total
Shen Lin, Ph.D. (2)
—
—
—
—
Ping Yang, Ph.D.
$
50,000
—
—
$
50,000
(1)
The following table presents the number of outstanding and unexercised option awards held by Dr. Lin and Dr. Ping Yang as of December 31, 2010. No equity awards were
granted to our directors in 2010. In February 2011, Dr. Ping Yang was granted options to purchase 21,875 shares of our common stock at an exercise price of $5.35 per share, which is scheduled to vest in monthly installments over the one-year
period after the grant date.
Name
Number of Shares Subject to
Outstanding Options as of
December 31, 2010
Shen Lin, Ph.D.
11,538
Ping Yang, Ph.D.
130,000
(2)
Dr. Lin is one of our employees but he is not an executive officer. He was a member of our board of directors during 2010. He did not receive any additional compensation for
his service as a director during 2010. See "Certain Relationships and Related Party Transactions—Compensation Arrangements" for a description of his compensation for his services as an employee for 2010. Dr. Lin resigned as a
director in February 2011.
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Director Compensation
In January 2011, our board of directors approved a compensation program for directors who are not also employed by us or any of our subsidiaries ("non-employee directors"). Under the program, each
non-employee director receives an annual retainer of $40,000 in cash. A non-employee director serving as chairperson of the board (or lead independent director if the chairperson of the board is not a non-employee director) receives an additional
annual retainer of $5,000 in cash, and a non-employee director serving as chair of a board committee receives an additional annual retainer of $10,000 in cash.
The director compensation program provides that a newly elected or appointed non-employee director will be granted an option to purchase 25,000 shares of our common stock, with the option being scheduled to vest in
monthly installments over the four-year period following the grant date. The program also provides for non-employee directors to receive annual option grants. Each non-employee director who was in office on February 3, 2011 or joined the board
of directors after that date and prior to this offering received an option to purchase 12,500 shares of our common stock, with the option being scheduled to vest in monthly installments over the one-year period following the later of
February 3, 2011 or the date the director joined the board of directors. After the consummation of this offering, each non-employee director then serving on the board will be granted, on or about February 3, 2012, an option to purchase
4,200 shares of our common stock, with the option being scheduled to vest in full on the day immediately prior to our first annual meeting of stockholders following the completion of the offering. On the date of the annual meeting and each annual
meeting date thereafter, each non-employee director who continues in office immediately following the annual meeting will be granted an additional option to purchase 12,500 shares of common stock, with the option being scheduled to vest in full on
the day immediately prior to the next annual meeting.
Each of the option grants made under our non-employee director compensation
program has an exercise price equal to the fair market value of our common stock on the grant date, a maximum term of ten years, and will fully vest upon the occurrence of a change in control.
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COMPENSATION DISCUSSION AND ANALYSIS
This section describes the material elements of compensation awarded to, earned by or paid to the individuals who served as our executive
officers during fiscal 2010. These individuals are listed in the "Summary Compensation Table" below and are referred to as the named executive officers in this prospectus.
Prior to this offering, our executive compensation programs were determined and approved by our board of directors. After the consummation of this
offering, our executive compensation programs will be determined and approved by the compensation committee of our board of directors as described below. None of the named executive officers will be members of the compensation committee. None of our
named executive officers had or will have any role in determining the compensation of other named executive officers, although Dr. Andrew Yang will make recommendations to the compensation committee as to the compensation of named executive
officers other than himself. Following this offering, the compensation committee will recommend, and the independent members of the board of directors will approve, the compensation of the chief executive officer.
Executive Compensation Program Objectives and Overview
The board of directors has in the past conducted, and it is anticipated that the compensation committee will continue to conduct, an annual review of our executive compensation programs to help ensure that:
•
the program is designed to achieve our goals of promoting financial and operational success by attracting, motivating, and facilitating the retention of key
employees with outstanding talent and ability; and
•
the program adequately rewards performance that is tied to creating stockholder value.
We have entered into employment letters with each of the named executive officers that were individually negotiated with the executive. Each of
these letters provides that the executive is an at-will employee and further provides for the executive to receive a base salary (subject to an annual review by the compensation committee) and other benefits generally available to our employees. The
material terms of each of these employment letters is described below in the sections titled "Description of Employment Letters—Cash Compensation" and "Potential Payments Upon Termination or Change in Control." Each named
executive officer is also eligible to receive annual incentive compensation in the form of performance bonuses and/or commissions. As described below, the named executive officers have also been granted equity-based awards from time to time as
determined by the board of directors.
In structuring executive compensation packages, the board of directors considers (and, following
this offering, the compensation committee will consider) how each component promotes retention and/or motivates performance by the executive. Base salaries and benefit programs are primarily intended to attract and retain qualified executives. These
are the elements of our executive compensation program where the value of the benefit in any given year is not dependent on performance (although base salary amounts and benefits determined by reference to base salary may increase from year to year
depending on performance, among other things). We believe that in order to attract and retain top executives, we need to provide them with predictable compensation amounts that reward their continued service.
Our annual incentive and commissions opportunities are primarily intended to motivate our named executive officers to achieve specific strategies
and operating objectives, although we
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believe it also helps us attract and retain top executives. Our long-term equity incentives are primarily intended to align named executive officers' long-term interests with
stockholders' long-term interests. We also believe long-term equity incentives help motivate performance and help us attract and retain top executives. These are the elements of our executive compensation program that are designed to reward
performance and thus the creation of stockholder value. Each named executive officer's annual bonus opportunity is paid out on an annual basis and is designed to reward performance for that year. Long-term equity incentives are generally paid
out or earned over a period of years and are designed to reward performance on a long-term basis.
The board of directors generally
reviews executive compensation survey data for companies in our industry. The board of directors does not "benchmark" executive compensation at any particular level in comparison with other companies. Rather, the board of directors
considers this data as background information and relies primarily on a range of factors as identified below in setting executive compensation. We expect that our compensation committee will continue this practice following this offering.
From time to time as the compensation committee deems appropriate, it may retain independent compensation consultants to help identify
appropriate peer group companies and to obtain and evaluate current executive compensation data. In 2011, the compensation committee retained the compensation consulting firm Compensia and recently engaged Compensia to begin a comprehensive review
of our compensation programs. Compensia does not perform any other consulting services for us or our management.
Current Executive Compensation
Program Elements
Base Salaries
Salaries for our named executive officers are set forth in the executives' employment letters and historically reviewed by the board of directors on at least an annual basis. It is anticipated that the
compensation committee will also review such base salaries on an annual basis following this offering. In setting specific salary levels for each named executive officer, the board of directors assesses the executive's past performance and
expected future contributions to us, the executive's salary and responsibilities relative to the other executive officers and the salaries of similarly situated executives with comparable companies and we expect that the compensation committee
will continue to assess these factors following this offering.
Annual Incentive Bonuses
Historically, annual incentive bonuses have been awarded to certain of the named executive officers based upon the achievement of performance goals
established by the board of directors for the fiscal year. The amount of the executive's actual bonus is determined based on the performance factors specified for that year. In determining the annual incentive opportunities for our chief
executive officer and chief financial officer for 2010, the board of directors believed that it was important to reward them for increasing sales and controlling expenses. Therefore, the board of directors developed bonus formulas based upon our
meeting sales targets specified by our board of directors and our adjusted operating margin (defined as operating income excluding stock-based compensation expense, amortization of intangible assets, and other non-recurring expenses divided by
revenue). For Dr. Andrew Yang, the board of directors determined that he would be eligible for a bonus equal to $140,000 for meeting sales targets specified by the board of directors plus $7,000 for each 1% of our adjusted operating margin for
2010. This formula resulted in a bonus of $320,749 for Dr. Andrew Yang (based on the sales
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targets being met and an adjusted operating margin of approximately 25.8%). For Ms. Chang, the board of directors determined that she would be eligible for a bonus equal to 1% of our
adjusted operating margin for 2010. This formula resulted in a bonus of $113,777 for Ms. Chang. In 2010, Dr. Dian Yang was also awarded a special bonus of $30,000 in connection with achieving certain performance goals.
In July 2010, our board of directors also decided to pay a special bonus on a company-wide basis to any employee that had been employed by us for
five years. The board of directors approved a total pool of $1.5 million for these bonuses. Each of our named executive officers (other than Mr. Shirley who was not eligible because he has not been employed by us for five years) was eligible
for this bonus. Payments were made in two installments, in July 2010 and December 2010, subject to the employee's remaining employed with us through the payment date. The percentage of the bonus pool awarded to each employee was generally
determined by dividing the number of vested stock options held by the employee by the total number of vested stock options held by all eligible employees, subject to certain limited discretionary adjustments by the chief executive officer.
The bonus amounts awarded to each of our named executive officers for 2010 are reflected in the "Summary Compensation Table for
Fiscal 2010" below.
Sales and Application Engineer Commission Plans
Two of our named executive officers, Mr. Shirley and Dr. Dian Yang, have significant sales responsibilities for us. Mr. Sarkar has
significant pre-sales and customer support responsibilities. As a result, they are each entitled to earn commissions under our sales and application engineer commission plans. Under these plans, the executive is entitled to receive a specified
percentage of their related sales up to a sales quota established by the board of directors and a higher percentage for sales in excess of the quota. The commissions for these executives for 2010 are reflected in the "Summary Compensation Table
for Fiscal 2010" below.
Long-Term Incentive Equity Awards
Our policy is that the long-term compensation of our named executive officers should be directly linked to the value provided to stockholders.
Therefore, we have historically made grants of stock options to provide further incentives to our executives to increase stockholder value. The board of directors based their award grants to executives each year on a number of factors (and following
this offering, the compensation committee is expected to continue to consider these factors), including:
•
the executive's position with us and total compensation package;
•
the executive's performance of his or her individual responsibilities;
•
the equity participation levels of comparable executives at comparable companies;
•
our financial performance; and
•
the executive's contribution to the success of our financial performance.
In addition, the size, frequency, and type of long-term incentive grants may be determined on the basis of tax consequences of the grants to the
individual and us, accounting impact, and potential dilution effects.
Our long-term incentive grants to named executive officers have
historically been made in the form of stock options. The exercise price of each of these grants is not less than the fair
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market value of our common stock on the grant date. Thus, the named executive officers realize value on their stock options only if our stockholders realize value on their shares. The stock
options also function as a retention incentive for our executives as they generally vest ratably over the four-year period after the commencement of service.
In August 2010, our board of directors approved the grant of an option to Ms. Chang to purchase 70,000 shares of our common stock in connection with her promotion to the position of our chief financial
officer. Prior to this grant, we had not granted any equity awards to any of our named executive officers since 2008 and had not granted any equity awards to Dr. Andrew Yang since 2005. Please see "—Subsequent Compensation Actions"
below for the terms of certain option grants to our named executive officers approved by the compensation committee on March 7, 2011. Following this offering, the compensation committee may also approve, in its sole discretion, additional
equity grants to our named executive officers from time to time.
As described below under "Management Incentive Plans," we
have adopted a new stock incentive plan in connection with this offering to provide the compensation committee greater flexibility in the types of incentives it may grant to employees. The compensation committee intends to review our equity grant
program and consider any changes that may be appropriate following the consummation of this offering.
Severance and Other Benefits
Upon Termination of Employment
We did not have severance arrangements with any of our named executive officers in 2010. As described
below under "Grants of Plan-Based Awards" and "Potential Payments Upon Termination or Change in Control," outstanding options and other equity-based awards granted to our named executive officers may accelerate on a change in
control of us. Although this vesting will occur whether or not a named executive officer's employment terminates, we believe it is appropriate to fully vest equity awards in these change in control situations and allow the award-holder to
benefit from any gain under the award at the time of the transaction.
Please see "—Subsequent Compensation Actions"
below for the terms of change in control severance arrangements for Dr. Andrew Yang and Ms. Chang approved by the board of directors on March 7, 2011.
Policy with Respect to Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows public companies a tax deduction for compensation in excess of $1,000,000
paid to their chief executive officers and certain other executive officers unless certain performance and other requirements are met. Our intent generally is to design and administer executive compensation programs in a manner that will preserve
the deductibility of compensation paid to our executive officers. However, we reserve the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may
not be deductible. The compensation committee will monitor the tax and other consequences of our executive compensation program as part of its primary objective of ensuring that compensation paid to our executive officers is reasonable,
performance-based, and consistent with the goals of us and our stockholders.
Subsequent Compensation Actions
On March 7, 2011, the board of directors approved our entering into change in control severance agreements with Dr. Andrew Yang and Ms. Chang. Under
these agreements, if we
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undergo a change in control and the executive's employment is terminated by us without cause (and, in the case of Ms. Chang, also by her for good reason) in connection with or following the
transaction, the executive will be entitled to receive cash severance of twelve months of the executive's base salary plus his or her target bonus for the year of termination. The executive would also be entitled to payment by us of his or her
COBRA premiums for twelve months and accelerated vesting of the executive's outstanding equity awards. The executive's right to receive these benefits is subject to the executive's executing a release of claims and complying with
certain restrictive covenants set forth in the agreement.
On March 7, 2011, the compensation committee approved option grants to each of
the named executive officers as follows: Dr. Andrew Yang - 75,000 options; Ms. Chang - 35,000 options; Mr. Shirley - 20,000 options; Dr. Dian Yang - 20,000 options; and Mr. Sarkar - 20,000 options. Each of these options has an exercise price of
$6.80 per share, which the compensation committee determined represents 100% of the fair market value of a share of our common stock on the grant date, and is scheduled to vest over a four-year period following the grant date.
On March 8, 2011, the compensation committee approved increases in the annual base salaries of Dr. Andrew Yang and Ms. Chang to $250,000 and
$200,000, respectively, and increases in the annual base salaries for each of Mr. Shirley, Dr. Dian Yang, and Mr. Sarkar to $160,000. The compensation committee also approved a new executive bonus program under which each of the named
executive officers will be eligible to receive a bonus for 2011. Bonuses under the program will be determined based on our bookings and operating margin in comparison with performance goals established by the compensation committee and such other
performance criteria as may be determined by the compensation committee.
Compensation Committee Interlocks and Insider Participation
We did not have a compensation committee for fiscal 2010. Our board of directors determined compensation decisions for our named executive officers
in 2010. Dr. Andrew Yang, our chief executive officer, was a member of our board of directors in 2010 and made recommendations to the board of directors as to the compensation of named executive officers other than himself. No member of our
board of directors had any relationships requiring disclosure by us under the Securities and Exchange Commission's rules requiring disclosure of certain relationships and related-party transactions. None of our executive officers served as a
director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity that has one or more executive officers who served on our board of directors during 2010.
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Summary Compensation Table for Fiscal 2010
The following table presents information regarding compensation of each of our named executive officers for services rendered during fiscal 2010.
Name and Principal Position
Year
Salary
($)
Bonus
($)(1)
Stock
Awards
($)
Option
Awards
($)(2)
Non-Equity
Incentive
Plan
Compensation
($)(3)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
All
Other
Compen-
sation
($)
Total
($)
Andrew T. Yang, Ph.D.
2010
135,000
307,905
—
—
320,749
—
—
763,654
Chief Executive Officer
Emily Chang
2010
135,000
33,103
—
137,452
113,777
—
—
419,332
Chief Financial Officer
Steven (Craig) Shirley
2010
150,000
—
—
—
227,079
—
—
377,079
Vice President Worldwide Sales
Dian Yang, Ph.D.
