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<SEC-DOCUMENT>0000897101-09-000653.txt : 20090330
<SEC-HEADER>0000897101-09-000653.hdr.sgml : 20090330
<ACCEPTANCE-DATETIME>20090330155308
ACCESSION NUMBER:		0000897101-09-000653
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20081231
FILED AS OF DATE:		20090330
DATE AS OF CHANGE:		20090330

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INSIGNIA SYSTEMS INC/MN
		CENTRAL INDEX KEY:			0000875355
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS MANUFACTURING INDUSTRIES [3990]
		IRS NUMBER:				411656308
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-13471
		FILM NUMBER:		09714173

	BUSINESS ADDRESS:	
		STREET 1:		8799 BROOKLYN BLVD.
		CITY:			MINNEAPOLIS
		STATE:			MN
		ZIP:			55445
		BUSINESS PHONE:		7633926200

	MAIL ADDRESS:	
		STREET 1:		8799 BROOKLYN BLVD.
		CITY:			MINNEAPOLIS
		STATE:			MN
		ZIP:			55445
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>insignia091381_10-k.htm
<DESCRIPTION>FORM 10-K FOR YEAR ENDED DECEMBER 31, 2008
<TEXT>

<HTML>

<HEAD><TITLE>Insignia Systems, Inc. Form 10-K for year ended 12-31-2008</TITLE></HEAD>
<BODY>

<P style="margin-top:6pt; margin-bottom:6pt"><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>

<DIV style="FONT-SIZE: 1pt; WIDTH: 100%; BORDER-BOTTOM: black 2pt solid"></DIV>
<DIV style="FONT-SIZE: 1pt; WIDTH: 100%; BORDER-BOTTOM: black 1pt solid"></DIV><BR>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="100%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=4><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><B>Washington, D.C. 20549</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="20%">
<TR style="font-size:1px">

<TD WIDTH="100%" VALIGN=TOP>
<HR SIZE=1 WIDTH=100% NOSHADE COLOR="BLACK" ALIGN=CENTER>
</TD>

</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=6><B>FORM 10-K</B></FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="20%">
<TR style="font-size:1px">

<TD WIDTH="100%" VALIGN=TOP>
<HR SIZE=1 WIDTH=100% NOSHADE COLOR="BLACK" ALIGN=CENTER>
</TD>

</TR>
</TABLE>


<P ALIGN=CENTER><FONT SIZE=3>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=3>For the year ended
 December 31, 2008</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=3>Commission File Number
 1-13471</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="20%">
<TR style="font-size:1px">

<TD WIDTH="100%" VALIGN=TOP>
<HR SIZE=1 WIDTH=100% NOSHADE COLOR="BLACK" ALIGN=CENTER>
</TD>

</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=6><B>INSIGNIA SYSTEMS, INC.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>(Exact
 name of registrant as specified in its charter)</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="51%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="39%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3><B>Minnesota</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3><B>41-1656308</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>(State
 or other jurisdiction of incorporation or organization)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>(IRS
 Employer Identification No.)</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=3><B>8799 Brooklyn Blvd.<BR>
Minneapolis, MN 55445</B><BR><FONT SIZE=2>(Address of principal executive
offices)</FONT></FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="32%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="45%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD COLSPAN="5" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3><B>(763) 392-6200</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>(Registrant&#146;s
 telephone number, including area code)</FONT></P>

</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3>Securities
 Registered Pursuant to Section 12(b) of the Act:</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3>Title
 of each class:</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3>Name
 of each exchange on which registered:</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3>Common
 Stock, $.01 par value</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3>The
 NASDAQ Stock Market LLC</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=3>Securities
 Registered Pursuant to Section 12(g) of the Act: None </FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="20%">
<TR style="font-size:1px">

<TD WIDTH="100%" VALIGN=TOP>
<HR SIZE=1 WIDTH=100% NOSHADE COLOR="BLACK" ALIGN=CENTER>
</TD>

</TR>
</TABLE>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the securities Act. Yes <FONT FACE=WINGDINGS>o</FONT> No <FONT FACE=WINGDINGS>x</FONT></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes <FONT FACE=WINGDINGS>o</FONT> No <FONT FACE=WINGDINGS>x</FONT></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.<BR>Yes <FONT FACE=WINGDINGS>x</FONT> No <FONT FACE=WINGDINGS>o</FONT></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant&#146;s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment of this Form 10-K. <FONT FACE=WINGDINGS>o</FONT></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Large
accelerated filer <FONT FACE=WINGDINGS>o&nbsp;&nbsp;</FONT>Accelerated filer <FONT
FACE=WINGDINGS>o&nbsp;&nbsp;</FONT>Non-accelerated filer <FONT
FACE=WINGDINGS>x&nbsp;&nbsp;</FONT>Smaller reporting company <FONT FACE=WINGDINGS>o</FONT></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).<BR>Yes <FONT FACE=WINGDINGS>o</FONT> No <FONT FACE=WINGDINGS>x</FONT></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of the last business day of the second
quarter (June 30, 2008) was approximately $23,726,000 based upon the last sale
price of the registrant&#146;s Common Stock on such date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number
of shares outstanding of Common Stock, $.01 par value, as of March 23, 2009,
was 15,129,098. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>DOCUMENTS INCORPORATED BY REFERENCE:<BR>
</B>Insignia Systems, Inc.
Proxy Statement to be filed for the Annual Meeting of Shareholders to be<BR>
held on May 20, 2009 (Part III &#150; Items 10, 11, 12, 13 and 14) </FONT></P>

<DIV style="MARGIN-TOP: 10pt; FONT-SIZE: 1pt; WIDTH: 100%; BORDER-BOTTOM: black 1pt solid"></DIV>
<DIV style="FONT-SIZE: 1pt; WIDTH: 100%; BORDER-BOTTOM: black 2pt solid"></DIV><BR>

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<HR SIZE=3 COLOR=GRAY NOSHADE>
<PAGE>
<BR>


<P ALIGN=CENTER><FONT SIZE=2><B><A NAME="toc">TABLE OF CONTENTS</A></B></FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="4%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><B><A  HREF="#A001">PART I.</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A002">Item 1.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A002">Business</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A003">Item 1A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A003">Risk Factors</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A004">Item 1B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A004">Unresolved Staff Comments</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A005">Item 2.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A005">Properties</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A006">Item 3.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A006">Legal Proceedings</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A007">Item 4.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A007">Submission of Matters to a Vote of Security Holders</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>12</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><B><A  HREF="#A008">PART II.</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A009">Item 5.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A009">Market for Registrant&#146;s Common Equity, Related Stockholder Matters
 and Issuer Purchases of Equity Securities</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>13</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A010">Item 6.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A010">Selected Financial Data</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A011">Item 7.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A011">Management&#146;s Discussion and Analysis of Financial Condition and
 Results of Operations</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A012">Item 7A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A012">Quantitative and Qualitative Disclosures About Market Risk</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>23</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A013">Item 8.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A013">Financial Statements and Supplementary Data</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>23</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A014">Item 9.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A014">Changes in and Disagreements With Accountants on Accounting and
 Financial Disclosures</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>40</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A015">Item 9A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A015">Controls and Procedures</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>41</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A016">Item 9B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A016">Other Information</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>41</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><B><A  HREF="#A017">PART III.</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A018">Item 10.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A018">Directors, Executive Officers and Corporate Governance</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>42</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A019">Item 11.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A019">Executive Compensation</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>42</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A020">Item 12.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A020">Security Ownership of Certain Beneficial Owners and Management and
 Related Stockholder Matters</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>42</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A021">Item 13.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A021">Certain Relationships and Related Transactions and Director
 Independence</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>42</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A022">Item 14.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A022">Principal Accounting Fees and Services</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>42</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><A HREF="#A023">Item 15.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A023">Exhibits and Financial Statement Schedules</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>43</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>2</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=2><B>Cautionary Statement Regarding Forward-Looking Information </B></FONT></P>

<P><FONT SIZE=2>Statements
made in this Annual Report on Form 10-K, in the Company&#146;s other SEC filings, in
press releases and in oral statements to shareholders and securities analysts,
which are not statements of historical or current facts, are &#147;forward-looking
statements.&#148; Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results or
performance of the Company to be materially different from the results or
performance expressed or implied by such forward-looking statements. The words
&#147;believes,&#148; &#147;expects,&#148; &#147;anticipates,&#148; &#147;seeks&#148; and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date the
statement was made. These statements are subject to the risks and uncertainties
that could cause actual results to differ materially and adversely from the
forward-looking statements. These risks and uncertainties include, but are not
limited to, the risks described in Part I, Item 1A. </FONT></P>

<P><FONT SIZE=3><B><I>P<A NAME=A001></A>ART I. </I></B></FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A002></A>tem 1.&nbsp;&nbsp;&nbsp;&nbsp;Business</U></FONT></P>

<P><FONT SIZE=2><B>General </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insignia
Systems, Inc., (the &#147;Company&#148;) markets in-store advertising products, programs
and services to retailers and consumer packaged goods manufacturers. The
Company has been in business since 1990. Since 1998, the Company has been
focusing on providing in-store services through the Insignia Point-Of-Purchase
Services (POPS) in-store advertising program. Insignia POPS<SUP>&#174;</SUP>
includes the Insignia POPSign<SUP>&#174;</SUP> program. </FONT></P>

<P><FONT SIZE=2>Insignia&#146;s
POPSign is a national, account-specific, in-store, shelf-edge advertising
program that has been shown to deliver significant sales increases. Funded by
consumer packaged goods manufacturers, the program allows manufacturers to
deliver vital product information to consumers at the point-of-purchase. The
brand information is combined with each retailer&#146;s store-specific prices and is
displayed on the retailer&#146;s unique sign format. The combining of manufacturer
and retailer information produces a complete &#147;call to action&#148; that gets
consumers the information they want and need to make purchasing decisions,
while building store and brand equity. </FONT></P>

<P><FONT SIZE=2>For retailers,
Insignia&#146;s POPSign program is a source of incremental revenue and is the first
in-store advertising program that delivers a complete &#147;call to action&#148; on a
product-specific and store-specific basis, with all participating retail stores
updated weekly. For consumer goods manufacturers, Insignia&#146;s POPSign program
provides access to the optimum retail advertising site for their products &#150; the
retail shelf-edge. In addition, manufacturers benefit from significant sales
increases, short lead times, micro-marketing capabilities, such as
store-specific and multiple language options, and a wide variety of program
features and enhancements that provide unique advertising advantages. </FONT></P>

<P><FONT SIZE="2">The Company&#146;s
Internet address is <U>www.insigniasystems.com.</U> The Company has made available on
its Web site all of the reports it files with the SEC. The Company&#146;s Web site
is not incorporated by reference into this Report on Form 10-K. Copies of
reports can also be obtained free of charge by requesting them from Insignia
Systems, Inc., 8799 Brooklyn Blvd., Minnesota 55445; Attention: CFO; telephone
763-392-6200. </FONT> </P>

<P ALIGN=CENTER><FONT SIZE=2>3</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=2><B>Industry and Market Background </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to Point-Of-Purchase Advertising International (POPAI), an industry non-profit
trade association, more than 70% of brand purchase decisions are being made
in-store. As a result, product manufacturers are constantly seeking in-store
vehicles to motivate consumers to buy their branded products. The Company&#146;s
market studies indicate that the shelf-edge sign represents the final and best
opportunity for manufacturers to convince the consumer to buy. In fact, a 2005
industry study concluded that shelf signs are the most effective type of
in-store advertising vehicle after end-aisle displays and in-store leaflets. </FONT></P>

<P><FONT SIZE=2>Many consumers
seek product information beyond price in order to make educated buying
decisions. The Company&#146;s marketing studies indicate the most effective sign
contains information supplied by the product manufacturer in combination with
the retailer&#146;s price and design look. </FONT></P>

<P><FONT SIZE=2><B>Company Products </B></FONT></P>

<P><FONT SIZE=2><B><I>Insignia&#146;s POPSign Program </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insignia&#146;s
POPSign program is an in-store, shelf-edge, point-of-purchase advertising
program that enables manufacturers to deliver product-specific messages quickly
and accurately &#150; in designs and formats that have been pre-approved and
supported by participating retailers. Insignia POPSigns deliver vital product
selling information from manufacturers, such as product uses and features,
nutritional information, advertising tag lines and product images. The brand
information is combined with the retailer&#146;s store-specific prices and is
displayed on the retailer&#146;s unique sign format that includes its logo, headline
and store colors. Each sign is displayed directly in front of the
manufacturer&#146;s product in the participating retailer&#146;s stores. Insignia&#146;s
POPSign program offers special features and enhancements, such as Advantage and
Custom Advantage headers that allow manufacturers to add visibility and
highlight their brand message at-shelf. Insignia offers Color POPSigns with
customizable, image-building full-color graphics. Insignia UltraColor<SUP>&#174;</SUP>
POPSigns offer 75% more area for the full-color creative than Color POPSigns. </FONT></P>

<P><FONT SIZE=2>Utilizing
proprietary technology, the Company collects and organizes the data from both
manufacturers and retailers, then formats, prints and delivers the signs to
retailers for distribution and display. Store personnel place the signs at the
shelf for two-week display cycles. The Company charges manufacturers for the
signs placed in stores for each cycle. Retailers are paid a fee to display the
signs and for product movement data provided to Insignia. </FONT></P>

<P><FONT SIZE=2><B><I>The Impulse Retail System and SIGNright
Sign System </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to 1996, the Company&#146;s primary product offering was the Impulse Retail System,
a system developed by an independent product design and development firm (the
&#147;Developer&#148;). In 1996, the Company replaced the Impulse Retail System with the
SIGNright Sign System. In 1998, the Company ceased the active domestic sales of
the SIGNright Sign System. </FONT></P>

<P><FONT SIZE=2>Cardstock
for the two systems is sold by the Company in a variety of sizes and colors
that can be customized to include pre-printed custom artwork, such as a retailer&#146;s
logo. Approximately 3% of 2008 revenues came from the sale of cardstock. The
Company expects this percentage to be comparable in the future. </FONT></P>

<P><FONT SIZE=2><B><I>Stylus Software </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
late 1993, the Company introduced Stylus, a PC-based software application used
by retailers to produce signs, labels, and posters. The Stylus software allows
retailers to create signs, labels and posters by manually entering the
information or by importing information from a database. Approximately 1% of
2008 revenues came from the sale of Stylus products and maintenance. The
Company expects this percentage to be comparable in the future. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>4</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=2><B>Marketing and Sales </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company directly markets the Insignia POPSign program to food and drug
manufacturers and retailers. By utilizing the Insignia POPSign program, these
manufacturers and retailers can easily accomplish what had previously been
either impossible or extremely difficult: tailoring national in-store
advertising programs to regional and local needs with minimal effort. In
addition to the benefits provided to manufacturers and retailers, Insignia&#146;s
POPSign program provides consumers more information and clearer messages to aid
in purchasing decisions. The Company believes its POPSign program is the most
complete in-store advertising sign program available, benefiting consumer,
retailer, and manufacturer. </FONT></P>

<P><FONT SIZE=2>On June 12,
2006, the Company entered into an Exclusive Reseller Agreement with Valassis
Sales and Marketing Services, Inc. (&#147;Valassis&#148;). The agreement had an initial term
of one year with the objective of increasing the Company&#146;s sales of Insignia
POPSigns. On December 6, 2006, the Company and Valassis executed Amendment No.
1 to the agreement which finalized certain appendices, made certain other
modifications to the agreement and extended the initial term through December
31, 2007. On July 2, 2007 the Company and Valassis executed Amendment No. 2 to
the agreement which extended the term of the agreement to December 31, 2017 and
expanded the strategic alliance to increase the role of Valassis to include
developing and expanding the Company&#146;s participating retailer network. In
conjunction with Amendment No. 2 Valassis received a five-year warrant to
acquire 800,000 shares of Insignia&#146;s common stock at a price of $4.04 and will
be paid cash commissions by the Company on the revenue the Company realizes
from POPS programs the consumer packaged goods manufacturers conduct in the new
retail chains. The Company recorded $1,521,000 of expense during the year ended
December 31, 2007 related to the fair value of the warrant. </FONT></P>

<P><FONT SIZE=2>Prior to April
1998, the Company marketed the Impulse Retail System and the SIGNright Sign
System through telemarketing by in-house sales personnel and independent sales
representatives. In May 1998, the Company discontinued the active marketing of
the systems. The Company sells cardstock and supplies related to these systems
to U.S. and international customers. </FONT></P>

<P><FONT SIZE=2>The Company
markets its Stylus software in the United States and internationally primarily
through resellers that integrate Stylus as an Open Database Connectivity design
and publishing component into their retail data and information management
software applications. </FONT></P>

<P><FONT SIZE=2>During 2008,
2007 and 2006, foreign sales accounted for less than 1% of total net sales each
year. The Company expects sales to foreign distributors will be less than 1% of
total net sales in 2009. </FONT></P>

