<SUBMISSION>
<ACCESSION-NUMBER>0000950134-06-020739
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20060930
<FILING-DATE>20061107
<DATE-OF-FILING-DATE-CHANGE>20061107
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ADEZA BIOMEDICAL CORP
<CIK>0000902482
<ASSIGNED-SIC>3825
<IRS-NUMBER>770054952
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-20703
<FILM-NUMBER>061192981
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1240 ELKO DR
<CITY>SUNNYVALE
<STATE>CA
<ZIP>94089
</BUSINESS-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f24446e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-Q</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(Mark One)</B>

</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>Quarterly report pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the quarterly period ended September&nbsp;30, 2006</B>
</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>Transition Report Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number: 000 &#151; 20703</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>Adeza Biomedical Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><I>(Exact name of Registrant as specified in its charter)</I></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>77-0054952</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><I>(State or Other Jurisdiction of</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>(I.R.S. Employer</I></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><I>Incorporation or Organization)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>Identification Number)</I></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>1240 Elko Drive, Sunnyvale, California 94089</B><BR>
<I>(Address of principal executive offices and zip code)</I></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>(408)&nbsp;745-0975</B><BR>
<I>(Registrant&#146;s telephone number, including area code)</I></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days. Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated
filer&#148; in Rule&nbsp;12b-2 of the Exchange Act. (Check one):
</DIV>
<DIV align="center" style="font-size: 10pt">Large Accelerated Filer <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated Filer <FONT face="Wingdings">&#254;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Accelerated Filer <FONT face="Wingdings">&#111;</FONT></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicated by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Exchange Act). Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of October&nbsp;27, 2006, 17,505,203 shares of the registrant&#146;s common stock were outstanding.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>









<P align="right" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px"><A href="#101"><B>PART I&#151; FINANCIAL INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Item&nbsp;1. Condensed Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Condensed Balance Sheets as of September&nbsp;30, 2006 and December&nbsp;31, 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">Condensed Statements of Income for the three and nine months ended September&nbsp;30, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Condensed Statements of Cash Flows for the nine months ended September&nbsp;30, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Notes to Condensed Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Item&nbsp;4. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:60px; text-indent:-15px"><A href="#110"><B>PART II &#151; OTHER INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Item&nbsp;1. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Item&nbsp;3. Defaults upon Senior Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Item&nbsp;4. Submission of Matters to a Vote of Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Item&nbsp;5. Other Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Item&nbsp;6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">Signatures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">Exhibit&nbsp;Index</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f24446exv10w18.htm">EXHIBIT 10.18</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f24446exv31w1.htm">EXHIBIT 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f24446exv31w2.htm">EXHIBIT 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f24446exv32w1.htm">EXHIBIT 32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f24446exv32w2.htm">EXHIBIT 32.2</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adeza Biomedical Corporation Trademarks and Registered Trademarks are trademarks of Adeza. Our
trademarks and trade names include the stylized A, Adeza<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, E-tegrity<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Test,
SalEst<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, Gestiva<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP> and TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
System. Other service marks, trademarks and trade names referred to in this Form 10-Q are the
property of their respective owners.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I&#151; FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. CONDENSED FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADEZA BIOMEDICAL CORPORATION</B>
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONDENSED BALANCE SHEETS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(In thousands, except par value)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>(Unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>(1)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:90px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">89,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,929</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncurrent deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">110,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">105,643</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:75px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,994</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,216</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued royalties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,427</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,322</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,238</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $0.001 par value; 100,000 shares authorized;
17,504 and 17,376 shares issued and outstanding at September&nbsp;30, 2006
and December&nbsp;31, 2005, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,432</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,604</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,146</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,440</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,405</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">110,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">105,643</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>- Derived from the December&nbsp;31, 2005 audited financial statements included in the Annual Report
on Form 10-K of Adeza Biomedical Corporation for fiscal year 2005.</TD>
</TR>

</TABLE>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to condensed financial statements.
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADEZA BIOMEDICAL CORPORATION</B>
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONDENSED STATEMENTS OF INCOME</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(In thousands, except per share amounts)<BR>

(Unaudited)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31,663</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,559</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales and marketing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,078</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,363</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,711</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total operating costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(437</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,952</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,802</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,754</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares used to compute net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,798</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to condensed financial statements.
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADEZA BIOMEDICAL CORPORATION</B>
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONDENSED STATEMENTS OF CASH FLOWS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(In thousands)<BR>

(Unaudited)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income to net cash provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Tax benefit from stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(288</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,137</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(181</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(72</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(117</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(259</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(155</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(348</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued royalties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(620</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(308</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,449</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,802</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(193</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(193</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds from issuances of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,122</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,122</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net increase in cash and cash equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,731</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">86,849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental cash flow information</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">597</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to condensed financial statements.
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADEZA BIOMEDICAL CORPORATION</B>
</DIV>

<DIV align="left">
<A name="106"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>NOTES TO CONDENSED FINANCIAL STATEMENTS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(Unaudited)</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. ORGANIZATION AND BUSINESS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adeza Biomedical Corporation (&#147;Adeza&#148; or the &#147;Company&#148;) is a Delaware corporation which was
originally incorporated in the state of California on January&nbsp;3, 1985 and reincorporated in
Delaware in 1996. Adeza is engaged in the design, development, manufacturing, sales, and marketing
of products for women&#146;s health worldwide. The Company&#146;s initial focus is on reproductive
healthcare, using its proprietary technologies to predict preterm birth and assess infertility. The
Company&#146;s products consist of:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>System and FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The
Fetal Fibronectin Test, which are used to assess the risk of preterm
birth in pregnant women.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The E-tegrity<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Test, which is used to determine the
feasibility of embryo implantation in patients with infertility who
are candidates for in vitro fertilization (&#147;IVF&#148;).</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All of the Company&#146;s assets are located in the U.S.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Basis of Presentation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying unaudited condensed financial statements have been prepared in accordance
with U.S. generally accepted accounting principles and applicable Securities and Exchange
Commission rules and regulations for interim financial reporting. These financial statements do not
include all of the information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. The accompanying unaudited condensed financial
statements reflect all adjustments (consisting of normal, recurring adjustments) that, in our
opinion, are necessary for a fair presentation of the results for the interim periods presented.
The results of operations for such periods are not necessarily indicative of the results expected
for the full year or for any future periods. The accompanying condensed financial statements and
related notes should be read in conjunction with the Company&#146;s audited financial statements and
notes included in its Annual Report on Form 10-K for the year ended December&nbsp;31, 2005 as filed with
the Securities and Exchange Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Use of Estimates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ from those
estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock-Based Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning as of January&nbsp;1, 2006 the Company accounts for its employee stock option plans under
the provisions of SFAS No.&nbsp;123R. SFAS No.&nbsp;123R requires the recognition of the fair value of
stock-based compensation in net income. The fair value of the Company&#146;s stock options was estimated
using a Black-Scholes option valuation model. This model requires the input of highly subjective
assumptions and elections in adopting and implementing SFAS No.&nbsp;123R, including expected stock
price volatility and the estimated life of each award. The fair value of stock-based awards is
amortized over the vesting period of the award. The Company has elected to use the straight-line
method for awards granted after the adoption of SFAS No.&nbsp;123R and continues to use a graded vesting
method for awards granted prior to the adoption of SFAS No.&nbsp;123R. The Company makes quarterly
assessments of the adequacy of its tax credit pool to determine if there are any deficiencies which
require recognition in its condensed statements of operations. Prior to adoption of SFAS No.&nbsp;123R,
the Company accounted for its stock option plans under the provisions of Accounting Principles
Board (APB)&nbsp;Opinion No.&nbsp;25 &#147;Accounting For Stock Issued to Employees&#148; (APB No.&nbsp;25) and Financial
Accounting Standards Board (FASB)&nbsp;Interpretation No.&nbsp;44, &#147;Accounting for Certain Transactions
Involving Stock Compensation &#151; an Interpretation of APB Opinion No.&nbsp;25&#148; and made pro forma footnote
disclosures as required by Statement of Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;148, &#147;Accounting
For Stock-
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based Compensation &#151; Transition and Disclosure&#148;, which amends SFAS No.&nbsp;123, &#147;Accounting For
Stock-Based Compensation&#148;. Pro forma net income and pro forma net income per share disclosed in the
footnotes to the Company&#146;s condensed financial statements were estimated using a Black-Scholes
option valuation model.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Accounting Pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2006, the Financial Accounting Standards Board (FASB)&nbsp;issued Statement of
Financial Accounting Standards No.&nbsp;157, &#147;Fair Value Measurements&#148; (&#147;FAS 157&#148;). SFAS 157 defines
fair value, establishes a framework for measuring fair value in generally accepted accounting
principles, and expands disclosures about fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November&nbsp;15, 2007, and is effective
for the Company as of January&nbsp;1, 2008. The Company does not believe that the adoption of SFAS 157
will materially impact its results of operations, financial position or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No.
108, &#147;Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current
Year Financial Statements&#148; (&#147;SAB 108&#148;), which provides interpretive guidance on how the effects of
the carryover or reversal of prior year misstatements should be considered in quantifying a current
year misstatement. SAB 108 is effective for fiscal years ending on or after November&nbsp;15, 2006. The
Company will be required to adopt the provisions of SAB 108 in its annual financial statements for
the year ending December&nbsp;31, 2006. The Company does not believe that the adoption of SAB 108 will
materially impact its results of operations, financial position or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2006, the FASB issued FASB Interpretation No.&nbsp;48, &#147;Accounting for Uncertainty in
Income Taxes &#151; an Interpretation of FASB Statement No.&nbsp;109&#148; (FIN 48). FIN 48 applies to all tax
positions related to income taxes subject to FASB Statement 109, <I>Accounting for Income Taxes. </I>Under
FIN 48, a company would recognize the benefit from a tax position only if it is
more-likely-than-not that the position would be sustained upon audit based solely on the technical
merits of the tax position. FIN 48 clarifies how a company would measure the income tax benefits
from the tax positions that are recognized, provides guidance as to the timing of the derecognition
of previously recognized tax benefits and describes the methods for classifying and disclosing the
liabilities within the financial statements for any unrecognized tax benefits. FIN 48 also
addresses when a company should record interest and penalties related to tax positions and how the
interest and penalties may be classified within the income statement and presented in the balance
sheet. FIN 48 is effective for fiscal years beginning after December&nbsp;15, 2006. The Company expects
to adopt FIN 48 at the beginning of its fiscal year 2007. Differences between the amounts
recognized in the statements of operations prior to and after the adoption of FIN 48 would be
accounted for as a cumulative effect adjustment to the beginning balance of retained earnings. The
Company is currently evaluating the impact of adopting FIN 48 on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, the FASB issued SFAS No.&nbsp;151, &#147;Inventory Costs, an amendment of ARB No.&nbsp;43,
Chapter&nbsp;4&#148; (&#147;SFAS No.&nbsp;151&#148;). SFAS No.&nbsp;151 clarifies that abnormal inventory costs such as costs of
idle facilities, excess freight and handling costs, and wasted materials (spoilage)&nbsp;are required to
be recognized as current period charges. The provisions of SFAS No.&nbsp;151 were effective for fiscal
years beginning after June&nbsp;15, 2005. The adoption of SFAS No.&nbsp;151 did not have a material impact on
the Company&#146;s results of operations, financial position or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. INVENTORIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market and consist of the following (in
thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>As of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>As of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">386</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. INTANGIBLE ASSETS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets are comprised entirely of purchased patents. The following table sets forth
the carrying amount of amortizable intangible assets (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>As of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>As of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross carrying amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: accumulated amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net carrying amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets are amortized on a straight line basis over their estimated useful lives of
five years. Amortization expense is expected to be $48,000 per year in 2006 and 2007 and $32,000
for the year ending December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. NET INCOME PER SHARE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic net income per share is calculated by dividing net income by the weighted-average number
of common shares outstanding for the period. Diluted net income per share is computed by dividing
net income by the weighted-average number of common shares and dilutive potential common shares
outstanding for the period. For purposes of this calculation, options, and warrants are considered
to be potential common shares and are only included in the calculation of diluted net income per
share when their effect is dilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the computation of basic and diluted net income per share (in
thousands, except per share amounts):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Numerator:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Denominator:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of common shares used in
basic earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">913</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Dilutive potential common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">995</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of common shares and
dilutive potential common shares used in diluted
earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,798</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income per share:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the three and nine months ended September&nbsp;30, 2006 options to purchase approximately 0.4
million and 0.3&nbsp;million shares, respectively, of common stock with exercise prices greater than the
average fair market value of the Company&#146;s stock of $15.65 and $17.46, respectively, were excluded
from the diluted net loss per share calculation because the effect would have been antidilutive.