2010
135,000
64,255
—
—
146,739
—
—
345,994
General Manager and Senior Vice President, Product Management
Aveek Sarkar
2010
135,000
33,328
—
—
168,622
—
—
336,950
Vice President of Product Engineering and Support
(1)
As described in "Compensation Discussion and Analysis" above, certain named executive officers were awarded bonuses and received commissions during 2010. This column
includes the following special bonuses: Dr. Andrew Yang, $307,905; Ms. Chang, $33,103; Dr. Dian Yang, $34,255; and Mr. Sarkar, $33,328. This column also reflects a bonus of $30,000 for Dr. Dian Yang.
(2)
The amounts reported in the "Option Awards" column of the table above for 2010 reflect the fair value on the grant date of the option awards granted to our named
executive officers during 2010. These values have been determined under the principles used to calculate the value of equity awards for purposes of our consolidated financial statements. For a discussion of the assumptions and methodologies used to
calculate the amounts referred to above, please see the discussion of option awards contained in note 11 to our consolidated financial statements for the year ended December 31, 2010 included elsewhere in this prospectus. For information about
the option awards granted to our named executive officers for fiscal 2010, please see the discussion under "—Grants of Plan-Based Awards in Fiscal 2010" below.
(3)
This column reflects bonuses awarded to Dr. Andrew Yang and Ms. Chang for 2010 based on our financial performance during the year, and commissions earned by
Mr. Shirley, Dr. Dian Yang and Mr. Sarkar under our sales and application engineer commission plans. Please see "—Current Executive Compensation Program Elements—Sales and Application Engineer Commission Plans"
above for a description of the material terms of these arrangements.
Compensation of Named Executive Officers
The Summary Compensation table above quantifies the value of the different forms of compensation earned by or awarded to our named executive
officers for fiscal 2010. The primary elements of our named executive officers' total compensation reported in the table can be composed of base salary, bonuses and commissions, and long-term equity incentives consisting of stock options.
The summary compensation table should be read in conjunction with the tables and narrative descriptions that follow. The Grants of
Plan-Based Awards table, and the accompanying description of the material terms of our stock option grants, provides information regarding the long-term equity incentives awarded to our named executive officers.
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The sections entitled "Outstanding Equity Awards at Year-End 2010" and "Option Exercises and Stock Vested in 2010" provide further information on the named executive
officers' potential realizable value and actual value realized with respect to their equity awards.
Description of Employment Letters—Cash
Compensation
We have entered into employment letters with each of our named executive officers. Each named executive officer is an
at-will employee. Either we or the executive officer can terminate the employment relationship at any time for any reason. Each employment letter provides for a base salary which has historically been reviewed by the board of directors at least
annually and participation in our employee benefit plans. The current base salary levels for each of our named executive officers are set forth in "Summary Compensation Table for Fiscal 2010" above.
Provisions of the named executive officers' employment letters relating to outstanding equity incentive awards and post-termination of
employment benefits are discussed below.
Grants of Plan-Based Awards in Fiscal 2010
The following table presents information regarding equity-based awards that were granted to our named executive officers in 2010. This table does
not include the non-equity incentive plan awards granted to named executive officers for 2010 and reported in "Summary Compensation Table for Fiscal 2010" above as such awards did not include any specific threshold, target or maximum
amounts.
Name
Grant
Date
Option
Awards:
Number 
of
Securities
Underlying
Options
(#)
Exercise
or Base
Price of
Option Awards
($/Sh)
Grant Date Fair
Value of Stock
and Option
Awards
($)(1)
Andrew T. Yang, Ph.D.
—
—
—
—
Emily Chang
8/23/2010
70,000
3.55
137,452
Steven (Craig) Shirley
—
—
—
—
Dian Yang, Ph.D.
—
—
—
—
Aveek Sarkar
—
—
—
—
(1)
The amount reported in this column reflects the fair value of this award on the grant date as determined under the principles used to calculate the value of equity awards for
purposes of our consolidated financial statements. For a discussion of the assumptions and methodologies used to value this award, please see footnote (2) to the Summary Compensation Table.
Description of Plan-Based Awards
We granted one stock option to a named executive officer in 2010. As described below, most of our option grants, including this grant to Ms. Chang, have been made under, and are subject to, the terms of our
2001 Stock Option/Stock Issuance Plan (the "2001 Stock Plan"). After the consummation of this offering, the 2001 Stock Plan will be administered by the compensation committee. Prior to February 3, 2011, our board of directors
administered the plan. The compensation committee will have authority to interpret the plan provisions and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding awards upon
the occurrence of certain corporate events such as reorganizations, mergers, and stock splits, and making provision to ensure that any tax withholding obligations incurred in respect of awards are satisfied. Awards granted
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under the plan are generally only transferable to a beneficiary of a named executive officer upon his or her death. However, awards may be transferred under limited circumstances, provided that
such transfers comply with applicable securities laws.
Under the terms of the 2001 Stock Plan, if we undergo a change in control, the
plan administrator will generally provide for the substitution, assumption, exchange or other continuation or settlement (in cash, securities or property) of the outstanding awards granted under the plan, or, if the plan administrator does not so
provide, the outstanding awards granted under the plan will generally become fully vested and, in the case of options, exercisable, and will generally terminate or be terminated in such circumstances. See "—Potential Payments Upon
Termination or Change in Control" for accelerated vesting that may apply to awards held by the named executive officers under their individual award agreements.
The option granted to Ms. Chang in 2010 was granted with a per-share exercise price that was not less than the fair market value of a share of our common stock on the grant date as determined by the board of
directors. The option is subject to a four-year vesting schedule, with 25% of the option vesting on the first anniversary of the grant date and the remaining 75% of the option vesting in monthly installments over the three-year period thereafter,
and would fully vest upon a change in control of the company. Once vested, the option will generally remain exercisable until its normal expiration date which is ten years after the grant date. Subject to any accelerated vesting that may apply in
the circumstances, the unvested portion of the option will immediately terminate upon a termination of the named executive officer's employment. The named executive officer will generally have 90 days to exercise the vested portion of the
option following a termination of employment. This period is extended to twelve months if the termination is a result of the named executive officer's death or disability. The options granted to the named executive officers do not include any
dividend rights.
Outstanding Equity Awards At Year-End 2010
The following table presents information regarding the outstanding stock options held by each of our named executive officers as of December 31, 2010, including the vesting dates for the portions of these
awards that had not vested as of that date. We have not granted any equity awards other than stock options to any of the named executive officers.
Option Awards (1)
Name
Award
Grant Date
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable (2)
Option
Exercise
Price ($)
Option
Expiration
Date
Andrew T. Yang, Ph.D
—
—
—
—
—
Emily Chang
11/7/06
10,000
—
1.20
11/6/16
10/10/07
15,833
4,167
2.75
10/9/17
2/27/08
14,167
5,833
3.10
2/26/18
8/28/08
(3)
1,538
—
2.70
8/27/18
8/23/10
—
70,000
3.55
8/22/20
Steven (Craig) Shirley
5/15/07
(4)
20,000
—
2.45
5/14/17
Dian Yang, Ph.D
5/10/06
30,000
—
1.20
5/9/16
11/7/06
20,000
—
1.20
11/6/16
2/27/08
21,250
8,750
3.10
2/26/18
8/28/08
(3)
3,077
—
2.70
8/27/18
8/28/08
(5)
4,615
—
2.70
8/27/18
Aveek Sarkar
11/2/05
(4)
1,000
—
0.35
11/1/15
2/27/08
21,250
8,750
3.10
2/26/18
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(1)
Unless otherwise noted, each of these options is scheduled to vest with respect to 25% of the option on the first anniversary of the grant date and with respect to the remaining
75% of the option in monthly installments over the three-year period thereafter.
(2)
Each of the options reported in this column may be exercised prior to vesting. If the option is exercised prior to vesting, the shares issued upon the exercise would be subject
to the same vesting requirements that applied to the portion of the option being exercised.
(3)
Each of these options is scheduled to vest with respect to 22.2% of the option on the six month anniversary of the grant date and with respect to the remaining 77.8% of the
option in monthly installments over the 21-month period thereafter.
(4)
Each of these options was granted as fully vested.
(5)
This option is scheduled to vest with respect to 28.6% of the option on the six month anniversary of the grant date and with respect to the remaining 71.4% of the option in
monthly installments over the 15-month period thereafter.
Option Exercises and Stock Vested in 2010
The following table presents information regarding the exercise of stock options by the named executive officers during fiscal 2010. As noted above,
we have not granted any equity awards other than stock options to any of the named executive officers.
Option Awards
Name
Number of Shares
Acquired 
on
Exercise
(#)
Value Realized 
on
Exercise
($)(1)
Andrew T. Yang, Ph.D.
—
—
Emily Chang
—
—
Steven (Craig) Shirley
—
—
Dian Yang, Ph.D.
30,000
103,500
Aveek Sarkar
—
—
(1)
The dollar amounts shown in this column are determined by multiplying (i) the number of shares of our common stock to which the exercise of the option related, by
(ii) the difference between the per-share fair market value of our common stock on the date of exercise as determined by our board of directors and the exercise price of the options.
Potential Payments upon Termination or Change in Control
The option granted to Ms. Chang on August 23, 2010, to the extent then outstanding and unvested, will fully accelerate upon a change in control. Mr. Shirley's employment letter provides that 50%
of any then-outstanding and unvested options that Mr. Shirley holds upon a change in control will accelerate and vest in full.
If
a change in control of us had occurred on December 31, 2010, the intrinsic value of the unvested portion of Ms. Chang's option that would have accelerated upon the transaction was $126,000. This value is calculated by multiplying the
amount by which the per share fair market value of our common stock as of December 31, 2010 as determined by our board of directors exceeds the exercise price of the option by the number of shares subject to the accelerated portion of the
option. Each of Mr. Shirley's outstanding options was fully vested as of December 31, 2010.
For a discussion of
subsequent events related to potential payments upon termination or a change in control, see "—Subsequent Compensation Actions."
Equity Incentive Plans
As of February 28,
2011, our employees, consultants, and directors hold outstanding stock options for the purchase of up to 2,210,483 shares of our common stock. Those options were granted under the 2001 Stock Plan. As of February 28, 2011, 1,380,375 of
those options had
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vested and the balance were not vested. The exercise prices of those options ranged from $0.05 per share to $5.35 per share and substantially all of those options had a maximum term of ten
years from the applicable date of grant.
The following sections provide more detailed information concerning our benefit plans and,
with respect to our equity compensation plans, the shares that are available for future awards under these plans. Each summary below is qualified in its entirety by the full text of the relevant plan document and/or option agreement, which has been
filed with the Securities and Exchange Commission as an exhibit to the registration statement of which this prospectus is a part and is available through the Securities and Exchange Commission's internet site at http://www.sec.gov.
2001 Stock Option/Stock Issuance Plan
We adopted the 2001 Stock Plan in 2001. Under the 2001 Stock Plan, we are generally authorized to grant options to purchase shares of our common stock to certain of our employees, directors, officers, and
consultants and certain employees, officers, and consultants of our subsidiaries. Options under the 2001 Stock Plan are either incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, or nonqualified stock
options. All options granted under the plan expire no later than ten years from their date of grant. No new awards will be granted under the 2001 Stock Plan after the consummation of this offering.
Our compensation committee currently administers the 2001 Stock Plan. As is customary in incentive plans of this nature, the number of shares
subject to outstanding awards under the 2001 Stock Plan and the exercise prices of those awards, are subject to adjustment in the event of changes in our capital structure, reorganizations, and other extraordinary events. In the event of a change in
control (as defined in the plan), the plan administrator will generally provide for the substitution, assumption, exchange or other continuation or settlement (in cash, securities or property) of the outstanding awards granted under the plan, or, if
the plan administrator does not so provide, the outstanding awards will generally become fully vested and, in the case of options, exercisable, and will terminate or be terminated in such circumstances.
Our board of directors may amend or terminate the 2001 Stock Plan at any time. The 2001 Stock Plan requires that certain amendments, to the extent
required by applicable law or any applicable listing agency or deemed necessary or advisable by the board of directors, be submitted to stockholders for their approval.
2011 Equity Incentive Plan
Our board of directors adopted a 2011 Equity Incentive Plan in
March 2011 (the "2011 Plan") to provide an additional means through the grant of awards to attract, motivate, retain, and reward selected employees and other eligible persons. We also intend to obtain approval of this plan from our
stockholders prior to the consummation of this offering. Employees, officers, directors, and consultants that provide services to us or one of our subsidiaries may be selected to receive awards under the 2011 Plan.
Our compensation committee will administer the 2011 Plan. The administrator of the plan has broad authority to:
•
select participants and determine the types of awards that they are to receive;
•
determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or
the award and establish the vesting conditions (if applicable) of such shares or awards;
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•
cancel, modify or waive our rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding awards, subject to any required consents;
•
construe and interpret the terms of the 2011 Plan and any agreements relating to the 2011 Plan;
•
accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards subject to any required consent;
•
subject to the other provisions of the 2011 Plan, make certain adjustments to an outstanding award and authorize the termination, conversion, substitution or
succession of an award; and
•
allow the purchase price of an award or shares of our common stock to be paid in the form of cash, check or electronic funds transfer, by the delivery of
previously-owned shares of our common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third-party payment or cashless exercise on such terms as the
administrator may authorize or any other form permitted by law.
A total of 2,400,000 shares of our common stock will
be authorized for issuance with respect to awards granted under the 2011 Plan. The share limit will automatically increase on the first trading day in January of each year by an amount equal to lesser of (1) 5.0% of the total number of
outstanding shares of our common stock on the last trading day in December in the prior year or (2) such lesser number as determined by our board of directors. Any shares subject to awards that are not paid, delivered or exercised before they
expire or are canceled or terminated, fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for other award grants under the 2011 Plan. As of the date of
this prospectus, no awards have been granted under the 2011 Plan, and the full number of shares authorized under the 2011 Plan is available for award purposes.
Awards under the 2011 Plan may be in the form of incentive or nonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, and other forms of awards including cash awards. Awards under
the plan generally will not be transferable other than by will or the laws of descent and distribution, except that the plan administrator may authorize certain transfers.
Nonqualified and incentive stock options may not be granted at prices below the fair market value of the common stock on the date of grant. Incentive stock options must have an exercise price that is at least equal
to the fair market value of our common stock, or 110% of fair market value of our common stock or incentive stock option grants to any 10% owner of our common stock, on the date of grant. These and other awards may also be issued solely or in part
for services. Awards are generally paid in cash or shares of our common stock. The plan administrator may provide for the deferred payment of awards and may determine the terms applicable to deferrals.
As is customary in incentive plans of this nature, the number and type of shares available under the 2011 Plan and any outstanding awards, as well
as the exercise or purchase prices of awards, will be subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends or other similar events that change the number or kind of
shares outstanding, and extraordinary dividends or distributions of property to the stockholders. In no case (except due to an adjustment referred to above or any repricing that may be approved by our stockholders) will any adjustment be made to a
stock option or stock appreciation right award under the 2011 Plan (by amendment, cancellation and regrant, exchange or other means) that would constitute a repricing of the per-share exercise or base price of the award.
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Generally, and subject to limited exceptions set forth in the 2011 Plan, if we dissolve or undergo
certain corporate transactions such as a merger, business combination or other reorganization, or a sale of all or substantially all of our assets, the plan administrator will generally provide for the substitution, assumption, exchange or other
continuation or settlement (in cash, securities or property) of the outstanding awards granted under the plan, or, if the plan administrator does not so provide, the outstanding awards will generally become fully vested and, in the case of options,
exercisable, and will terminate or be terminated in such circumstances. The plan administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2011 Plan. For example, the administrator
could provide for the acceleration of vesting or payment of an award in connection with a corporate event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.