<P><FONT SIZE=2><B>Competition </B></FONT></P>

<P><FONT SIZE=2><B><I>Insignia&#146;s POPSign Program </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Insignia POPSign program is competing for the marketing expenditures of branded
product manufacturers for at-shelf advertising-related signage. The Insignia
POPSign program has one major competitor in its market, which is News America
Marketing In-Store<SUP>&#174;</SUP>, Inc. (News America). </FONT></P>

<P><FONT SIZE=2>News America
offers a network for in-store advertising, promotion and sales merchandising
services. News America has branded its in-store shelf signage products as
SmartSource Shelftalk<SUP>sm</SUP>, SmartSource Shelfvision<SUP>sm</SUP> and
SmartSource Price Pop<SUP>&#174;</SUP>. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>5</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=2>We believe the
main strengths of the Insignia POPSign program in relation to its competitors
are: </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the linking
 of manufacturers to retailers at a central coordination point</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>providing a
 complete &#147;call to action&#148; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>supplying
 product-specific and store-specific messages at the retail shelf</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>delivering vital
 product information and store-specific prices </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>short lead
 times </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>significant
 sales increases </FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Patents and Trademarks </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has developed and is using a number of trademarks, service marks,
slogans, logos and other commercial symbols to advertise and sell its products.
The Company owns U.S. registered trademarks for Insignia Systems, Inc.<SUP>&#174;</SUP> (and Design), Insignia
POPS<SUP>&#174;</SUP>, POPS Select<SUP>&#174;</SUP>, Insignia Color POPS<SUP>&#174;</SUP>,
Insignia POPSign<SUP>&#174;,</SUP> UltraColor<SUP>&#174;</SUP>, Stylus<SUP>&#174;</SUP>,
Stylus Work Center <SUP>&#174;</SUP>, SIGNright<SUP>&#174;</SUP>, Impulse<SUP>&#174;</SUP>,
DuraSign<SUP>&#174;</SUP>, I-Care<SUP>&#174;</SUP>, and Check This Out.<SUP>&#174;</SUP> </FONT></P>

<P><FONT SIZE=2>The Company is
in the process of obtaining trademark registrations in the United States for
the trademarks &#147;Insignia E-POPS&#148; and &#147;Insignia ShelfPOPS.&#148; </FONT></P>

<P><FONT SIZE=2>The barcode
which the Company uses on the sign cards for the Impulse and SIGNright Sign
Systems was also developed by the Developer, which has granted the Company an
exclusive worldwide license of its rights to the barcode. The license requires
the Company to pay a royalty of 1% of the net sales price received by the
Company on cardstock or other supply items that bear the barcode used by the
Impulse and SIGNright Sign Systems. Although a patent has been issued to the
Developer, which covers the use of the barcode, there is no assurance that the
Company will be able to prevent other suppliers of cardstock from copying the
barcode used by the Company. However, the Company believes that the number,
relatively small size and geographic dispersal of Impulse and SIGNright users,
their relationship with the Company and the Company&#146;s retention of its customer
list as a trade secret will discourage other sign card suppliers from offering
bar-coded sign cards for use on the Impulse and SIGNright machines. </FONT></P>

<P><FONT SIZE=2>Key employees
are required to enter into nondisclosure and invention assignment agreements,
and customers, vendors and other third parties also must agree to nondisclosure
restrictions prior to disclosure of our trade secrets or other confidential or
proprietary information. </FONT></P>

<P><FONT SIZE=2><B>Product Development </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product
development for Insignia&#146;s POPSign program has been conducted internally and
includes the proprietary data management and operations system, as well as the
current offering of point-of-purchase and other advertising products. Ongoing
internal systems enhancements, as well as the development of point-of-purchase
and other advertising or promotional products, will be conducted utilizing both
internal and external resources as appropriate. </FONT></P>

<P><FONT SIZE=2>Product
development on the SIGNright Sign System was primarily conducted by the
Developer on a contract basis. </FONT></P>

<P><FONT SIZE=2>The Stylus
software product line remains a viable application for the Company&#146;s retailer
customers. The Company performs development to keep Stylus current and updated
to meet industry requirements. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2><B>Customers </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Two
customers accounted for 19% and 10% of the Company&#146;s total net sales for the
year ended December 31, 2008. Two other customers accounted for 13% and 11%,
15% and 11%, and 26% and 10% of the Company&#146;s total net sales for the years ended
December 31, 2008, 2007 and 2006. </FONT></P>

<P><FONT SIZE=2><B>Backlog </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
backlog at March 2, 2009 was approximately $11.7 million, of which $11.3
million is for delivery during 2009 and $400,000 is for delivery during 2010.
The orders are believed to be firm but there is no assurance that all of the
backlog will actually result in revenues. Sales backlog at February 29, 2008
was approximately $16.9 million. </FONT></P>

<P><FONT SIZE=2><B>Seasonality </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s results of operations have fluctuated from quarter to quarter due to
variations in net sales and operating expenses. There is no seasonal pattern to
these fluctuations. </FONT></P>

<P><FONT SIZE=2>The results of operations
fluctuate from quarter to quarter as a result of the following: </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The timing of seasonal
 events for customers; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Variations in the specific
 products which customers choose to advertise; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Fluctuations in
 advertising budgets of customers and the amounts they commit to in-store
 advertising; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Variations in the number
 of retailers in the Company&#146;s network; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Sales incentives to sales
 staff and strategic partners; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Minimum program level
 commitments to retailers; and </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Professional fees related
 to litigation. </FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Employees </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of February 27, 2009, the Company had 114 employees, including all full-time
and part-time employees. </FONT></P>

<P><FONT SIZE=2><B>Segment Reporting </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company operates in a single reportable segment. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>7</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=3><U>I<A NAME=A003></A>tem 1A.&nbsp;&nbsp;&nbsp;&nbsp;Risk Factors </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
business faces significant risks, including the risks described below.
Additional risks that we do not yet know of or that we currently believe are
immaterial may also impair our business operations. If any of the events or
circumstances described in the following risks occurs, our business, financial
condition or results of operations could suffer, and the trading price of our
common stock could decline. </FONT></P>

<P><FONT SIZE=2><B>Our Customers And Retailers May Be Susceptible To Changes In
General Economic Conditions </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
revenues are affected by our customers&#146; marketing and advertising spending and
our revenues and results of operations may be subject to fluctuations based
upon general economic conditions. A continued economic downturn may reduce
demand for our products and services or depress pricing of those products and
services and have an adverse effect on our results of operations. Retailers may
be impacted by changes in consumer spending as well, which may adversely impact
our ability to renew contracts with our existing retailers as well as contract
with new retailers on terms which are acceptable. In addition, if we are unable
to successfully anticipate changing economic conditions, we may be unable to
effectively plan for and respond to those changes, and our business could be
negatively affected. </FONT></P>

<P><FONT SIZE=2><B>We Have Had Significant Losses In Prior Periods </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we had net income of $2,343,000 and $2,396,000 for the years ended December 31,
2007 and 2006 respectively, we have had significant net losses for all of the
other years since the year ended December 31, 2003. There can be no assurance
that we will be profitable on a quarterly or annual basis. If we are unable to
generate net income from operations our business will be adversely affected and
our stock price will likely decline. </FONT></P>

<P><FONT SIZE=2><B>We Are Involved In Major Litigation </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August 2000, News America Marketing In-Store, Inc. (News America), brought suit
against the Company in U.S. District Court in New York, New York. The case was
settled in November 2002. The terms of the settlement agreement are
confidential. The settlement did not impact the Company&#146;s operating results. </FONT></P>

<P><FONT SIZE=2>In October 2003, News
America brought suit against the Company in U.S. District Court in New York,
New York, alleging that the Company has engaged in deceptive acts and
practices, has interfered with existing business relationships with retailers
and prospective economic advantage, and has engaged in unfair competition. The
suit sought unspecified damages and injunctive relief. In February 2007 the
U.S. District Court in New York transferred this action to Minnesota where the
claims became part of the lawsuit the Company filed against News America and
Albertson&#146;s Inc. in 2004 (described below), and the New York action was
subsequently dismissed. </FONT></P>

<P><FONT SIZE=2>On September 23, 2004, the
Company brought suit against News America and Albertson&#146;s Inc. (Albertson&#146;s) in
Federal District Court in Minneapolis, Minnesota, for violations of federal and
state antitrust and false advertising laws, alleging that News America has
acquired and maintained monopoly power through various wrongful acts designed to
harm the Company in the in-store advertising and promotion products and
services market. The suit seeks injunctive relief sufficient to prevent further
antitrust injury and an award of treble damages to be determined at trial for
the harm caused to the Company. On June 30, 2006 the Court denied the motions
of News America and Albertson&#146;s to dismiss the suit. On September 20, 2006, the
State of Minnesota through its Attorney General intervened as a co-plaintiff in
the business disparagement portion of the Minnesota case. In December 2006,
News America filed counterclaims in the Minnesota case that included claims
similar to those in its New York action against Insignia and one of its
officers, plus claims for damages for two alleged incidents of libel and slander.
Motions to dismiss the counterclaims were argued in June 2007, and on September
28, 2007 the Court denied the motions to dismiss the counterclaims. The parties
are now engaged in pre-trial discovery. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>8</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
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<P><FONT SIZE=2>Pursuant to Court order, all
discovery and pre-trial matters must be completed by May 1, 2009. On February
4, 2008, the Court approved a Consent Decree entered into by News America and
the State of Minnesota under which News America agreed to not violate
Minnesota&#146;s statutes prohibiting commercial disparagement. On July 29, 2008,
the Company and Albertson&#146;s entered into a Settlement Agreement and Mutual
Release, in which they each agreed to release all claims against the other, and
the Company agreed to dismiss its lawsuit against Albertson&#146;s. </FONT></P>

<P><FONT SIZE=2>The Company filed claims in
December 2006 and January 2007 with its director&#146;s and officer&#146;s liability and
general liability insurers related to the defense costs and insurance coverage
for claims asserted against the Company and one of its officers in News America&#146;s
counterclaims. On August 9, 2007, the Company filed a complaint against the
insurers in Hennepin County District Court, State of Minnesota requesting a
declaratory judgment that the insurers owe the Company and its officer such
defense costs and insurance coverage. In December 2007, the Company settled its
claim against one of the insurers, and in March 2009, the Company settled with
the other insurer and received a payment of $1,387,000 as part of the
settlement. </FONT></P>

<P><FONT SIZE=2>Although management believes
that News America&#146;s counterclaims are without merit, an evaluation of the
likelihood of an unfavorable outcome and an estimate of the potential liability
cannot be rendered at this time. If the Company is required to pay a
significant amount in settlement or damages, it will have a material adverse
effect on its operations and financial condition. In addition, a negative
outcome of this litigation could affect long-term competitive aspects of the
Company&#146;s business. </FONT></P>

<P><FONT SIZE=2>Management currently expects
the amount of legal fees and expenses that will be incurred in connection with
the ongoing lawsuits to be significant throughout 2009. During the years ended
December 31, 2008, 2007 and 2006, the Company incurred legal fees and expenses
of $4,086,000, $1,758,000 and $935,000 related to the ongoing lawsuits. Legal
fees and expenses are expensed as incurred and are included in general and
administrative expenses in the statements of operations. </FONT></P>

<P><FONT SIZE=2>The Company is subject to
various other legal proceedings in the normal course of business. Management
believes the outcome of these proceedings will not have a material adverse
effect on the Company&#146;s financial position or results of operations. </FONT></P>

<P><FONT SIZE=2><B>We Are Dependent On Our Contracts With Retailers And Our
Ability To Renew Those Contracts When Their Terms Expire </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
an ongoing basis, we negotiate renewals of various retailer contracts. Some of
our retailer contracts require us to guarantee minimum payments to our
retailers. If we are unable to offer guarantees at the required levels in the
new contracts, and the contracts are not renewed because of that or because of
other reasons, it will have a material adverse effect on our operations and
financial condition. </FONT></P>

<P><FONT SIZE=2>Our POPS business and
results of operations could be adversely affected if the number of retailer
partners decreases significantly or if the retailer partners fail to continue
to provide good service including performing their duties in placing and
maintaining POPSigns at the shelf in their stores and providing product movement
data to us. </FONT></P>

<P><FONT SIZE=2>Our contract with Safeway
Stores expired on December 31, 2008, which could have a material adverse effect
on our business. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2><B>Our Results Of Operations May Be Subject To Significant
Fluctuations Which May Result In A Decrease In Our Stock Price </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
quarterly and annual operating results have fluctuated in the past and may vary
in the future due to a wide variety of factors including: </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the loss of contracts with
 retailers; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the continued impact of
 significant litigation on our business;  </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the timing of seasonal
 events for customers or the loss of customers;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the timing of new retail
 stores being added; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the timing of additional
 selling, marketing and general and administrative expenses; and </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>competitive conditions in
 our industry. </FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>Due to these factors, our
quarterly net sales, expenses and results of operations could vary
significantly in the future and this could adversely affect the market price of
our common stock. </FONT></P>

<P><FONT SIZE=2><B>We Have Significant Competitors </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
face significant competition from other providers of at-shelf advertising or
promotional signage. Some of these competitors have significantly greater
financial resources that can be used to market their products. Should our
competitors succeed in obtaining more of the at-shelf advertising business from
our current customers, our revenues and related operations would be adversely
affected. </FONT></P>

<P><FONT SIZE=2><B>Our Results Are Dependent On The Success Of Our Insignia POPS
Program Which Represents A Very Significant Part Of Our Business </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are largely dependent on our POPS program, which represented approximately 92%,
88% and 88% of total net sales for fiscal 2008, 2007 and 2006, respectively. We
expect the POPS program to represent a higher percentage in fiscal 2009 and
future periods. Should brand manufacturers no longer perceive value in the POPS
program, our business and results of operations would be adversely affected due
to our heavy dependence on this program. </FONT></P>

<P><FONT SIZE=2><B>Our Results Are Dependent On The Level Of Spending By Branded
Product Manufacturers For Advertising And Promotional Expenditures </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are largely dependent on the net sales from our POPSigns, which are purchased
by branded product manufacturers. Changes in economic conditions could result
in reductions in advertising and promotional expenditures by branded product
manufacturers. Should these reductions occur, our revenues and related results
of operations would be adversely affected. </FONT></P>

<P><FONT SIZE=2><B>Our Results Are Dependent On Our Manufacturer Partners
Continuing To Achieve Sales Increases </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
product manufacturer customers use our POPS program to motivate consumers to
buy their branded products. Use of our POPS program has historically resulted
in sales increases for that particular product. If our POPS program does not
continue to result in these product sales increases, our marketing success and
sales levels could be adversely affected. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2><B>Our Stock Price Has Been And May Continue To Be Volatile </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2008 our common stock has traded between $2.95 and $0.75 per share. The market
price of our common stock may continue to be volatile and may be significantly
affected by: </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the loss or addition of
 contracts with major retailers; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the continued impact of
 significant litigation on our business; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>actual or anticipated
 fluctuations in our operating results;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>announcements of new
 services by us or our competitors; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>developments with respect
 to conditions and trends in our industry or in the industries we serve;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>general market conditions;
 and </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&#149;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>other factors, many of
 which are beyond our control. </FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=3><U>I<A NAME=A004></A>tem 1B. &nbsp;&nbsp;&nbsp;&nbsp;Unresolved Staff Comments </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable. </FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A005></A>tem 2. &nbsp;&nbsp;&nbsp;&nbsp; Properties </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company currently leases approximately 41,000 square feet of office and
warehouse space in suburban Minneapolis, Minnesota, through February 29, 2016.
The Company believes that the 41,000 square feet of space will meet the
Company&#146;s foreseeable needs. </FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A006></A>tem 3. &nbsp;&nbsp;&nbsp;&nbsp;Legal Proceedings </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August 2000, News America Marketing In-Store, Inc. (News America), brought suit
against the Company in U.S. District Court in New York, New York. The case was
settled in November 2002. The terms of the settlement agreement are
confidential. The settlement did not impact the Company&#146;s operating results. </FONT></P>

<P><FONT SIZE=2>In
October 2003, News America brought suit against the Company in U.S. District
Court in New York, New York, alleging that the Company has engaged in deceptive
acts and practices, has interfered with existing business relationships with
retailers and prospective economic advantage, and has engaged in unfair
competition. The suit sought unspecified damages and injunctive relief. In
February 2007 the U.S. District Court in New York transferred this action to
Minnesota where the claims became part of the lawsuit the Company filed against
News America and Albertson&#146;s Inc. in 2004 (described below), and the New York
action was subsequently dismissed. </FONT></P>