Comparatively, for both the three and nine months ended September&nbsp;30, 2005 options to purchase
approximately 0.1&nbsp;million shares of common stock with exercise prices greater than the average fair
market value of the Company&#146;s stock of $16.65 and $14.93, respectively, were excluded from the
diluted net loss per share calculation because the effect would have been antidilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. COMPREHENSIVE INCOME</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statement of Financial Accounting Standards No.&nbsp;130, &#147;Reporting Comprehensive Income,&#148;
establishes standards for the reporting of comprehensive income and its components in the financial
statements. Comprehensive income is defined as the change in equity of a business enterprise during
a period from transactions and other events and circumstances from non-owner sources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s comprehensive income includes net income and unrealized gains (losses)&nbsp;on
available-for-sale securities, comprised of commercial papers with maturities of less than three
months, and is reflected as a component of stockholders&#146; equity. The components of comprehensive
income, net of tax, were as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gains
(losses)&nbsp;on
available-for-sale
securities, net of
tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. STOCK-BASED COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2006, the Company adopted the provisions of SFAS No.&nbsp;123R. SFAS No.&nbsp;123R
establishes accounting for stock-based awards exchanged for employee services. Accordingly,
stock-based compensation cost is measured on the grant date, based on the fair value of the award
and is recognized as an expense over the employee requisite service period. Prior to January&nbsp;1,
2006, the Company accounted for its stock-based awards under the recognition and measurement
provisions of Accounting Principles Board Opinion No.&nbsp;25 &#147;Accounting for Stock Issued to Employees&#148;
and related Interpretations as permitted by SFAS No.&nbsp;123.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Prior to the Adoption of SFAS No.&nbsp;123R</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to the adoption of SFAS No.&nbsp;123R, the Company provided disclosures required under SFAS
No.&nbsp;123, &#147;Accounting for Stock-Based Compensation,&#148; (&#147;SFAS No.&nbsp;123&#148;) as amended by SFAS No.148,
&#147;Accounting for Stock-Based Compensation &#151; Transition and Disclosures.&#148; $0.2&nbsp;million and $0.7
million of employee stock-based compensation expense was reflected in net income for the three and
nine months ended September&nbsp;30, 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the preparation of the notes to the consolidated condensed financial statements for the
three months ended March&nbsp;31, 2006, the Company determined that the calculation of its pro forma net
income reported under SFAS 123 for the year ended December&nbsp;31, 2005, as previously reported, was
understated primarily as a result of an incorrect change in the fair value calculation (and,
therefore, the amortization expense related to) options granted in August&nbsp;2004. Accordingly, pro
forma net income reported under SFAS 123 for the three and nine month periods ended September&nbsp;30,
2005, presented in the tables below, was revised. These revisions had no effect on the Company&#146;s
previously reported results of operations or financial condition. The stock-based employee and
director compensation expense previously reported for the three and nine months ended September&nbsp;30,
2005 was $0.6&nbsp;million and $1.9&nbsp;million, respectively, and the pro forma net income previously
reported for the three and nine months ended September&nbsp;30, 2005 was $1.8&nbsp;million and $4.2&nbsp;million,
respectively.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Three Months</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Nine Months</b> &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(in thousands, except per share amounts)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Add: Total stock based employee and
director compensation expense determined
under intrinsic value method for all
awards, net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">669</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Total stock based employee and
director compensation expense determined
under the fair value method for all
awards, net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,069</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,910</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,194</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Reported net income per share:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Pro forma net income per share</B>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shares used to compute net income per share:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,798</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Impact of Adoption of SFAS No.&nbsp;123R</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company elected to adopt the modified prospective application method as provided by SFAS
No.&nbsp;123R. Under that transition method, compensation costs recognized in the three and nine months
ended September&nbsp;30, 2006, include (a)&nbsp;compensation cost for all share-based payments granted prior
to, but not yet vested as of January&nbsp;1, 2006, based on the grant-date fair value estimated in
accordance with the original provisions of SFAS No.&nbsp;123, and (b)&nbsp;compensation costs for all
share-based payments granted subsequent to January&nbsp;1, 2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS No.&nbsp;123R.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the three and nine months ended September&nbsp;30, 2006, we recognized compensation expense in
connection with the adoption of FAS 123R of $0.8&nbsp;million and $2.7&nbsp;million, respectively. Diluted
earnings per share was reduced by $0.02 and $0.07 for the three and nine months ended September&nbsp;30,
2006, respectively, as a result of the Company&#146;s adoption of FAS 123R. As of September&nbsp;30, 2006 the
stock-based compensation capitalized as inventory was minimal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of adoption FAS 123R, the Company&#146;s income before income taxes and net income for
the three months ended September&nbsp;30, 2006 are $0.6&nbsp;million and $0.2&nbsp;million lower, respectively,
than if the Company had continued to account for share-based compensation under Opinion 25.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Equity Incentive Program</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s equity incentive program is a long-term retention program that is intended to
attract and retain qualified management and technical employees and align stockholder and employee
interests. At September&nbsp;30, 2006, the equity incentive program consisted of the 2004 Equity
Incentive Plan (the 2004 Plan). Under the 2004 Plan, options, stock appreciation rights, stock
purchase rights and restricted stock may be issued to employees, officers, directors, and
consultants of Adeza. The 2004 Plan permits the grant of share options for up to 1,875,000 shares
of common stock. The maximum number of shares shall be increased annually on January 1 of each year
by a number of shares equal to the lesser of (a)&nbsp;three percent of the number of shares issued and
outstanding on the immediately preceding December&nbsp;31, (b)&nbsp;525,000 Shares, and (c)&nbsp;a number of
Shares set by the Board. The 2004 Plan provides that the exercise price for incentive stock options
will be no less than 100% of fair value of Adeza&#146;s common stock on the date of grant. Generally,
these options vest ratably over four years and have a term of 10&nbsp;years. No restricted stock, stock
appreciation or purchase rights have been issued as of September&nbsp;30, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides certain information with respect to the 2004 Plan, which was in
effect as of September&nbsp;30, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Securities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining Available</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>for Future Issuance</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Under Equity</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation Plan</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities to be</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Excluding</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Issued upon</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise Price of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Reflected in</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Column (a))</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(a)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(b)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(c)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity
compensation plan
approved by
security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,581,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,516,351</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair value of each option award is estimated on the date of grant using the Black-Scholes
valuation model, consistent with the provisions of SFAS No.&nbsp;123R, SEC SAB No.&nbsp;107, &#147;Share-Based
Payments&#148; and the Company&#146;s prior period pro forma disclosures of net earnings, including
stock-based compensation (determined under a fair value method as prescribed by SFAS No.&nbsp;123).
Expected volatilities used in 2006 are based on volatilities from the Company&#146;s peer group, which
is consistent with the technique the Company used prior to the adoption of SFAS No.&nbsp;123R. Due to
the Company&#146;s short public trading history the Company determined that the use of a peer group is
more reflective of market conditions and a better indicator of expected volatility than a
historical volatility. The Company uses historical data to estimate the expected option forfeiture
rate. The expected term of options granted is derived from analysis of the Company&#146;s peer group and
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">historical data. The risk-free rate for periods within the contractual life of the option is
based on a risk-free zero-coupon spot interest rate at the end of the reporting period. The Company
has never declared or paid any cash dividends and does not presently plan to pay cash dividends in
the foreseeable future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair value of stock options granted to employees in the three and nine months ended
September&nbsp;30, 2006 and September&nbsp;30, 2005 was estimated at the date of grant using the
Black-Scholes model using the following weighted-average assumptions:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">75</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">63</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">75</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.76</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.07</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.92</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.03</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected term (in years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS No.&nbsp;123R requires the use of option pricing models that were not developed for use in
valuing employee stock options. The Black-Scholes option-pricing model was developed for use in
estimating the fair value of short-lived exchange traded options that have no vesting restrictions
and are fully transferable. In addition, option-pricing models require the input of highly
subjective assumptions, including the option&#146;s expected life and the price volatility of the
underlying stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the combined activity under the equity incentive plans for the
indicated periods:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted-Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Aggregate</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Available</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining Contract</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Intrinsic Value</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>for Grant</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Term (in years)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(in thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,035,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,668,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares authorized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">521,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85,600</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(127,746</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45,453</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at September&nbsp;30, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,516,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,581,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,980</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested and expected to vest at September&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,537,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable at September&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">978,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,636</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate intrinsic value in the table above represents the total pretax intrinsic
value, based on the Company&#146;s closing stock price of $16.41 as of September&nbsp;30, 2006, which would
have been received by the option holders had all option holders with in-the-money options exercised
their options as of that date. Stock options that expired during the nine months ended September
30, 2006 were minimal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company did not grant any stock options during the three months ended September&nbsp;30, 2006.