Our board of directors may amend or terminate the 2011 Plan at any time, but no such action will affect any outstanding award in any manner
materially adverse to a participant without the consent of the participant. Plan amendments will be submitted to stockholders for their approval as required by applicable law or any applicable listing agency. The 2011 Plan is not exclusive—our
compensation committee may grant stock and performance incentives or other compensation, in stock or cash, under other plans or authority.
The plan will terminate on March 7, 2021. However, the plan administrator will retain its authority until all outstanding awards are exercised or terminated. The maximum term of options, stock appreciation rights,
and other rights to acquire common stock under the plan is ten years after the initial date of the award.
2011 Employee Stock
Purchase Plan
Our board of directors adopted a 2011 Employee Stock Purchase Plan (the "Purchase Plan") to provide an
additional means to attract, motivate, retain, and reward employees and other eligible persons by allowing them to purchase additional shares of our common stock. We also intend to obtain approval of this plan from our stockholders prior to the
consummation of this offering.
The Purchase Plan is designed to allow our eligible employees and the eligible employees of our
participating subsidiaries to purchase shares of our common stock, at semi-annual intervals, with their accumulated payroll deductions.
Share Reserve
. A total of 600,000 shares of our common stock will initially be available for issuance under the
Purchase Plan. The share limit will automatically increase on the first trading day in January of each year by an amount equal to lesser of (1) 1.0% of the total number of outstanding shares of our common stock on the last trading day in
December in the prior year, (2) 2,000,000 shares, or (3) such lesser number as determined by our board of directors
.
Offering Periods
.    The Purchase Plan will have a series of successive overlapping offering periods with a new offering
period beginning on the first business day of February and August each year (commencing in August 2011) and each continuing for a period of 24 months. The initial offering period will begin on the first business day of August 2011. Each offering
period will consist of four purchase periods, each with a six-month duration. Purchase periods will commence on the first business day of February and August and will end on the last business day of the immediately following July or January,
respectively. The first purchase date will occur on the last business day of January 2012.
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Eligible Employees
.    Individuals scheduled to work more than 20 hours per
week for more than five calendar months per year may join an offering period on the start date of that period. Employees may participate in only one offering period at a time.
Payroll Deductions
.    A participant may contribute up to 15% of his or her cash earnings through payroll deductions, and the accumulated deductions will be applied to the purchase of
shares on each semi-annual purchase date. Unless otherwise provided in advance by the plan administrator, the purchase price per share will be equal to 85% of the fair market value per share on the start date of the offering period or, if lower, 85%
of the fair market value per share on the semi-annual purchase date. In no event, however, may any participant purchase more than 5,000 shares on any purchase date.
Reset Feature
.    If the fair market value per share of our common stock on any purchase date is less than the fair market value per share on the start date of the two-year offering
period, then that offering period will automatically terminate, and participants in that offering period will automatically be enrolled in the new 24-month offering period beginning on the next business day.
Change in Control
.    If we are acquired by merger or sale of all or substantially all of our assets or more than 50% of
our voting securities, then all outstanding purchase rights will automatically be exercised on or prior to the effective date of the acquisition, unless the plan administrator provides for the rights to be settled in cash or exchanged or substituted
on the transaction. Unless otherwise provided in advance by the plan administrator, the purchase price will be equal to 85% of the market value per share on the start date of the offering period in which the acquisition occurs or, if lower, 85% of
the fair market value per share on the purchase date.
Other Plan Provisions
.    No new offering periods
shall commence on or after the 20th anniversary of the date our stockholders approve the Purchase Plan, and the Purchase Plan shall terminate as of the purchase date on or immediately following such date unless sooner terminated in accordance with
its terms. Our board of directors may at any time amend, suspend or discontinue the Purchase Plan. However, certain amendments may require stockholder approval.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of February 28, 2011 by:
•
each of our directors and executive officers;
•
all directors and executive officers as a group;
•
each person known by us to beneficially own more than 5% of our outstanding common stock; and
•
each of the selling stockholders.
The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities.
Under the rules of the Securities and Exchange Commission, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power," which includes the power to vote or to direct the voting of such
security, or "investment power," which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire
beneficial ownership within 60 days after February 28, 2011. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no
economic interest. Except as indicated by footnote, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.
Applicable percentage ownership is based on 17,190,188 shares of common stock outstanding as of February 28, 2011, assuming conversion of all
outstanding shares of our preferred stock into common stock upon the completion of this offering, but does not reflect the exercise of any options to purchase common stock. For the purposes of the table below, we have assumed that
                   shares of common stock will be outstanding upon completion of this offering.
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Unless otherwise noted below, the address of the persons listed on the table is c/o Apache Design
Solutions, Inc., 2645 Zanker Road, San Jose, California 95134.
Common Stock Beneficially Owned
Name
Number Prior
to This
Offering
Percentage
Prior to this
Offering
Number After
This Offering
Percentage
After this
Offering
Executive Officers and Directors
Andrew T. Yang, Ph.D.
3,371,448
19.6
%
Emily Chang (1)
191,538
1.1
Dian Yang, Ph.D. (2)
277,692
1.6
Steven (Craig) Shirley (3)
140,000
*
Aveek Sarkar (4)
211,000
1.2
Ping Yang, Ph.D. (5)
151,875
*
Lori Holland (6)
37,500
*
All executive officers and directors as a group
(7 persons) (7)
4,381,053
25.5
5% or More Stockholders
Andreas V. Bechtolsheim
1,496,705
8.7
Shen Lin, Ph.D. (8)
1,127,348
6.6
Yu Liu (9)
1,143,400
6.7
Intel Capital (Cayman) Corporation (10)
1,104,995
6.4
Norman Chang (11)
1,050,598
6.1
Selling Stockholders
*
Less than 1.0%.
(1)
Includes 121,538 shares of common stock subject to outstanding stock options exercisable within 60 days of February 28, 2011.
(2)
Includes 87,692 shares of common stock subject to outstanding stock options exercisable within 60 days of February 28, 2011.
(3)
Includes 20,000 shares of common stock subject to outstanding stock options exercisable within 60 days of February 28, 2011.
(4)
Includes 31,000 shares of common stock subject to outstanding stock options exercisable within 60 days of February 28, 2011.
(5)
Includes 21,875 shares of common stock subject to outstanding stock options exercisable within 60 days of February 28, 2011.
(6)
Includes 37,500 shares of common stock subject to outstanding stock options exercisable within 60 days of February 28, 2011.
(7)
Includes 319,605 shares of common stock subject to outstanding stock options exercisable within 60 days of February 28, 2011.
(8)
Includes 11,538 shares of common stock subject to outstanding stock options exercisable within 60 days of February 28, 2011. Shen Lin served as an executive officer and on
our board of directors. See "Certain Relationships and Related Party Transactions—Compensation Arrangements" for a description of his relationship with us.
(9)
Yu Liu is one of our employees. See "Certain Relationships and Related Party Transactions—Compensation Arrangements" for a description of his relationship with us.
(10)
Intel Capital (Cayman) Corporation is a subsidiary of Intel Corporation. Arvind Sodhani, the executive vice president of Intel Corporation, Ravi Jacob, the vice president and
treasurer of Intel Corporation, and Marty Linne, the general counsel of Intel Capital Corporation, a subsidiary of Intel Corporation, disclaim beneficial ownership of the shares held by Intel Capital (Cayman) Corporation except to the extent of
their pecuniary interests therein. The address for Intel Capital (Cayman) Corporation is 2200 Mission College Blvd., MS: RNB 6-59, Santa Clara, CA 95054. We have entered into certain business agreements with Intel Capital (Cayman) Corporation or its
affiliates. See "Certain Relationships and Related Party Transactions—Business Agreements with Intel Corporation" for a description of the relationship between Intel Capital (Cayman) Corporation and us.
(11)
Norman Chang is one of our employees. See "Certain Relationships and Related Party Transactions—Compensation Arrangements" for a description of his relationship
with us.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since January 1, 2008, we have been a party to several transactions in which the amount involved exceeded $120,000 and in which the following
persons had a direct or indirect material interest:
•
any of our directors or executive officers;
•
any nominee for election as one of our directors;
•
any person or entity who is known by us to own beneficially more than 5% of our outstanding stock; or
•
any member of the immediate family of any of the foregoing persons.
These transactions include:
Business Agreements with Intel Corporation
As of February 28, 2011, Intel Capital (Cayman) Corporation held 834,725 shares of our Series A preferred stock and 270,270 shares of our
Series B preferred stock. As a result, Intel Capital (Cayman) Corporation holds in excess of 5% of our outstanding stock. Intel Capital (Cayman) Corporation is an affiliate of Intel Corporation, a customer of ours. We have entered into a series of
agreements with Intel Corporation.
In 2001, we entered into a Development, Marketing & License Agreement, or the development
agreement, with Intel Corporation in connection with Intel Corporation's investment in us. The development agreement generally provided a framework for us to work with Intel Corporation while designing our products. The development agreement
had a five year term, but certain provisions, including those provisions summarized below, survive the termination or expiration of the development agreement. In March 2011, we entered into an amendment to the development agreement with Intel
Corporation. Pursuant to the development agreement, as amended, we have agreed, among other things, not to assert our patents against Intel Corporation, and that, under certain circumstances, if we divest or assign any of our patents, then Intel
Corporation will be entitled to an irrevocable, worldwide, nonexclusive license to such patents to make or have made Intel Corporation's products. Further, in addition, we agreed to allow Intel Corporation, in its discretion, to be a selling
stockholder and register shares for resale pursuant to the registration statement of which this prospectus is a part.
At the same time
that we entered into the development agreement, we also entered into a separate letter agreement with Intel Corporation in connection with its investment in us. The letter agreement provides, among other things, that Intel Corporation has the right
to have a representative attend meetings of our board of directors and also has the right to receive certain information from us.
In
October 2006, we entered into a Software License Agreement with Intel Corporation. Pursuant to this agreement, Intel Corporation licensed certain of our software and services. We agreed to indemnify Intel Corporation for any damages incurred by
Intel Corporation because of actual or alleged infringement of any patent, copyright, trade secret, trademark, mask work or other proprietary right arising out of Intel Corporation's use of the licensed software or services provided by us. In
June 2008, we entered into a Purchase Agreement–Software and Related Services with Intel Corporation. We subsequently amended this agreement to extend the term and amend the pricing provisions. Pursuant to this agreement, Intel Corporation
licensed certain of our products and services. The agreement provided similar indemnification terms as those in the Software License Agreement dated October 2006.
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Option Exchange Program
In June 2008, our board of directors reviewed our historical option grant practices and the fair value of our common stock at the time of the grant of stock options. After discussion and deliberation, our board of
directors determined that the fair value of a share of our common stock as of December 31, 2005 and during 2006 was $1.20 per share. During 2006, we had issued stock options with an exercise price less than $1.20 per share. Our board of
directors adopted a program pursuant to which the holders of stock options granted by us during 2006 were permitted, under transition relief afforded by the Internal Revenue Service under Section 409A of the Internal Revenue Code, to elect not
later than December 31, 2008 to increase the per share exercise price of such options (to the extent still outstanding and not previously exercised) to $1.20 per share. Several optionees elected to increase the exercise prices of their
outstanding stock options pursuant to this program. The following executive officers and directors made such election with respect to the number of shares indicated below:
Name
Number of Shares
Old Exercise Price
New Exercise Price
Emily Chang
10,000
$
0.50
$
1.20
Shen Lin
10,000
$
0.50
$
1.20
Dian Yang
50,000
$
0.50
$
1.20
Ping Yang
80,000
$
0.50
$
1.20
Compensation Arrangements
Shen Lin is one of our employees but is not an executive officer. He previously was both an executive officer and a member of our board of
directors. Dr. Lin resigned as an executive officer in August 2009 and as a director in February 2011. He did not receive any additional compensation for his service as a director during 2010. As an employee, Dr. Lin received a base salary
of $135,000, a cash bonus of $100,000, and a special bonus of $183,412, so that his aggregate compensation in 2010 was $418,412.
Norman
Chang is one of our employees but is not an executive officer. As an employee, Mr. Chang received a base salary of $135,000, a cash bonus of $40,000, and a special bonus of $183,412, so that his aggregate compensation in 2010 was $358,412.
Yu Liu is currently one of our employees but is not an executive officer. As an employee, Mr. Liu received a base salary of
$130,000, a cash bonus of $45,000, and a special bonus of $183,412, so that his aggregate compensation in 2010 was $358,412.
Indemnification
Agreements
We have entered into indemnification agreements with several of our executive officers and all of our directors. Each
indemnification agreement provides that we will indemnify the director or executive officer, as the case may be, to the fullest extent permitted by law for claims arising in his or her capacity as our director or executive officer, as the case may
be, provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe that his or her
conduct was unlawful. In the event that we do not assume the defense of a claim against a director or such officer, we will be required to advance his or her expenses in connection with his or her defense, provided that he or she undertakes to repay
all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us.
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Registration Rights
In addition to rights of resale under Rule 144, all of the holders of our Series A preferred stock and Series B preferred stock and some holders of our common stock, including our chief executive officer and board
member, Dr. Andrew Yang, and certain other five percent stockholders, who will hold an aggregate of 9,953,885 shares of outstanding common stock after this offering, have entered into an Amended and Restated Investors' Rights Agreement, or the
stockholders' agreement, which entitles them to registration rights that enable them to require us to file a registration statement registering their shares for resale to the public. These registration rights include demand registration rights,
Form S-3 registration rights, and piggyback registration rights. We are also responsible for paying all registration expenses in connection with any registration pursuant to the stockholders' agreement. We have also agreed to indemnify each of
these stockholders which is party to the stockholders' agreement against certain liabilities under the Securities Act in connection with any registration of their registrable shares.
Review, Approval, or Ratification of Related Party Transactions
Upon completion of this
offering, our audit committee will be responsible for reviewing and approving all related party transactions that are required to be disclosed under the applicable rules of the Securities and Exchange Commission and the Nasdaq Global Market, when
appropriate, and authorizing or ratifying all such transactions in accordance with written policies and procedures established by our board of directors from time to time.
No member of our audit committee may participate in the review, approval, authorization or ratification of a transaction with respect to which he or she is a related party, except that such member can be counted
for purposes of a quorum and shall provide such information with respect to the transaction as may be reasonably requested by other members of the committee.
The transactions described under "Certain Relationships and Related Party Transactions" were not reviewed or approved by our audit committee because they took place prior to the creation of the committee.
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DESCRIPTION OF CAPITAL STOCK
General
Upon completion of this offering,
our authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. This section refers to our amended and restated certificate of
incorporation and our amended and restated bylaws, each of which is expected to become effective upon consummation of this offering. All of our existing stock is, and the shares of common stock being offered by us in this offering will be, upon
payment therefor, validly issued, fully paid, and nonassessable. As of February 28, 2011, there were 116 holders of our common stock, 16 holders of our Series A preferred stock, and 22 holders of our Series B preferred stock. Immediately prior
to or upon consummation of this offering, we expect that all outstanding shares of preferred stock will be converted into shares of our common stock on a one-for-one basis.
The discussion below describes the most important terms of our capital stock, amended and restated certificate of incorporation and amended and restated bylaws that will be in effect upon completion of this
offering. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, refer to our amended and restated certificate of incorporation and amended and restated bylaws, copies of which
have been filed as exhibits to the registration statement of which this prospectus is a part, and to the applicable provisions of the General Corporation Law of the State of Delaware, or the DGCL.