<P><FONT SIZE=2>On
September 23, 2004, the Company brought suit against News America and
Albertson&#146;s Inc. (Albertson&#146;s) in Federal District Court in Minneapolis,
Minnesota, for violations of federal and state antitrust and false advertising
laws, alleging that News America has acquired and maintained monopoly power
through various wrongful acts designed to harm the Company in the in-store
advertising and promotion products and services market. The suit seeks
injunctive relief sufficient to prevent further antitrust injury and an award
of treble damages to be determined at trial for the harm caused to the Company.
On June 30, 2006 the Court denied the motions of News America and Albertson&#146;s
to dismiss the suit. On September 20, 2006, the State of Minnesota through its
Attorney General intervened as a co-plaintiff in the business disparagement
portion of the Minnesota case. In December 2006, News America filed
counterclaims in the Minnesota case that included claims similar to those in
its New York action against Insignia and one of its officers, plus claims for
damages for two alleged incidents of libel and slander. Motions to dismiss the
counterclaims were argued in June 2007, and on September 28, 2007 the Court
denied the motions to dismiss the counterclaims. The parties are now engaged in
pre-trial discovery. Pursuant to Court order, all discovery and pre-trial
matters must be completed by May 1, 2009. On February 4, 2008, the Court
approved a Consent Decree entered into by News America and the State of
Minnesota under which News America agreed to not violate Minnesota&#146;s statutes
prohibiting commercial disparagement. On July 29, 2008, the Company and
Albertson&#146;s entered into a Settlement Agreement and Mutual Release, in which
they each agreed to release all claims against the other, and the Company
agreed to dismiss its lawsuit against Albertson&#146;s.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>11</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=2>The Company filed claims in
December 2006 and January 2007 with its director&#146;s and officer&#146;s liability and
general liability insurers related to the defense costs and insurance coverage
for claims asserted against the Company and one of its officers in News
America&#146;s counterclaims. On August 9, 2007, the Company filed a complaint
against the insurers in Hennepin County District Court, State of Minnesota
requesting a declaratory judgment that the insurers owe the Company and its
officer such defense costs and insurance coverage. In December 2007, the
Company settled its claim against one of the insurers, and in March 2009, the
Company settled with the other insurer and received a payment of $1,387,000 as
part of the settlement. </FONT></P>

<P><FONT SIZE=2>Although management believes
that News America&#146;s counterclaims are without merit, an evaluation of the
likelihood of an unfavorable outcome and an estimate of the potential liability
cannot be rendered at this time. If the Company is required to pay a
significant amount in settlement or damages, it will have a material adverse
effect on its operations and financial condition. In addition, a negative
outcome of this litigation could affect long-term competitive aspects of the
Company&#146;s business. </FONT></P>

<P><FONT SIZE=2>Management currently expects
the amount of legal fees and expenses that will be incurred in connection with
the ongoing lawsuits to be significant throughout 2009. During the year ended
December 31, 2008, the Company incurred legal fees and expenses of $4,086,000
related to the ongoing lawsuits. Legal fees and expenses are expensed as
incurred and are included in general and administrative expenses in the
statements of operations. </FONT></P>

<P><FONT SIZE=2>The Company is subject to
various other legal proceedings in the normal course of business. Management
believes the outcome of these proceedings will not have a material adverse
effect on the Company&#146;s financial position or results of operations. </FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A007></A>tem 4. &nbsp;&nbsp;&nbsp;&nbsp;Submission of Matters to a Vote of
Security Holders </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
matters were submitted to a vote of security holders during the fourth quarter
of fiscal 2008. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>12</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=3><B><I>P<A NAME=A008></A>ART II. </I></B></FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A009></A>tem 5. </U><FONT SIZE=3><U>&nbsp;&nbsp;&nbsp;&nbsp;</U></FONT><FONT SIZE=3><U>Market for
Registrant&#146;s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities </U></FONT></FONT></P>

<P><FONT SIZE=2><B>Market Information </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s common stock trades on the
NASDAQ Capital Market&#174; under the symbol ISIG. The following table sets forth
the range of high and low bid prices reported on the Nasdaq System. These quotations represent prices between dealers
and do not reflect retail mark-ups, mark-downs or commissions. </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="28%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="17%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>2008</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P>&nbsp;</P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>High</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Low</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P>&nbsp;</P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>High</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P>&nbsp;</P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Low</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>First Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2.95</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.71</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>First Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3.64</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2.69</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Second Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.50</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.64</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Second Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4.27</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.00</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Third Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2.24</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.50</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Third Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>5.08</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>4.00</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Fourth Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.94</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.75</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Fourth Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4.74</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.25</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Approximate Number of Holders of Common Stock
</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of February 27, 2009, the Company had one class of Common Stock beneficially
held by approximately 1,700 owners. </FONT></P>

<P><FONT SIZE=2><B>Dividends </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has never paid cash dividends on its common stock. The Board of
Directors presently intends to retain all earnings for use in the Company&#146;s
business and does not anticipate paying cash dividends in the foreseeable
future. </FONT></P>

<P><FONT SIZE=2><B>Stock Repurchase Plan </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August 19, 2008, the Board of Directors authorized the repurchase of up to
$2,000,000 of the Company&#146;s common stock on or before July 31, 2009. The plan
does not obligate the Company to repurchase any particular number of shares,
and may be suspended at any time at the Company&#146;s discretion. </FONT></P>

<P><FONT SIZE=2>Our share repurchase program
activity for the three months ended December 31, 2008 was: </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="37%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Total Number<BR>
 Of Shares<BR>
 Repurchased</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="4" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Average<BR>
 Price Paid<BR>
 Per Share</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="4" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Total Number Of<BR>
 Shares Purchased As<BR>
 Part Of Publicly<BR>
 Announced Plans<BR>
 Or Programs</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="4" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Approximate Dollar <BR>
 Value of Shares<BR>
 That<BR>
 May Yet Be<BR>
 Purchased<BR>
 Under The Plans<BR>
 Or Programs</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>October 1-31, 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN="CENTER"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,541,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>November 1-30, 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN="CENTER"><FONT SIZE=2>300,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.90</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>300,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,271,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>December 1-31, 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN="CENTER"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,271,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>13</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=2><B>Stock Performance Graph </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following graph compares the cumulative total shareholder return on the
Company&#146;s Common Stock for the five fiscal years beginning December 31, 2003
and ending December 31, 2008, with the cumulative total return on the NASDAQ
Stock Market &#151; U.S. Index and the Russell 2000 Index over the same period
(assuming the investment of $100 in the Company&#146;s Stock, the NASDAQ Stock
Market &#150; U. S. Index and the Russell 2000 Index on December 31, 2003 and the
reinvestment of all dividends). </FONT></P>

<P><FONT SIZE=2><IMG SRC="img001.jpg" ALT="(LINE GRAPH)"></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>14</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>



<P><FONT SIZE=3><U>I<A NAME=A010></A>tem
6.&nbsp;&nbsp;&nbsp;&nbsp;Selected Financial Data</U></FONT></P>

<P><FONT SIZE=2>(In thousands,
except per share amounts.)</FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="42%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>For the
 Years Ended<BR>
 December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2004</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>31,406</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>24,431</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>21,894</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>19,598</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>20,992</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Operating income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(299</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>81</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><SUP>(2)</SUP></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,314</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(3,331</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(4,875</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)<SUP>(4)</SUP></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(2,257 </FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)<SUP>(1)</SUP></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,343</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2><SUP>(3)</SUP></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,396</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(3,308</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(4,858</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net income (loss) per share:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Basic</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(0.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(0.38</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Diluted</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.14</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.38</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Shares used in calculation of net income
 (loss) per share:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Basic</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,484</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,411</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,093</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,002</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>12,687</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Diluted</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,484</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>16,186</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,556</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,002</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>12,687</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Working capital</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>6,396</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>7,751</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5,017</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,592</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,813</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total assets</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,593</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>13,340</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>8,583</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>6,673</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>9,921</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total shareholders&#146; equity</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>7,271</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,677</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,862</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,072</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5,333</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="94%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE="MARGIN-TOP:-2PX"><FONT SIZE=2><SUP>(1)</SUP></FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="MARGIN-TOP:2PX"><FONT SIZE=2>Includes tax expense of
 $2,131 related to the increase of the valuation allowance against deferred
 tax assets more fully described in Note 7 to the financial statements.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE="MARGIN-TOP:-2PX"><FONT SIZE=2><SUP>(2)</SUP></FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="MARGIN-TOP:2PX"><FONT SIZE=2>Includes a one-time
 non-cash charge of $1,521 for the warrant granted to Valassis more fully
 described in Note 6 to the financial statements.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE="MARGIN-TOP:-2PX"><FONT SIZE=2><SUP>(3)</SUP></FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="MARGIN-TOP:2PX"><FONT SIZE=2>Includes a tax benefit of
 $2,131 related to the reduction of the valuation allowance against deferred
 tax assets more fully described in Note 7 to the financial statements.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P STYLE="MARGIN-TOP:-2PX"><FONT SIZE=2><SUP>(4)</SUP></FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="MARGIN-TOP:2PX"><FONT SIZE=2>Includes a
 $960 impairment of goodwill in 2004 and a $2,133 impairment of goodwill in
 2003 related to the acquisition of VALUStix. During 2006 the Company ceased
 all business activities related to VALUStix.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=3><U>I<A NAME=A011></A>tem
7.&nbsp;&nbsp;&nbsp;&nbsp;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations</U></FONT></P>

<P><FONT SIZE=2>The following
discussion should be read in conjunction with the financial statements and the
related notes included in this Report. This Report contains forward-looking
statements that involve risks and uncertainties. Our actual results could
differ materially from those in such forward-looking statements as a result of
many factors, including those discussed in &#147;Cautionary Statements Regarding
Forward-Looking Information&#148; and elsewhere in this Report.</FONT></P>

<P><FONT SIZE=2><B>Impact Of The Current
Economic Environment</B></FONT></P>

<P><FONT SIZE=2>The Company
does not believe that the recession which began in 2008 had a significant
effect on its results of operations for the year ended December 31, 2008.
POPSign service revenues for the year ended December 31, 2008, increased 34%
over the year ended December 31, 2007. Products sales for the year ended
December 31, 2008, decreased 12.9% from the year ended December 31, 2007, which
reflects a historical trend of decreases due to decreased demand for thermal
sign card supplies and laser supplies. The Company may be adversely affected by
the economic environment in the future if spending levels of its customers are
reduced or it is unable to renew contracts with existing retailers or contract with new
retailers on terms which are acceptable.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>15</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=2><B>Results of Operations</B></FONT></P>

<P><FONT SIZE=2>The following
table sets forth, for the periods indicated, certain items in the Company&#146;s
Statements of Operations as a percentage of total net sales.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="84%">
<TR style="font-size:1px">
<TD WIDTH="55%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year ended
 December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN="RIGHT"><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN="RIGHT"><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN="RIGHT"><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cost of sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>46.2</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>44.6</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>45.9</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Gross profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>53.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>55.4</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>54.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Operating expenses:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Selling</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>27.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>23.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>22.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Marketing</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Warrant expense</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>6.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>General and administrative</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>22.6</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>19.9</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>16.6</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total operating expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>54.8</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>55.1</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>43.5</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Operating income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Other income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>0.6</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>0.6</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>0.3</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Income (loss) before taxes</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.4</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Income tax (expense) benefit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(6.8</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>8.7</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>(7.2</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>9.6</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>10.9</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Critical Accounting
Policies</B></FONT></P>

<P><FONT SIZE=2>Our discussion
of our financial condition and results of operations is based upon our financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. During the preparation of these
financial statements, we are required to make estimates and assumptions that
affect the reported amounts of assets, liabilities, net revenues, costs and
expenses and related disclosures. On an ongoing basis, we evaluate our
estimates and assumptions, including those related to revenue recognition,
allowance for doubtful accounts, income taxes, and stock-based compensation
expense. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances. The results
of our analysis form the basis for making assumptions about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions, and the impact of such differences may be material to our
consolidated financial statements.</FONT></P>

<P><FONT SIZE=2>We believe the
following critical accounting policies affect our more significant judgments
and estimates used in the preparation of our financial statements:</FONT></P>

<P><FONT SIZE=2><B><I>Revenue Recognition</I></B>.
The Company recognizes revenue from Insignia POPSigns ratably over the period
of service, which is either a two-week or four-week display cycle. We recognize
revenue related to equipment, software and sign card sales at the time the
products are shipped to customers. Revenue associated with maintenance
agreements is recognized ratably over the life of the contract. Revenue that
has been billed and not yet recognized is reflected as deferred revenue on our
balance sheet.</FONT></P>

<P><FONT SIZE=2><B><I>Allowance for
Doubtful Accounts</I></B><I>.</I> An allowance is
established for estimated uncollectible accounts receivable. The Company
determines its allowance by considering a number of factors, including the
length of time trade accounts receivable are past due, the Company&#146;s previous
loss history, the customer&#146;s current ability to pay its obligation to the
Company, the condition of the general economy and the industry as a whole and
other relevant facts and circumstances. Unexpected changes in the
aforementioned factors could result in materially different amounts.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>16</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=2><B><I>Income Taxes</I></B>. We account for income taxes in accordance
with Statement of Financial Accounting Standard No. 109, or FAS 109,<I> Accounting for Income Taxes,</I> as clarified
by FASB Interpretation No. 48,<I> Accounting
for Uncertainty in Income Taxes</I> (&#147;FIN 48&#148;). Under this method,
deferred income taxes are determined based on the estimated future tax effects
of differences between the financial statement and tax bases of assets and
liabilities given the provisions of enacted tax laws. Deferred income tax
provisions and benefits are based on changes to the assets or liabilities from
year to year. In providing for deferred taxes, we consider tax regulations of
the jurisdictions in which we operate, estimates of future taxable income, and
available tax planning strategies. If tax regulations, operating results or the
ability to implement tax-planning strategies vary, adjustments to the carrying
value of deferred tax assets and liabilities may be required. Valuation
allowances are recorded related to deferred tax assets based on the &#147;more
likely than not&#148; criteria of FAS&nbsp;No.&nbsp;109.</FONT></P>

<P><FONT SIZE=2>FIN 48 requires that we
recognize the financial statement benefit of a tax position only after
determining that the relevant tax authority would more likely than not sustain
the position following an audit. For tax positions meeting the more-likely-than-not
threshold, the amount recognized in the financial statements is the largest
benefit that has a greater than 50 percent likelihood of being realized upon
ultimate settlement with the relevant tax authority.</FONT></P>

<P><FONT SIZE=2>At December
31, 2008, all of the Company&#146;s net deferred tax assets were offset with a
valuation allowance, which amounted to approximately $8.6 million. The Company
does not believe it is more likely than not that these deferred tax assets will
be realized in future years.</FONT></P>

<P><FONT SIZE=2><B><I>Stock-Based
Compensation</I></B><I>.</I> Effective January 1, 2006, the Company
adopted Statement of Financial Accounting Standards No. 123R, Share-Based
Payment (SFAS 123R), which requires companies to measure and recognize
compensation expense for all stock-based payments at fair value. We use the
Black-Scholes option pricing model to determine the weighted average fair value
of options and employee stock purchase plan rights. The determination of fair
value of share-based payment awards on the date of grant using an
option-pricing model is affected by our stock price as well as by assumptions
regarding a number of highly complex and subjective variables. These variables
include, but are not limited to, the expected stock price volatility over the
term of the awards, and actual and projected employee stock option exercise
behaviors.</FONT></P>

<P><FONT SIZE=2>The expected
terms of the options and employee stock purchase plan rights are based on
evaluations of historical and expected future employee exercise behavior. The
risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately
equal to the expected life at grant date. Volatility is based on historical and
expected future volatility of the Company&#146;s stock. The Company has not
historically issued any dividends and does not expect to in the future. SFAS
123R requires forfeitures to be estimated at the time of the grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from
estimates.</FONT></P>

<P><FONT SIZE=2>If factors
change and we employ different assumptions in the application of SFAS 123R to
grants in future periods, the compensation expense that we record under SFAS
123R may differ significantly from what we have recorded in the current
periods.</FONT></P>

<P><FONT SIZE=2><B>Fiscal 2008 Compared to Fiscal 2007</B></FONT></P>

<P><FONT SIZE=2><B><I>Net Sales.</I></B>
Net sales for the year ended December 31, 2008 increased 28.6% to $31,406,000
compared to $24,431,000 for the year ended December 31, 2007. </FONT></P>

<P><FONT SIZE=2>Service
revenues from our POPSign programs for the year ended December 31, 2008
increased 34% to $28,931,000 compared to $21,589,000 for the year ended
December 31, 2007. The increase was primarily due to an increase in the number
of POPSign programs executed for customers (consumer packaged goods
manufacturers) during the 2008 period which more than offset a reduction in the
average sign price during the 2008 period. The Company expects that service
revenues from POPSign programs for the year ending December 31, 2009 will be
lower than for the year ended December 31, 2008 as a result of the loss of
Safeway, Inc. from its network of retailers at December 31, 2008 when the
contract with Safeway Inc. expired. Additionally, current economic conditions
may have an adverse effect on spending levels by our customers, which could
negatively impact service revenues for the year ending December&nbsp;31,&nbsp;2009.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>17</FONT></P>

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<P><FONT SIZE=2>Product sales
for the year ended December 31, 2008 decreased 12.9% to $2,475,000 compared to
$2,842,000 for the year ended December 31, 2007. The decrease was primarily due
to decreased sales of both thermal sign card supplies and laser supplies based
upon decreased demand for these products from our customers. The Company
expects further declines in sales of thermal and laser sign card supplies for
the year ending December 31, 2009. </FONT></P>