Therefore, there is no corresponding weighted-average grant fair value of stock options granted
during the three months ended September&nbsp;30, 2006. The total intrinsic value of options exercised
during the three month period ended September&nbsp;30, 2006 was approximately $0.3&nbsp;million. The total
cash received from employees as a result of stock option exercises during the three months ended
September&nbsp;30, 2006 was approximately $0.1&nbsp;million. In connection with these exercises, the tax
benefits realized by the Company for the three months ended
September&nbsp;30, 2006 was $0.1 million.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company settles employee stock option exercises with newly issued common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2006, the unrecorded deferred stock-based compensation balance related to
stock options was $4.4&nbsp;million, and that amount will be recognized over an estimated weighted
average amortization period of 1.2&nbsp;years.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. PROVISION FOR INCOME TAXES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recorded a provision for income taxes of $1.1&nbsp;million for the three months ended
September&nbsp;30, 2006, related to federal and state taxes, compared to a provision for income taxes of
$0.1&nbsp;million for the three months ended September&nbsp;30, 2005. The Company&#146;s effective tax rate for
the three months ended September&nbsp;30, 2006 and 2005 was 59.5% and 5.9%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recorded a provision for income taxes of $1.6&nbsp;million for the nine months ended
September&nbsp;30, 2006, related to federal and state taxes, compared to a provision for income taxes of
$0.3&nbsp;million for the nine months ended September&nbsp;30, 2005. The Company&#146;s effective tax rate for the
nine months ended September&nbsp;30, 2006 and 2005 was 56.0% and 5.5%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the three months ended September&nbsp;30, 2006 and 2005, the provision for income taxes is
based on the Company&#146;s annual effective tax rate in compliance with SFAS 109. The annual effective
tax rate was calculated on the basis of the Company&#146;s expected level of profitability that results
in federal and state income taxes. To the extent the Company&#146;s expected profitability changes
during the year, the effective tax rate would be revised to reflect any changes in the projected
profitability. For the three months ended September&nbsp;30, 2006, the difference between the provision
for income tax that would be derived by applying the statutory rate to the Company&#146;s income before
tax and the provision actually recorded is primarily due to the impact of non-deductible 123R stock
option compensation expenses. For the three months ended September&nbsp;30, 2005, the difference between
the provision for income tax that would be derived by applying the statutory rate to the Company&#146;s
income before tax and the provision actually recorded is primarily due to the benefit of operating
loss carryforwards that reduced the provision to federal alternative minimum tax and state income
tax. Excluding the effects of FAS123R, the Company&#146;s tax rate would be closer to the federal
statutory rate plus the state tax rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for income taxes in accordance with SFAS No.&nbsp;109, &#147;Accounting for Income
Taxes,&#148; which requires that deferred tax assets and liabilities be recognized using enacted tax
rates for the effect of temporary differences between the book and tax bases of recorded assets and
liabilities. SFAS No.&nbsp;109 also requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some or all of the deferred tax assets will not be
realized. The Company evaluates quarterly the realizability of its deferred tax assets by assessing
its valuation allowance and, if necessary, the Company adjusts the amount of such allowance. The
factors used to assess the likelihood of realization include the Company&#146;s forecast of future
taxable income and available tax planning strategies that could be implemented to realize the net
deferred tax assets. The Company assessed its deferred tax assets at the end of 2005, as well as
the end of the first, second and third quarters of 2006, and determined that it was more likely
than not that the Company would be able to realize net deferred tax assets based upon its forecast
of future taxable income and other relevant factors. Changes to the realization of the net deferred
tax assets or to our income taxes payable would have an impact to the Company&#146;s tax provision and
in turn would affect net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. SUBSEQUENT EVENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;20, 2006, the Company received an &#147;approvable letter&#148; from the U.S. Food and Drug
Administration (FDA)&nbsp;with respect to its New Drug Application for Gestiva<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP> for the
prevention of preterm birth in women with a history of preterm delivery. An approvable letter is an
official notification from the FDA that the FDA may approve the company&#146;s NDA if specific
conditions are satisfied. The approvable letter for Gestiva requires the completion of an
additional animal study and certain other conditions that must be satisfied prior to obtaining
final U.S. marketing approval. The approvable letter also outlines several post-approval clinical
requirements, which are consistent with recommendations made by the FDA advisory committee in
August&nbsp;2006. The Company has requested a meeting with the FDA to better understand the FDA&#146;s
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">conditions for approval. Satisfying the conditions will require both time and expense. The
Company cannot be certain when it will obtain FDA approval for Gestiva, if at all.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A decision by the FDA regarding three-year exclusivity under Hatch-Waxman for Gestiva is
expected to be made at the time of any final approval. Discussions with the FDA regarding our
Orphan Drug application for seven-year exclusivity are ongoing. While the Company&#146;s initial request
for Orphan Drug designation was not granted, it plans to meet with the FDA to provide additional
new information for further review by the Agency.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following discussion of our financial condition and results of operations should be read
in conjunction with the condensed financial statements and the notes thereto included in Item&nbsp;1 of
this Quarterly Report on </I><I>Form 10-Q</I><I>. Statements in this Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this quarterly report on Form&nbsp;10-Q
which express that we &#147;believe,&#148; &#147;anticipate,&#148; &#147;expect&#148; or &#147;plan to&#148; as well as other statements
which are not historical fact, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. </I>Examples of forward-looking statements include, without
limitation, statements regarding expected financial results, tax rates and stock-based compensation
expense, the expansion of products, markets and offerings and additional product indications.
<I>Actual events or results may differ materially as a result of the risks and uncertainties described
herein and elsewhere including, but not limited to, those factors described under &#147;Risk Factors&#148;
below and those described under &#147;Business&#148; set forth in Part&nbsp;I of our Annual Report on Form&nbsp;10-K
for the year-ended December&nbsp;31, 2005.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>BUSINESS OVERVIEW</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We design, develop, manufacture and market innovative products for women&#146;s health. Our initial
focus is on reproductive healthcare, using our proprietary technologies to predict preterm birth
and assess infertility. Our principal product is a patented diagnostic test FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>,
The Fetal Fibronectin Test, that utilizes a single-use, disposable cassette and is analyzed on our
patented instrument, the TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System. This FDA-approved product is designed
to objectively determine a woman&#146;s risk of preterm birth by detecting the presence of a specific
protein, fetal fibronectin, in vaginal secretions during pregnancy. We began selling our
single-use, disposable FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test in 1999 and launched our
second-generation system, the TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>System, in 2001. Sales of
TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Systems to hospital and clinical laboratories allow healthcare
providers access to our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test, resulting in the
potential for better patient care and for significant cost savings by avoiding unnecessary medical
treatment. We have also submitted to the FDA a New Drug Application, or NDA, for
Gestiva<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP> (17 alpha-hydroxyprogesterone caproate injection 250 mg/ml), our product
candidate to prevent preterm birth in women who have a history of preterm delivery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe the key factors underlying our growth since 1999 include greater healthcare
provider acceptance, demonstrated cost savings from the use of our tests, expanded reimbursement
coverage by insurance companies, expansion of our sales force and increased marketing efforts.
Continued growth in test volume and revenue will depend on the above and a number of factors,
including placing additional TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Systems in hospitals and clinical
laboratories, increasing utilization of existing TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Systems, increasing
healthcare provider acceptance for other FDA-approved uses of the product and developing additional
applications or products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Business Developments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Gestiva</I><SUP style="font-size: 85%; vertical-align: text-top"><I>&#153; </I></SUP>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;29, 2006, we announced that the Reproductive Health Drugs Advisory Committee to the
FDA recommended by a majority vote that the data presented by us in our Gestiva NDA support
efficacy in preventing preterm birth prior to 35&nbsp;weeks and that overall safety data are adequate
and sufficiently reassuring to support marketing approval in women with a history of preterm
delivery. The Reproductive Health Drugs Advisory Committee to the FDA also recommended the
collection of post-marketing clinical data. Although Advisory Committee recommendations are not
binding, typically FDA final determinations are consistent with their recommendations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;20, 2006, we received an &#147;approvable letter&#148; from the U.S. Food and Drug
Administration (FDA)&nbsp;with respect to our New Drug Application for Gestiva<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP> for the
prevention of preterm birth in women with a history of preterm delivery. An approvable letter is
an official notification from the FDA that the FDA may approve the company&#146;s NDA if specific
conditions are satisfied. The approvable letter for Gestiva requires the completion of an
additional animal study and certain other conditions that must be satisfied prior to obtaining
final U.S. marketing approval. The approvable letter also outlines several post-approval clinical
requirements, which are consistent with recommendations made by the FDA advisory committee in
August&nbsp;2006. We have requested a meeting with the FDA to better understand the FDA&#146;s conditions for approval. Satisfying the conditions will require both time and expense. We cannot be certain
when we will obtain FDA approval for Gestiva, if at all.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A decision by the FDA regarding three-year exclusivity under Hatch-Waxman for Gestiva is
expected to be made at the time of any final approval. Discussions with the FDA regarding our
Orphan Drug application for seven-year exclusivity are ongoing. While our initial request for
Orphan Drug designation was not granted, we plan to meet with the FDA to provide additional new
information for further review by the Agency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Gestiva is approved for marketing in the United States, we plan to use our existing sales
force to market the product to the same physicians to whom we market FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The
Fetal Fibronectin Test, thereby leveraging our direct sales efforts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CRITICAL ACCOUNTING POLICIES AND ESTIMATES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We prepare our financial statements in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base
our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. Except as
stated below regarding SFAS No.&nbsp;123R, our critical accounting policies and estimates have not
changed significantly from the critical accounting policies and estimates discussed in our Annual
Report on Form 10-K for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock-Based Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning as of January&nbsp;1, 2006 we account for our employee stock option plans under the
provisions of SFAS No.&nbsp;123R. SFAS No.&nbsp;123R requires the recognition of the fair value of
stock-based compensation in net income. The fair value of our stock options was estimated using a
Black-Scholes option valuation model. This model requires the input of highly subjective
assumptions and elections in adopting and implementing SFAS No.&nbsp;123R, including expected stock
price volatility and the estimated life of each award. The fair value of stock-based awards is
amortized over the vesting period of the award. We have elected to use the straight-line method for
awards granted after the adoption of SFAS No.&nbsp;123R and continue to use a graded vesting method for
awards granted prior to the adoption of SFAS No.&nbsp;123R. We make quarterly assessments of the
adequacy of our tax credit pool to determine if there are any deficiencies which require
recognition in our condensed statements of operations. Prior to adoption of SFAS No.&nbsp;123R, we
accounted for our stock option plans under the provisions of Accounting Principles Board (APB)
Opinion No.&nbsp;25 &#147;Accounting For Stock Issued to Employees&#148; (APB No.&nbsp;25) and Financial Accounting
Standards Board (FASB)&nbsp;Interpretation No.&nbsp;44, &#147;Accounting for Certain Transactions Involving Stock
Compensation &#151; an Interpretation of APB Opinion No.&nbsp;25&#148; and made pro forma footnote disclosures as
required by Statement of Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;148, &#147;Accounting For Stock-Based
Compensation &#151; Transition and Disclosure&#148;, which amends SFAS No.&nbsp;123, &#147;Accounting For Stock-Based
Compensation&#148;. Pro forma net income and pro forma net income per share disclosed in the footnotes
to our condensed financial statements were estimated using a Black-Scholes option valuation model.
For more information, see Note 7 in the Notes to the Consolidated Financial Statements,
&#147;Stock-Based Compensation.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Product Sales</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our product sales are derived primarily from the sale of our disposable FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>,
The Fetal Fibronectin Test. In addition, we derive a small portion of our revenues from the sale of
TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Systems and other products. We currently use distributors for sales
outside of the United States and Canada. Our business has been in the past and may continue to be
seasonal and is affected by customer ordering patterns, which may involve quarterly or semi-annual
orders, as well as other factors which may cause quarterly variances in our sales. As a result, our
sales may not increase in sequential quarters and our net income may fluctuate significantly.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of product sales for the three months and nine months ended
September&nbsp;30, 2006 and September&nbsp;30, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">17.8</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The $2.1&nbsp;million increase in product sales for the three months ended September&nbsp;30, 2006,
compared to the three months ended September&nbsp;30, 2005, and the $5.6&nbsp;million increase in product
sales for the nine months ended September&nbsp;30, 2006, compared to the nine months ended September&nbsp;30,
2005, were primarily attributable to increased sales volume of our Fetal Fibronectin Test
cassettes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Geographic sales information is based on the location of the end customer. The following is a
summary of product sales by geographic region for the three months and nine months ended September
30, 2006 and September&nbsp;30, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>United States</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">17.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">17.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of total product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">96.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>International</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">34.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">31.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of total product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International sales, as well as sales in the United States, remained relatively consistent as
a percentage of total product sales for the three and nine months ended September&nbsp;30, 2006 compared
to the three and nine months ended September&nbsp;30, 2005. We expect international sales, as a
percentage of total product sales, to remain relatively consistent for the remainder of the year
ending December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cost of Product Sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cost of product sales represents the cost of materials, direct labor and overhead
associated with the manufacture of our products, and delivery charges, lab services and royalties.