Common Stock
The holders of our common
stock are entitled to one vote per share on all matters to be voted upon by stockholders. Holders of our common stock are entitled, among other things, (i) to share ratably in dividends if, when, and as declared by our board of directors out of
funds legally available therefor and (ii) in the event of liquidation, dissolution or winding-up of the company, to share ratably in the distribution of assets legally available therefor, after payment of debts and expenses. Holders of our
common stock have no subscription, redemption or conversion rights. The holders of our common stock do not have cumulative voting rights in the election of directors and have no preemptive rights to subscribe for additional shares of our capital
stock. The rights, preferences, and privileges of holders of our common stock are subject to the terms of any series of preferred stock which we may issue in the future. A vote of the holders of a majority of our common stock is generally required
to take action under our amended and restated certificate of incorporation and amended and restated bylaws.
Preferred Stock
Our board of directors has the authority, within the limitations and restrictions stated in our amended and restated certificate of incorporation,
to authorize the issuance of shares of preferred stock, in one or more classes or series, and to fix the rights, preferences, privileges, and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences, preemptive rights, and the number of shares constituting any series or the designation of such series. We currently have 3,633,665 shares of Series A convertible preferred stock and 2,300,000 shares of Series B convertible
preferred stock outstanding. These shares of Series A preferred stock and Series B preferred stock will be converted into shares of common stock on a one-to-one basis immediately prior to or upon consummation of this offering and as a result, after
this offering, we will not have designated any series of preferred stock and we will not have any outstanding shares of preferred stock. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of common
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stock. The issuance of preferred stock, while providing flexibility in connection with possible future financings and acquisitions and other corporate purposes could, under certain circumstances,
have the effect of delaying, deferring or preventing a change in control of our company and might harm the market price of our common stock.
Registration Rights
In addition to rights
of resale under Rule 144, all of the holders of our Series A preferred stock and Series B preferred stock and certain holders of our common stock, who will hold an aggregate of 9,953,885 shares of outstanding common stock after this offering, have
entered into a stockholders' agreement that entitles them to registration rights that enable them to require us to file a registration statement registering their shares for resale to the public. These registration rights include demand
registration rights, Form S-3 registration rights, and piggyback registration rights. We are also responsible for paying all registration expenses in connection with any registration pursuant to the stockholders' agreement. We have agreed to
indemnify each of the stockholders that is a party to the stockholders' agreement against certain liabilities under the Securities Act in connection with any registration of their registrable shares.
Provisions of our Certificate of Incorporation and Bylaws and Delaware Anti-Takeover Law
We are governed by the DGCL. Upon completion of this offering, our amended and restated certificate of incorporation and amended and restated bylaws
will contain provisions that could make more difficult the acquisition of the company by means of a tender offer, a proxy contest or otherwise.
Classified Board
Upon the completion of this offering, our amended and restated certificate of
incorporation and amended and restated bylaws will provide for a classified board of directors, pursuant to which the board of directors will be divided into three classes whose members will serve three-year staggered terms. Our certificate of
incorporation also will prohibit cumulative voting by stockholders in connection with the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates.
No Written Consent of Stockholders
Upon the completion of this offering, our amended and restated bylaws will provide that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that
stockholders may not take any action by written consent in lieu of a meeting.
Advance Notice Procedures
Upon the completion of this offering, our amended and restated bylaws will provide that our chief executive officer, chairperson of the board of
directors or a majority of the members of our board of directors then in office may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of
stockholders. Our amended and restated bylaws will also limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.
Our amended and restated bylaws will also establish an advance notice procedure for stockholders to make nominations of candidates for election as
directors, or bring other
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business before an annual or special meeting of the stockholders. This notice procedure will provide that only persons who are nominated by, or at the direction of our board of directors or by a
stockholder who has given timely written notice to the secretary of our company prior to the meeting at which directors are to be elected, will be eligible for election as directors. The procedure also requires that, in order to raise matters at an
annual or special meeting, those matters must be raised before the meeting pursuant to the notice of meeting the company delivers or by, or at the direction of our board of directors or by a stockholder who is entitled to vote at the meeting and who
has given timely written notice to the secretary of the company of his, her or its intention to raise those matters at the annual meeting. If our chairperson or other officer presiding at a meeting determines that a person was not nominated, or
other business was not brought before the meeting, in accordance with the notice procedure, that person will not be eligible for election as a director, or that business will not be conducted at the meeting.
Blank Check Preferred Stock
Upon the completion of this offering, our certificate of incorporation will provide for 5,000,000 authorized shares of preferred stock. The
existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For
example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interest of us and our stockholders, our board of directors could cause shares of preferred stock to
be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our certificate of
incorporation will grant our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets
available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control
of us.
Authorized but Unissued Shares
Our authorized but unissued shares of common stock will be available for future issuance without stockholder approval. We may use these additional shares for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions, and employee benefit plans. The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control of us by means of a
proxy contest, tender offer, merger or otherwise.
Limitation of Officer and Director Liability and Indemnification Arrangements
Upon completion of this offering, our amended and restated certificate of incorporation and our amended and restated bylaws will
limit the liability of our officers and directors to the maximum extent permitted by Delaware law. Delaware law provides that directors will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except
liability for:
•
any breach of their duty of loyalty to the corporation or its stockholders;
•
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
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•
unlawful payments of dividends or unlawful stock repurchases or redemptions; or
•
any transaction from which the director derived an improper personal benefit.
These provisions of our amended and restated certificate of incorporation and amended and restated bylaws will have no effect on any non-monetary
remedies that may be available to us or our stockholders, nor will it relieve us or our officers or directors from compliance with federal or state securities laws. The amended and restated bylaws also will generally provide that we will indemnify,
to the fullest extent permitted by law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, investigation, administrative hearing or any other proceeding by reason of the fact
that he or she is or was our director or officer, or is or was serving at our request as a director, officer, employee or agent of another entity, against expenses incurred by him or her in connection with such proceeding. An officer or director
will not be entitled to indemnification by us if:
•
the officer or director acted in bad faith or in a manner he or she did not believe to be in, or not opposed to, our best interests; or
•
with respect to any criminal action or proceeding, the officer or director did not have reasonable cause to believe his or her conduct was lawful.
In addition to the indemnification to be provided for in our amended and restated certificate of incorporation, we
have entered into indemnification agreements with certain of our executive officers and all of our directors. Each indemnification agreement provides that we will indemnify such executive officer or director to the fullest extent permitted by law
for claims arising in his or her capacity as our director or officer provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal
proceeding, had no reasonable cause to believe that his or her conduct was unlawful. In the event that we do not assume the defense of a claim against an executive officer or a director, we will be required to advance his or her expenses in
connection with his or her defense, provided that he or she undertakes to repay all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us.
The overall effect of the foregoing provisions and indemnification agreements may be to deter a future offer to buy our company. Stockholders might
view such an offer to be in their best interest should the offer include a substantial premium over the market price of our common stock at that time. In addition, these provisions may have the effect of assisting our management to retain its
position and place it in a better position to resist changes that the stockholders may want to make if dissatisfied with the conduct of our business. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers or persons controlling our company pursuant to the foregoing provisions, the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable.
Section 203 of the Delaware General Corporate Law
Upon completion of this offering, we will be subject to the provisions of Section 203 of the Delaware General Corporation Law. In general,
Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a three-year period following the time that this stockholder becomes an interested
stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a
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person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation's voting
stock. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
•
before the stockholder became interested, the board of directors approved either the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder;
•
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some
instances; or
•
at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and authorized at an
annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
Transfer Agent and Registrar
The transfer
agent and registrar for our common stock is                     .
Listing
We will apply to have our shares of common stock listed on the Nasdaq Global Market
under the symbol "APAD."
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and we cannot assure you that a liquid trading market for our common stock
will develop or be sustained after this offering. Future sales of substantial numbers of shares of our common stock, including shares issued upon exercise of options, in the public market after this offering, or the anticipation of those sales,
could adversely affect market prices of our common stock prevailing from time to time and could impair our ability to raise capital through sales of our equity securities.
Upon completion of this offering, we will have outstanding                  shares of common stock, assuming the conversion of all
outstanding shares of our preferred stock.
All of the shares sold in this offering will be freely tradable without restriction under
the Securities Act unless purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act. All of the remaining
                 shares of common stock to be outstanding after this offering will be deemed "restricted securities," as that term is defined under Rule 144,
and will be subject to the 180-day lock-up period, which may be extended in specified circumstances described below. Within 180 days of the date of this prospectus, all of these shares will qualify for resale under Rule 144, excluding any
shares held by affiliates.
Restricted securities may be sold in the public market only if they have been registered or if they qualify
for an exemption from registration under Rule 144 or 701 under the Securities Act, which are summarized below.
Rule 144
In general, under Rule 144 under the Securities Act, beginning 90 days after the effective date of the registration statement of which this
prospectus is a part, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning
of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A
non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.
A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities
within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding shares of our common stock or the average
weekly trading volume of our common stock reported through the Nasdaq Global Market during the four calendar weeks preceding such sale. Such sales are also subject to certain manner of sale provisions, notice requirements, and the availability of
current public information about us.
Rule 701
In general, under Rule 701 of the Securities Act, most of our employees, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement
are eligible to resell those shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with the holding period or certain other restrictions contained in Rule 144.
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Lock-Up Agreements
We, our directors and officers and substantially all of our stockholders and holders of options to purchase our stock, have agreed, subject to certain limited exceptions, not to offer, sell, contract to sell or
otherwise dispose of, or enter into any transaction that is designed to, or could be expected to, result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our
common stock or derivatives of our common stock owned by these persons prior to this offering or common stock issuable upon exercise of options held by these persons for a period of 180 days after the effective date of the registration statement of
which this prospectus is a part without the prior written consent of Deutsche Bank Securities Inc. This consent may be given at any time without public notice. We have entered into a similar agreement with the representative of the underwriters,
except that we may be permitted to issue shares of our common stock for acquisition purposes. There are currently no agreements between the representative and any of our stockholders or affiliates releasing them from these lock-up agreements prior
to the expiration of the 180-day period.
The 180-day restricted period described in the preceding paragraph will be extended if:
•
during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or
•
prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of
the 180-day restricted period,
in which case the restrictions described in the preceding paragraph will continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Deutsche Bank Securities Inc.
Registration Rights
In addition to rights
of resale under Rule 144, all of the holders of our Series A preferred stock and Series B preferred stock and certain holders of our common stock, who will hold an aggregate of 9,953,885 shares of outstanding common stock after this offering, have
entered into a stockholders' agreement that entitles them to registration rights that enable them to require us to file a registration statement registering their shares for resale to the public. These registration rights include demand
registration rights, Form S-3 registration rights, and piggyback registration rights. We are also responsible for paying all registration expenses in connection with any registration pursuant to the stockholders' agreement. We have agreed to
indemnify each of the stockholders that is a party to the stockholders' agreement against certain liabilities under the Securities Act in connection with any registration of their registrable shares.
Equity Plans
Following this offering, we
intend to file registration statements on Form S-8 under the Securities Act to register all of the shares of common stock issued or issuable under our 2001 Stock Option/Stock Issuance Plan, our 2011 Equity Incentive Plan, and our 2011 Employee
Stock Purchase Plan.
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MATERIAL U.S. FEDERAL TAX CONSEQUENCES FOR
NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of the material U.S. federal income and estate tax consequences relating to the ownership and disposition of our common stock by non-U.S. holders (as defined below) who
purchase our common stock in this offering and hold such common stock as capital assets (generally for investment). This discussion is based on currently existing provisions of the Internal Revenue Code of 1986, as amended, applicable U.S. Treasury
regulations promulgated thereunder, judicial decisions, and rulings and pronouncements of the U.S. Internal Revenue Service, or the IRS, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or
subject to different interpretation. This discussion does not address all the tax consequences that may be relevant to specific holders in light of their particular circumstances or to holders subject to special treatment under U.S. federal income
or estate tax laws (such as financial institutions, insurance companies, tax-exempt organizations, controlled foreign corporations, passive foreign investment companies, retirement plans, partnerships or entities treated as such for U.S. federal
income tax purposes and their partners, dealers in securities, brokers, certain former U.S. citizens or long-term residents or persons who have acquired our common stock as part of a straddle, hedge, conversion transaction or other integrated
investment). This discussion does not address the state, local or foreign tax or U.S. federal non-income or estate tax consequences relating to the ownership and disposition of our common stock. You are urged to consult your own tax advisor
regarding the U.S. federal tax consequences of owning and disposing of our common stock, as well as the applicability and effect of any state, local or foreign tax laws.
As used in this discussion, the term "non-U.S. holder" refers to a beneficial owner of our common stock that for U.S. federal income tax purposes is not:
•
an individual who is a citizen or resident of the United States;
•
a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of
Columbia;
•
an estate the income of which is subject to U.S. federal income tax regardless of the source thereof; or
•
a trust (a) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S.
persons have the authority to control all its substantial decisions or (b) that has in effect a valid election under applicable U.S. Treasury regulations to be treated as a U.S. person.
If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax
treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common stock, we urge you to consult your own tax advisor.
Dividends
We do not anticipate paying
dividends on our common stock in the foreseeable future. See "Dividend Policy." If we make a distribution of cash or property, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or
accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first
reduce a non-U.S. holder's basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock.
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Dividends paid by us to a non-U.S. holder, to the extent treated as dividends for U.S. federal income
tax purposes, generally will be subject to U.S. federal withholding tax at a 30% rate, unless (i) an applicable income tax treaty reduces or eliminates such tax, and a non-U.S. holder provides us with an IRS Form W-8BEN (or successor form)
certifying its entitlement to the benefit of such treaty or (ii) the dividends are effectively connected with a non-U.S. holder's conduct of a trade or business in the United States and the non-U.S. holder provides us with an IRS Form
W-8ECI (or successor form). In the latter case, a non-U.S. holder generally will be subject to U.S. federal income tax with respect to such dividends in the same manner as a U.S. person, unless otherwise provided in an applicable income tax treaty.
Additionally, a non-U.S. holder that is a corporation may be subject to a branch profits tax on its after-tax effectively connected dividend income at a rate of 30% (or at a reduced rate under an applicable income tax treaty). If a non-U.S. holder
is eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty, such non-U.S. holder may obtain a refund of any excess amount withheld by filing an appropriate claim for refund with the IRS.
Sale, Exchange or Other Disposition
Generally, a non-U.S. holder will not be subject to U.S. federal income tax on gain realized upon the sale, exchange or other disposition of our
common stock unless (i) such non-U.S. holder is an individual present in the U.S. for 183 days or more in the taxable year of the sale, exchange or other disposition and certain other conditions are met, (ii) the gain is effectively
connected with such non-U.S. holder's conduct of a trade or business in the United States and, where a tax treaty so provides, the gain is attributable to a U.S. permanent establishment of such non-U.S. holder or (iii) we are or have been
a "U.S. real property holding corporation" for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held our common stock and
either (a) our common stock has ceased to be traded on an "established securities market" prior to the beginning of the calendar year in which the sale, exchange or other disposition occurs or (b) the non-U.S. holder owns
(actually or constructively) more than five percent of our common stock. We believe that we are not a U.S. real property holding corporation, and we do not anticipate becoming a U.S. real property holding corporation.
A non-U.S. holder described in (i) above will be required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset by
U.S. source capital losses. A non-U.S. holder described in (ii) above will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in
(ii) may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. holders should consult any applicable income tax or other treaties that may provide for different
rules.