<P><FONT SIZE=2><B><I>Gross Profit.</I>
</B>Gross profit for the year ended December 31, 2008 increased 24.7% to
$16,884,000 compared to $13,542,000 for the year ended December 31, 2007. Gross
profit as a percentage of total net sales decreased to 53.8% for 2008 compared
to 55.4% for 2007. </FONT></P>

<P><FONT SIZE=2>Gross profit
from our POPSign program revenues for the year ended December 31, 2008
increased 28.9% to $16,002,000 compared to $12,419,000 for the year ended
December 31, 2007. The increase in gross profit of $3,583,000 resulted from $7,342,000 of increased revenues offset by an increase in retailer expenses of $2,652,000 and an increase in all other costs of services (labor, overhead and material) of $1,107,000. Gross profit as a
percentage of POPSign program revenues decreased to 55.3% for 2008 compared to
57.5% for 2007, due primarily to lower average revenue per sign combined with
higher average cost per sign (primarily retailer expenses) in the 2008 period.</FONT></P>

<P><FONT SIZE=2>Gross profit
from our product sales for the year ended December 31, 2008 decreased 21.5% to
$882,000 compared to $1,123,000 for the year ended December 31, 2007. Gross
profit as a percentage of product sales decreased to 35.6% for 2008 compared to
39.5% for 2007. The decreases were primarily due to decreased sales and the
effect of fixed costs.</FONT></P>

<P><FONT SIZE=2><B><I>Operating Expenses</I></B></FONT></P>

<P><FONT SIZE=2><B><I>Selling.</I></B>
Selling expenses (exclusive of selling related warrant expense) for the year
ended December 31, 2008 increased 50.4% to $8,521,000 compared to $5,664,000 for
the year ended December 31, 2007, primarily due to increased sales commissions,
staffing levels and meals/entertainment/travel costs. The increased sales
commissions were due to increased POPSign program sales and the effect of
increased incentives for our strategic partner (Valassis Sales &amp; Marketing
Services, Inc. (&#147;Valassis&#148;)) and our employed sales force. Selling expenses as
a percentage of total net sales increased to 27.1% in 2008 compared to 23.2% in
2007, primarily due to the factors described above offset partially by the
effect of increased sales in 2008.</FONT></P>

<P><FONT SIZE=2><B><I>Marketing.</I></B>
Marketing expenses (exclusive of marketing related warrant expense) for the
year ended December 31, 2008 increased 13.5% to $1,602,000 compared to
$1,412,000 for the year ended December 31, 2007, primarily due to increased
labor and benefit costs (as a result of increased staffing levels) partially
offset by decreased data acquisition and analysis costs. Marketing expenses as
a percentage of total net sales decreased to 5.1% in 2008 compared to 5.8% in
2007, primarily due to the factors described which were more than offset by the
effect of increased sales in 2008.</FONT></P>

<P><FONT SIZE=2><B><I>Warrant expense
(selling and marketing).</I></B> On July 2, 2007, the
Company and Valassis entered into Amendment No. 2 (the &#147;Amendment&#148;) to the
Exclusive Reseller Agreement between the parties. The Amendment extends the
term of the strategic alliance between the parties to December 31, 2017. The
Amendment also expands the strategic alliance to increase the role of Valassis
in the selling and marketing efforts of developing and expanding the Company&#146;s
participating retailer network. Valassis received a five-year warrant to
acquire 800,000 shares of the Company&#146;s common stock at a price of $4.04 and
will be paid a cash commission by the Company on the revenue the Company
realizes from POPS programs the consumer packaged goods manufacturers conduct
in the new retail chains. For the year ended December 31, 2007, the Company
recorded $1,521,000 of expense related to the fair value of the warrant. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>18</FONT></P>

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<P><FONT SIZE=2><B><I>General and
Administrative.</I></B> General and administrative
expenses for the year ended December 31, 2008 increased 45.1% to $7,060,000
compared to $4,864,000 for the year ended December 31, 2007, primarily due to
increased legal costs related to the News America litigation and increased
staffing levels which were partially offset by the receipt of a lease
termination payment. The Company received a payment of $400,000 of early
termination of its previous facility lease on July 31, 2008. The payment, net
of $115,000 of moving expense, is recorded as part of general and
administrative expenses. General and administrative expenses as a percentage of
total net sales increased to 22.6% in 2008 compared to 19.9% in 2007, primarily
due to the factors described above offset partially by the effect of increased
sales in 2008. Legal fees were $4,234,000 for the year ended December 31, 2008
compared to $1,883,000 for the year ended December 31, 2007. The legal fees in
each year were incurred primarily in connection with two News America lawsuits
described elsewhere herein. Legal fees increased in 2008 primarily due to the
increased in activity in the News America litigation as the parties prepare to
be trial-ready by May 1, 2009. We currently expect the amount of legal fees
that will be incurred in connection with the ongoing lawsuit to be significant
in 2009 as trial preparation continues and as the trial is conducted. Also, if
the Company is required to pay a significant amount in settlement or damages,
it will have a material adverse effect on its operations and financial
condition. In addition, a negative outcome of this litigation could affect
long-term competitive aspects of the Company&#146;s business.</FONT></P>

<P><FONT SIZE=2><B><I>Other Income
(Expense).</I></B> Other income (net) for the year ended
December 31, 2008 was $180,000 compared to other income (net) of $153,000 for
the year ended December 31, 2007. Included in other income (net) was interest
income of $234,000 for the year ended December 31, 2008 versus interest income
of $247,000 for the year ended December 31, 2007. Interest income for the 2008
year was lower due to lower interest rates which more than offset the effect of
higher average cash balances in 2008. Lower interest expense of $57,000 for the
year ended December 31, 2008 versus $95,000 for the year ended December 31,
2007 was primarily due to the expiration of the line of credit on April 30,
2007.</FONT></P>

<P><FONT SIZE=2><B><I>Income Taxes.</I></B>
The Company recorded income tax expense for the year ended December 31, 2008 of
$2,138,000 as a result of increasing the valuation allowance against the
deferred tax assets by $1,930,000, recording expense of $201,000 from changes
in the deferred tax assets and recognizing $7,000 of current income tax expense
related to state tax liabilities. The Company recorded an income tax benefit
for the year ended December 31, 2007 of $2,109,000 as a result of the reversal
of $2,337,000 of the valuation allowance against the deferred tax asset which
offset expense from a change in deferred tax assets of $206,000 and $22,000 of
current income tax expense related to Federal alternative minimum tax liability
and other state tax liabilities.</FONT></P>

<P><FONT SIZE=2><B><I>Net Income (Loss).</I></B>
The net loss for the year ended December 31, 2008 was $(2,257,000) compared to
net income of $2,343,000 for the year ended December 31, 2007.</FONT></P>

<P><FONT SIZE=2><B>Fiscal 2007 Compared to Fiscal 2006</B></FONT></P>

<P><FONT SIZE=2><B><I>Net Sales.</I></B>
Net sales for the year ended December 31, 2007 increased 11.6% to $24,431,000
compared to $21,894,000 for the year ended December 31, 2006. </FONT></P>

<P><FONT SIZE=2>Service
revenues from our POPSign programs for the year ended December 31, 2007
increased 12.3% to $21,589,000 compared to $19,219,000 for the year ended
December 31, 2006. The increase was primarily due to an increase in the number
of POPSign programs sold to consumer packaged goods manufacturers.</FONT></P>

<P><FONT SIZE=2>Product sales
for the year ended December 31, 2007 increased 6.2% to $2,842,000 compared to
$2,675,000 for the year ended December 31, 2006. The increase was primarily due
to increased sales of laser label supplies which were partially offset by
decreased sales of thermal sign card supplies. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>19</FONT></P>

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<P><FONT SIZE=2><B><I>Gross Profit.</I>
</B>Gross profit for the year ended December 31, 2007 increased 14.4% to
$13,542,000 compared to $11,840,000 for the year ended December 31, 2006. Gross
profit as a percentage of total net sales increased to 55.4% for 2007 compared
to 54.1% for 2006. </FONT></P>

<P><FONT SIZE=2>Gross profit
from our POPSign program revenues for the year ended December 31, 2007
increased 15.8% to $12,419,000 compared to $10,725,000 for the year ended
December 31, 2006. The increase was primarily due to increased sales and the
effect of fixed costs. Gross profit as a percentage of POPSign program revenues
increased to 57.5% for 2007 compared to 55.8% for 2006, due to the factors
discussed above.</FONT></P>

<P><FONT SIZE=2>Gross profit
from our product sales for the year ended December 31, 2007 increased 0.7% to
$1,123,000 compared to $1,115,000 for the year ended December 31, 2006. Gross
profit as a percentage of product sales decreased to 39.5% for 2007 compared to
41.7% for 2006. The decrease was primarily due to a change in the sales mix toward
lower margin products.</FONT></P>

<P><FONT SIZE=2><B><I>Operating Expenses</I></B></FONT></P>

<P><FONT SIZE=2><B><I>Selling.</I></B>
Selling expenses (exclusive of selling related warrant expense) for the year
ended December 31, 2007 increased 17.1% to $5,664,000 compared to $4,838,000
for the year ended December 31, 2006, primarily due to increased sales
commissions as a result of increased sales, increased labor and benefit costs
as a result of increased headcount and salary adjustments, and increased travel
related costs. Selling expenses as a percentage of total net sales increased to
23.2% in 2007 compared to 22.1% in 2006, primarily due to the factors described
above offset partially by the effect of increased sales in 2007.</FONT></P>

<P><FONT SIZE=2><B><I>Marketing.</I></B>
Marketing expenses (exclusive of marketing related warrant expense) for the
year ended December 31, 2007 increased 34.3% to $1,412,000 compared to
$1,051,000 for the year ended December 31, 2006, primarily due to increased
labor and benefit costs (as a result of increased headcount and salary
adjustments) and increased data acquisition and analysis costs. Marketing
expenses as a percentage of total net sales increased to 5.8% in 2007 compared
to 4.8% in 2006, primarily due to the factors described above offset partially
by the effect of increased sales in 2007.</FONT></P>

<P><FONT SIZE=2><B><I>Warrant expense
(selling and marketing).</I></B> On July 2, 2007, the
Company and Valassis Sales and Marketing Services, Inc. (&#147;Valassis&#148;), entered
into Amendment No. 2 (the &#147;Amendment&#148;) to the Exclusive Reseller Agreement
between the parties. The Amendment extends the term of the strategic alliance
between the parties to December 31, 2017. The Amendment also expands the
strategic alliance to increase the role of Valassis in the selling and
marketing efforts of developing and expanding the Company&#146;s participating
retailer network. Valassis received a five-year warrant to acquire 800,000
shares of the Company&#146;s common stock at a price of $4.04 and will be paid a
cash commission by the Company on the revenue the Company realizes from POPS
programs the consumer packaged goods manufacturers conduct in the new retail
chains. For the year ended December 31, 2007, the Company recorded $1,521,000
of expense related to the fair value of the warrant. </FONT></P>

<P><FONT SIZE=2><B><I>General and
Administrative.</I></B> General and administrative
expenses for the year ended December 31, 2007 increased 33.7% to $4,864,000
compared to $3,637,000 for the year ended December 31, 2006, primarily due to
increased legal costs and increased labor and benefit costs (resulting from
increased headcount, salary adjustments and increased stock-based compensation costs).
General and administrative expenses as a percentage of total net sales
increased to 19.9% in 2007 compared to 16.6% in 2006, primarily due to the
factors described above offset partially by the effect of increased sales in
2007. Legal fees were $1,883,000 for the year ended December 31, 2007 compared
to $1,143,000 for the year ended December 31, 2006. The legal fees in each year
were incurred primarily in connection with two News America lawsuits described
elsewhere herein. Legal fees increased in 2007 primarily due to the increase in
activity in the News America litigation as the parties prepared to be
trial-ready.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>20</FONT></P>

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<P><FONT SIZE=2><B><I>Other Income
(Expense).</I></B> Other income (net) for the year ended
December 31, 2007 was $153,000 compared to other income (net) of $82,000 for
the year ended December 31, 2006. Interest income of $247,000 for the year
ended December 31, 2007 versus interest income of $123,000 for the year ended
December 31, 2006 was the result of higher interest rates and higher cash
balances during the 2007 period. Interest expense of $95,000 for the year ended
December 31, 2007 versus $146,000 for the year ended December 31, 2006 was
primarily due to the expiration of the line of credit on April 30, 2007. Other
income for the year ended December 31, 2006 also included $100,000 of income
from the sale of certain VALUStix assets. During 2006, the Company ceased all
business activities related to VALUStix.</FONT></P>

<P><FONT SIZE=2><B><I>Income Taxes.</I></B>
The Company recorded an income tax benefit for the year ended December 31, 2007
of $2,109,000 as a result of the reversal of $2,337,000 of the valuation
allowance against the deferred tax asset, change in deferred tax assets of
$206,000 and $22,000 of current income tax expense related to Federal
alternative minimum tax liability and other state tax liabilities. The Company
recorded no income tax expense for the year ended December 31, 2006 primarily
due to the deduction for tax purposes in 2006 of the remaining unamortized
goodwill associated with the VALUStix acquisition and the full valuation allowance
provided against the net deferred tax asset. For financial statement purposes
the goodwill was determined to be impaired in 2003 and 2004 and was written-off
during those periods. During 2006, the Company ceased all business activities
related to VALUStix and abandoned the VALUSTIX trademark.</FONT></P>

<P><FONT SIZE=2><B><I>Net Income.</I></B>
Net income for the year ended December 31, 2007 was $2,343,000 compared to
$2,396,000 for the year ended December 31, 2006.</FONT></P>

<P><FONT SIZE=2><B>Liquidity and Capital Resources</B></FONT></P>

<P><FONT SIZE=2>The Company
has financed its operations with proceeds from public and private stock sales
and sales of its services and products. At December 31, 2008, working capital
was $6,396,000 compared to $7,751,000 at December 31, 2007. During the same
period total cash and cash equivalents increased $3,659,000 to $11,052,000.</FONT></P>

<P><FONT SIZE=2>Net cash
provided by operating activities during 2008 was $5,615,000. The increase in
cash and cash equivalents resulted from the net loss $(2,257,000), non-cash
expense of $2,992,000 (for depreciation, amortization, deferred income tax
expense and stock-based compensation) and $4,880,000 of cash provided by
changes in operating assets and liabilities. Accounts receivable increased
$612,000 during 2008 primarily due to higher net sales in the last two months
of 2008 compared to the last two months of 2007. Prepaid expenses decreased by
$611,000 during 2008 primarily due to the absence of prepayments to a retailer
at December 31, 2008 which were present at December 31, 2007. Accounts payable
and accrued liabilities increased $4,073,000 during 2008 primarily as a result
of increased commissions, legal expense and retailer expense payable at
December 31, 2008. The Company expects accounts receivable, accounts payable
and accrued liabilities to fluctuate during future periods depending on the
level of quarterly POPSign revenues and legal activity related to the News
America litigation. </FONT></P>

<P><FONT SIZE=2>Net cash of
$1,049,000 was used in investing activities in 2008 due to the purchase of
property and equipment, primarily the purchase of digital printing equipment,
computer hardware and software and leasehold improvements in the new facility.
The Company expects that 2009 capital expenditures will at a minimum be
$100,000 and could reach $500,000 if the Company decides to proceed with
additional purchases of digital printing equipment for increased product
quality and lower cost per sign.</FONT></P>

<P><FONT SIZE=2>Net cash of
$907,000 was used in financing activities for the year ended December 31, 2008.
The Company used $738,000 (including fees) of cash to repurchase 525,000 shares
of common stock as part of the stock repurchase plan adopted in August 2008.
The Company also used $267,000 of cash for the payment of long-term liabilities
due to a retailer. The Company received $98,000 of proceeds (net of expenses)
from the issuance of common stock related to the employee stock purchase plan
and exercises of stock options. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>21</FONT></P>

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<P><FONT SIZE=2>The Company
believes that based upon current business conditions, its existing cash balance
and future cash from operations will be sufficient for its cash requirements
during 2009. However, there can be no assurances that this will occur or that
the Company will be able to secure additional financing from public or private
stock sales or from other financing agreements if needed.</FONT></P>

<P><FONT SIZE=2><B>New Accounting
Pronouncements</B></FONT></P>

<P><FONT SIZE=2><U>Fair
Value Measurements <BR>
</U>In
September&nbsp;2006, the FASB Statement issued FASB No.&nbsp;157,<I> Fair Value Measurements</I> (SFAS 157) which
is effective for fiscal years beginning after November&nbsp;15, 2007 and for
interim periods within those years. This statement defines fair value,
establishes a framework for measuring fair value, and expands the related
disclosure requirements. However, on December&nbsp;14, 2007, the FASB issued
proposed FSP FAS 157-2 which would delay the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). This proposed FSP partially defers the
effective date of SFAS 157 to fiscal years beginning after November&nbsp;15,
2008, and interim periods within those fiscal years for items within the scope
of this FSP. Furthermore, in October&nbsp;2008, the FASB issued FSP FAS 157-3,<I> Determining the Fair Value of a Financial Asset When
the Market for that Asset is Not Active,</I> and was effective upon
issuance. Effective for 2008, we adopted SFAS 157 except as it applies to those nonfinancial assets and nonfinancial
liabilities as noted in proposed FSP FAS 157-2. The partial adoption of SFAS 157,
FSP FAS 157-2 or FSP FAS 157-3 did not have a material impact on our
consolidated financial position, results of operations or cash flows and we do
not believe the adoption of FSP FAS 157-2 will be material to our consolidated
financial statements.</FONT></P>