The following is a summary of cost of product sales for the three months and nine months ended
September&nbsp;30, 2006 and September&nbsp;30, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">23.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of sales, as a percentage of product sales, for the three months ended September&nbsp;30,
2006, compared to the three months ended September&nbsp;30, 2005 remained relatively consistent. The
increase in cost of product sales, as a percentage of product sales, for the nine months ended
September&nbsp;30, 2006 compared to the nine months ended September&nbsp;30, 2005 was primarily due to a
slight increase in overhead spending.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Royalties</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have certain royalty commitments associated with the shipment and licensing of certain
products. Royalty costs are generally based on a dollar amount per unit shipped or a percentage of
the underlying revenue. The following is a summary of royalty costs for the three months and nine
months ended September&nbsp;30, 2006 and September&nbsp;30, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Royalty costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in royalty costs for the three and nine months ended September&nbsp;30, 2006, compared
to the three and nine months ended September&nbsp;30, 2005, was primarily due to the increase in sales
volume over the respective periods. As a percentage of product sales, royalty costs remained
relatively consistent for the three and nine months ended September&nbsp;30, 2006 and 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect royalty costs as a percentage of product sales to fluctuate since royalty costs are
dependent on several factors, including the level and type of sales and the level of allowed
deductions. However, we believe royalty costs as a percentage of product sales will remain below
7.5% for the year ended December&nbsp;31, 2006, assuming no new licenses involving royalties are
required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Gross Profit</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">85.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">85.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">84.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">85.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross margins, or gross profit as a percentage of sales, for the three and nine months ended
September&nbsp;30, 2006, compared to the three and nine months ended September&nbsp;30, 2005, remained
relatively consistent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sales and Marketing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing expenses consist primarily of sales and marketing personnel and sales
force incentive compensation and costs related to travel, tradeshows, promotional materials and
programs, advertising and healthcare provider education materials and events.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales and marketing expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">44.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">42.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">48.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">40.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">53.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">44.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The $2.0&nbsp;million increase in sales and marketing expenses for the three months ended September
30, 2006, compared to the three months ended September&nbsp;30, 2005 was primarily attributable to (i)
an increase of $1.1&nbsp;million related to the expansion of our direct sales force and associated
costs, (ii)&nbsp;an increase of $0.6&nbsp;million due to marketing programs, and (iii)&nbsp;an increase of $0.3
million in stock-based compensation expense, primarily associated with the adoption of SFAS No.
123R on January&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The $6.0&nbsp;million increase in sales and marketing expenses for the nine months ended September
30, 2006, compared to the nine months ended September&nbsp;30, 2005 was primarily attributable to (i)&nbsp;an
increase of $3.8&nbsp;million related to the expansion of our direct sales force and associated costs,
(ii)&nbsp;an increase of $1.1&nbsp;million due to marketing programs, and (iii)&nbsp;an increase of $1.1&nbsp;million
in stock-based compensation expense, primarily associated with the adoption of SFAS No.&nbsp;123R on
January&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect our selling and marketing expenditures to increase as we continue our efforts to
increase our market penetration and prepare for marketing and selling efforts related to Gestiva.
We also expect our employee related costs to increase, including stock-based compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General and Administrative</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our general and administrative expenses consist primarily of personnel expenses for
accounting, human resources, information technology and corporate administration functions. Other
costs include facility costs, professional fees for legal and accounting services including patent
expenses.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.1</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">17.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">17.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The $0.1&nbsp;million decrease in general and administrative expenses for the three months ended
September&nbsp;30, 2006 compared to the three months ended September&nbsp;30, 2005 was primarily attributable
to a decrease of $0.4&nbsp;million in legal fees and other general costs. This decrease was partially
offset by (i)&nbsp;an increase of $0.2&nbsp;million in stock-based compensation expense, primarily associated
with the adoption of SFAS No.&nbsp;123R on January&nbsp;1, 2006 and (ii)&nbsp;an increase of $0.1&nbsp;million in
personnel costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The $0.9&nbsp;million increase in general and administrative expenses for the nine months ended
September&nbsp;30, 2006, compared to the nine months ended September&nbsp;30, 2005 was primarily attributable
to (i)&nbsp;an increase of $0.8&nbsp;million in costs associated with operating as a public company,
including personnel costs, the timing of billings for professional services related to audit and
tax, and other general costs, and (ii)&nbsp;an increase of $0.7&nbsp;million in stock-based compensation
expense,
primarily associated with the adoption of SFAS No.&nbsp;123R on January&nbsp;1, 2006. This increase was
partially offset by a decrease of $0.6&nbsp;million in legal fees and other general costs.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect our general and administrative expenses to increase primarily related to
continuously increasing costs associated with being a public company, anticipated increased
headcount and legal expenses. We also expect our employee related costs to increase, including
stock-based compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Research and Development</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development expenses consist of costs incurred for company-sponsored research
and development activities. These expenses consist primarily of direct and research-related
allocated overhead expenses such as facilities costs, salaries and benefits, and material and
supply costs and include costs associated with clinical trials.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">52.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">55.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in research and development expenses for the three and nine months ended
September&nbsp;30, 2006, compared to the three and nine months ended September&nbsp;30, 2005, was primarily
attributable to an increase in costs associated with our continued product development efforts,
including costs related to Gestiva<FONT style="font-variant: SMALL-CAPS">, </FONT>our drug candidate for the prevention of preterm birth
in women who have a history of preterm delivery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect that our research and development costs will increase as a result of our continued
product development efforts. We also expect our employee-related costs to increase, including
stock-based compensation expense. In addition, significant costs may be incurred related to
pre-clinical and clinical requirements to be incurred before and after any potential FDA approval
for Gestiva.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Interest Income</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income consists primarily of interest income generated from our investments in
commercial paper, money market funds and repurchase agreements.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">72.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">87.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">9.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">9.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in interest income for the three and nine months ended September&nbsp;30, 2006,
compared to the three and nine months ended September&nbsp;30, 2005, was primarily attributable to an
increase in the levels of cash and cash equivalents, as well as higher average interest rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Provision for Income Taxes</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">711.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">416.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of product sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded a provision for income taxes of $1.1&nbsp;million for the three months ended September
30, 2006, related to federal and state taxes, compared to a provision for income taxes of $0.1
million for the three months ended September&nbsp;30, 2005. Our effective tax rate for the three months
ended September&nbsp;30, 2006 and 2005 was 59.5% and 5.9%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded a provision for income taxes of $1.6&nbsp;million for the nine months ended September
30, 2006, related to federal and state taxes, compared to a provision for income taxes of $0.3
million for the nine months ended September&nbsp;30, 2005. Our effective tax rate for the nine months
ended September&nbsp;30, 2006 and 2005 was 56.0% and 5.5%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the three months ended September&nbsp;30, 2006 and 2005, the provision for income taxes is
based on our annual effective tax rate in compliance with SFAS 109. The annual effective tax rate
was calculated on the basis of our expected level of profitability that results in federal and
state income taxes. To the extent our expected profitability changes during the year, the effective
tax rate would be revised to reflect any changes in the projected profitability. For the three
months ended September&nbsp;30, 2006, the difference between the provision for income tax that would be
derived by applying the statutory rate to our income before tax and the provision actually recorded
is primarily due to the impact of non-deductible 123R stock option compensation expenses. For the
three months ended September&nbsp;30, 2005, the difference between the provision for income tax that
would be derived by applying the statutory rate to our income before tax and the provision actually
recorded is primarily due to the benefit of operating loss carryforwards that reduced the provision
to federal alternative minimum tax and state income tax. Excluding the effects of FAS123R, the
Company&#146;s tax rate would be closer to the federal statutory rate plus the state tax rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for income taxes in accordance with SFAS No.&nbsp;109, &#147;Accounting for Income Taxes,&#148;
which requires that deferred tax assets and liabilities be recognized using enacted tax rates for
the effect of temporary differences between the book and tax bases of recorded assets and
liabilities. SFAS No.&nbsp;109 also requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some or all of the deferred tax assets will not be
realized. We evaluate quarterly the realizability of its deferred tax assets by assessing its
valuation allowance and, if necessary, we adjust the amount of such allowance. The factors used to
assess the likelihood of realization include our forecast of future taxable income and available
tax planning strategies that could be implemented to realize the net deferred tax assets. We
assessed our deferred tax assets at the end of 2005, as well as the end of the first, second and
third quarters of 2006, and determined that it was more likely than not that we would be able to
realize net deferred tax assets based upon our forecast of future taxable income and other relevant
factors. Changes to the realization of the net deferred tax assets or to our income taxes payable
would have an impact to our tax provision and in turn would affect net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since our inception, our operations have been primarily financed through public and private
equity investments, working capital provided by our product sales, capital leases, and research and
development contracts. Our cash and cash equivalents were $94.2&nbsp;million as of September&nbsp;30, 2006.
All of our cash equivalents have original maturities of three months or less.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating, investing and financing activities for the nine months ended September&nbsp;30, 2006
and September&nbsp;30, 2005 are summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><I>(Dollars in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,802</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(193</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,122</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,731</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating activities generated cash of $4.2&nbsp;million during the nine months ended September
30, 2006, compared to generating cash of $5.8&nbsp;million during the nine months ended September&nbsp;30,
2005. This $1.6&nbsp;million decrease in net cash generated from operating activities was primarily
driven by a decrease in net income, excluding non-cash charges, of $2.2&nbsp;million. This decrease was partially offset by an
increase in working capital sources of cash of $0.6&nbsp;million. The major contributor to the increase
in working capital sources of cash included a higher cash flow from the collection of accounts
receivables.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect that cash provided by operating activities may fluctuate in future periods as a
result of a number of factors, including fluctuations in our operating results, the timing of
product shipments, the rate of collections of accounts receivable, inventory management, the timing
of tax and other payments, and our ability to manage other areas of working capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Investing Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our investing activities consumed cash of $0.2&nbsp;million during the nine months ended September
30, 2006, compared to consuming cash of $0.2&nbsp;million during the nine months ended September&nbsp;30,
2005. Cash consumed by investing activities for both periods was related to the purchase of
property and equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Financing Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financing activities generated cash of $0.5&nbsp;million during the nine months ended September
30, 2006, compared to generating cash of $1.1&nbsp;million during the nine months ended September&nbsp;30,
2005. Cash generated from financing activities for both periods was due to the proceeds from the
exercise of employee stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to cash generated from product sales, we believe our existing cash and cash
equivalents will be sufficient to meet our anticipated cash requirements for at least the next two
years. However, future research and development, clinical trials and sales and marketing expenses,
as well as administration support, or licensing or acquisition of other products may require
additional capital resources. We may raise additional funds through public or private equity
offerings, debt financings, capital lease transactions, corporate collaborations or other means.