Federal Estate Tax
Common stock owned or treated as owned by an individual who is a non-U.S. holder at the time of his or her death generally will be included in the
individual's gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
Information reporting and backup withholding (at
the then applicable rate) may apply to certain payments made to a non-U.S. holder on or with respect to our common stock, unless the non-U.S. holder certifies as to its status as a non-U.S. holder under penalties of perjury or
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otherwise establishes an exemption and certain other conditions are satisfied. Pursuant to applicable income tax treaties or other agreements, the IRS may also make these information reports
available to tax authorities in the non-U.S. holder's country of residence. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder will be allowed as a refund or
a credit against such non-U.S. holder's U.S. federal income tax liability, provided that the required information is timely furnished to the IRS and other applicable requirements are satisfied.
Recently Enacted Legislation Affecting Taxation of our Common Stock Held by or Through Foreign Entities
Recently enacted legislation generally will impose a U.S. federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our
common stock paid after December 31, 2012 to a "foreign financial institution" (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to
collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign
entities with U.S. owners). The legislation also will generally impose a U.S. federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our common stock paid after December 31, 2012 to a non-financial foreign entity
unless such entity provides the withholding agent with a certification identifying the direct and indirect U.S. owners of the entity. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. Prospective
investors are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in our common stock.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the underwriters named below, through their representative Deutsche Bank
Securities Inc., have severally agreed to purchase from us and the selling stockholders the following respective number of shares of common stock at a public offering price less the underwriting discounts and commissions set forth on the cover page
of this prospectus:
Underwriters
Number
of Shares
Deutsche Bank Securities Inc.
Needham & Company, LLC
Canaccord Genuity Inc.
ThinkEquity LLC
D.A. Davidson & Co.
Total
The underwriting agreement provides that the obligations of the several underwriters to purchase the shares of common
stock offered hereby are subject to certain conditions precedent and that the underwriters will purchase all of the shares of common stock offered by this prospectus, other than those covered by the over-allotment option described below, if any of
these shares are purchased.
We have been advised by the representative of the underwriters that the underwriters propose to offer the
shares of common stock to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $         per share under the
public offering price. The underwriters may allow, and these dealers may re-allow, a concession of not more than $         per share to other dealers. After the initial public offering, the representative of
the underwriters may change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not
later than 30 days after the date of this prospectus, to purchase up to         additional shares of common stock at the public offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus. The underwriters may exercise this option only to cover over-allotments made in connection with the sale of the common stock offered by this prospectus. To the extent that the underwriters exercise this option, each of
the underwriters will become obligated, subject to conditions, to purchase approximately the same percentage of these additional shares of common stock as the number of shares of common stock to be purchased by it in the above table bears to the
total number of shares of common stock offered by this prospectus. We will be obligated, pursuant to the option, to sell these additional shares of common stock to the underwriters to the extent the option is exercised. If any additional shares of
common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the             shares are being offered.
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The underwriting discounts and commissions per share are equal to the public offering price per share
of common stock less the amount paid by the underwriters to us or the selling stockholders per share of common stock. The underwriting discounts and commissions are          percent of the initial public
offering price. We and the selling stockholders have agreed to pay the underwriters the following discounts and commissions, assuming either no exercise or full exercise by the underwriters of the underwriters' over-allotment option:
Total Fees
Fee per share
Without Exercise of
Over-Allotment Option
With Full Exercise of
Over-Allotment Option
Discounts and commissions paid by us
$
$
$
Discounts and commissions paid by the selling stockholders
$
$
$
In addition, we estimate that our share
of the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $        .
We and the selling stockholders have agreed to indemnify the underwriters against some specified types of liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters
may be required to make in respect of any of these liabilities.
We, each of our officers and directors, and substantially all of our
stockholders and holders of options to purchase our stock, have agreed, subject to certain limited exceptions, not to offer, sell, contract to sell or otherwise dispose of, or enter into any transaction that is designed to, or could be expected to,
result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our common stock or derivatives of our common stock owned by these persons prior to this offering or common
stock issuable upon exercise of options held by these persons for a period of 180 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of Deutsche Bank Securities Inc. This
consent may be given at any time without public notice. We have entered into a similar agreement with the representative of the underwriters. There are no agreements between the representative and any of our stockholders or affiliates releasing them
from these lock-up agreements prior to the expiration of the 180-day period.
The 180-day restricted period described in the preceding
paragraph will be extended if:
•
during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or
•
prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of
the 180-day restricted period,
in which case the restrictions described in the preceding paragraph will continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Deutsche Bank Securities Inc.
The representative of the underwriters have advised us that the underwriters do not intend to confirm sales to any account over which they exercise
discretionary authority.
In connection with the offering, the underwriters may purchase and sell shares of our common stock in the open
market. These transactions may include short sales, purchases to cover positions created by short sales, and stabilizing transactions.
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Short sales involve the sale by the underwriters of a greater number of shares than they are required
to purchase in the offering. Covered short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares of common stock from us in the offering. The underwriters may close out any covered short
position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the
price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.
Naked short sales are any sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be
created if underwriters are concerned that there may be downward pressure on the price of the shares in the open market prior to the completion of the offering.
Stabilizing transactions consist of various bids for or purchases of our common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting
discount received by it because the representative of the underwriters have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have the effect of preventing or slowing a decline in the market price of our
common stock. Additionally, these purchases, along with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that
might otherwise exist in the open market. These transactions may be effected on the Nasdaq Global Market, in the over-the-counter market, or otherwise.
We will apply to have our shares of common stock listed on the Nasdaq Global Market under the symbol "APAD."
Pricing of this Offering
Prior to this
offering, there has been no public market for our common stock. Consequently, the initial public offering price of our common stock will be determined by negotiation among us, the selling stockholders, and the representative of the underwriters.
Among the primary factors that will be considered in determining the public offering price are:
•
prevailing market conditions;
•
our results of operations in recent periods;
•
the present stage of our development;
•
the market capitalizations and stages of development of other companies that we and the representative of the underwriters believe to be comparable to our
business; and
•
estimates of our business potential.
Electronic Distribution
A prospectus in
electronic format is being made available on Internet web sites maintained by the lead underwriter of this offering and may be made available on web sites maintained by other underwriters. Other than the prospectus in electronic format, the
information on any
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underwriter's web site and any information contained in any other web site maintained by an underwriter is not part of the prospectus or the registration statement of which the prospectus
forms a part.
Relationships with Underwriters
Some of the underwriters or their affiliates may provide investment banking services to us in the future.
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LEGAL MATTERS
O'Melveny & Myers LLP, Menlo Park, California, will pass upon the validity of the shares of common stock offered hereby. As of the
date of this prospectus, an attorney at O'Melveny & Myers LLP beneficially owned an aggregate of less than 0.1% of our outstanding shares of common stock. Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California, is
representing the underwriters in this offering.
EXPERTS
The consolidated financial statements as of December 31, 2009 and 2010 and for each of the years in the three-year period ended
December 31, 2010 are included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement on Form S-1 with the Securities and Exchange Commission with respect to the registration of the common stock
offered for sale with this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits to the registration statement. For further information about us, the common stock we are offering
by this prospectus and related matters, you should review the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus about the contents of any contract or any other
document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration
statement and the exhibits that were filed with the registration statement may be inspected without charge at the public reference facilities maintained by the Securities and Exchange Commission at 100 F. Street, N.E., Washington, D.C. 20549, and
copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the prescribed fee. Information on the operation of the public reference facilities may be obtained by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the
Securities and Exchange Commission. The address of the site is http://www.sec.gov. You may also request copies of these filings, at no cost, by telephone at (408) 457-2000 or by mail to: Apache Design Solutions, Inc., 2645 Zanker Road, San
Jose, California 95134, Attention: Chief Financial Officer; http://www.apache-da.com.
Upon completion of this offering, we will become
subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance with such requirements, will file periodic reports, proxy statements, and other information with the Securities and
Exchange Commission. These periodic reports, proxy statements, and other information will be available for inspection and copying at the regional offices, public reference facilities, and web site of the Securities and Exchange Commission referred
to above. We intend to furnish our stockholders with annual reports containing consolidated financial statements audited by our independent registered accounting firm.
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APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of December 31, 2009 and 2010
F-3
Consolidated Statements of Operations for the three years ended December 31, 2008, 2009, and
2010
F-4
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Income for the three years ended December 31, 2008,
 2009, and 2010
F-5
Consolidated Statements of Cash Flows for the three years ended December 31, 2008, 2009, and
2010
F-6
Notes to Consolidated Financial Statements
F-7
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors
Apache Design Solutions, Inc.:
We have audited the accompanying consolidated balance sheets of Apache Design Solutions, Inc. and subsidiaries (the Company) as of
December 31, 2009 and 2010, and the related consolidated statements of operations, stockholders' equity (deficit) and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2010. These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Apache Design Solutions, Inc. and subsidiaries as of December 31, 2009 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2010, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Mountain View, California
March 14, 2011
F-2
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except par value)
December 31,
Pro Forma
Equity as of
December 31,
2010
2009
2010
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
16,957
$
26,175
Short-term investments
—
1,052
Accounts receivable
7,828
7,500
Deferred tax assets
2,525
1,263
Prepaid expenses and other current assets
878
1,905
Total current assets
28,188
37,895
Property and equipment, net
1,114
857
Intangible assets, net
7,257
5,013
Goodwill
4,531
4,531
Long-term deferred tax assets
2,441
3,916
Other assets
538
499
Total assets
$
44,069
$
52,711
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses
$
4,916
$
5,946
Deferred revenue, current portion
26,196
27,303
Total current liabilities
31,112
33,249
Deferred revenue, net of current portion
1,684
1,874
Long-term purchase consideration
250
—
Long-term tax liabilities
4,242
6,713
Other long-term liabilities
57
8
Total liabilities
37,345
41,844
Redeemable convertible preferred stock:
Series A redeemable convertible preferred stock, ($0.0001 par value, 3,634 shares authorized, issued, and outstanding)
1,741
1,741
$
—
Series B redeemable convertible preferred stock, ($0.0001 par value, 2,300 shares authorized, issued, and outstanding)
4,255
4,255
—
Total redeemable convertible preferred stock
5,996
5,996
—
Stockholders' equity:
Common stock ($0.0001 par value, 20,000 shares authorized, 10,968, and 11,100 issued and outstanding at December 31, 2009 and 2010,
respectively)
1
1
2
Additional paid-in capital
3,870
4,709
10,704
Retained earnings (accumulated deficit)
(3,143
)
161
161
Total stockholders' equity
728
4,871
$
10,867
Total liabilities, redeemable convertible preferred stock, and stockholders' equity
$
44,069
$
52,711
See accompanying notes to consolidated financial statements.
F-3
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
Year Ended December 31,
2008
2009
2010
Revenue
$
25,695
$
34,601
$
44,047
Cost of revenue
5,812
6,662
8,999
Gross profit
19,883
27,939
35,048
Operating expenses:
Sales and marketing
9,529
9,794
12,930
Research and development
7,797
8,588
11,516
General and administrative
2,903
3,573
4,926
Total operating expenses
20,229
21,955
29,372
Operating income (loss)
(346
)
5,984
5,676
Other income (expense)
13
(93
)
366
Income (loss) before income taxes
(333
)
5,891
6,042
Provision (benefit) for income taxes
(3,507
)
2,622
2,738
Net income
$
3,174
$
3,269
$
3,304
Net income per share:
Basic
$
0.29
$
0.30
$
0.30
Diluted
$
0.18
$
0.19
$
0.19
Weighted-average shares used in computing net income per share:
Basic
10,882
10,930
11,016
Diluted
17,253
17,237
17,631
Pro forma net income per share (unaudited):
Basic
$
0.19
Diluted
$
0.19
Weighted-average shares used in computing pro forma net income per share (unaudited):
Basic
16,950
Diluted
17,631
See accompanying notes to consolidated
financial statements.
F-4
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Income
(In thousands)
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(Deficit)
Shares
Amount
Balance, December 31, 2007
10,845
$
1
$
2,076
$
(9,586
)
$
(2
)
$
(7,511
)
Comprehensive income
Net income
—
—
—
3,174
—
3,174
Unrealized investment gain, net
—
—
—
—
2
2
Total comprehensive income
3,176
Issuance of common stock upon exercise of stock options for cash
65
—
49
—
—
49
Repurchase of common
stock
(4
)
—
—
—
—
—
Stock-based compensation
—
—
911
—
—
911
Accretion of preferred stock
—
—
(87
)
—
—
(87
)
Balances, December 31, 2008
10,906
1
2,949
(6,412
)
—
(3,462
)
Net income
—
—
—
3,269
—
3,269
Issuance of common stock upon exercise of stock options for cash
62
—
102
—
—
102
Stock-based compensation
—
—
819
—
—
819
Balances, December 31, 2009
10,968
1
3,870
(3,143
)
—
728
Net income
—
—
—
3,304
—
3,304
Issuance of common stock upon exercise of stock options for cash
132
—
119
—
—
119
Stock-based compensation
—
720
—
—
720
Balances, December 31, 2010
11,100
$
1
$
4,709
$
161
$
—
$
4,871
See accompanying notes to consolidated financial statements.
F-5
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
2008
2009
2010
Cash flows from operating activities:
Net income
$
3,174
$
3,269
$
3,304
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
1,650
2,315
2,788
Loss on disposal of property and equipment
—
12
—
Stock-based compensation
911
819
720
Deferred income taxes
(5,078
)
666
(213
)
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable
3,742
(4,330
)
328
Prepaid expenses and other current assets
43
540
(1,026
)
Other assets
(110
)
(212
)
39
Accounts payable and accrued expenses
(432
)
1,543
1,288
Deferred revenue
3,751
3,622
1,297
Long term tax liabilities
1,385
1,146
2,471
Other long-term liabilities
189
(142
)
—
Net cash provided by operating activities
9,225
9,248
10,996
Cash flows from investing activities:
Cash paid for acquisition, net of cash acquired
—
(4,321
)
—
Proceeds from sales and maturities of short-term investments
2,629
6,026
3
Purchases of short-term investments
(6,026
)
—
(1,055
)
Purchase of property and equipment
(354
)
(752
)
(287
)
Net cash provided by (used in) investing activities
(3,751
)
953
(1,339
)
Cash flows from financing activities:
Holdback payments related to acquisitions
—
(2,000
)
(500
)
Proceeds from issuance of common stock, net
49
102
119
Payment on capital lease obligations
—
(27
)
(58
)
Net cash provided by (used in) financing activities
49
(1,925
)
(439
)
Net increase in cash and cash equivalents
5,523
8,276
9,218
Cash and cash equivalents, beginning of year
3,158
8,681
16,957
Cash and cash equivalents, end of year
$
8,681
$
16,957
$
26,175
Supplemental disclosures of cash flow information:
Cash paid for income taxes
$
234
$
479
$
1,368
Cash paid for interest
$
111
$
90
$
20
See accompanying notes to consolidated financial
statements.
F-6
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Business Description
Apache Design Solutions, Inc. (the Company) was incorporated in
Delaware in 2001. The Company is a provider of innovative power analysis and optimization software solutions that enable the design of power-efficient, noise-immune high performance integrated circuits, or ICs, and electronic systems. The
Company's solutions consist of a suite of software tools and methodologies that enable IC and electronic system designers to reduce power consumption, deliver reliable power to all circuit and system components and mitigate power-induced signal
interference, or noise. Revenue is derived primarily from software license and maintenance agreements with customers in the United States, Europe, and Asia.