<P><FONT SIZE=2><U>Business
Combinations<BR>
</U>In December 2007, the
FASB issued SFAS No. 141 (revised 2007), <I>Business Combinations</I> (SFAS No. 141 (R)).
SFAS No. 141 (R) requires an acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. SFAS No. 141 (R) is effective for fiscal years after December 15,
2008. We expect to adopt SFAS No. 141 (R) on January 1, 2009, and we do not
expect it to have a material effect on its financial position or results of
operations.</FONT></P>

<P><FONT SIZE=2><U>Noncontrolling
Interests in Consolidated Financial Statements<BR>
</U>In December 2007, the
FASB issued SFAS No. 160, <I>Noncontrolling Interests in Consolidated Financial
Statement-amendments of ARB No. 51</I> (SFAS No. 160). SFAS No. 160
states that accounting and reporting for minority interests will be
recharacterized as noncontrolling interests and classified as a component of
equity. The SFAS No. 160 also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. This
statement is effective as of the beginning of an entity&#146;s first fiscal year
beginning after December 15, 2008, which corresponds to the Company&#146;s year
beginning January 1, 2009. The Company currently believes that the adoption of
SFAS No. 160 will have no material impact on its financial position or results
of operations.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>22</FONT></P>

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<P><FONT SIZE=2><B>Contractual
Obligations</B></FONT></P>

<P><FONT SIZE=2>The following
table summarizes the Company&#146;s
contractual obligations and commercial commitments as of December 31, 2008:</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>Payments
due by Period</B></FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="32%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Total</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Less than <BR>
 1 Year</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2-3<BR>
 Years</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>4-5<BR>
 Years</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>After <BR>
 5 years</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Contractual Obligations:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Operating leases, excluding operating
costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,340,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>441,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>902,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>939,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,058,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Payments to retailers*</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>6,036,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,988,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3,048,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Long-term liabilities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>422,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>202,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>220,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Purchase commitments</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>300,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>300,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total contractual obligations</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>10,098,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>3,931,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>4,170,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>939,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>1,058,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>*On an ongoing
basis, the Company negotiates renewals of various retailer agreements, some of
which provide for fixed or store-based payments rather than sign
placement-based payments. Upon the completion of renewals, the annual
commitment amounts could be in excess of the amounts above.</FONT></P>

<P><FONT SIZE=2><B>Off-Balance Sheet
Transactions</B></FONT></P>

<P><FONT SIZE=2>None.</FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A012></A>tem
7A.&nbsp;&nbsp;&nbsp;&nbsp;Quantitative and Qualitative Disclosures About
Market Risk</U></FONT></P>

<P><FONT SIZE=2>Not
applicable.</FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A013></A>tem
8.&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements and Supplementary Data</U></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>I<SMALL>NDEX TO</SMALL> F<SMALL>INANCIAL</SMALL> S<SMALL>TATEMENTS</SMALL></B></FONT></P>

<P><FONT SIZE=2>The following are included
on the pages indicated:</FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="90%">
<TR style="font-size:1px">
<TD WIDTH="93%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#B001">Report of
 Independent Registered Public Accounting Firm</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>24</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#B002">Balance
 Sheets as of December 31, 2008 and 2007</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>25</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#B003">Statements
 of Operations for the years ended December 31, 2008, 2007 and 2006</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>26</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#B004">Statements
 of Shareholders&#146; Equity for the years ended December 31, 2008, 2007 and 2006</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>27</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#B005">Statements
 of Cash Flows for the years ended December 31, 2008, 2007 and 2006</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>28</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#B006">Notes to
 Financial Statements</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>29</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>23</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>



<P ALIGN=CENTER><FONT SIZE=2><B>R<A NAME=B001></A><SMALL>EPORT OF</SMALL> </B><B>I<SMALL>NDEPENDENT
REGISTERED</SMALL> </B><B>P<SMALL>UBLIC</SMALL>
</B><B>A<SMALL>CCOUNTING
FIRM</SMALL></B></FONT></P>

<P><FONT SIZE=2>To the Board of Directors and Shareholders <BR>
Insignia Systems, Inc. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheets of Insignia Systems, Inc. (a
Minnesota corporation) (the &#147;Company&#148;) as of December 31, 2008 and 2007, and
the related statements of operations, shareholders&#146; equity and cash flows for
each of the three years in the period ended December 31, 2008. These financial
statements are the responsibility of the Company&#146;s management. Our responsibility
is to express an opinion on these financial statements based on our audits. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. The Company is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company&#146;s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Insignia Systems, Inc. as of
December 31, 2008 and 2007, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2008, in
conformity with accounting principles generally accepted in the United States
of America. </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="70%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="30%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>/s/ Grant Thornton LLP </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Minneapolis, Minnesota<BR>
 March 27, 2009</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>24</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P ALIGN=CENTER><FONT SIZE=2><B>Insignia Systems, Inc.<BR>
<A NAME=B002></A>B<small>ALANCE</small> </B><B>S<small>HEETS</small></B></FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="71%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>As of
 December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>ASSETS</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Current Assets:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cash and cash equivalents</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>11,052,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>7,393,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accounts receivable, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,767,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,155,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Inventories</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>442,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>397,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Deferred tax assets, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>164,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Prepaid expenses and other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>238,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>883,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total Current Assets</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>14,499,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10,992,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Other Assets:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Property and equipment, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,054,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>375,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Non-current deferred tax assets, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,967,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Other</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>40,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>6,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Total Assets</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>15,593,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>13,340,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Current Liabilities:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Current maturities of long-term liabilities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>202,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>266,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accounts payable</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,770,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,369,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accrued liabilities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Compensation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>820,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>622,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Employee stock purchase plan</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>65,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>98,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Legal</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>365,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>208,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Other commissions</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,742,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>152,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>981,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>221,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Deferred revenue</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>1,158,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>305,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total Current Liabilities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>8,103,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3,241,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Long-Term Liabilities, less current maturities</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>219,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>422,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Commitments and Contingencies</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Shareholders&#146; Equity:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Common stock, par value $.01:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Authorized shares &#150; 40,000,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Issued and outstanding shares &#150; 15,069,000 in 2008 and
15,550,000 in
 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>151,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>156,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Additional paid-in capital</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>31,881,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>32,025,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accumulated deficit</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(24,761,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(22,504,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total Shareholders&#146; Equity</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>7,271,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>9,677,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Total Liabilities and Shareholders&#146; Equity</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>15,593,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>13,340,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><I>See accompanying notes to financial statements.</I></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>25</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<div ALIGN=CENTER><FONT SIZE=2><B>Insignia Systems, Inc.</B></FONT></div>

<div ALIGN=CENTER><FONT SIZE=2><A NAME=B003></A><B>S<small>TATEMENTS</small> <small>OF</small> </B><B>O<small>PERATIONS</small></B></FONT></div>
<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="55%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year Ended
 December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Services revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>28,931,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>21,589,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>19,219,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Products sold</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,475,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,842,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,675,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total Net Sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>31,406,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>24,431,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>21,894,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Cost of services</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>12,929,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,170,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>8,494,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Cost of goods sold</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>1,593,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>1,719,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>1,560,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total Cost of Sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>14,522,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>10,889,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>10,054,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:51.85PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Gross Profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>16,884,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>13,542,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>11,840,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><B>Operating
 Expenses:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Selling</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>8,521,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>5,664,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>4,838,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Marketing</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,602,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,412,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,051,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Warrant expense</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,521,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>General and administrative</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>7,060,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,864,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,637,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total Operating Expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>17,183,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>13,461,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>9,526,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8"  style="border-bottom:solid black 1px;border-top:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:51.85PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Operating Income (Loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(299,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>81,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,314,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2><B>Other
 Income (Expense):</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Interest income</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>234,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>247,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>123,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Interest expense</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(57,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(95,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(146,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Other income</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>3,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>1,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>105,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total Other Income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>180,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>153,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>82,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:51.85PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Income (Loss) Before Taxes</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(119,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>234,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,396,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Income tax (expense)
 benefit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(2,138,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,109,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:51.85PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Net Income (Loss)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>(2,257,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>2,343,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>2,396,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Net income (loss) per
 share:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Basic</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Diluted</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>0.14</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>0.15</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Shares used in calculation
 of net income (loss) per share:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Basic</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,484,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,411,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,093,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Diluted</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>15,484,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>16,186,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>15,556,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><I>See accompanying notes to financial statements.</I></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>26</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P ALIGN=CENTER><FONT SIZE=2><B>Insignia Systems, Inc.<BR>
S<A NAME=B004></A><small>TATEMENTS</small> <small>OF</small> </B><B>S<small>HAREHOLDERS</small></B><B>&#146; E<small>QUITY</small></B></FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="31%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><BR><B>Common Stock</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" ROWSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Additional<BR>
 Paid-In<BR>
 Capital</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" ROWSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Accumulated<BR>
Deficit</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Shares</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Amount</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Total</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>

</TD>
</TR>


<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</tr>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2><B>Balance at December 31, 2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,002,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>150,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>29,165,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(27,243,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,072,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Issuance of
 common stock, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>150,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>133,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>135,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Value of
 stock-based compensation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>259,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>259,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Net income</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,396,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,396,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2><B>Balance at December 31, 2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,152,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>152,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>29,557,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(24,847,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>4,862,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Issuance of
 common stock, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>398,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>471,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>475,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Value of
 stock-based compensation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>476,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>476,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Value of
 warrants issued for services</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,521,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,521,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Net income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,343,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,343,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><B>Balance at December 31, 2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,550,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>156,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>32,025,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(22,504,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,677,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Issuance of
 common stock, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>44,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>98,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>98,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Repurchase
 of common stock, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(525,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(5,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(733,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(738,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Value of
 stock-based compensation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>491,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>491,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Net loss</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(2,257,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(2,257,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2><B>Balance at December 31, 2008</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>15,069,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>151,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>31,881,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>(24,761,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>7,271,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><I>See accompanying notes to financial statements.</I></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>27</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P ALIGN=CENTER><FONT SIZE=2><B>Insignia Systems, Inc.<BR>
<A NAME=B005></A>S<SMALL>TATEMENTS OF</SMALL> C<SMALL>ASH</SMALL> F<SMALL>LOWS</SMALL></B></FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="56%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year Ended December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Operating
Activities:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(2,257,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,343,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,396,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Adjustments to reconcile net
income (loss) to net cash provided by
 operating activities:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Depreciation and
amortization</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>370,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>266,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>207,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Deferred income tax expense
(benefit)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,131,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(2,131,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1  FACE=ARIAL>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Provision for bad debt
expense</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1  FACE=ARIAL>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1  FACE=ARIAL>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(31,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Stock-based
compensation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>491,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>476,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>259,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Warrant expense</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1  FACE=ARIAL>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,521,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1  FACE=ARIAL>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Changes in operating assets and
liabilities:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accounts receivable</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(612,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>770,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(600,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Inventories</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(45,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>55,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(4,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Prepaid expenses and
other</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>611,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>55,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(133,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accounts payable</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,401,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>24,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(425,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accrued liabilities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,672,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>476,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(132,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Deferred revenue</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>853,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(131,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(176,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net cash provided by operating
activities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5,615,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,724,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,361,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Investing Activities:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Purchases of property and
equipment</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(1,049,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(164,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(275,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net cash used in investing
activities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(1,049,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(164,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(275,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Financing Activities:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net change in line of
credit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1  FACE=ARIAL>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(186,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>54,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Payment of long-term
liabilities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(267,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(241,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(201,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Proceeds from issuance of common
stock, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>98,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>475,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>135,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Repurchase of common stock,
net</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(738,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=1  FACE=ARIAL>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=1  FACE=ARIAL>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net cash provided by (used in)
financing activities</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(907,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>48,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(12,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Increase in cash and cash equivalents</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,659,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,608,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,074,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cash and cash equivalents at beginning of
year</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>7,393,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>3,785,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,711,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cash and cash equivalents at end of
year</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>11,052,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>7,393,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>3,785,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2><B>Supplemental disclosures for cash flow
information:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cash paid during the year for interest</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>17,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>53,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>103,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cash paid during the year for income
taxes</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>8,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>60,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><I>See accompanying notes to financial statements.</I></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>28</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P ALIGN=CENTER><FONT SIZE=2><B>Insignia Systems, Inc.<BR>
<A NAME=B006></A>N<SMALL>OTES TO</SMALL> F<SMALL>INANCIAL</SMALL> S<SMALL>TATEMENTS</SMALL></B></FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>1.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Summary of
 Significant Accounting Policies. </B></FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Description of Business.</I></B> Insignia Systems, Inc. (the &#147;Company&#148;)
 markets in-store advertising products, programs and services to retailers and
 consumer packaged goods manufacturers. The Company&#146;s products include the
 Insignia Point-of-Purchase Services (POPS) in-store advertising program,
 thermal sign card supplies for the Company&#146;s SIGNright and Impulse systems,
 Stylus software and laser printable cardstock and label supplies. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Revenue Recognition</I></B><B>.</B>
 The Company recognizes revenue from Insignia POPSigns ratably over the period
 of service. The Company recognizes revenue related to equipment, software and
 sign card sales at the time the products are shipped to customers. Revenue
 associated with maintenance agreements is recognized ratably over the life of
 the contract. Revenue that has been billed and not yet earned is reflected as
 deferred revenue on the Balance Sheet. Revenues are recognized by the Company
 when persuasive evidence of an arrangement exists, shipment has occurred, the
 price is fixed, and collectability is reasonably assured. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Cash and Cash Equivalents</I></B><B>.</B> The Company considers all highly liquid
 investments with an original maturity date of three months or less to be cash
 equivalents. Cash equivalents are stated at cost, which approximates fair
 value. At December 31, 2008, $213,000 was invested in an overnight repurchase
 account, $7,000,000 was invested in certificates of deposit and $3,858,000
 was invested in a short-term money market account. At December 31, 2007,
 $1,345,000 was invested in an overnight repurchase account, $6,000,000 was
 invested in certificates of deposit and $5,000 was invested in a short-term
 money market account. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Fair Value of Financial Instruments.</I></B> The financial statements include the
 following financial instruments: cash and cash equivalents, accounts
 receivable, accounts payable and long-term liabilities. The fair value of the
 long-term liabilities is estimated based on the use of discounted cash flow
 analysis using interest rates for other debt offered to the Company. The
 Company estimates the carrying value of the long-term liabilities
 approximates fair value. All other financial instruments approximate fair
 value because of the short-term nature of these instruments. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Accounts Receivable.</I></B> The
 majority of the Company&#146;s accounts receivable is due from companies in the
 consumer packaged goods industry. Credit is extended based on evaluation of a
 customer&#146;s financial condition and, generally, collateral is not required.
 Accounts receivable are due within 30-60 days and are stated at amounts due
 from customers net of an allowance for doubtful accounts. Accounts receivable
 outstanding longer than the contractual payment terms are considered past
 due. The Company determines its allowance by considering a number of factors,
 including the length of time trade accounts receivable are past due, the
 Company&#146;s previous loss history, the customer&#146;s current ability to pay its
 obligation to the Company, and the condition of the general economy and the
 industry as a whole. The Company writes-off accounts receivable when they
 become uncollectible, and payments subsequently received on such receivables
 are credited to the allowance for doubtful accounts. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Changes in the Company&#146;s
 allowance for doubtful accounts are as follows: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="80%" STYLE="MARGIN-LEFT:10%">
<TR style="font-size:1px">
<TD WIDTH="51%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN="CENTER"><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN="CENTER"><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Beginning balance</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>10,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>10,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Bad debt provision
(recovery)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accounts written-off</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(3,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD>
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>Ending balance</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>7,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>10,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>