Due to the uncertainty of financial markets, financing may not be available to us on acceptable
terms or at all. Therefore, we may raise additional capital from time to time due to favorable
market conditions or strategic considerations even if we have sufficient funds for planned
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future capital requirements are difficult to forecast and will depend on many factors,
including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>success of our product sales and related collections;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>future expenses to expand and support our sales and marketing activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>costs relating to changes in regulatory policies or laws that affect our operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>maintaining and expanding our manufacturing capacity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the level of investment in research and development and clinical trials required to maintain and improve our technology
position;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our need or decision to acquire or license businesses, products or technologies.</TD>
</TR>




</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If at any time sufficient capital is not available, either through existing capital resources
or through raising additional funds, we may be required to delay, reduce the scope of, eliminate or
divest one or more of our research, clinical or sales and marketing programs or our entire
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Contractual Obligations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2006, we had three facility leases which include a one-year term expiring
on September&nbsp;30 2007, as well as an operating lease for a telephone system. We had no long-term
debt, capital lease obligations, long-term purchase agreements or other commitments. There have
been no new material contractual obligations since December&nbsp;31, 2005. See Note 5 of our Notes to
Financial Statements included in our annual Report on Form 10-K for the year 2005 for more detailed
information.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Quantitative and Qualitative Disclosures about Market Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no significant changes in our market risk compared to the disclosures in Item
7A of our Annual Report on Form 10-K for the year ended December&nbsp;31, 2005.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Controls and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Evaluation of disclosure controls and procedures. </I>As required by Exchange Act Rule&nbsp;13a-15(b),
as of the end of the period covered by this Form 10-Q, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive Officer and
our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as defined in Rule&nbsp;13a-15(e). Based upon that evaluation, our Chief
Executive Officer along with our Chief Financial Officer, concluded that our disclosure controls
and procedures are effective at the reasonable assurance level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Changes in internal controls. </I>There were no changes in our internal controls over financial
reporting during the quarter ended September&nbsp;30, 2006 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Limitations on Effectiveness of Disclosure Controls. </I>We intend to review and evaluate the
design and effectiveness of our disclosure controls and procedures on an ongoing basis and to
correct any material deficiencies that we may discover. Our goal is to ensure that our senior
management has timely access to material information that could affect our business. While we
believe the present design of our disclosure controls and procedures is effective to achieve our
goal, future events affecting our business may cause us to modify our disclosure controls and
procedures. The effectiveness of controls cannot be absolute because the cost to design and
implement a control to identify errors or mitigate the risk of errors occurring should not outweigh
the potential loss caused by errors that would likely be detected by the control. Moreover, we
believe that disclosure controls and procedures cannot be guaranteed to be 100% effective all of
the time. Accordingly, a control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system&#146;s objectives will be met.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II&#151; OTHER INFORMATION</B>
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. Legal Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1A. Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>In addition to other information in this report, the following factors should be considered
carefully in evaluating our company. If any of the risks or uncertainties described in this Form
10-Q or in our annual report on </I><I>Form 10-K</I><I> for the year ended December&nbsp;31, 2005 actually occurs, our
business, results of operations or financial condition could be materially adversely affected. The
risks and uncertainties described in this </I><I>Form 10-Q</I><I> are not the only ones facing the company.
Additional risks and uncertainties of which we are unaware or currently deem immaterial may also
become important factors that may harm our business. The risk factors set forth below contain a
number of material changes relative to those set forth in the &#147;RISK FACTORS&#148; section of our annual
report on </I><I>Form 10-K</I><I> for the year ended December&nbsp;31, 2005. The changes relate primarily to Gestiva,
our therapeutic product candidate for the prevention of preterm birth in women who have a history
of preterm delivery.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISKS RELATING TO OUR BUSINESS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Because our revenues and financial results depend significantly on a limited product line, if we
are unable to manufacture or sell our products in sufficient quantities and in a timely manner, our
business will suffer.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, substantially all of our revenue has resulted from sales of our principal product
line, our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test, the TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System
(and its predecessor, the TLi System) and related consumables. Although we intend to introduce
additional products, we expect sales of the Fetal Fibronectin Test to account for substantially all
of our near-term revenue. Because our business is highly dependent on our Fetal Fibronectin Tests,
the TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System and the related consumables, factors adversely affecting
the pricing of or demand for these products could have a material and adverse effect on our
business and cause the value of our securities to decline substantially. We will lose revenue if
alternative diagnostic products or technologies gain commercial acceptance or if reimbursement is
limited. We cannot assure that we will be able to continue to manufacture these products in
commercial quantities at acceptable costs. Our inability to do so would adversely affect our
operating results and cause our business to suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If our products do not achieve and sustain market acceptance, we may fail to generate sufficient
revenue to maintain our business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commercial success depends in large part on our ability to achieve and sustain market
acceptance of our principal product line, FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test and the
TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System. A key element of our business plan calls for us to expand
sales of our TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System in hospitals and clinical laboratories and
increase the related sales of the Fetal Fibronectin Test and other consumables used in conjunction
with the TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System. To accomplish this, we will need to convince
healthcare providers of the benefits of our products through various means, including through
published papers, presentations at scientific conferences and additional clinical trials. If
existing users of our products determine that these products do not satisfy their requirements, or
if our competitors develop a product perceived to better satisfy their requirements, our sales of
Fetal Fibronectin Tests and other consumables may decline, and our revenues may correspondingly
decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, our commercial success may depend on our ability to gain market acceptance for
our other products and product candidates, including Gestiva. Market acceptance of our product
portfolio will depend on our ability to develop additional applications of our existing products
and to introduce new products to additional markets, including the oncology diagnostic market, the
reproductive endocrinology and infertility markets and other women&#146;s health markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other factors that might influence market acceptance of our products and product candidates
include the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evidence of clinical utility;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>convenience and ease of use;</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability of alternative and competing diagnostic products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cost-effectiveness;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>effectiveness of marketing, distribution and pricing strategy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>publicity concerning these products or competitive products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>concerns regarding product safety; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reimbursement.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our marketing and development efforts could require us to expend significant time and
resources, and we may not succeed in these efforts. If our products are unable to achieve or
maintain broad market acceptance, our revenues and operating results may be negatively impacted and
our business would suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our quarterly revenues and operating results are subject to significant fluctuations, and our stock
price may decline if we do not meet the expectations of investors and analysts.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2006, we had an accumulated deficit of $31.1&nbsp;million. For the quarters
ended September&nbsp;30, 2006, June&nbsp;30, 2006 and March&nbsp;31, 2006, we had net income of $751,000, $537,000
and $6,000, respectively. However, we may not sustain profitability and cannot guarantee losses
will not occur in the future. Our quarterly revenues and operating results are difficult to predict
and have in the past and may in the future fluctuate significantly from quarter to quarter due to a
number of factors, many of which are outside our control. These factors include, but are not
limited to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to increase market acceptance of women&#146;s health diagnostics generally and of
our products in particular, as discussed under &#147;Risk Factors &#151; If our products do not achieve
and sustain market acceptance, we may fail to generate sufficient revenue to maintain our
business&#148;;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our need and ability to generate and manage growth as discussed under &#147;Risk Factors &#151; If we
fail to properly manage our anticipated growth in the United States or abroad, we may incur
significant additional costs and expenses and our operating results may suffer&#148;;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in, or failure of, delivery of components by our suppliers as more fully described
in &#147;Risk Factors &#151; We rely on a limited number of suppliers, and if these suppliers fail or
are unable to perform in a timely and satisfactory manner, we may be unable to manufacture
our products or satisfy product demand in a timely manner, which could delay the production
or sale of these products&#148;;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>risks related to Gestiva described below, including those discussed under &#147;Risk Factors&#151; If
we are unable to obtain or maintain regulatory approval for Gestiva, we will be limited in
our ability to commercialize Gestiva, and our business will be harmed,&#148; &#147;&#151;The market for
Gestiva may be very competitive because we have no patent protection for Gestiva, and we may
not obtain regulatory exclusivity for Gestiva,&#148; and &#147;&#151; We rely on a limited number of
suppliers, and if these suppliers fail or are unable to perform in a timely and satisfactory
manner, we may be unable to manufacture our products or satisfy product demand in a timely
manner, which could delay the production or sale of our products.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the quarterly variations and seasonal nature of our business, and the resulting demand for
our products based on procurement cycles of our customers;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the manner in which our operations are regulated;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the adoption of new accounting policies;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increases in the length of our sales cycle;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in gross margins;</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>compensation charges related to the issuance of stock options; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficult political and economic conditions.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These and other factors make it difficult for us to predict sales for subsequent periods and
future performance. If our quarterly operating results fail to meet or exceed the expectations of
securities analysts or investors, our stock price could drop suddenly and significantly. We believe
quarterly comparisons of our financial results are not necessarily meaningful and should not be
relied upon as an indication of our future performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we expect to incur additional expenses to execute our business plan, and these
expenses will increase as we expand our marketing efforts, research and development activities,
clinical testing and manufacturing capacity. These expenses, among other things, may cause our net
income and working capital to decrease or result in a net loss. If sales do not continue to grow,
we may not be able to maintain profitability. Our expansion efforts may prove more expensive than
we currently anticipate, and we may not succeed in increasing our revenues sufficiently to offset
these higher expenses. If we fail to do so, the market price for our common stock will likely
decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If third-party payors do not adequately reimburse our customers, market acceptance of our products
may be impaired, which may adversely affect our revenues and our operating results.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market acceptance of our products and the majority of our sales depend, in large part, on the
availability of adequate reimbursement for the use of our products from government insurance plans,
including Medicare and Medicaid, managed care organizations, private insurance plans and other
third-party payors primarily in the United States and, to a lesser extent abroad. Third-party
payors are often reluctant to reimburse healthcare providers for the use of medical diagnostic
products incorporating new technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because each third-party payor individually approves reimbursement, obtaining these approvals
can be a time-consuming and costly process that requires us to provide scientific and clinical
support for the use of each of these products to each third-party payor separately with no
assurance that approval will be obtained. For example, the policies of some third-party payors
limit reimbursement for the use of our Fetal Fibronectin Test to women with signs and symptoms of
preterm labor. In addition, if Gestiva is approved, we will need to dedicate considerable resources
to obtaining approvals for reimbursement. This individualized process can delay the market
acceptance of new products and may have a negative effect on our revenues and operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market acceptance of our products internationally may depend in part upon the availability of
reimbursement within prevailing healthcare payment systems. Reimbursement and healthcare payment
systems in international markets vary significantly by country and include both government
sponsored healthcare and private insurance. We may not obtain international reimbursement approvals
in a timely manner, if at all. Our failure to receive international reimbursement approvals may
negatively impact market acceptance of our products in the international markets in which those
approvals are sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe third-party payors are increasingly limiting coverage for medical diagnostic and
pharmaceutical<U> </U>products in the United States and internationally, and in many instances are
exerting pressure on product suppliers to reduce their prices. Consequently, third-party
reimbursement may not be consistently available or adequate to cover the cost of our products.