(2) Significant Accounting Policies
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries in France, Taiwan, Japan,
Korea, China, India, Israel, and the United Kingdom. All significant intercompany accounts and transactions have been eliminated.
(b) Use of Estimates
The
preparation of consolidated financial statements in conformity with the U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(c) Foreign Currency Translation
The functional currency of each of the Company's active foreign subsidiaries is the U.S. dollar. Assets and liabilities that are not denominated in U.S. dollars are remeasured with any related gain
or loss recorded in earnings.
(d) Cash, Cash Equivalents, and Short-Term Investments
The Company classifies investments with original maturities of three months or less when acquired as cash equivalents. Cash and cash
equivalents consist primarily of cash and money market accounts. Investments with maturities greater than three months and less than one year are classified as short-term investments. As of December 31, 2010, short-term investments
consisted of investment in certificate of deposits totaling $1.1 million, which approximates fair value.
(e) Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company evaluates the collectibility of
accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer's ability to meet its financial obligations, the Company records a specific allowance against
F-7
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
amounts due, and thereby reduces the net recognized receivable to the amount the Company reasonably believes will be collected. If all collection efforts have been exhausted, the receivable is
written off against the allowance. The uncollectible amount written off was $103,000 and $31,000 in fiscal years 2008 and 2010 respectively. No uncollected amount was written off in fiscal year 2009. No allowances for doubtful accounts have been
recorded as of December 31, 2009 and 2010.
(f) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method
over the estimated useful lives of the related assets, generally three to five years. Leasehold improvements are recorded at cost and amortized using the straight-line method over the lesser of the estimated useful lives or the remaining lease
term. Maintenance and repair costs are charged to operations as incurred.
(g) Revenue Recognition
The Company licenses its software products and solutions primarily under time-based licenses (TBL) agreements. A TBL is a license valid for a finite
term, generally one to three years, in which the license expires at the end of the term. The software licenses are generally bundled with postcontract customer support (maintenance) for the license term.
The Company recognizes revenue when: (1) persuasive evidence of an arrangement exists, (2) delivery of software or services has occurred,
(3) the fee for such software or services is fixed or determinable, and (4) collectibility of the full license or service fee is probable. The Company applies these revenue recognition criteria as follows:
•
Persuasive Evidence of an Arrangement Exists
.    Prior to recognizing revenue on an arrangement, the Company's customary policy
is to have a purchase order from customers that have previously negotiated a master end-user license arrangement or purchase agreement, signed by both the customer and the Company.
•
Delivery Has Occurred
.    The Company delivers its products to its customers electronically, and the delivery occurs when the Company
provides the customer access codes, or "license keys," that allow the customer to access a fully functioning version of the software.
Certain of the Company's license agreements provide its customers the right to adjust their license to cover other specific software. Because these agreements provide access to a specified set of software
products, the Company does not consider delivery to have occurred until access to at least one copy of each of the products specified in the license agreement has been granted to the customer.
•
Fee is Fixed or Determinable
.    The Company's determination of whether an arrangement fee is fixed or determinable depends
principally on the arrangement's payment terms. For contracts where payments are weighted toward the latter part of the contract term, the Company recognizes revenue that represents the lesser of the fee that is due and payable, or the portion
of the entire fee that would be recognized under a straight-line method over the term of the license.
F-8
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
•
Collectibility is Probable
.    The Company judges collectibility of the arrangement fee on a customer-by-customer basis pursuant to
our credit review policy. When a new customer is acquired, the Company evaluates the customer's financial position and ability to pay prior to selling a TBL to that customer. The Company generally only sells additional licenses to, or enters
into license renewals with, existing customers with which it has a history of successful collection.
The Company has
analyzed all of the elements included in its multiple-element software arrangements and determined that it does not have sufficient vendor-specific objective evidence (VSOE) to allocate revenue to the maintenance components as all current license
arrangements come packaged with a combination of a term-based license and maintenance. Accordingly, assuming all other revenue recognition criteria are met, the Company recognizes revenue at the lesser of the pro rata portion of the license fee for
the applicable period, or as the payment from the customer becomes due.
Deferred revenue is classified on the consolidated balance sheet
as current and long-term deferred revenue based upon whether the revenue is expected to be recognized within the next 12 months, or after the next 12 months.
(h) Income Taxes
Income taxes have been provided for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefits that are more likely
than not to be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to
be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likelihood of being sustained. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
(i) Concentrations of Credit Risk
The Company sells its products worldwide primarily to customers in the global semiconductor market. The Company performs ongoing credit evaluations of its customers' financial condition and does not require
collateral. The Company evaluates the need to establish reserves for any potential credit losses. Such losses have been within management's expectations and have not been material in any year presented.
F-9
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APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Revenue from major customers as a percentage of total revenue were as follows:
Year Ended December 31,
2008
2009
2010
Customer A
*
12
%
*
Customer B
*
10
%
*
Customer C
*
*
11
%
Customers accounting for 10% or more of
accounts receivable were as follows:
December 31,
2009
2010
Customer A
28
%
29
%
Customer D
21
%
*
Customer E
*
15
%
*
Amounts were less than 10% for the respective period.
Customer C is also a shareholder that owned 1,104,995 shares of the Company's redeemable convertible preferred stock as of December 31, 2010.
(j) Goodwill and Intangible Assets
Goodwill represents the excess of the aggregate purchase price over the fair value of the tangible and identifiable intangible assets acquired by the Company. The carrying amount of goodwill is tested for
impairment annually or more frequently if facts and circumstances warrant a review. A two-step evaluation to assess goodwill for impairment is required. First, the fair value of each reporting unit is compared to its carrying value. If the fair
value equals or exceeds the carrying value, goodwill is not considered to be impaired and proceeding to the second step is not required. If the carrying value of any reporting unit exceeds its fair value, then the implied fair value of the reporting
unit's goodwill must be determined and compared to the carrying value of its goodwill and other intangible assets. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then an impairment charge equal to the
difference is recorded. For the years presented, the Company operated as one reporting unit and there were no impairments of goodwill as the fair value equaled or exceeded the carrying value.
Intangible assets consist of purchased technology, patents, customer relationships, and contract backlog. Intangible assets are amortized on a
straight-line basis over their estimated useful lives, which range from two to seven years.
(k) Accounting for Impairment of
Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstance indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value, less
cost to sell. The Company did not recognize any long-lived asset impairment charges in fiscal years 2008, 2009, and 2010.
F-10
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(l) Stock-Based Compensation
Stock-based compensation expense for stock options is estimated at the grant date based on each award's fair value as calculated using the
Black-Scholes-Merton (BSM) option pricing model. This fair value is amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.
(m) Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the
period. Diluted net income per share gives effect to equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock method of accounting.
(n) Segment Information
The
Company operates in one reportable segment. The Company's chief operating decision-maker, its chief executive officer, reviews its operating results on an aggregate basis and manages its operations as a single operating segment.
(o) Unaudited Pro Forma Stockholders' Equity and Net Income Per Share
If the offering contemplated by this prospectus is consummated, all of the redeemable convertible preferred stock outstanding will automatically
convert into 5,933,665 shares of common stock, based on the shares of redeemable convertible preferred stock outstanding at December 31, 2010. Unaudited pro forma stockholders' equity and pro forma net income per share, as adjusted for the
assumed conversion of the convertible preferred stock, are reflected in the consolidated financial statements.
(p) Comprehensive
Income
The Company is required to display comprehensive income and its components as part of the Company's consolidated
financial statements. Comprehensive income comprises net income and other comprehensive income, including unrealized gain from investments.
(q) Recently Issued Accounting Standards
In October 2009, the Financial Accounting Standards
Board (FASB) issued new standards for revenue recognition with multiple deliverables. These new standards impact the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of
accounting. Additionally, these new standards modify the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration.
These new standards are required to be adopted in the first quarter of 2011. The Company will adopt the guidance on a prospective basis effective the first quarter of fiscal year 2011. The Company does not believe the adoption of the guidance will
have a material impact on its consolidated financial statements.
F-11
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In October 2009, the FASB issued new standards for the accounting for certain revenue arrangements
that include software elements. These new standards amend the scope of preexisting software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. These new
standards are required to be adopted in the first quarter of 2011. The Company will adopt the guidance on a prospective basis effective the first quarter of fiscal year 2011. The Company does not believe the adoption of the guidance will have a
material impact on its consolidated financial statements.
(3) Business Combination
On September 4, 2009, the Company acquired, in a taxable transaction, certain assets and foreign subsidiaries of Sequence Design, Inc.
(Sequence), a provider of the Register Transfer Level (RTL) design for power solutions, for cash consideration of approximately $5.3 million plus the assumption of certain specified liabilities. A total of $0.8 million of the cash
consideration was held back to cover any potential indemnity claims, out of which $0.5 million was paid on the first anniversary of the acquisition, and the remaining $0.3 million is payable on the second anniversary, provided that such
amount shall be subject to the Company's rights to indemnification as set forth in the purchase agreement related to such acquisition. Additionally, approximately $0.6 million is payable over a 24-month period to certain former Sequence
employees should they satisfy certain performance criteria as employees of the Company which is recorded as compensation as earned. The Company included the operating results of Sequence in the consolidated statement of operations starting as of the
closing date of the acquisition.
The financial information in the table below summarizes the combined results of operations of the
Company and Sequence, on a pro forma basis, as though the companies had been combined as of the beginning of fiscal 2008 and fiscal 2009. The pro forma financial information is presented for informational purposes only and is not indicative of the
results of operations that would have been achieved if the acquisition had taken place on January 1, 2008 or January 1, 2009 or of results that may occur in the future:
Pro Forma Results
(unaudited)
Year Ended
December 31,
2008
2009
Revenue
$
32,728
$
39,221
Net income
$
1,000
$
1,629
The pro forma financial information for all periods presented also includes the business combination accounting effect
on historical Sequence deferred revenues, adjustments to amortization charges from acquired intangible assets, and related tax impacts. In addition, during the year ended December 31, 2009, the Company incurred $0.2 million of third-party
acquisition-related costs. These expenses are included in general and administrative expense in the Company's consolidated statement of operations for the year ended December 31, 2009.
F-12
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Following the acquisition of Sequence, the Company sought to integrate the combined companies by
bundling acquired products with Apache's existing products and cross selling to the combined customer base. The Company also sought to reduce the costs associated with the operation of the acquired business by consolidating sales and marketing
efforts and by eliminating redundant administrative resources and rationalizing research and development. As a result of the foregoing, the Company has not separately assessed the impact of this acquisition on the Company's consolidated
financial statements.
The assets acquired and liabilities assumed were recorded at fair value, and the excess of the purchase price
over the fair value of the net assets acquired was recorded as goodwill, which resulted primarily from our expectation of synergies from the integration of the acquired company's technology with our technology. The $3.0 million goodwill
recorded in connection with this acquisition is deductible for income tax purposes over 15 years. The Company accounted for acquisition-related costs as expenses in the periods where the costs were incurred and the services were received.
The initial consideration has been allocated as follows (in thousands):
Tangible assets acquired
$
915
Intangible assets acquired:
Developed technology
2,690
Patents
160
Customer relationships
230
Contract backlog
1,090
Goodwill
2,994
Total intangible assets
7,164
Net of liabilities assumed
(2,829
)
Net assets acquired
$
5,250
The fair values of Sequence's intangible assets were determined using the income approach with significant inputs
that are not observable in the market. Key assumptions include the expected future cash flows, the timing of the expected future cash flows and the discount rates consistent with the level of risk associated with those expected from cash flows.
The acquired intangible assets are being amortized on a straight-line basis over their estimated useful lives, which are two to
five years.
The Company acquired all of the outstanding shares of Optimal in the year ended December 31, 2007, for which it
paid $7.5 million in cash. A total of $2.0 million of the cash consideration was held back from the purchase price for a period of two years to cover any potential indemnity claims. During the year ended December 31, 2009, the
$2.0 million holdback was paid out in full.
(4) Financial Instruments
The Company measures at fair value its cash equivalents using a valuation hierarchy based on whether the inputs to those valuation techniques are
observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable
F-13
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
inputs reflect the Company's own assumption. These two types of inputs have created the following fair value hierarchy:
•
Level 1—Valuations based on quoted prices in inactive markets for identical assets that the Company has the ability to access.
•
Level 2—Valuations based on inputs other than quoted prices included within Level 1, for which all significant inputs are observable, either
directly or indirectly.
•
Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The Company's short-term investments consist of certificates of deposit. The Company estimates the fair value of its certificates of deposit
using Level 1 inputs.
The carrying value of accounts receivable and accounts payable approximates fair value because of the
short-term nature of these instruments.
(5) Property and Equipment
Property and equipment consisted of the following (in thousands):
December 31,
2009
2010
Computer hardware
$
2,500
$
2,807
Furniture and fixtures
290
275
Software
256
256
Leasehold improvements
586
582
3,632
3,920
Less: accumulated depreciation and amortization
2,518
3,063
$
1,114
$
857
Depreciation and amortization expense was $568,000, $845,000, and $580,000 in fiscal years 2008, 2009, and 2010,
respectively. The Company had no capital lease obligation in fiscal year 2008. The cost of equipment acquired under capital leases was $131,000 as of December 31, 2009 and 2010. Depreciation of assets reported under capital leases was included
with depreciation expense.
F-14
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(6) Intangible Assets
(a) Acquired Intangible Assets
As of December 31, 2009, the major classes of amortizable
intangible assets were as follows (in thousands):
Gross
Carrying
Amount
Accumulated
Amortization
Net
Weighted
Average
Remaining
Life (months)
Developed technology
$
7,090
$
(2,086
)
$
5,004
45
Patents
160
(10
)
150
56
Customer relationships
1,650
(455
)
1,195
58
Contract backlog
1,090
(182
)
908
20
$
9,990
$
(2,733
)
$
7,257
As of December 31, 2010, the major classes of amortizable intangible assets were as follows (in
thousands):
Gross
Carrying
Amount
Accumulated
Amortization
Net
Weighted
Average
Remaining
Life (months)
Developed technology
$
7,090
$
(3,504
)
$
3,586
34
Patents
160
(43
)
117
44
Customer relationships
1,650
(704
)
946
46
Contract backlog
1,090
(726
)
364
8
$
9,990
$
(4,977
)
$
5,013
Total amortization expense for intangible assets was $1.1 million, $1.5 million, and $2.2 million
in fiscal years 2008, 2009, and 2010, respectively.
Estimated amortization expense for the following five years and thereafter (in
thousands):
2011
$
2,062
2012
1,552
2013
819
2014
580
2015
—
2016 and thereafter
—
$
5,013
F-15
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(7) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following (in thousands):
December 31,
2009
2010
Accounts payable
$
692
$
1,019
Payroll, bonus, and commission
1,687
2,240
Vacation
606
681
Holdback payments related to Sequence acquisition
500
250
Other
1,431
1,756
$
4,916
$
5,946
(8) Redeemable Convertible Preferred Stock
The following table summarizes the redeemable convertible preferred stock authorized, issued, and outstanding as of December 31, 2008, 2009, and 2010:
Par
Value
Shares
Authorized
Shares
Issued and
Outstanding
Series A
$
0.0001
3,633,665
3,633,665
Series B
$
0.0001
2,300,000
2,300,000
5,933,665
5,933,665
The rights, privileges, and preferences for Series A and Series B are as follows:
(a)
Holders of Series A and Series B are entitled to receive noncumulative dividends at an annual rate of $0.038336 and $0.148 per share, respectively, when and if declared
by the Board of Directors, prior to and in preference to holders of common stock. No dividends have been declared through December 31, 2010.