</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>29</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE="2"><I><B>Inventories</B></I>. Inventories are primarily comprised of
parts and supplies for Impulse and SIGNright machines, sign cards, and
rollstock. Inventory is valued at the lower of cost or market using the
first-in, first-out (FIFO) method, and consists of the following: </FONT> </P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="60%"  STYLE="MARGIN-LEFT:10%">
<TR style="font-size:1px">
<TD WIDTH="31%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Raw materials</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>107,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>82,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Work-in-process</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>64,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>36,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Finished goods</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>271,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>279,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>442,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>397,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Property and Equipment</I></B><B>.</B> Property and equipment is recorded at cost.
 Significant additions or improvements extending asset lives are capitalized,
 while repairs and maintenance are charged to expense when incurred.
 Depreciation is provided in amounts sufficient to relate the cost of assets
 to operations over their estimated useful lives. The straight-line method of
 depreciation is used for financial reporting purposes and accelerated methods
 are used for tax purposes. Estimated useful lives of the assets are as
 follows: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="60%">
<TR style="font-size:1px">
<TD WIDTH="10%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Production tooling</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>1-3 years</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Machinery and equipment</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>5 years</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Office furniture and
 fixtures</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>3 years</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Computer equipment and
 software</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>3 years</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Leasehold improvements are
 amortized over the shorter of the remaining term of the lease or estimated
 life of the asset. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Impairment of Long-Lived Assets</I></B><B>. </B>The Company records impairment losses on
 long-lived assets used in operations when indicators of impairment are
 present and the undiscounted cash flows estimated to be generated by those
 assets are less than the assets&#146; carrying amount. Impaired assets are then
 recorded at their estimated fair market value. There were no impairments during
 the years ended December 31, 2008, 2007 and 2006. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Income Taxes</I></B><B>.</B>
 Income taxes are accounted for under the liability method. Deferred income
 taxes are provided for temporary differences between the financial reporting
 and tax basis of assets and liabilities. Deferred taxes are reduced by a
 valuation allowance when, in the opinion of management, it is more likely
 than not that some portion or all of the deferred tax asset will not be
 realized. Deferred tax assets and liabilities are adjusted for the effects of
 changes in tax laws and rates on the date of the enactment. It is the
 Company&#146;s policy to provide for uncertain tax positions and the related
 interest and penalties based upon management&#146;s assessment of whether a tax
 benefit is more likely than not to be sustained upon examination by tax
 authorities. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Stock-Based Compensation.</I></B> Effective January 1, 2006, the Company
 adopted Statement of Financial Accounting Standards No. 123R, <I>Share-Based Payment</I> (SFAS 123R), which
 requires companies to measure and recognize compensation expense for all
 stock-based payments at fair value. We use the Black-Scholes option pricing
 model to determine the weighted average fair value of options and employee
 stock purchase plan rights. The determination of fair value of share-based
 payment awards on the date of grant using an option-pricing model is affected
 by our stock price as well as by assumptions regarding a number of highly
 complex and subjective variables. These variables include, but are not
 limited to, the expected stock price volatility over the term of the awards,
 and actual and projected employee stock option exercise behaviors. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>30</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The expected terms of the
 options and employee stock purchase plan rights are based on evaluations of
 historical and expected future employee exercise behavior. The risk-free
 interest rate is based on the U.S. Treasury rates at the date of grant with
 maturity dates approximately equal to the expected life at grant date.
 Volatility is based on historical and expected future volatility of the
 Company&#146;s stock. The Company has not historically issued any dividends and
 does not expect to in the future. SFAS 123R requires forfeitures to be
 estimated at the time of the grant and revised, if necessary, in subsequent
 periods if actual forfeitures differ from estimates. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>If factors change and we
 employ different assumptions in the application of SFAS 123R to grants in
 future periods, the related compensation expense that we record under SFAS
 123R may differ significantly from what we have recorded in the current
 periods. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE="2"><B><I>Advertising Costs</I></B>. Advertising
costs are charged to operations as incurred. Advertising expenses were
approximately $11,000, $9,000 and $8,000 during the years ended December 31,
2008, 2007 and 2006. </FONT> </P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE="2"><B><I>Net
Income (Loss) Per Share</I></B>. Basic net income (loss) per share is computed by dividing net income
(loss) by the weighted average shares outstanding and excludes any dilutive
effects of options, warrants and convertible securities. Diluted net income
per share gives effect to all diluted potential common shares outstanding
during the year. Options and warrants to purchase approximately 2,186,000,
1,396,000 and 1,086,000 shares of common stock with weighted average exercise
prices of $4.89, $5.81 and $6.29 were outstanding at December 31, 2008, 2007
and 2006 and were not included in the computation of common stock equivalents
because their exercise prices were higher than the average fair market value
of the common shares during the reporting periods. </FONT> </P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>For the year ended December
 31, 2008, the effect of options and warrants was anti-dilutive due to the net
 loss incurred during the period. Had net income been achieved, approximately
 381,000 of common stock equivalents would have been included in the computation
 of diluted net income per share for the year ended December 31, 2008. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Weighted average common
 share outstanding for the years ended December 31, 2008, 2007 and 2006 were
 as follows: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="90%"  STYLE="MARGIN-LEFT:10%">
<TR style="font-size:1px">
<TD WIDTH="56%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year ended December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Denominator for basic net income (loss) per share
&#150; weighted average
 shares</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,484,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,411,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>15,093,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Effect of dilutive securities:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Stock options</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>

<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>

<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>775,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>

<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>460,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Denominator for diluted net income (loss) per
share &#150; adjusted
 weighted average shares</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>15,484,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>16,186,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>15,556,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE="2"><B><I>Use of
Estimates</I></B>. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from these estimates. </FONT> </P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>31</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>New Accounting Pronouncements. </I></B></FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Fair
 Value Measurements:</I>
 In September 2006, the FASB Statement issued FASB No. 157,<I> Fair Value Measurements</I> (SFAS 157)
 which is effective for fiscal years beginning after November 15, 2007 and for
 interim periods within those years. This statement defines fair value,
 establishes a framework for measuring fair value, and expands the related
 disclosure requirements. However, on December 14, 2007, the FASB issued
 proposed FSP FAS 157-2 which would delay the effective date of SFAS 157 for
 all nonfinancial assets and nonfinancial liabilities, except those that are
 recognized or disclosed at fair value in the financial statements on a
 recurring basis (at least annually). This proposed FSP partially defers the
 effective date of SFAS 157 to fiscal years beginning after November 15, 2008,
 and interim periods within those fiscal years for items within the scope of
 this FSP. Furthermore, in October 2008, the FASB issued FSP FAS 157-3,<I> Determining the Fair Value of a
Financial Asset
 When the Market for that Asset is Not Active,</I> and was effective
 upon issuance. Effective for 2008, we adopted SFAS 157 except as it applies to those nonfinancial assets and nonfinancial
 liabilities as noted in proposed FSP FAS 157-2. The partial adoption of SFAS
 157, FSP FAS 157-2 or FSP FAS 157-3 did not have a material impact on our
 consolidated financial position, results of operations or cash flows and we
 do not believe the adoption of FSP FAS 157-2 will be material to our
 consolidated financial statements. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Business
 Combinations:</I> In
 December 2007, the FASB issued SFAS No. 141 (revised 2007), <I>Business Combinations</I> (SFAS No. 141
 (R)). SFAS No. 141 (R) requires an acquiring entity in a business combination
 to recognize all (and only) the assets acquired and liabilities assumed in
 the transaction; establishes the acquisition-date fair value as the
 measurement objective for all assets acquired and liabilities assumed; and
 requires the acquirer to disclose to investors and other users all of the
 information they need to evaluate and understand the nature and financial
 effect of the business combination. SFAS No. 141 (R) is effective for fiscal
 years after December 15, 2008. We expect to adopt SFAS No. 141 (R) on January
 1, 2009, and we do not expect it to have a material effect on its financial
 position or results of operations. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Noncontrolling
 Interests in Consolidated Financial Statements:</I> In December 2007, the FASB issued SFAS No.
 160, <I>Noncontrolling Interests in
 Consolidated Financial Statement-amendments of ARB No. 51</I> (SFAS
 No. 160). SFAS No. 160 states that accounting and reporting for minority
 interests will be recharacterized as noncontrolling interests and classified
 as a component of equity. The SFAS No. 160 also establishes reporting
 requirements that provide sufficient disclosures that clearly identify and
 distinguish between the interests of the parent and the interests of the
 noncontrolling owners. This statement is effective as of the beginning of an
 entity&#146;s first fiscal year beginning after December 15, 2008, which
 corresponds to the Company&#146;s year beginning January 1, 2009. The Company
 currently believes that the adoption of SFAS No. 160 will have no material
 impact on its financial position or results of operations. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>32</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>



<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Property and Equipment</B>. Property and
 equipment consists of the following at December 31: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="74%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2><B>Property and Equipment:</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Production tooling, machinery and
equipment</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,115,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,725,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Office furniture and fixtures</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>250,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>191,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Computer equipment and software</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>719,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>698,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Web site</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>38,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Leasehold improvements</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>255,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>368,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3,377,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,982,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:34.55PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Accumulated depreciation and amortization</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(2,323,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(2,607,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:.6IN;TEXT-INDENT:-8.65PT'><FONT SIZE=2>Net Property and Equipment</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>1,054,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>375,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>3<B>.</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Line of Credit</B>. The Company had a Financing
 Agreement, Security Agreement and Revolving Note (collectively, &#147;the Credit
 Agreement&#148;) with Marquette Business Credit, Inc. which was in effect through
 April 30, 2007. The Company did not renew the Credit Agreement and all
 borrowings were repaid as of April 30, 2007. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>4.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Long-Term Liabilities</B>. In prior periods, the
 Company reached an agreement with a retailer for the deferred payment of
 certain obligations on an interest-free basis. These obligations are recorded
 as long-term liabilities with an imputed annual interest rate of 10.0%. </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="90%" style=margin-left:10%>
<TR style="font-size:1px">
<TD WIDTH="73%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE="1"><B>December 31</B> </FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Uncollateralized three year liability,
 payable in monthly installments</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>23,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>290,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Uncollateralized liability, due December
 31, 2009</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>179,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>179,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Uncollateralized liability, due December
 31, 2010</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>219,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>219,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Total</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>421,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>688,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Less current maturities</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(202,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(266,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>219,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>422,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>5.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Commitments and Contingencies. </B></FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Operating Leases</I></B>.
 The Company conducts its operations in a leased facility. In October 2007 the
 Company entered into agreements to terminate its previous facility lease and
 sublease effective July 31, 2008. On March 27, 2008, the Company entered into
 an operating lease for its current facility which is in effect from August
 2008 through February 2016. The Company also leases equipment under operating
 lease agreements effective through September 2009. Rent expense under all of
 these leases, net of sub-lease rental income, was approximately $546,000,
 $527,000 and $527,000 for the years ended December 31, 2008, 2007 and 2006.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Minimum
 future lease obligations under these leases, excluding operating costs, are
 approximately as follows for the years ending December 31:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="55%"style=margin-left:10%>
<TR style="font-size:1px">
<TD WIDTH="77%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="15%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>2009</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>441,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>2010</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>446,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>2011</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>456,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>2012</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>465,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>2013</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>474,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Thereafter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,058,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>33</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Legal</I></B>. In
 August 2000, News America Marketing In-Store, Inc. (News America), brought
 suit against the Company in U.S. District Court in New York, New York. The
 case was settled in November 2002. The terms of the settlement agreement are
 confidential. The settlement did not impact the Company&#146;s operating results. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>In October
 2003, News America brought suit against the Company in U.S. District Court in
 New York, New York, alleging that the Company has engaged in deceptive acts
 and practices, has interfered with existing business relationships with
 retailers and prospective economic advantage, and has engaged in unfair
 competition. The suit sought unspecified damages and injunctive relief. In
 February 2007 the U.S. District Court in New York transferred this action to
 Minnesota where the claims became part of the lawsuit the Company filed
 against News America and Albertson&#146;s Inc. in 2004 (described below), and the
 New York action was subsequently dismissed. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>On September
 23, 2004, the Company brought suit against News America and Albertson&#146;s Inc.
 (Albertson&#146;s) in Federal District Court in Minneapolis, Minnesota, for
 violations of federal and state antitrust and false advertising laws,
 alleging that News America has acquired and maintained monopoly power through
 various wrongful acts designed to harm the Company in the in-store
 advertising and promotion products and services market. The suit seeks
 injunctive relief sufficient to prevent further antitrust injury and an award
 of treble damages to be determined at trial for the harm caused to the
 Company. On June 30, 2006 the Court denied the motions of News America and
 Albertson&#146;s to dismiss the suit. On September 20, 2006, the State of
 Minnesota through its Attorney General intervened as a co-plaintiff in the
 business disparagement portion of the Minnesota case. In December 2006, News
 America filed counterclaims in the Minnesota case that included claims
 similar to those in its New York action against Insignia and one of its
 officers, plus claims for damages for two alleged incidents of libel and
 slander. Motions to dismiss the counterclaims were argued in June 2007, and
 on September 28, 2007 the Court denied the motions to dismiss the
 counterclaims. The parties are now engaged in pre-trial discovery. Pursuant
 to Court order, all discovery and pre-trial matters must be completed by May
 1, 2009. On February 4, 2008, the Court approved a consent decree entered
 into by News America and the State of Minnesota under which News America
 agreed to not violate Minnesota&#146;s statutes prohibiting commercial
 disparagement. On July 29, 2008, the Company and Albertson&#146;s entered into a
 settlement agreement and mutual release, in which they each agreed to release
 all claims against the other, and the Company agreed to dismiss its lawsuit
 against Albertson&#146;s. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The Company
 filed claims in December 2006 and January 2007 with its director&#146;s and
 officer&#146;s liability and general liability insurers related to the defense
 costs and insurance coverage for claims asserted against the Company and one
 of its officers in News America&#146;s counterclaims. On August 9, 2007, the
 Company filed a complaint against the insurers in Hennepin County District
 Court, State of Minnesota requesting a declaratory judgment that the insurers
 owe the Company and its officer such defense costs and insurance coverage. In
 December 2007, the Company settled its claim against one of the insurers, and
 in March 2009, the Company settled with the other insurer and received a
 payment of $1,387,000 as part of the settlement. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Although
 management believes that News America&#146;s counterclaims are without merit, an
 evaluation of the likelihood of an unfavorable outcome and an estimate of the
 potential liability cannot be rendered at this time. If the Company is
 required to pay a significant amount in settlement or damages, it will have a
 material adverse effect on its operations and financial condition. In
 addition, a negative outcome of this litigation could affect long-term
 competitive aspects of the Company&#146;s business. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Management
 currently expects the amount of legal fees and expenses that will be incurred
 in connection with the ongoing lawsuits to be significant throughout 2009.
 During the year ended December 31, 2008, the Company incurred legal fees and
 expenses of $4,086,000 related to the ongoing lawsuits. Legal fees and expenses
 are expensed as incurred and are included in general and administrative
 expenses in the statements of operations. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>34</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The Company
 is subject to various other legal proceedings in the normal course of
 business. Management believes the outcome of these proceedings will not have
 a material adverse effect on the Company&#146;s financial position or results of
 operations. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Retailer Agreements</I></B>.
 The Company has contracts in the normal course of business with various
 retailers, some of which provide for fixed or store-based payments rather
 than sign placement-based payments. During the years ended December 31, 2008,
 2007 and 2006, the Company incurred $4,935,000, $3,730,000 and $3,502,000 of
 costs related to fixed and store-based payments. The amounts were recorded in
 Cost of Services in the Statements of Operations. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Aggregate
 commitment amounts under agreements with retailers are approximately as
 follows for the years ending December 31: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="55%"style=margin-left:8%>
<TR style="font-size:1px">
<TD WIDTH="77%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="17%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>2009</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,988,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>2010</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,907,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>2011</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>141,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>On an
 ongoing basis the Company negotiates renewals of various retailer agreements.
 Upon the completion of future contract renewals, the annual commitment
 amounts for 2009 and thereafter could be in excess of the amounts above. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>6.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Shareholders&#146; Equity</B>. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Private Placements and Warrants.</I></B>
 On December 18, 2002, the Company closed a private placement of $7,500,000 of
 common stock to a small group of accredited investors at a price of $9.19 per
 share, pursuant to a Securities Purchase Agreement. The price represented a
 15% discount from the average closing bid price of the Company&#146;s common stock
 over the five days prior to the closing. As part of this offering, the
 Company also issued warrants to the investors entitling them to purchase an
 additional 244,827 shares of the Company&#146;s common stock at an initial
 exercise price of $12.44 per share for a five-year period. Additionally, a
 warrant to purchase 40,805 shares with the same terms was issued to the
 Placement Agent. The warrant agreements were amended, effective December 29,
 2003, to adjust the exercise price of the warrants to $2.75 per share in
 exchange for certain terms of the warrant agreement being deleted in their
 entirety. During the year ended December 31, 2007, 110,122 of the warrants were
 exercised and the remaining 175,510 warrants expired on December 18, 2007. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>On July 2,
 2007, the Company issued a warrant to purchase 800,000 shares of the
 Company&#146;s common stock to Valassis Sales and Marketing Services, Inc.
 (&#147;Valassis&#148;) at a price of $4.04 for a term of five years. The warrant was
 issued for services to develop and expand the Company&#146;s participating
 retailer network in conjunction with Amendment No. 2 to the Exclusive
 Reseller Agreement which defines the terms of the strategic sales alliance
 between the Company and Valassis. The Company recorded $1,521,000 of expense
 related to the fair value of the warrant. The Black-Scholes option-pricing
 model was used to estimate the fair value of the warrant using an expected
 life of 5 years, volatility of 40%, a dividend yield of 0% and a risk-free
 interest rate of 4.9%. At December 31, 2008, the entire warrant was
 outstanding and exercisable. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Stock-Based Compensation</I></B>.
 The Company&#146;s stock-based compensation plans are administered by the
 Compensation Committee of the Board of Directors, which selects persons to
 receive awards and determines the number of shares subject to each award and
 the terms, conditions, performance measures and other provisions of the
 award. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Effective
 January 1, 2006, the Company adopted Statement of Financial Accounting
 Standards No. 123R, <I>Share-Based Payment</I>
 (SFAS 123R), which requires companies to measure and recognize compensation
 expense for all stock-based payments at fair value. SFAS 123R is being applied
 on the modified prospective basis. Under the modified prospective approach,
 SFAS 123R applies to new awards and to awards that were outstanding on
 January 1, 2006 that are subsequently modified, repurchased or cancelled.
</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>35</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Under the
 modified prospective approach, compensation cost recognized beginning in the
 first quarter of fiscal 2006 includes compensation cost for all share-based
 payments granted prior to, but not yet vested on January 1, 2006, and
 compensation cost for all share-based payments granted subsequent to January
 1, 2006 based on the grant-date fair value estimated in accordance with the
 provisions of SFAS 123R. Prior periods were not restated to reflect the
 impact of adopting the new standard. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The following
 table summarizes the stock-based compensation expense which was recognized in
 the Statements of Operations for the years ended December 31, 2008, 2007 and
 2006: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="90%" STYLE="MARGIN-LEFT:5%">
<TR style="font-size:1px">
<TD WIDTH="59%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year ended
 December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Cost of
 sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>86,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>91,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>61,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Selling</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>95,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>80,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>55,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Marketing</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>65,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>58,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>32,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>General and
 administrative</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>245,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>247,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>111,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>491,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>476,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>259,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The Company
 uses the Black-Scholes option-pricing model to estimate fair value of
 stock-based awards with the following weighted average assumptions: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="88%" STYLE="MARGIN-LEFT:7%">
<TR style="font-size:1px">
<TD WIDTH="59%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2><I>Stock Options:</I></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Expected
 life (years)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.38</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.92</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.64</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Expected
 volatility</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>75</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>40</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>63</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Dividend
 yield</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Risk-free
 interest rate</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2.67</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>4.77</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>4.91</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The Company
 uses the straight-line attribution method to recognize expense for unvested
 options. The amount of share-based compensation recognized during a period is
 based on the value of the awards that are ultimately expected to vest. SFAS
 123R requires forfeitures to be estimated at the time of grant and revised,
 if necessary, in subsequent periods if actual forfeitures differ from those
 estimates. The Company will re-evaluate the forfeiture rate annually and
 adjust it as necessary. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>As of
 December 31, 2008, there was $273,000 of total unrecognized compensation
 costs related to the outstanding stock options which is expected to be
 recognized over a weighted average period of 1.0 years. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Stock Options</I></B>.
 Prior to 2003 the Company had a stock option plan (the &#147;1990 Plan&#148;) for its
 employees and directors under which substantially all of the shares reserved
 for issuance had been issued. During May 2003, the Company&#146;s shareholders
 approved the 2003 Incentive Stock Option Plan (the &#147;2003 Plan&#148;) and an
 aggregate of 350,000 shares of common stock were reserved for issuance. The
 shareholders approved an additional 650,000 shares for issuance in May of
 2004, an additional 625,000 shares for issuance in May of 2005, an additional
 250,000 for issuance in May of 2007 and an additional 500,000 for issuance in
 May of 2008. The 2003 Plan replaced the 1990 Plan. Options granted under the
 1990 Plan will remain in effect until they are exercised or expire according
 to their terms. All current option grants are made under the 2003 Plan. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Under the
 terms of the stock option plans, the Company grants incentive or
 non-qualified stock options to employees and directors generally at an
 exercise price at or above 100% of fair market value at the close of business
 on the date of grant. The stock options expire five or ten years after the
 date of grant and generally vest over three years. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>36</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The
 following table summarizes activity under the Option Plans: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="95%" STYLE="MARGIN-LEFT:5%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Plan Shares<BR>
 Available<BR>
 for Grant</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Plan<BR>
 Options<BR>
 Outstanding</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Weighted<BR>
 Average Exercise<BR>
 Price Per Share</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Aggregate<BR>
 Intrinsic<BR>
 Value</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Balance at
 December 31, 2005</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>563,366</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,859,329</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>4.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Reserved</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Granted</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(615,100</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>615,100</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.24</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Exercised</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(113,331</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.52</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>179,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cancelled &#150; 2003 Plan</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>252,934</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(252,934</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2.44</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cancelled &#150; 1990 Plan</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(61,066</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>7.66</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Balance at
 December 31, 2006</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>201,200</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,047,098</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3.59</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Reserved</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>250,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Granted</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(513,100</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>513,100</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3.74</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Exercised</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(142,616</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.23</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>478,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cancelled &#150; 2003 Plan</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>96,968</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(96,968</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.60</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cancelled &#150; 1990 Plan</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(66,400</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>8.17</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Balance at
 December 31, 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>35,068</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2,254,214</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3.73</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Reserved</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>500,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Granted</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(321,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>321,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.93</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Exercised</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(4,367</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.24</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cancelled &#150; 2003 Plan</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>49,936</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(49,936</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>2.47</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Cancelled &#150; 1990 Plan</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(23,200</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>6.10</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>Balance at
 December 31, 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>264,004</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>2,497,711</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>3.50</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="55%" STYLE="MARGIN-LEFT:5%">
<TR style="font-size:1px">
<TD WIDTH="72%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="17%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P><FONT SIZE=2>The numbers
 of options exercisable under the Option Plans were:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>December 31, 2006</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,242,487</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>December 31, 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,372,417</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>December 31, 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,751,837</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The
 following table summarizes information about the stock options outstanding at
 December 31, 2008: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="95%" STYLE="MARGIN-LEFT:5%">
<TR style="font-size:1px">
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="14%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="4%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD COLSPAN="4" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="9" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Options Outstanding</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="7" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Options Exercisable</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="4" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Ranges of<BR>
 Exercise<BR>
 Prices</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Number<BR>
 Outstanding</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Weighted<BR>
 Average<BR>
 Remaining<BR>
 Contractual Life</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="4" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Weighted<BR>
 Average<BR>
 Exercise Price<BR>
 Per Share</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Number</B><FONT SIZE=1><B><BR>
 </B></FONT><FONT SIZE=1><B>Exercisable</B></FONT></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD COLSPAN="4" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>Weighted<BR>
 Average<BR>
 Exercise Price<BR>
 Per share</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>$0.58</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.96</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>310,401</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=CENTER><FONT SIZE=2>6.51
 years</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.91</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>302,067</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.91</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.97</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.31</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>656,433</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>6.70
 years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.24</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>511,305</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.25</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.32</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.95</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>350,547</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=CENTER><FONT SIZE=2>8.91
 years</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.92</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>67,047</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1.94</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.96</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.32</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>42,067</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>4.71
 years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.09</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>29,406</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.19</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3.33</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>4.28</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>551,331</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=CENTER><FONT SIZE=2>7.58
 years</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3.80</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>255,745</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>3.86</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4.29</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5.80</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>84,999</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>4.27
 years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5.74</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>84,334</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5.75</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>5.81</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>8.90</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>309,933</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=CENTER><FONT SIZE=2>1.81
 years</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>7.82</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>309,933</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>7.82</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>8.91</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>11.36</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>192,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>2.72
 years</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>9.61</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>192,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>9.61</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>