Additionally, third-party payors who have previously approved a specific level of reimbursement may
reduce that level. Under prospective payment systems, in which healthcare providers may be
reimbursed a set amount based on the type of diagnostic procedure performed, such as those utilized
by Medicare and in many privately managed care systems, the cost of our diagnostic products may not
be justified and reimbursed. Any limitations on reimbursement for our products could limit our
ability to commercialize and sell new products and continue to sell our existing products, or may
cause the prices of our existing products to be reduced, which may adversely affect our revenues
and operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we fail to properly manage our anticipated growth in the US or abroad, we may incur significant
additional costs and expenses and our operating results may suffer.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Growth of our business is likely to place a significant strain on our managerial, operational
and financial resources and systems. In the United States, while we anticipate hiring additional
personnel to assist in the planned expansion of sales efforts for our current products and the
development of future products, we may not be able to successfully increase sales of current
products or introduce new products and meet our growth goals. The strain on our management and
staff may be
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">particularly acute as we expand into the therapeutic business as well as the diagnostic
business. To manage our anticipated growth, we must attract and retain qualified personnel and
manage and train them effectively. We will depend on our personnel and third parties to effectively
market our products to an increasing number of hospitals, physicians and other healthcare
providers. We will also depend on our personnel to develop next generation technologies. Further,
our anticipated growth will place additional strain on our suppliers and manufacturers, as well as
our own internal manufacturing processes, resulting in an increased need for us to carefully
monitor for quality assurance. In addition, we may choose or be required to relocate or expand our
manufacturing facility to accommodate potential growth in our business. Any failure by us to manage
our growth effectively could have an adverse effect on our ability to achieve our revenue and
profitability goals.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our plans to expand our presence in international markets will cause us to incur various costs
and expenses and may strain our operating and financial systems and resources in a manner that
could materially and adversely affect our operating results. We will be subject to the regulatory
oversight of additional authorities as we expand internationally. These authorities may impose
regulations and restrictions on the sales and marketing of our products that are different and
potentially more restrictive than those placed on us by regulators in the US. We may be required to
expend considerable resources to comply with these requirements. Ultimately, we may not be able to
comply with such regulations in a timely manner, if at all. If we are unable to satisfy these
requirements on commercially reasonable terms, our ability to commercialize our products would be
hampered and our revenues may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We will need to devote considerable resources to comply with federal, state and foreign regulations
and, if we are unable to fully comply, we could face substantial penalties.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are directly or indirectly through our customers subject to extensive regulation by both
the federal government and the states and foreign countries where we conduct our business.
Companies such as ours are required to expend considerable resources complying, in particular, with
laws such as the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Federal Food, Drug and Cosmetic Act, which regulates the design, testing, manufacture,
labeling, marketing, distribution and sale of medical devices and pharmaceuticals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Federal Anti-Kickback Law, which prohibits the illegal inducement of referrals for
which payment may be made under federal healthcare programs such as the Medicare and Medicaid
Programs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Medicare laws and regulations that prescribe the requirements for coverage and payment,
including the amount of such payment, and laws prohibiting false claims for reimbursement
under Medicare and Medicaid;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CE mark which could limit our ability to sell in Europe; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ISO 13485 which could limit our ability to sell in Canada.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Companies such as ours are also required to comply with laws and regulations regarding the
practice of medicine by non-physicians, consumer protection and Medicare and Medicaid payments. If
our past or present operations are found to be in violation of any of the laws described above or
the other governmental regulations to which we or our customers are subject, we may be subject to
the applicable penalty associated with the violation, including civil and criminal penalties,
damages, fines, exclusion from the Medicare and Medicaid programs and the curtailment or
restructuring of our operations. If we are required to obtain permits or licenses under these laws
that we do not already possess, we may become subject to substantial additional regulation or incur
significant expense. Any penalties, damages, fines, curtailment or restructuring of our operations
may adversely affect our ability to operate our business and our financial results. Because many of
these laws have not been fully interpreted by the regulatory authorities or the courts, and their
provisions are open to a variety of interpretations and additional legal or regulatory change, we
may be at a heightened risk of being found to be in violation of these laws. As we expand our
business beyond diagnostic products, we will need to comply with laws and regulations in addition
to those applicable to diagnostic products. Any action against us for violation of these laws, even
if we successfully defend against it, could cause us to incur significant legal expenses, divert
our management&#146;s attention from the operation of our business and damage our reputation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we are unable to maintain our existing regulatory approvals and clearances for our existing
diagnostic products, or obtain new regulatory approvals and clearances for our diagnostic product
candidates, our ability to commercially distribute our products and our business may be
significantly harmed.</B>
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FDA, and comparable agencies of other countries generally regulate our diagnostic products
as medical devices. In the United States, FDA regulations govern, among other things, the
activities that we perform, including product development, product testing, product labeling,
product storage, manufacturing, advertising, promotion, product sales, reporting of certain product
failures and distribution. Most of the new products that we plan to develop and commercialize in
the United States will require either pre-market notification, also known as 510(k) clearance, or
pre-market approval, from the FDA prior to marketing. The 510(k) clearance process requires us to
notify the FDA of our intent to market a medical device. The overall 510(k) clearance process
usually takes from three to twelve months from the time of submission to the time that you can
begin to sell a product in the market, but can take significantly longer. The pre-market approval
process, often referred to as the PMA process, is much more costly, lengthy and uncertain and
generally takes between one and three years from submission to PMA approval, but may take
significantly longer and such clearance or approval may never be obtained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the diagnostic products that we have submitted and may submit in the future for FDA
clearance or approval are or will be subject to substantial restrictions, including, among other
things, restrictions on the indications for which we may market our products, which could result in
reductions in or an inability to grow our revenues. Even if regulatory approval of a product is
granted, the approval may be subject to limitations on the indicated uses for which the product may
be marketed or certain requirements for costly post-marketing testing and surveillance to monitor
the performance and clinical utility of the product. For example, any of our products that have
received FDA approval, such as our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test or
TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System, remain subject to ongoing post-marketing regulation and
oversight by the FDA. The marketing claims that we are permitted to make in labeling our
diagnostic products, if cleared or approved by the FDA, are limited to those specified in any
clearance or approval. Our intention to expand the use of our products into new areas such as the
prediction of successful induction of labor and oncology will require us to make new submissions to
the FDA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we are subject to review, periodic inspection and marketing surveillance by the
FDA to determine our compliance with regulatory requirements for any product for which we obtain
marketing approval. Following approval, our manufacturing processes, subsequent clinical data and
promotional activities are subject to ongoing regulatory obligations. If the FDA finds that we have
failed to comply with these requirements or later discovers previously unknown problems with our
products, including unanticipated adverse events of unanticipated severity or frequency,
manufacture or manufacturing processes or failure to comply with regulatory requirements, it can
institute a wide variety of enforcement actions, ranging from a public warning letter to more
severe sanctions, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fines, injunctions and civil penalties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recall or seizure of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>restrictions on our products or manufacturing processes, including operating restrictions,
partial suspension or total shutdown of production;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>denial of requests for 510(k) clearances or PMAs of product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>withdrawal of 510(k) clearances or PMAs already granted;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disgorgement of profits; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>criminal prosecution.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any of these enforcement actions could affect our ability to commercially distribute our
products in the United States and may also harm our ability to conduct the clinical trials
necessary to support the marketing, clearance or approval of these products and could materially
and adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our PMA supplement seeking approval for use of our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin
Test in predicting successful induction of labor has been submitted to the FDA. The FDA initially
placed its review of the application on hold while a third party we have engaged conducts an audit
of all of the clinical study sites because of the number of protocol deviations, in order to
confirm the accuracy of the data. The audit has been completed and we will need to submit new
analyses of the data and a corrective action plan to the FDA before it will resume its review of
the application. The new
analyses of the data or the corrective action plan may not be acceptable to us or to the FDA
and we may not continue to pursue or obtain FDA approval for this application.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on our CLIA-certified laboratory located at our facility in Sunnyvale, California to
process E-tegrity Tests. The Centers for Medicare and Medicaid Services, or the CMS, requires that
operators of CLIA-certified laboratories submit to surveillance and follow-up inspections. If we
are unable to meet the CMS&#146;s requirements for continued operation pursuant to CLIA, our laboratory
may lose its CLIA certification, and we may be unable to continue to process E-tegrity Tests. As a
result, our business may be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we are unable to obtain or maintain regulatory approval for Gestiva, we will be limited in our
ability to commercialize Gestiva, and our business will be harmed. In addition, if pre-marketing or
post-marketing approval requirements are too expensive or too
time-consuming and could adversely
affect our financial condition, we may elect to not commercialize, or not continue commercializing,
Gestiva.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The research, testing, manufacturing, selling and marketing of pharmaceutical product
candidates are subject to extensive regulation by the FDA and other regulatory authorities in the
United States and other countries, which regulations differ from country to country. Obtaining and
maintaining regulatory approval typically is an uncertain process, is costly and takes many years.
For example, the FDA&#146;s approvable letter for Gestiva requires us to conduct certain animal studies,
which will be expensive and delay approval, and there can be no assurance that such studies, once
completed, will result in Gestiva&#146;s approval. Moreover, the FDA has requested expensive,
time-consuming post-marketing studies of Gestiva, which could cause us to elect not to
commercialize, or not continue commercializing, the product. In addition, failure to comply with
the FDA and other applicable foreign and U.S. regulatory requirements may subject us to
administrative or judicially imposed sanctions. These include warning letters, civil and criminal
penalties, injunctions, product seizure or detention, product recalls, total or partial suspension
of production, and refusal to approve pending NDAs, or supplements to approved NDAs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regulatory approval of an NDA or NDA supplement is never guaranteed. Despite the time,
resources and effort expended, failure can occur at any stage. The FDA has substantial discretion
in the approval process for human medicines. The FDA can deny, delay or limit approval of a product
candidate for many reasons including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the FDA may not find that there is adequate evidence that our product candidate is safe or effective;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the FDA may not find data from the clinical or preclinical testing to be sufficient; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the FDA may not approve our or our third party manufacturers&#146; processes or facilities.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future governmental action or changes in FDA policy or personnel may also result in delays or
rejection of an NDA in the United States. If we receive regulatory approval for Gestiva, we will
also be subject to ongoing FDA obligations and continued regulatory oversight and review, such as
continued safety reporting requirements; and we may also be subject to additional FDA
post-marketing obligations, such as Phase IV studies. If we are not able to maintain regulatory
compliance, we may not be permitted to market Gestiva or any other therapeutic product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any regulatory approvals that we receive for Gestiva or any other product candidates may also
be subject to limitations on the indicated uses for which the medicine may be marketed or contain
requirements for potentially costly post-marketing follow-up studies. In addition, if the FDA
approves any of our product candidates, the labeling, packaging, adverse event reporting, storage,
advertising, promotion and record-keeping for the medicine will be subject to extensive regulatory
requirements. The subsequent discovery of previously unknown problems with the medicine, including
adverse events of unanticipated severity or frequency, may result in restrictions on the marketing
of the medicine, and could include withdrawal of the medicine from the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we modify our marketed diagnostic products, we may be required to obtain new 510(k) clearances
or PMAs, or we may be required to cease marketing or recall the modified products until clearances
are obtained.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any modification to a 510(k)-cleared or pre-market approved diagnostic device that could
significantly affect its safety or effectiveness, or that would constitute a major change in its
intended use, requires a new 510(k) clearance or PMA, such as the development of our
FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test as a diagnostic test for the induction of labor.
The
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FDA requires every manufacturer to make the determination of whether new clearance or approval
is required for 510(k)-cleared devices. The FDA may review any manufacturer&#146;s decision. The FDA may
not agree with our decisions regarding whether new clearances or approvals are necessary. If the
FDA requires us to seek 510(k) clearance or PMA for any modification to a previously cleared or
approved product, we may be required to cease marketing or to recall the modified product until we
obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.