(b)
In the event of the liquidation or dissolution of the Company, holders of Series B are entitled to receive an amount equal to $1.85 per share, plus all accrued and unpaid
dividends, prior and in preference to any distributions made to the holders of Series A and common stock. The holders of Series A are entitled to receive an amount equal to $0.4792 per share, prior and in preference to any distributions
made to the holders of common stock. If after making the above distribution, the remaining assets of the Company legally available for distribution, if any, shall be distributed ratably to the holders of Series A, Series B, and common
stock on an as-if-converted basis. At December 31, 2010, the aggregate liquidation preference of Series A and Series B was $1.7 million and $4.3 million, respectively.
(c)
Series A and Series B shares are convertible, one-for-one, into common stock at the option of the holder, at any time after the date of issuance. This conversion rate
is subject to adjustment for stock splits, stock dividends, and certain other events.
(d)
Each share of Series A and Series B is automatically converted into one share of common stock, upon the earliest to occur of: (i) an initial
public offering with proceeds of not less than $20 million, and an offering price of at least $3.70 per share; (ii) the closing of a liquidation event with an aggregate consideration equal to the sum of
F-16
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
$60 million and three times the aggregate proceeds from all issuances of Series B ($12.8 million at December 31, 2010); and (iii) approval by the holders of a majority of
the then outstanding preferred stock, voting together as a class.
(e)
Holders of Series A and Series B are entitled to vote, with each preferred share having the voting rights equal to the number of common stock shares into which it is
convertible, on all matters submitted to a vote of the Company's stockholders. The holders of Series A, voting separately as a class, are entitled to elect one member to the Board of Directors. The holders of Series A and
Series B, voting together as a class, are entitled to elect one member to the Board of Directors.
(f)
Each share of Series A and Series B is redeemable at any time after the fifth anniversary of Series B issuance date, if requested by holders of at least 75% of the
then, outstanding shares of Series A and Series B, voting as separate classes. The redemption price for the Series A and Series B is $0.4792 per share and $1.85 per share, respectively, subject to adjustment for stock splits,
stock dividends, and certain other events, plus declared and unpaid dividends. As a result, the Company has accounted for Series A and Series B outside of permanent equity.
(9) Common Stock
The Company is authorized to issue 20,000,000 shares of common stock
with a par value of $0.0001 per share. At December 31, 2009 and 2010, 10,968,287 and 11,099,815 shares were issued and outstanding, respectively. The holders of common stock, voting separately as a class, are entitled to elect one member
to the Board of Directors.
(10) Employee Benefit Plan
The Company has a 401(k) retirement plan to provide defined contribution retirement benefits for all eligible employees. Participants may contribute a portion of their compensation to the plan, subject to
limitations under the Internal Revenue Code. The Company does not have any matching plan and has not made any contribution to the 401(k) Plan.
(11)
Stock Option Plan
In October 2001, the Company adopted the 2001 Stock Option/Stock Issuance Plan (the Plan). The Company
has reserved a total of 9,200,000 shares of common stock for issuance under the Plan. Under the Plan, the Board of Directors may grant incentive stock options to U.S. employees and directors and nonstatutory stock options to employees,
directors, and consultants. The exercise price of an option cannot be less than the fair value of one share of common stock on the date of grant for incentive stock options or 85% of the fair value of one share of common stock for nonstatutory stock
options (not less than 110% of the fair value for stockholders owning greater than 10% of all classes of stock who receive an incentive stock option) as determined by the Board of Directors. Options expire after 10 years or less as provided in
the option agreement (5 years for stockholders owning greater than 10% of all classes of stock who receive on incentive stock option). Employee options generally vest over 4 years, but options with shorter vesting periods can be granted by
the Board of Directors. The Plan allows for exercise of unvested options with repurchase rights over the restricted common stock issued at the original exercise price. The repurchase rights lapse at the same rate as the original option vesting
schedule.
F-17
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The fair value of awards granted under the stock option plan is measured at the grant date using
the BSM option pricing model. The BSM option pricing model incorporates various subjective assumptions, including expected volatility, expected term and the risk-free interest rates, as well as the fair value of the common stock on the grant date as
determined by management. These input factors are subjective and are determined using management's judgment. If a difference arises between the assumptions used in determining stock-based compensation expense and the actual factors that become
known over time, the Company may change the input factors used in determining future stock-based compensation expense. Any such changes could materially impact the results of operations in the period in which the changes are made and in periods
thereafter.
The fair value of awards is recognized on a straight-line basis over the vesting period. The compensation expense for
share-based awards is based on awards that are expected to vest and is reduced for estimated forfeitures. The Company applies an annual forfeiture rate that is determined based on historical forfeitures and represents the awards expected to be
forfeited each year.
As the Company does not have a trading history for the common stock, the expected stock price volatility for the
common stock is estimated by taking the average of the historical volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of several public
companies in the technology and software industry.
The Company determines the expected term in accordance with the "simplified
method" for a plain vanilla employee stock option for which the value is estimated using a BSM formula. Under this approach, the expected term would be presumed to be the midpoint between the vesting date and the end of the contractual term.
The use of this approach is permitted as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the lack of trading history for its common stock.
The risk-free interest rate is based upon interest rates that match the expected term of the option granted. The dividend yield is zero as the
Company does not expect to be paying cash dividends on the common stock.
Valuation assumptions:
Year Ended December 31,
2008
2009
2010
Expected dividend yield
—
—
—
Expected volatility
51.5
%
61.8
%
54.9
%
Expected term (in years)
6.0
5.9
6.1
Risk-free interest rate
2.2%-3.5
%
2.4%-2.7
%
1.7-3.0
%
Average common stock fair value
$
2.98
$
2.15
$
3.26
F-18
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At the respective grant dates, the exercise price was determined by the Board of Directors by
reference to, among other things, the estimated fair value of the underlying common stock, which ranged from:
Year Ended December 31,
2008
2009
2010
Exercise price
$
1.75-2.70
$
1.75-2.25
$
2.25-4.55
Stock-based compensation expense included
in the consolidated statements of operations was as follows (in thousands):
Year Ended December 31,
2008
2009
2010
Cost of revenue
$
178
$
184
$
190
Sales and marketing
305
302
192
Research and development
337
230
229
General and administrative
91
103
109
$
911
$
819
$
720
Stock option activity under the Plan is as follows:
Available for
Grant
Number of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Terms (years)
Aggregate
Intrinsic
Value
Balances, December 31, 2007
20,662
1,379,300
$
1.52
9.13
Authorized
1,000,000
—
—
Granted
(967,308
)
967,308
$
2.96
Canceled
239,273
(239,273
)
$
2.84
Repurchased
4,209
—
$
0.31
Exercised
—
(64,935
)
$
1.21
Balances, December 31, 2008
296,836
2,042,400
$
2.06
8.05
Granted
(432,750
)
432,750
$
2.15
Canceled
284,995
(284,995
)
$
2.77
Exercised
—
(62,480
)
$
1.64
Balances, December 31, 2009
149,081
2,127,675
$
2.00
7.47
Authorized
1,000,000
—
—
Granted
(418,400
)
418,400
$
3.26
Canceled
120,700
(120,700
)
$
2.49
Repurchased
437
—
$
1.20
Exercised
—
(131,965
)
$
0.91
Balances, December 31, 2010
851,818
2,293,410
$
2.26
7.12
$
7,083,997
Options vested as of December 31, 2010
1,474,656
$
1.93
6.17
$
5,030,943
Options expected to vest after December 31, 2010
706,354
$
1.58
8.81
$
1,771,208
F-19
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value
based on stock options with an exercise price less than the fair value of the Company's common stock on December 31, 2010 of $5.35. The total intrinsic value of options exercised during the year ended December 31, 2009 and 2010 was
$22 thousand and $0.4 million, respectively.
The following table summarizes additional information about stock options
outstanding at December 31, 2010:
Options Outstanding and
Exercisable
Exercise Price
Number
Outstanding
Weighted-
Remaining
Contractual
Life (in years)
$  0.05
105,000
1.95
$  0.18
104,500
3.95
$  0.35
6,000
4.84
$  1.20
349,000
5.46
$  1.75
85,127
8.19
$  2.25
464,200
9.01
$  2.45
285,400
6.40
$  2.70
106,733
7.66
$  2.75
161,000
6.78
$  3.10
366,650
7.18
$  3.55
201,500
9.65
$  4.55
58,300
9.88
2,293,410
The weighted average grant date fair value of options granted during the years 2009 and 2010 was $1.24 and
$1.82, respectively. The Company had total unrecognized compensation expense, net of estimated forfeitures, related to stock option grants of $1.0 million as of December 31, 2010, which will be recognized over the remaining weighted
average vesting period of 2.63 years.
From 2002 through 2010, the Company granted 954,969 options to purchase common stock at exercise
prices from zero to $3.10 per share to outside advisors or consultants. Compensation expense related to unvested shares held by non-employees is remeasured each reporting period. As of December 31, 2010, options to purchase 107,500 shares
are still outstanding of which 11,667 remain unvested. Stock-based compensation expense related to these options was not material during fiscal years 2008, 2009, and 2010.
F-20
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(12) Net Income Per Share
The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders:
Year Ended December 31,
2008
2009
2010
(In thousands, except per
share data)
Numerator:
Net income
$
3,174
$
3,269
$
3,304
Denominator:
Weighted average common stock—basic
10,882
10,930
11,016
Effect of potentially dilutive securities:
Add convertible preferred stock
5,934
5,934
5,934
Add diluted effect of share options
437
373
681
Weighted average common stock—diluted
17,253
17,237
17,631
Net income per share:
Basic
$
0.29
$
0.30
$
0.30
Diluted
$
0.18
$
0.19
$
0.19
For fiscal years 2008, 2009 and 2010, options to purchase approximately 850,000, 1,158,000 and 433,000 shares of common
stock, respectively, with exercise prices greater than the average fair value of our stock, were not included in the calculation of diluted net income per share because the effect would have been anti-dilutive.
(13) Income Taxes
Net income (loss) from
continuing operations before income taxes is as follows (in thousands):
Year Ended December 31,
2008
2009
2010
United States
$
(757
)
$
5,416
$
5,168
Foreign
424
475
874
$
(333
)
$
5,891
$
6,042
F-21
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(a) Income Taxes
Income tax provision (benefit) attributable to income from continuing operations consisted of (in thousands):
Year Ended December 31,
2008
2009
2010
Current expense:
Federal
$
8
$
541
$
644
State
79
407
209
Foreign
1,479
1,099
2,102
1,566
2,047
2,955
Deferred expense (benefit):
Federal
(3,921
)
794
(235
)
State
(1,173
)
(219
)
18
Foreign
21
—
—
(5,073
)
575
(217
)
Provision (benefit) for income taxes
$
(3,507
)
$
2,622
$
2,738
(b) Tax Rate Reconciliation
Income tax expense (benefit) attributable to income from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 34% to pretax income from continuing operations
as a result of the following (in thousands):
Year Ended December 31,
2008
2009
2010
Income tax expense (benefit) at federal statutory rate
$
(113
)
$
2,003
$
2,054
Nondeductible items and other
377
288
31
State taxes, net of federal benefit
(155
)
98
155
Foreign rate differential
149
40
67
Foreign withholding tax
636
488
726
Research and development credits
(294
)
(295
)
(295
)
Valuation allowance
(4,107
)
—
—
Total income tax expense (benefit)
$
(3,507
)
$
2,622
$
2,738
F-22
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(c) Significant Components of Deferred Taxes
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 2009 and 2010 are presented below (in thousands):
December 31,
2009
2010
Deferred tax assets:
Property, plant, and equipment
$
17
$
28
Accruals and reserves
610
533
Deferred revenue
660
908
State taxes, net of federal benefit
159
118
Net operating losses and credit carryfowards
5,943
5,754
Other
21
(138
)
Gross deferred tax assets
7,410
7,203
Less valuation allowance
(1,259
)
(1,525
)
Total deferred tax assets
6,151
5,678
Deferred tax liabilities:
Intangible assets
(1,185
)
(499
)
Net deferred tax assets
$
4,966
$
5,179
The Company concluded that a full valuation allowance was required against all net deferred tax assets as of
December 31, 2007. During 2008, the Company concluded that it is more likely than not that all of its deferred tax assets except certain foreign tax credits and acquired net operating losses subject to limitations will be realized and as a
result, valuation allowance of $4.6 million was released during the year, of which $4.1 million was recorded as deferred tax benefit, and $0.5 million was recorded as an adjustment to goodwill.
The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Management considers various sources of taxable income and all available positive and negative evidence about these possible sources of taxable income. The Company gives
significant weight to evidence that can be objectively verified. Taxable income for the years ended December 31, 2008, 2009, and 2010 was $1.0 million, $6.9 million, and $7.5 million, respectively, for federal purposes before applying
any credit carryforwards. Based on the level of historical taxable income and projections for future taxable income over the periods for which the deferred tax assets are deductible, management believes that it is more likely than not that the
Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2010.
The valuation allowance of $1.3 million and $1.5 million at December 31, 2009 and 2010, respectively, was primarily related to foreign
tax credit carryforwards that, in the judgment of management, are not more likely than not to be realized due to the annual limitation based on the Company's foreign source income.
F-23
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2010, the Company has federal and state net operating loss carryforwards
of approximately $5.0 million and $6.6 million, respectively, which expire on various dates through 2028. The Company's ability to utilize the loss carryforwards is subject to limitations pursuant to the ownership change rules of
Internal Revenue Code Section 382. As of December 31, 2010, the Company has California state research and development credits carryforwards of approximately $1.0 million. California state research and development credits may be
carried forward indefinitely.
The Company has not provided for U.S. federal income taxes on its non-U.S. subsidiaries'
undistributed earnings as of December 31, 2010, because each earnings are intended to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to applicable U.S. federal
and state income taxes. There are no significant cumulative unremitted foreign earnings as of December 31, 2010.
The changes in
the Company's gross amount of unrecognized tax benefits during the year ended December 31, 2010 are as follows (in thousands):
2010
Unrecognized tax benefits at the beginning of the fiscal year
$
2,798
Decrease in unrecognized tax benefits of tax positions taken during a prior year
(136
)
Increase in unrecognized tax benefits as a result of tax positions taken during the current year
1,964
Unrecognized tax benefits at the end of the fiscal year
$
4,626
As of December 31, 2010, $2.3 million of unrecognized tax benefits would, if recognized, reduce the effective tax
rate.
The Company's policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense.
As of December 31, 2009 and 2010, the Company had $1.7 million and $2.4 million of accrued income tax related interest and penalties on unrecognized tax benefits, respectively. Interest included in the Company's provision for income
taxes was an expense of $0.1 million and $0.4 million for fiscal years 2009 and 2010, respectively.
The Company files
U.S. federal, California and other U.S. states, and other foreign jurisdictions income tax returns. The Company's major taxing jurisdictions are U.S. federal and California. Fiscal years 2004 to 2009 remain open to examination by
the Internal Revenue Service and California Franchise Tax Board. Because the Company uses historical net operating loss carryforward and other tax attributes to offset its federal and state taxable income in current and future years' tax
returns, such attributes can be adjusted by the taxing authorities until the statute of limitations closes on the year in which such attributes were utilized. The Company is not currently under examination in any of its major taxing jurisdictions.
As of December 31, 2010, the Company does not currently expect significant changes in the total unrecognized tax benefits within
the next 12 months.