<tr>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>$0.58</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>$</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>11.36</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>2,497,711</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=CENTER><FONT SIZE=2>6.15
 years</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>3.50</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>1,751,837</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>&nbsp;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>3.93</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Options
 outstanding under the Option Plans expire at various dates during the period
 October 2009 through May 2018. Options outstanding at December 31, 2008 had a
 weighted average remaining life of 6.15 years and an aggregate intrinsic
 value of $21,000. Options exercisable at December 31, 2008 had a weighted
 average remaining life of 5.13 years and an aggregate intrinsic value of
 $21,000. The weighted average grant-date fair value of options granted during
 the years ended December 31, 2008, 2007 and 2006, were $1.01, $1.38 and $0.52.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>37</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Employee Stock Purchase Plan. </I></B>The
 Company has an Employee Stock Purchase Plan (the &#147;Plan&#148;) that enables
 employees to contribute up to 10% of their compensation toward the purchase
 of the Company&#146;s common stock at 85% of market value. During the years ended
 December 31, 2008, 2007 and 2006, employees purchased 39,914, 164,040 and
 57,460 shares under the Plan. At December 31, 2008, 155,663 shares are
 reserved for future employee purchases of common stock under the Plan. For
 the year ended December 31, 2008, the Company recognized $67,000 of
 stock-based compensation expense related to the Plan. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>7.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Income Taxes</B>. The (provision) benefit for
 income taxes consists of the following: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="95%" STYLE="MARGIN-LEFT:5%">
<TR style="font-size:1px">
<TD WIDTH="59%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year Ended
 December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Current
 taxes - Federal</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(7,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Current
 taxes - State</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(7,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(15,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Deferred
 taxes - Federal</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(185,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(189,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Deferred
 taxes - State</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(16,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(17,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>(Expense) benefit from adjustment of
 valuation allowance</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(1,930,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,337,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>(Provision)
 benefit for income taxes</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>(2,138,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>2,109,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Significant
 components of the deferred taxes are as follows: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="95%" STYLE="MARGIN-LEFT:5%">
<TR style="font-size:1px">
<TD WIDTH="70%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="11%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>As of
 December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN="CENTER"><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN="CENTER"><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2><B>Current Deferred Tax Assets</B>:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Net
 operating loss carryforwards</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>550,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Accrued
 expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>99,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>96,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Inventory
 reserve</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>27,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>27,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>2,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>4,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Current deferred tax assets before
 valuation allowance</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>128,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>677,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Less
 valuation allowance</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(128,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(513,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>Current
 deferred tax assets</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>164,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2><B>Long -Term Deferred Tax Assets</B>:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Net
 operating loss carryforwards</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>7,632,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>7,182,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Warrant
 expense</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>563,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>563,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Accrued
 expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>147,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>215,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Depreciation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>31,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>96,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Stock
 options</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>78,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>52,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Alternative
 minimum tax credits</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>34,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>31,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Other</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>1,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Long-term
 deferred tax assets before valuation allowance</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>8,486,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>8,139,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Less
 valuation allowance</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(8,486,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>(6,172,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>Long-term
 deferred tax assets</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>1,967,000</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>38</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>At December 31,
 2008, the Company had net operating loss carryforwards of approximately
 $21,463,000, which are available to offset future taxable income. The Company
 has determined that these carryforwards are not currently subject to the
 limitations of Internal Revenue Code Section 382 which provides limitations
 on the availability of net operating losses to offset current taxable income
 if an ownership change has occurred. These carryforwards will begin expiring
 in 2010. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>At December
 31, 2008, the Company had indefinite-lived alternative minimum tax credit
 carryforwards of $34,000. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The Company
 has established a valuation allowance due to uncertainties regarding the
 realization of deferred tax assets. During the year ended December 31, 2008,
 the Company recorded a $1,930,000 net increase to the valuation allowance due
 to changes in the Company&#146;s expectations regarding its ability to realize
 certain deferred tax assets, which resulted from a determination that it was
 more likely than not that none of the deferred tax assets would be realized.
 During the year ended December 31, 2007, the Company recorded a $2,337,000
 net release to the valuation allowance due to changes in the Company&#146;s
 expectations regarding its ability to realize certain deferred tax assets, which
 resulted from a determination that it was more likely than not that a portion
 of the net deferred tax assets would be realized. The Company evaluates all
 significant available positive and negative evidence, including the existence
 of losses in recent years and its forecast of future taxable income, in
 assessing the need for a valuation allowance. The underlying assumptions the
 Company uses in forecasting future taxable income require significant
 judgment and take into account the Company&#146;s recent performance. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The Company
 will continue to assess the valuation allowance and to the extent it is
 determined that said allowance is no longer required, the tax benefit of the
 remaining deferred tax assets will be recognized in the future. Included as
 part of the Company&#146;s net operating loss carryforwards are approximately
 $2,700,000 in tax deductions that resulted from the exercise of stock
 options. When these loss carryforwards are realized the corresponding changes
 in the valuation allowance will be recorded as additional paid-in capital. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The actual
 tax expense attributable to income from continuing operations differs from
 the expected tax expense (benefit) computed by applying the U.S. federal
 corporate income tax rate of 34% to the net income (loss) as follows: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="85%" STYLE="MARGIN-LEFT:5%">
<TR style="font-size:1px">
<TD WIDTH="65%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year Ended
 December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Federal
 statutory rate</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(34.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>34.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>34.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Change in
 valuation allowance</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,618.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(961.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(48.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Stock
 options</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>116.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>56.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>State taxes</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>79.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(41.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.4</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>Meals &amp;
 entertainment</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>21.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>9.4</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" >
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Expiration
 of carryforwards</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>&#151;</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=RIGHT><FONT SIZE=2>13.3</FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>Effective
 federal income tax rate</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>1,801.7</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>(902.7</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=1>&nbsp;</FONT>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P ALIGN=RIGHT><FONT SIZE=2>0.0</FONT></P>

</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8" style="border-bottom:double black 3px">
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>On January
 1, 2007, the Company adopted FASB Interpretation No. 48, &#147;Accounting for
 Uncertainty in Income Taxes &#150; an interpretation of FASB Statement No 109&#148;
 (FIN 48). As a result of implementation of FIN 48, the Company has determined
 that no liability is required to be recognized. The Company files income tax
 returns in the United States and numerous state and local tax jurisdictions.
 Tax years that are open for examination and assessment by the Internal
 Revenue Service are 2005 through 2008. With limited exceptions, tax years
 prior to 2004 are no longer open in major state and local tax jurisdictions. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>39</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>8.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Employee Benefit Plans</B>. The Company has a
 Retirement Profit Sharing and Savings Plan under Section 401(k) of the
 Internal Revenue Code. The plan allows employees to defer up to 50% of their
 wages, subject to Federal limitations, on a pre-tax basis through
 contributions to the plan. During the years ended December 31, 2008 and 2007
 the Company made a matching contribution of $71,000 and $66,000,
 respectively. During the year ended December 31, 2006 the Company made no
 matching contributions. </FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>9.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Concentrations.</B> </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Major Customers</I>.</B>
 During the year ended December 31, 2008, four customers accounted for 19%,
 13%, 11% and 10% of the Company&#146;s total net sales. At December 31, 2008,
 these four customers represented 12%, 2%, 7% and 24% of the Company&#146;s total
 accounts receivable. During the year ended December 31, 2007, two customers
 accounted for 15% and 11% of the Company&#146;s total net sales. At December 31,
 2007, these two customers represented 23% and 4% of the Company&#146;s total
 accounts receivable. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Although
 there are a number of customers that the Company sells to, the loss of a
 major customer could adversely affect operating results. Additionally, the
 loss of a major retailer from the Company&#146;s retail network could adversely
 affect operating results. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><I>Export Sales</I></B>.
 Export sales accounted for less than 1% of total net sales during the years
 ended December 31, 2008, 2007 and 2006. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>10.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>Quarterly Financial Data</B>. (Unaudited) </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Quarterly
 data for the years ended December 31, 2008 and 2007 was as follows: </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="95%" STYLE="MARGIN-LEFT:5%">
<TR style="font-size:1px">
<TD WIDTH="39%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="11%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="11%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year Ended
 December 31, 2008</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>1<SUP>st</SUP> Quarter</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2<SUP>nd</SUP> Quarter</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>3<SUP> rd</SUP> Quarter</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE="1">&nbsp; </FONT> </P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>4<SUP>th</SUP> Quarter</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>6,563,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>7,578,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>8,597,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>8,668,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Gross profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,534,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,294,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,499,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,557,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(240,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>410,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(254,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(2,173,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net income (loss) per share:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Basic</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(0.02</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.03</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(0.02</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(0.14</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Diluted</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.02</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.03</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.02</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.14</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>Year Ended
 December 31, 2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=1><B>&nbsp;</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>1<SUP>st</SUP> Quarter</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>2<SUP>nd</SUP> Quarter</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>&nbsp;</B></FONT></P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>3<SUP> rd</SUP> Quarter</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE="1">&nbsp; </FONT> </P>

</TD>
<TD COLSPAN="2" VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=1><B>4<SUP>th</SUP> Quarter</B></FONT></P>

</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE="1">&nbsp; </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>6,065,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>6,969,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>6,461,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>4,936,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Gross profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,358,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,160,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,608,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,416,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>427,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,198,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(907,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>1,625,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Net income (loss) per share:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Basic</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.03</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.08</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>(0.06</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P ALIGN=RIGHT><FONT SIZE=2>0.10</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Diluted</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.03</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.07</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.06</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.10</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=3><U>I<A NAME=A014></A>tem 9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in
and Disagreements With Accountants on Accounting and Financial Disclosures </U></FONT></P>

<P><FONT SIZE=2>Not
applicable. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>40</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=3><U>I<A NAME=A015></A>tem 9A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Controls and Procedures </U></FONT></P>