Any recall or FDA requirement that we seek additional approvals or clearances could result in
delays, fines, costs associated with modification of a product, loss of revenue and potential
operating restrictions imposed by the FDA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Even if we receive approval for the marketing and sale of Gestiva for the prevention of preterm
birth in women who have a history of preterm delivery, it may never be accepted as a treatment for
preterm birth in women who have a history of preterm delivery.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many factors may affect the market acceptance and commercial success of Gestiva for the
prevention of preterm birth in women who have a history of preterm delivery. Although there is
currently no FDA-approved treatment for the prevention of preterm birth in women who have a history
of preterm delivery, the comparable formulation to Gestiva, 17 alpha-hydroxyprogesterone caproate
(or 17P), is available from compounding pharmacies, and there is one other company developing a
different formulation of progesterone applied via a vaginal gel. Even if the FDA approves Gestiva,
physicians may adopt Gestiva only if they determine, based on experience, clinical data, side
effect profiles and other factors, that it is preferable to other products or treatments then in
use. Acceptance of Gestiva among influential practitioners will be essential for market acceptance
of Gestiva.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other factors that may affect the market acceptance and commercial success of Gestiva include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effectiveness of Gestiva, including any side effects, as compared to alternative treatment methods;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the product labeling or product insert required by the FDA for Gestiva;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost-effectiveness of Gestiva and the availability of insurance or other third-party
reimbursement for patients using Gestiva;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing of market entry of Gestiva relative to competitive products;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent and success of our sales and marketing efforts; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the rate of adoption of Gestiva by physicians and by target patient population.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The failure of Gestiva to achieve market acceptance would prevent us from generating
meaningful product revenue from Gestiva.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We have limited experience marketing pharmaceutical products, and will need to develop
pharmaceutical sales and marketing capabilities to successfully commercialize Gestiva.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We plan to use our existing sales force to market Gestiva. However, our management and sales
force have limited experience in marketing or selling pharmaceutical products. To achieve
commercial success for Gestiva, we must invest considerable time and resources in educating and
training our management and sales force in pharmaceutical marketing generally, and in the marketing
of Gestiva specifically. However, our Gestiva sales and marketing efforts may not be successful or
cost-effective. For example, in the event that the commercial launch of Gestiva is delayed due to
FDA requirements or other reasons, we may make investments in Gestiva marketing and sales too early
relative to the launch of Gestiva. If our Gestiva sales and marketing efforts are not successful,
cost-effective and timely, our profitability may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we experience delays in the development of new products or delays in planned improvements to our
products, our commercial opportunities will be reduced and our future competitive position may be
adversely affected.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To improve our competitive position, we believe that we will need to develop new diagnostic
and therapeutic products, as well as improve our existing instruments, reagents and ancillary
products. Improvements in automation and the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">number of tests that can be performed in a specified period of time will be important to the
competitive position of our products as we market to a broader, perhaps less technically
proficient, group of customers. Our ability to develop new products and make improvements in our
products may face difficult technological challenges leading to delays in development, particularly
as we expand our business beyond diagnostic products. If we are unable to successfully complete
development of new products or if we are unable to successfully complete the planned enhancements
to our products, in each case without significant delays, our future competitive position may be
adversely affected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If other companies develop and market technologies or products faster than we do, or if those
products are more cost effective or useful than our products, our commercial opportunities will be
reduced or eliminated.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The extent to which any of our technologies and products achieve and sustain market acceptance
will depend on numerous competitive factors, many of which are beyond our control. Competition in
the medical device, diagnostic product and pharmaceutical industries is intense and has been
accentuated by a rapid pace of technological development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While no company directly competes with us in our core diagnostic markets, there are other
diagnostic techniques currently in use to diagnose the likelihood of preterm birth, such as
ultrasound. In addition, other companies may develop new diagnostic products or technologies that
could compete with or entirely displace our products and technologies. For example, other
biomarkers, including cytokines and other proteins indicative of infection, and proteomics are the
subject of research that may yield new products or technologies. The effectiveness of these
alternative techniques may improve with time and additional research by clinicians or
manufacturers. The medical devices and diagnostic products industries include large diagnostics and
life sciences companies. Most of these entities have substantially greater research and development
capabilities and financial, scientific, manufacturing, marketing, sales and service resources than
we do.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gestiva, if approved for the prevention of preterm birth in women who have a history of
preterm delivery, may compete with compounding pharmacies selling 17P for the prevention of preterm
birth, such as Wedgewood Pharmacy. We are also aware of another company, Columbia Laboratories,
that is currently enrolling patients in a clinical trial for a product candidate for the prevention
of preterm birth. Any regulatory exclusivity we obtain with respect to Gestiva will not block the
Columbia Laboratories product candidate, because the product candidate being developed by Columbia
Laboratories contains a different active ingredient and is a different dosage form than Gestiva.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our actual and potential competitors have more experience than we do in research and
development, clinical trials, regulatory matters, manufacturing, marketing and sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These organizations also compete with us to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pursue acquisitions, joint ventures or other collaborations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>license proprietary technologies that are competitive with our technologies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>attract funding; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>attract and hire scientific and other talent.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we cannot successfully compete with new products or technologies, sales of our products and
our competitive position will suffer, and our stock price might be adversely affected. Because of
their greater experience with commercializing technologies and larger research and development
capabilities, other companies might succeed in developing and commercializing technologies or
products earlier and obtaining regulatory approvals and clearances from the FDA more rapidly than
we do. Other companies also might develop more effective technologies or products that are more
predictive, more highly automated or more cost-effective, which may render our technologies or
products obsolete or non-competitive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we or any of our third-party manufacturers for our diagnostic do not operate in accordance with
Quality System Regulations, we could be subject to FDA enforcement actions, including the seizure
of our products and the halt of our production.</B>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and any third-party manufacturers that we currently rely on or will rely on in the future
for our diagnostic products, including those we rely on to produce components of our products, must
continuously adhere to the current good manufacturing practices, or cGMP, set forth in the FDA&#146;s
Quality System Regulations, or QSR, and enforced by the FDA through its facilities inspection
program. In complying with QSR, we and our third-party manufacturers must expend significant time,
money and effort in design and development, testing, production, record keeping and quality control
to assure that our products meet applicable specifications and other regulatory requirements. The
failure to comply with these specifications and other requirements could result in an FDA
enforcement action, including the seizure of products and shutting down of production. We or any of
these third-party manufacturers may also be subject to comparable or more stringent regulations of
foreign regulatory authorities. In any of these circumstances, our ability to develop, produce and
sell our products could be impaired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have received regulatory approvals for some of the operations located at our Sunnyvale,
California headquarters, including our CLIA-certified laboratory. Should we choose to relocate, or
if for some reason we are required to relocate some or all of our facilities from this location, we
may be required to apply for regulatory approvals for the new location. It may be difficult or
impossible for us to obtain the necessary approvals to continue our business in its present form at
any such new location, and our business may be harmed as a result.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We rely on a limited number of suppliers, and if these suppliers fail or are unable to perform in a
timely and satisfactory manner, we may be unable to manufacture our products or satisfy product
demand in a timely manner, which could delay the production or sale of our products.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on a limited number of suppliers for both raw materials and components necessary for
the manufacture of our diagnostic products, including our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal
Fibronectin Test and TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System. We acquire all of these components,
assemblies and raw materials on a purchase-order basis, which means that the supplier is not
required to supply us with specified quantities over a certain period of time or to set aside part
of its inventory for our forecasted requirements. If we need alternative sources for key
components, assemblies or raw materials for any reason, such components, assemblies or raw
materials may not be immediately available. If alternative suppliers are not immediately available,
we will have to identify and qualify alternative suppliers, and delivery of such components,
assemblies or raw materials may be delayed. Consequently, if we do not forecast properly, or if our
suppliers are unable or unwilling to supply us in sufficient quantities or on commercially
acceptable terms, we may not have access to sufficient quantities of these components, assemblies
and raw materials on a timely basis and may not be able to satisfy product demand. We may not be
able to find an adequate alternative supplier if required, in a reasonable time period, or on
commercially acceptable terms, if at all. Our inability to obtain a supplier for the manufacture of
our products may force us to curtail or cease operations, which would have a material adverse
effect on our product sales and profitability. We also relied upon a fulfillment provider to
process orders for our products, coordinate invoicing and collections, as well as ship our products
to customers in the United States through September&nbsp;30, 2005. In the fourth quarter of 2005, we
transferred the fulfillment operation back to Adeza. Any problems with this transition may have a
material adverse effect on our product sales and profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, if any of these components, assemblies or raw materials are no longer available
in the marketplace, we will be forced to further develop our technologies to incorporate alternate
components, assemblies and raw materials and to do so in compliance with QSR. If we incorporate new
components, assemblies or raw materials into our products, we may need to seek and obtain
additional approvals or clearances from the FDA or foreign regulatory agencies, which could delay
the commercialization of these products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We have no manufacturing capabilities for Gestiva and we may depend on third parties who are single
source suppliers to manufacture Gestiva. If these suppliers are unable to continue manufacturing
Gestiva and we are unable to obtain supply from alternative sources, our business will be harmed.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have no experience in, and we do not own facilities for, nor do we plan to
develop our own facilities for, manufacturing Gestiva. To date, our need for Gestiva has been
limited to the amounts required in connection with our Gestiva NDA submission, which includes
stability studies related to Gestiva. We have obtained our supply of Gestiva pursuant to a clinical
supply agreement with a contract manufacturer, and we have obtained our supply of the active
pharmaceutical ingredient in Gestiva on a purchase order basis. We do not intend to establish our
own manufacturing facilities for Gestiva, and we are in the process of negotiating commercial
supply agreements with the contract manufacturer and the supplier of the active ingredient. If we
are successful in negotiating commercial supply agreements with those parties, each of them may be
a single source supplier to us. In the event we are unable, for whatever reason, to obtain Gestiva
or the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">active pharmaceutical ingredient in Gestiva in quantities sufficient for commercialization, we
may not be able to identify alternate manufacturers able to meet our needs on commercially
reasonable terms and in a timely manner, or at all. If we are unable, for whatever reason, to
obtain sufficient quantities of Gestiva from our contract manufacturers, we may not be able to
manufacture in a timely manner, if at all<B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If our third party manufacturers of Gestiva fail to comply with FDA regulations or otherwise fail
to meet our requirements, our product development and commercialization efforts may be delayed.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We depend on third party manufacturers to supply Gestiva. Our suppliers and manufacturers must
comply with the FDA&#146;s current Good Manufacturing Practices, or cGMP, regulations and guidelines.