F-24
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(14) Segment Information
The Company operates in one reportable segment. The Company's chief operating decision-maker, its chief executive officer, reviews its operating results on an aggregate basis and manages its operations as a
single operating segment. Revenue by region is classified based on the regions to which the products are shipped, which may differ from the location of customer's principal offices.
The Company operates in four main geographic areas: the United States (U.S.); Europe, the Middle East, and Africa (EMEA); Japan; and Asia Pacific,
excluding Japan. The Company's long-lived assets included property and equipment, purchased technology, and goodwill. Long-lived assets are attributed to geographic areas based on the country where the assets are located. As of
December 31, 2009 and 2010, long-lived assets of approximately $12.7 million and $10.2 million, respectively, are domiciled in the United States. Long-lived assets for all other locations are not material to the consolidated financial
statements.
The following table sets forth the Company's revenue by geographic region (in thousands):
Year Ended December 31,
2008
2009
2010
U.S.
$
15,422
$
20,898
$
25,192
EMEA
3,413
5,166
6,484
Asia Pacific, excluding Japan
3,317
4,978
6,340
Japan
3,543
3,559
6,031
Total revenue
$
25,695
$
34,601
$
44,047
(15) Commitments
(a) Leases
The Company
leases its facilities under several noncancelable operating and capital lease agreements, which expire at various dates. Approximate future minimum lease payments as of December 31, 2010, under operating leases are as follows (in thousands):
Operating
Capital
Fiscal year:
2011
$
780
$
56
2012
132
8
2013
68
—
$
980
$
64
Rental expenses for certain operating lease agreements with scheduled rent increases and other lease incentives are
recognized on a straight-line basis over the term of the lease. Total rental expense under operating leases was $1.0 million, $1.1 million, and $1.3 million in 2008, 2009, and 2010, respectively.
F-25
Table of Contents
APACHE DESIGN SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(b) Other Contingencies
The Company warrants to licensees that for 90 days following delivery, the licensed product will substantially conform to its users guide as
exists at the date of delivery. The Company's obligation under this warranty is to use reasonable efforts to correct any nonconformity and supply the licensee with a corrected version of the licensed product as soon as practical after being
notified by the licensee of any nonconformity. If the correction is commercially unreasonable, the Company may terminate the license and return to licensee a pro rata portion of the license fee paid. The Company typically provides customers limited
indemnities with respect to claims that their use of the Company's analysis and optimization software products infringe on patents, copyrights, trademarks, or trade secrets. To date, there have been no significant expenses related to indemnity
claims.
(16) Legal Matters
The
Company and its subsidiaries are, from time to time, party to legal proceedings arising in the normal course of business. In management's opinion, there are no pending claims or litigation, the outcome of which would have a material adverse
effect on the Company's consolidated results of operations, financial position, or cash flows.
(17) Subsequent Events
On January 27, 2011, the Board of Directors approved an amendment to the Company's amended and restated certificate of incorporation that
increased the authorized common stock to 21,000,000 shares and increased the size of the Board of Directors to five members. The holders of common stock, series A and series B, voting together as a class, are entitled to elect these two additional
directors.
On February 3, 2011 and March 7, 2011, the Board of Directors granted stock options to employees, directors, and
consultants to purchase an aggregate of 88,875 and 938,300 shares of the Company's common stock with an exercise price of $5.35 and $6.80 per share, respectively.
On March 7, 2011, the Board of Directors approved the 2011 Equity Incentive Plan to grant equity awards of up to 2,400,000 shares to its employees, directors, and consultants.
On March 7, 2011, the Board of Directors approved the 2011 Employee Stock Purchase Plan to issue and sell up to 600,000 shares to the
Company's employees.
On March 7, 2011, the Board of Directors approved an increase to its 2001 Stock Option/ Stock Incentive Plan
by another 600,000 shares for a total of 9,800,000 shares.
F-26
Table of Contents
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide
information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
10
Forward-Looking Statements and Statistical Data and Market Information
41
Use of Proceeds
44
Dividend Policy
45
Capitalization
46
Dilution
48
Selected Consolidated Financial and Other Data
50
Management's Discussion and Analysis of Financial Condition and Results of Operations
52
Business
71
Management
85
Compensation Discussion and Analysis
92
Principal and Selling Stockholders
105
Certain Relationships and Related Party Transactions
107
Description of Capital Stock
110
Shares Eligible for Future Sale
115
Material U.S. Federal Tax Consequences for Non-U.S. Holders of Common Stock
117
Underwriting
120
Legal Matters
124
Experts
124
Where You Can Find Additional Information
124
Index to Consolidated Financial Statements
F-1
Until
                    , 2011 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
Apache Design Solutions, Inc.
Shares
Common Stock
Deutsche Bank Securities
Needham & Company, LLC
Canaccord Genuity
ThinkEquity LLC
D.A. Davidson & Co.
Prospectus
, 2011
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than the underwriting discount and commissions, payable by us in connection with the sale of common stock being registered. All amounts are estimated
except the Securities and Exchange Commission (the "SEC") registration fee and the FINRA filing fees.
SEC registration fee
8,708
FINRA filing fee
8,000
Nasdaq Global Market listing fee
*
Printing and engraving expenses
*
Legal fees and expenses
*
Accounting fees and expenses
*
Blue Sky fees and expenses (including legal fees)
*
Transfer agent and registrar fees and expenses
*
Miscellaneous
*
Total
$
*
*
To be filed by amendment.
Item 14.
Indemnification of Directors and Officers
Section 145(a) of the Delaware General Corporation Law (the "DGCL") provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), because he or she is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 145(b) of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its favor because the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit
if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made with respect to any claim, issue or matter as to which he
or she shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of
the case, he or she is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or other adjudicating court shall deem proper.
II-1
Table of Contents
Section 145(g) of the DGCL provides, in general, that a corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify the
person against such liability under Section 145 of the DGCL.
We expect that the certificate of incorporation adopted by us prior
to the consummation of this offering (the "Charter") will provide that no director of our company shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to us or our stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) in respect of
unlawful dividend payments or stock redemptions or repurchases or other distributions pursuant to Section 174 of the DGCL, or (4) for any transaction from which the director derived an improper personal benefit. In addition, our Charter
will provide that if the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of our company shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended.
We also expect our Charter will further provide that any repeal or modification of such article by our stockholders or an
amendment to the DGCL will not adversely affect any right or protection existing at the time of such repeal or modification with respect to any acts or omissions occurring before such repeal or modification of a director serving at the time of such
repeal or modification.
We expect that our amended and restated bylaws adopted by us prior to the consummation of this offering, will
provide that we will indemnify each of our directors and officers, certain employees, and agents, to the fullest extent permitted by the DGCL as the same may be amended (except that in the case of an amendment, only to the extent that the amendment
permits us to provide broader indemnification rights than the DGCL permitted us to provide prior to such the amendment) against any and all expenses, judgments, penalties, fines, and amounts reasonably paid in settlement that are incurred by the
director, officer or such employee or on the director's, officer's or employee's behalf in connection with any threatened, pending or completed proceeding or any claim, issue or matter therein, to which he or she is or is threatened
to be made a party because he or she is or was serving as a director, officer or employee of our company, or at our request as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of our company and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. We expect the amended and restated bylaws will further provide for the advancement of expenses to each of our directors and, in the discretion of the board of directors, to certain officers and
employees.
In addition, we expect the amended and restated bylaws will provide that the right of each of our directors and officers to
indemnification and advancement of expenses shall be a contract right and shall not be exclusive of any other right now possessed or hereafter acquired under any statute, provision of the amended and restated certificate of incorporation or the
amended and restated bylaws, agreement, vote of stockholders or otherwise. Furthermore, our amended and restated bylaws will authorizes us to provide insurance for our directors, officers, and employees, against any liability, whether or not we
would have the power to indemnify such person against such liability under the DGCL or the amended and restated bylaws.
II-2
Table of Contents
Some of our officers, along with other stockholders, are parties to an Amended and Restated
Investors' Rights Agreement that provides for, among other things, the rights of these stockholders to cause us to register shares of our common stock held by these stockholders. We have agreed with these stockholders, including some of our
officers, that, in the event any of their shares of our common stock are included in an underwritten registration statement, then, to the extent permitted by law, we will indemnify and hold harmless these stockholders, any underwriter for these
stockholders, and each person, if any, who controls these stockholders or underwriters, against any losses, claims, damages or liabilities (joint or several) to which they may become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by us of any securities laws.
We have entered into
indemnification agreements with certain of our executive officers and all of our directors. Each indemnification agreement provides that we will indemnify the director or executive officer, as the case may be, to the fullest extent permitted by law
for claims arising in his or her capacity as our director or executive officer, as the case may be, provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and,
with respect to any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. In the event that we do not assume the defense of a claim against a director or such officer, we will be required to advance his or her
expenses in connection with his or her defense, provided that he or she undertakes to repay all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us.
We also maintain a directors' and officers' insurance policy which covers certain liabilities of directors and officers of our company
arising out of claims based on acts or omissions in their capacities as directors or officers.
In any underwriting agreement we enter
into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers, and persons who control us within the meaning of the Securities Act,
against certain liabilities.
Item 15.
Recent Sales of Unregistered Securities
During the past three years, we have issued to directors, officers, employees, and consultants options to purchase 2,150,733 shares of our common stock with a per share exercise price ranging from $1.75 to $6.80
under our 2001 Stock Option/Stock Issuance Plan and have issued 82,719 shares of our common stock upon exercise of such options. The issuances of such securities were exempt from registration under the Securities Act, pursuant to Rule 701
thereof on the basis that the transactions were pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. All recipients had access, through their relationship
with our company, to information about us.
There were no underwritten offerings employed in connection with any of the transactions
described above.
II-3
Table of Contents
Item 16.
Exhibits
(a) See the
Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this registration statement on Form S-1, which Exhibit Index is incorporated herein by reference.
(b) No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements
or the notes thereto.
Item 17.
Undertakings
(1) The
undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery
to each purchaser.
(2) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(3) The undersigned registrant hereby undertakes that:
(a)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective.
(b)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
II-4
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose,
State of California on March 14, 2011.
APACHE DESIGN SOLUTIONS, INC.
By:
/
S
/    A
NDREW
T. Y
ANG
Name: Andrew T. Yang, Ph.D.
Title: Chief Executive Officer
SIGNATURES AND POWER
OF ATTORNEY
We, the undersigned directors and officers of Apache Design Solutions, Inc. (the "Company"), hereby severally
constitute and appoint Andrew T. Yang and Emily Chang, and each of them individually, our true and lawful attorneys, with full power to them, and to each of them individually, to sign for us and in our names in the capacities indicated below, the
registration statement on Form S-1 filed herewith, and any and all pre-effective and post-effective amendments to said registration statement, and any registration statement filed pursuant to Rule 462(b) under the Securities Act, in
connection with the registration under the Securities Act, of equity securities of the Company, and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said
attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of them might or could do in person, and
hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shall do or cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities
indicated on the date indicated:
Signature
Title
Date
/
S
/    A
NDREW
T.
Y
ANG
Andrew T. Yang
Chief Executive Officer and Director
March 14, 2011
/
S
/    E
MILY
C
HANG
Emily Chang
Chief Financial Officer (principal financial and accounting officer)
March 14, 2011
/
S
/    P
ING
Y
ANG
Ping Yang
Director
March 14, 2011
/
S
/    L
ORI
H
OLLAND
Lori Holland
Director
March 14, 2011
II-5
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description
1.1*
Form of Underwriting Agreement
2.1
Asset Purchase Agreement, dated as of August 19, 2009, by and between Apache Design Solutions, Inc. and Sequence Design, Inc.
3.1
Form of Amended and Restated Certificate of Incorporation of the Company to be effective upon consummation of this offering
3.2
Form of Amended and Restated Bylaws of the Company to be effective upon consummation of this offering
4.1*
Form of Common Stock Certificate
4.2
Amended and Restated Investors' Rights Agreement, dated as of January 21, 2004, among Apache Design Solutions, Inc. and the stockholders party thereto
5.1*
Opinion of O'Melveny & Myers LLP
10.1
2001 Stock Option/Stock Issuance Plan
10.2
2011 Equity Incentive Plan
10.3
2011 Employee Stock Purchase Plan
10.4
Software License Agreement, dated as of October 30, 2006, by and between Apache Design Solutions, Inc. and Intel Corporation
10.5**
Purchase Agreement—Software and Related Services, dated as of June 30, 2008, by and between Apache Design Solutions, Inc. and Intel Corporation
10.6**
Amendment No. 1 to Purchase Agreement—Software and Related Services, dated as of September 30, 2009, by and between Apache Design Solutions, Inc. and Intel
Corporation
10.7**
Intel Side Letter, dated as of August 27, 2001, by and between Apache Design Solutions, Inc. and Intel Capital Corporation.
10.8**
Development, Marketing & License Agreement, dated as of August 14, 2001, by and between Intel Corporation and Apache Design Solutions, Inc.
10.9
Amendment No. 1 to Development, Marketing & License Agreement, dated as of March 11, 2011, by and between Intel Corporation and Apache Design Solutions, Inc.
10.10
Lease Agreement, dated as of August 13, 2007, by and between Apache Design Solutions, Inc. and Zanker Investment Group, LLC
10.11
Form of Indemnification Agreement with Executive Officers and Directors
10.12*
Amended and Restated Employment Letter, dated as of                     , 2011, by and
between Apache Design Solutions, Inc. and Andrew T. Yang
10.13*
Amended and Restated Employment Letter, dated as of                     , 2011, by and
between Apache Design Solutions, Inc. and Emily Chang
10.14
Offer Letter, dated as of February 8, 2006, by and between Apache Design Solutions, Inc. and Steven (Craig) Shirley
10.15
Offer Letter, dated as of March 18, 2005, by and between Apache Design Solutions, Inc. and Dian Yang
Table of Contents
Exhibit
Number
Description
10.16
Salary Raise Letter, dated as of January 1, 2007, by and between Apache Design Solutions, Inc. and Dian Yang
10.17
Offer Letter, dated as of February 19, 2001, by and between Apache Design Solutions, Inc. and Norman Chang
10.18
Salary Raise Letter, dated as of February 1, 2008, by and between Apache Design Solutions, Inc. and Norman Chang
10.19
Offer Letter, dated as of February 5, 2001, by and between Apache Design Solutions, Inc. and Shen Lin
10.20
Salary Raise Letter, dated as of February 1, 2008, by and between Apache Design Solutions, Inc. and Shen Lin
10.21
Offer Letter, dated as of March 1, 2002, by and between Apache Design Solutions, Inc. and Yu Liu
10.22
Salary Raise Letter, dated as of February 1, 2008, by and between Apache Design Solutions, Inc. and Yu Liu
10.23
Offer Letter, dated as of September 11, 2003, by and between Apache Design Solutions, Inc. and Aveek Sarkar
10.24
Letter Agreement, dated as of January 14, 2011, by and between Apache Design Solutions, Inc. and Ping Yang
10.25
Letter Agreement, dated as of January 14, 2011, by and between Apache Design Solutions, Inc. and Lori Holland
10.26
Form of 2010 AE Compensation Policy
10.27
Form of 2010 Sales Compensation Policy
14.1*
Code of business conducts and ethics
21.1
List of Subsidiaries of the Registrant
23.1
Consent of KPMG LLP, independent registered public accounting firm
23.2*
Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)
24.1
Power of Attorney (included in signature page)
*
To be filed by amendment.
**
Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from the Registration Statement and submitted separately to the
Securities and Exchange Commission.