<P><FONT SIZE=2><B>Disclosure Controls and Procedures </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s management carried out an evaluation, under the supervision and with
the participation of the Company&#146;s Chief Executive Officer and the Company&#146;s
Chief Financial Officer (principal financial officer), of the effectiveness of
the design and operation of the Company&#146;s disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of December 31, 2008, pursuant to Exchange
Act Rule 13a-15. Based upon that evaluation, the Company&#146;s Chief Executive
Officer and the Company&#146;s Chief Financial Officer (principal financial officer)
concluded that the Company&#146;s disclosure controls and procedures as of December
31, 2008 were effective to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC, and are designed to ensure that information
required to be disclosed by us in these reports is accumulated and communicated
to our management, as appropriate to allow timely decisions regarding
disclosures. </FONT></P>

<P><FONT SIZE=2>We will
consider further actions and continue to evaluate the effectiveness of our
disclosure controls and internal controls and procedures on an ongoing basis,
taking corrective action as appropriate. Management does not expect that
disclosure controls and procedures or internal controls can prevent all errors
and all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable and not absolute assurance that the objectives of the
control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. While management believes that its disclosure
controls and procedures provide reasonable assurance that fraud can be detected
and prevented, because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, have been detected. </FONT></P>

<P><FONT SIZE=2><B>Management&#146;s Annual Report on Internal
Control Over Financial Reporting </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
management is responsible for establishing and maintaining adequate control
over financial reporting, as such term is defined in Rule 13a-15(f) of the
Exchange Act. Under the supervision and with the participation of our
management, including our Chief Executive Officer and our Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting as of December 31, 2008. In conducting its
evaluation, our management used the criteria set forth by the framework in
Internal Control &#150; Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, management
believes our internal control over financial reporting was effective as of
December 31, 2008. </FONT></P>

<P><FONT SIZE=2>The
certification of the Company&#146;s Principal Executive Officer and Principal
Financial Officer attached as Exhibits 31.1 and 31.2 to this Annual Report on
Form 10-K include, in paragraph 4 of such certifications, information
concerning the Company&#146;s disclosure controls and procedures and internal
controls over financial reporting. Such certifications should be read in
conjunction with the information contained in the Item 9A for a more complete
understanding of the matters covered by such certifications. </FONT></P>

<P><FONT SIZE=2>This annual
report does not include an attestation report of the Company&#146;s registered
public accounting firm regarding internal control over financial reporting.
Management&#146;s report was not subject to attestation by the Company&#146;s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management&#146;s report
in this annual report. </FONT></P>

<P><FONT SIZE=2><B>Changes in Internal Control Over Financial
Reporting </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
changes in the Company&#146;s internal control over financial reporting have
occurred during the fourth quarter of 2008 that have materially affected, or
are reasonably likely to materially affect, the Company&#146;s internal control over
financial reporting. </FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A016></A>tem 9B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Information </U></FONT></P>

<P><FONT SIZE=2>None. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>41</FONT></P>

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<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=3><B><I>P<A NAME=A017></A>ART III. </I></B></FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A018></A>tem 10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directors, Executive
Officers and Corporate Governance </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by Item 10 concerning the directors and executive officers
of the Company and corporate governance is incorporated herein by reference to
the Company&#146;s proxy statement for its 2009 Annual Meeting of Shareholders,
which will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal year for which
this report is filed. </FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A019></A>tem 11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Compensation </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by Item 11 is incorporated herein by reference to the
Company&#146;s proxy statement for its 2009 Annual Meeting of Shareholders which
will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal year for which
this report is filed. </FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A020></A>tem 12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by Item 12 is incorporated herein by reference to the
Company&#146;s proxy statement for its 2009 Annual Meeting of Shareholders which
will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal year for which
this report is filed. </FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A021></A>tem 13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain Relationships and
Related Transactions and Director Independence </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by Item 13 is incorporated herein by reference to the
Company&#146;s proxy statement for its 2009 Annual Meeting of Shareholders which
will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal year for which
this report is filed. </FONT></P>

<P><FONT SIZE=3><U>I<A NAME=A022></A>tem 14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal Accounting Fees
and Services </U></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by Item 14 is incorporated herein by reference to the
Company&#146;s proxy statement for its 2009 Annual Meeting of Shareholders which
will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal year for which
this report is filed. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>42</FONT></P>

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<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P><FONT SIZE=3><U>I<A NAME=A023></A>tem 15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits and Financial
Statement Schedules </U></FONT></P>

<P><FONT SIZE=2>The following
financial statements of Insignia Systems, Inc. are included in Item 8: </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="10%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Report of
 Independent Registered Public Accounting Firm </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Balance
 Sheets as of December 31, 2008 and 2007 </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Statements
 of Operations for the years ended December 31, 2008, 2007 and 2006</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Statements
 of Shareholders&#146; Equity for the years ended December 31, 2008, 2007 and 2006</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Statements
 of Cash Flows for the years ended December 31, 2008, 2007 and 2006</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Notes to
 Financial Statements</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(a)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibits</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="42%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>Exhibit<BR>
 Number</FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Description</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Incorporation By Reference
 To</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>3.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Articles of Incorporation
 of Registrant, as amended to date</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 3.1 of the
 Registrant&#146;s Registration Statement on Form S-18, Reg. No. 33-40765C</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>3.2</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Bylaws, as amended to date</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 3.1 of the
 Registrant&#146;s Form 8-K filed February 23, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>4.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Specimen Common Stock
 Certificate of Registrant</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 4.1 of the
 Registrant&#146;s Registration Statement on Form S-18, Reg. No. 33-40765C</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The Company&#146;s 1990 Stock
 Plan, as amended</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.3 of the
 Registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2001</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.2</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Employee Stock Purchase
 Plan, as amended</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 4.1 of the
 Registrants Registration Statement on Form S-8, Reg. No. 333-136591</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.3</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The Company&#146;s 2003
 Incentive Stock Option Plan, as amended</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 4.1 of the
 Registrant&#146;s Registration Statement on Form S-8, Reg. No. 333-153031</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.4</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amended Change in Control
 Severance Agreement with Scott F. Drill dated December 20, 2005</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.10 of the
 Registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2005</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.5</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amended Change in Control
 Severance Agreement with Justin W. Shireman dated December 20, 2005</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.11 of the Registrant&#146;s
 Annual Report on Form 10-K for the year ended December 31, 2005</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.6</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consulting Agreement,
 effective February 1, 2006, between Gary L. Vars and the Company</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 4.1 of the
 Registrant&#146;s Form 8-K filed February 1, 2006</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.7</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Nonqualified Stock Option
 Agreement, effective February 1, 2006, between Gary L. Vars and the Company</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 4.2 of the
 Registrant&#146;s Form 8-K filed February 1, 2006</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.8</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exclusive Reseller
 Agreement between Valassis Sales &amp; Marketing Services, Inc. and the
 Company entered into as of June 12, 2006</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.1 of the
 Registrant&#146;s Form 10-Q for the quarterly period ended June 30, 2006</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.9</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amended Change in Control
 Severance Agreement with Scott J. Simcox dated February 20, 2007</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.1 of the
 Registrant&#146;s Form 8-K filed February 23, 2007</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>43</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="42%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P ALIGN=CENTER><FONT SIZE=2>Exhibit<BR>
 Number</FONT></P>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Description</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Incorporation By Reference
 To</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.10</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amended Change in Control
 Severance Agreement with Alan Jones dated May 23, 2007</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.1 of the
 Registrant&#146;s Form 8-K filed May 30, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.11</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amended Change in Control
 Severance Agreement with A. Thomas Lucas dated May 23, 2007</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.2 of the
 Registrant&#146;s Form 8-K filed May 30, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.12</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amendment #2 dated July 2,
 2007 to Exclusive Reseller Agreement dated June 12, 2006 between Valassis
 Sales &amp; Marketing Services, Inc. and the Company</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.1 of the
 Registrant&#146;s Form 10-Q for the quarterly period ended June 30, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.13</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Form of Warrant dated July
 2, 2007 to purchase shares of common stock issued to Valassis Sales &amp;
 Marketing Services, Inc. by the Company per Amendment #2 to the Exclusive
 Reseller Agreement</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.2 of the
 Registrant&#146;s Form 10-Q for the quarterly period ended June 30, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.14</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Lease Termination Agreement
 between the Company and the Landlord, dated October 12, 2007</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.20 of the
 Registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.15</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Sublease Termination
 Agreement between the Company and the Sublessee dated October 12, 2007</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.21 of the
 Registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.16</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Lease Agreement between the
 Company and the Landlord (Opus Northwest L.L.C.) dated March 27, 2008
 (Exhibits Omitted)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.22 of the
 Registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.17</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2008 CEO Bonus Plan</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.23 of the
 Registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.18</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2008 Executive Bonus Plan</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.24 of the
 Registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2007</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>10.19</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Senior Management
 Litigation Incentive Plan</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 10.1 of the
 Registrant&#146;s Form 8-K filed May 23, 2008</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>14</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Code of Ethics</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exhibit 14 of the
 Registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2003</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>23.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consent of Independent
 Registered Public Accounting Firm</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed herewith</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>31.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Certification of Principal
 Executive Officer</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed herewith</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>31.2</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Certification of Principal
 Financial Officer</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed herewith</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>32</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Section 1350 Certification</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed herewith</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>44</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
<PAGE>
<P><FONT SIZE=2><A HREF="#toc">Table of Contents</A></FONT></P>


<P ALIGN=CENTER><FONT SIZE=2><B>SIGNATURES</B></FONT></P>

<P><FONT SIZE=2>Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="60%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="15%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="20%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP NOWRAP>
<P><FONT SIZE=2>By:&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Scott F.
 Drill</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Scott F.
 Drill</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2>President
 and CEO</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Dated: March
 27, 2009</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant in the capacities
and on the dates indicated. </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="24%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="44%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="26%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Signature</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Title</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>Date</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Scott F. Drill</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD ROWSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2>President, Chief Executive
 Officer (principal executive officer) Secretary and Director</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>March 27, 2009</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Scott F. Drill</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Justin W. Shireman</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD ROWSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2>Vice President of Finance,
 Chief Financial Officer (principal financial and accounting officer) and
 Treasurer</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD ROWSPAN="2" VALIGN=top>
<P><FONT SIZE=2>March 27, 2009</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Justin W. Shireman</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Peter V. Derycz</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>March 27, 2009</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Peter V. Derycz</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Donald J. Kramer</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>March 27, 2009</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Donald J. Kramer</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Reid V. MacDonald</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>March 27, 2009</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Reid V. MacDonald</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Gordon F. Stofer</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>March 27, 2009</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Gordon F. Stofer</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

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..1N..&2"(BBJJK@E!_]D_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>insignia091381_ex23-1.htm
<DESCRIPTION>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
<TEXT>

<HTML>

<HEAD><TITLE>Exhibit 23.1 to Insignia Systems, Inc. Form 10-K for year ended 12-31-2008</TITLE></HEAD>
<BODY>

<P ALIGN=RIGHT><FONT SIZE=3><B>Exhibit
23.1</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=3><B><U>CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</U></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have issued our report dated March 27, 2009, with respect to the financial
statements included in the Annual Report of Insignia Systems, Inc. on Form 10-K
for the year ended December 31, 2008. We hereby consent to the incorporation by
reference of said report in the Registration Statements of Insignia Systems,
Inc. on Forms S-3 and amendments (File No. 333-102486, effective April 14, 2003
and File No. 333-121587, effective January 21, 2005) and Forms S-8 (File No.
333-153031, effective August 15, 2008, File No. 333-145506, effective August
16, 2007, File No. 333-136591, effective August 14, 2006, File No. 333-127606,
effective August 16, 2005, File No. 333-120504, effective November 15, 2004, File
No. 333-107087, effective July 16, 2003, File No. 333-97513, effective August
1, 2002, File No. 333-83062, effective February 20, 2002, File No. 333-65172,
effective July 16, 2001, File No. 333-41240, effective July 12, 2000, File No. 333-41242,
effective July 12, 2000, File No. 333-80261, effective June 9, 1999, File No.
333-59709, effective July 23, 1998, File No. 333-43781, effective January 6,
1998, File No. 33-92376, effective prior to 1998, File No. 33-92374, effective
prior to 1998, File No. 33-75372, effective prior to 1998, and File No.
33-47003, effective prior to 1998). </FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="60%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>/s/ Grant Thornton LLP </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Minneapolis, Minnesota<BR>
 March 27, 2009</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR><BR><BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>


</BODY>

</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>insignia091381_ex31-1.htm
<DESCRIPTION>CERTIFICATION OF PEO PURSUANT TO SECTION 302
<TEXT>

<HTML>

<HEAD><TITLE>Exhibit 31.1 to Insignia Systems, Inc. Form 10-K for year ended 12-31-2008</TITLE></HEAD>
<BODY>


<P ALIGN=RIGHT><FONT SIZE=3><B>Exhibit
31.1</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=3><B>CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER</B></FONT></P>

<P><FONT SIZE=2>I, Scott F. Drill, certify that:</FONT></P>

<P><FONT SIZE=2>1. I have reviewed this report on Form 10-K of
Insignia Systems, Inc.;</FONT></P>

<P><FONT SIZE=2>2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; </FONT></P>

<P><FONT SIZE=2>3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report; </FONT></P>

<P><FONT SIZE=2>4. The registrant&#146;s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and we have:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant is made known to us by others
within the Company, particularly during the period in which this report is
being prepared; and</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; and</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)
Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)
Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant&#146;s internal control over financial reporting; </FONT></P>

<P><FONT SIZE=2>5. The registrant&#146;s other certifying officer and I
have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant&#146;s auditors and the audit committee of
registrant&#146;s board of directors (or persons performing the equivalent
functions):</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrant&#146;s ability to record, process, summarize and report
financial information; and</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.</FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="58%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="41%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Date: March 27, 2009</FONT></P>
</TD>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Scott F. Drill</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Scott F. Drill</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>President and Chief Executive Officer</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(principal executive officer)</FONT></P>
</TD>
</TR>
</TABLE>
<BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>



</BODY>

</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>insignia091381_ex31-2.htm
<DESCRIPTION>CERTIFICATION OF PFO PURSUANT TO SECTION 302
<TEXT>

<HTML>

<HEAD><TITLE>Exhibit 31.2 to Insignia Systems, Inc. Form 10-K for year ended 12-31-2008</TITLE></HEAD>
<BODY>

<P ALIGN=RIGHT><FONT SIZE=3><B>Exhibit
31.2</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=3><B>CERTIFICATION
OF PRINCIPAL FINANCIAL OFFICER</B></FONT></P>

<P><FONT SIZE=2>I, Justin W. Shireman, certify that:</FONT></P>

<P><FONT SIZE=2>1. I have reviewed this report on Form 10-K of
Insignia Systems, Inc.;</FONT></P>

<P><FONT SIZE=2>2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; </FONT></P>

<P><FONT SIZE=2>3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report; </FONT></P>

<P><FONT SIZE=2>4. The registrant&#146;s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and we have:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant is made known to us by others
within the Company, particularly during the period in which this report is
being prepared; and</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; and</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)
Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)
Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant&#146;s internal control over financial reporting; </FONT></P>

<P><FONT SIZE=2>5. The registrant&#146;s other certifying officer and I
have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant&#146;s auditors and the audit committee of
registrant&#146;s board of directors (or persons performing the equivalent
functions):</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrant&#146;s ability to record, process, summarize and
report financial information; and</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.</FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="58%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="41%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Date: March 27, 2009</FONT></P>
</TD>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Justin W. Shireman</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Justin W. Shireman</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Vice President of Finance and CFO</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(principal financial officer)</FONT></P>
</TD>
</TR>
</TABLE>
<BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>


</BODY>

</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>insignia091381_ex32.htm
<DESCRIPTION>CERTIFICATION OF PEO/PFO PURSUANT TO SECTION 906
<TEXT>

<HTML>

<HEAD><TITLE>Exhibit 32 to Insignia Systems, Inc. Form 10-K for year ended 12-31-2008</TITLE></HEAD>
<BODY>

<P ALIGN=RIGHT><FONT SIZE=3><B>Exhibit 32</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=3><B>SECTION 1350 CERTIFICATION</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned certify pursuant to 18 U.S.C. &#167; 1350, that:</FONT></P>

<P><FONT SIZE=2>1. The accompanying Annual Report
on Form 10-K for the period ended December 31, 2008, fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and</FONT></P>

<P><FONT SIZE=2>2. The information contained in
the accompanying Annual Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</FONT></P>

<TABLE ALIGN=CENTER BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="58%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="41%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Date: March 27, 2009</FONT></P>
</TD>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Scott F. Drill</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Scott F. Drill</FONT></P>
</TD>
</TR>
<TR>
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<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>President and Chief Executive Officer</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(principal executive officer)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Date: March 27, 2009</FONT></P>
</TD>
<TD VALIGN=TOP style="border-bottom:solid black 1px">
<P><FONT SIZE=2>/s/ Justin W. Shireman</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Justin W. Shireman</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Vice President, Finance and CFO</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(principal financial officer)</FONT></P>
</TD>
</TR>
</TABLE>
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