Our suppliers and manufacturers may encounter difficulties in achieving quality control and quality
assurance and may experience shortages of qualified personnel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Their failure to follow cGMP or other regulatory requirements and to document their compliance
with cGMP may lead to significant delays in the availability of products for commercial use or
clinical study or the termination or hold on a clinical study, or may delay or prevent filing or
approval of marketing applications for Gestiva.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Failure of our third party suppliers and manufacturers or us to comply with applicable
regulations could result in sanctions being imposed on us, including fines, injunctions, civil
penalties, failure of regulatory authorities to grant marketing approval of our products, delays,
suspension or withdrawal of approvals, license revocation, seizures or recalls of products,
operating restrictions and criminal prosecutions, any of which could harm our business. If the
operations of any current or future supplier or manufacturer were to become unavailable for any
reason, commercialization of Gestiva could be delayed and our revenue from product sales could be
reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we use a different third-party manufacturer to produce commercial quantities of Gestiva
than we used for the studies we conducted in connection with the Gestiva NDA submission, the FDA
may require us to conduct a study to demonstrate that the product used in our studies is equivalent
to the final commercial product. If we are unable to establish that the product is equivalent, or
if the FDA disagrees with the results of our study, commercial launch of Gestiva would be delayed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We depend on distributors to market and sell our products in overseas markets, and if our foreign
distributors fail in their efforts or are unwilling or unable to devote sufficient resources to
market and sell our products, our ability to effectively market our products and our business will
be harmed.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our international sales totaled $0.4&nbsp;million for the three months ended September&nbsp;30, 2006,
$0.3&nbsp;million for the three months ended June&nbsp;30, 2006, $0.2&nbsp;million for the three months ended
March&nbsp;31, 2006, and $1.0&nbsp;million in the years ended December&nbsp;31, 2005 and 2004. Our international sales currently depend upon the marketing efforts
of and sales by certain distributors in Europe, Australia, the Pacific Rim region and South
America. In most instances, our distribution arrangements are governed by short-term purchase
orders. We also rely upon certain of these distributors to assist in obtaining product registration
and reimbursement approvals in certain international markets, and we may not be able to engage
qualified distributors in our targeted markets. The distributors that we are able to obtain may not
perform their obligations. If a distributor fails to invest adequate resources and support in
promoting our products and training physicians, hospitals and other healthcare providers in the
proper techniques for using our products or in awareness of our products, or if a distributor
ceases operations, we would likely be unable to achieve significant sales in the territory
represented by the distributor. If we decide to market new products abroad, we will likely need to
educate our existing or new distributors about these new products and convince them to distribute
the new products. If these distributors are unwilling or unable to market and sell our products, we
may experience delayed or reduced market acceptance and sales of our products outside the United
States. Our failure to engage adequate distributors, or the failure of the distributors to perform
their obligations as expected, may harm our ability to effectively market our products and our
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The regulatory approval process outside the United States varies depending on foreign regulatory
requirements and may limit our ability to develop, manufacture and sell our products
internationally.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To market any of our products outside of the United States, we and certain of our
distributors, are subject to numerous and varying foreign regulatory requirements, implemented by
foreign health authorities, governing the design and conduct of human clinical trials and marketing
approval for pharmaceutical and diagnostic products. The approval procedure varies among countries
and can involve additional testing, and the time required to obtain approval may differ from that
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">required to obtain FDA approval. The foreign regulatory approval process includes all of the
risks associated with obtaining FDA approval set forth above, and approval by the FDA does not
ensure approval by the health authorities of any other country, nor does the approval by foreign
health authorities ensure approval by the FDA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>If our products do not perform as expected, we may experience reduced revenue, delayed or reduced
market acceptance of our products, increased costs and damage to our reputation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends on the market&#146;s confidence that we can provide reliable, high quality
medical diagnostic devices. Our customers are particularly sensitive to product defects and errors
because of the use of our products in medical practice. Our reputation and the public image of our
products may be impaired for any of the following reasons:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure of our products to perform as expected;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a perception that our products are difficult to use; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>litigation concerning the performance of our products.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even after any underlying problems are resolved, any manufacturing defects or performance
errors in our products could result in lost revenue, delay in market acceptance, damage to our
reputation, increased service and warranty costs and claims against us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If product liability suits or other claims and product field actions are initiated against us, we
may be required to engage in expensive and time-consuming litigation, pay substantial damages, face
increased insurance rates and sustain damage to our reputation, which would significantly impair
our financial condition.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business exposes us to potential product liability claims and field action risks that are
inherent in the testing, manufacturing, marketing and sale of pharmaceutical and diagnostic
products. We may be unable to avoid product liability claims or field actions, including those
based on claims that the use or failure of our products resulted in a misdiagnosis or harm to a
patient. Although we believe that our liability coverage is adequate for our current needs, and
while we intend to expand our product liability insurance coverage to any products for which we
obtain marketing approval, including Gestiva, insurance may be unavailable, prohibitively expensive
or may not fully cover our potential liabilities. If we are unable to maintain sufficient insurance
coverage on reasonable terms or to otherwise protect against potential product liability claims or
field actions, we may be unable to continue to market our products and develop new markets.
Defending a lawsuit could be costly and significantly divert management&#146;s attention from conducting
our business. A successful product liability claim brought against us in excess of any insurance
coverage we have at that time could cause us to incur substantial liabilities, potentially in
excess of our total assets, and our business to fail. In addition, we are a specialty company
focused on women&#146;s health. We have a narrow customer base that is subject to significant
malpractice litigation that may place us at risk of the same. Product liability claims, product
field actions or other regulatory proceedings may damage our reputation by raising questions about
our products&#146; safety and efficacy could significantly harm our reputation, interfere with our
efforts to market our products and make it more difficult to obtain the funding and commercial
relationships necessary to maintain our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we or others identify side effects after our therapeutic products are on the market, we may be
required to perform lengthy additional clinical trials, change the labeling of our products or
withdraw our products from the market, any of which would hinder or preclude our ability to
generate revenues.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we or others identify side effects after any of our therapeutic products are on the market:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory authorities may withdraw their approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may be required to reformulate our products, conduct additional clinical trials, make
changes in labeling of our products or implement changes to or obtain re-approvals of our
manufacturing facilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may experience a significant drop in the sales of the affected products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our reputation in the marketplace may suffer; and</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may become the target of lawsuits, including class action lawsuits.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any of these events could harm or prevent sales of the affected products or could increase the
costs and expenses of commercializing and marketing these products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We depend on the services of key personnel to implement our strategy, and if we lose key management
or scientific personnel, scientific collaborators or other advisors or are unable to attract and
retain other qualified personnel, we may be unable to execute our business plan and our operations
and business would suffer.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends, in large part, on the efforts and abilities of Emory Anderson, who is our
President and Chief Executive Officer, Dr.&nbsp;Durlin Hickok, who is our Vice President, Medical
Affairs, Dr.&nbsp;Robert Hussa, our Vice President, Research and Development, Mark Fischer-Colbrie, who
is our Vice President of Finance and Administration and Chief Financial Officer, and Marian Sacco,
our Vice President, Sales and Marketing, as well as the other members of our senior management and
our scientific and technical personnel. While we have executed management continuity agreements, we
do not currently have employment agreements with any of these individuals. We do not currently
carry key person insurance on the lives of any of these executives. Many of these people have been
members of our executive team for several years, and their knowledge of our business would be
difficult or time-consuming to replace. We also depend on our scientific collaborators and other
advisors, particularly with respect to our research and development efforts. If we lose the
services of one or more of our key officers, employees or consultants, or are unable to retain or
attract the services of existing or new scientific collaborators and other advisors, our research
and development and product development efforts could be delayed or curtailed, our ability to
execute our business strategy would be impaired, and our stock price might be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Most of our operations are currently conducted at a single location that may be at risk from
earthquakes and other natural or unforeseen disasters.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently conduct all of our manufacturing, development and management activities at a
single location in Sunnyvale, California near known fault zones. In addition, our E-tegrity Tests
are currently processed solely through our CLIA-certified laboratory located at our Sunnyvale
facility. Despite precautions taken by us, any future natural or man-made disaster, such as a fire,
earthquake or terrorist activity, could cause substantial delays in our operations, damage or
destroy our equipment or inventory, and reduce our sales or cause us to incur additional expenses.
In addition, the facility and some pieces of manufacturing equipment would be difficult to replace
and could require substantial replacement lead-time. A disaster could seriously harm our business
and results of operations. While we carry insurance for certain business interruptions, some
natural and man-made disasters are excluded from our insurance policies, including those caused by
terrorist acts or earthquakes. We believe that our insurance coverage is generally adequate for our
current needs in the event of losses not caused by excluded events, but we may be subject to
interruptions caused by excluded events or extraordinary events resulting in losses in excess of
our insurance coverage or for which we have no coverage. This could impair our operating results
and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we use biological and hazardous materials in a manner that causes injury, we could be liable for
damages.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development activities sometimes involve the controlled use of potentially
harmful biological materials, hazardous materials and chemicals that are dangerous to human health
and safety or the environment. We are subject on an ongoing basis to federal, state and local laws
and regulations governing the use, storage, handling and disposal of these materials and specified
waste products. The cost of compliance with these laws and regulations might be significant and
could negatively affect our profitability. We believe our safety procedures for handling and
disposing of these materials comply in all material aspects with federal, state and local laws and
regulations and to date, we have not been required to take any action to correct any noncompliance.
However, we cannot completely eliminate the risk of accidental contamination or injury to third
parties from the use, storage, handling or disposal of these materials. Although we believe our
insurance coverage is adequate for our current needs, in the event of contamination or injury, we
could be held liable for any resulting damages, and any liability could exceed our resources or any
applicable insurance coverage we may have.
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Potential business combinations could require significant management attention and prove difficult
to integrate with our business, which could distract our management, disrupt our business, dilute
stockholder value and adversely affect our operating results.</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we become aware of potential business combination candidates to our business, which could
include license, co-promote, joint venture, and other types of arrangements, we may decide to
combine with such businesses or acquire their assets in the future. We have acquired businesses or
product lines in the past. For example, we acquired exclusive rights to the SalEst Test in 2003.
While we have not encountered such difficulties following our prior acquisitions, business
combinations generally involve a number of additional difficulties and risks to our business,
including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure to integrate management information systems, personnel, research and development
and marketing, operations, sales and support;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potential loss of key current employees or employees of the other company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disruption of our ongoing business and diversion of management&#146;s attention from other business concerns;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potential loss of the other company&#146;s customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure to develop further the other company&#146;s technology successfully;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unanticipated costs and liabilities; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other accounting consequences.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we may not realize benefits from any business combination we may undertake in the
future. If we fail to successfully integrate such businesses, or the technologies associated with
such business combinations into our company, the revenue and operating results of the combined
company could be adversely affected. Any integration process would require significant time and
resources, and we may not be able to manage the process successfully. If our customers are
uncertain about our ability to operate on a combined basis, they could delay or cancel orders for
our products. We may not successfully evaluate or utilize the acquired technology or accurately
forecast the financial impact of a combination, including accounting charges or volatility in the
stock price of the combined entity. We may find challenges associated with integration particularly
difficult if we acquire a business in an area unfamiliar to us or our senior management team. If we
fail to successfully integrate other companies with which we may combine in the future, our
business could be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we fail to obtain necessary funds for our operations, we will be unable to continue to develop
and commercialize new products and technologies and we may need to downsize or halt our operations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect capital outlays and operating expenditures to increase over the next several years
as we expand our infrastructure, commercialization, manufacturing, clinical trials and research and
development activities. We believe that our cash and cash equivalents, will be sufficient to meet
our operating and capital requirements for at least the next two years. However, our present and
future funding requirements will depend on many factors, including, among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the level of research and development investment required to maintain and improve our technology position;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the success of our product sales and related collections;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our need or decision to acquire or license businesses, products or technologies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>maintaining or expanding our manufacturing or commercialization capacity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>greater than expected costs associated with Gestiva;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>competing technological and market developments; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>costs relating to changes in regulatory policies or laws that affect our operations.</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of these factors, we may need to raise additional funds, and we cannot be certain
that such funds will be available to us on acceptable terms when needed, if at all. In addition, if
we raise additional funds through collaboration, licensing or other similar arrangements, it may be
necessary to relinquish potentially valuable rights to our future products or proprietary
technologies, or grant licenses on terms that are not favorable to us. If we cannot raise funds on
acceptable terms, we may not be able to expand our operations, develop new products, take advantage
of future opportunities or respond to competitive pressures or unanticipated customer requirements
and may be required to delay, reduce the scope of, eliminate or divest one or more of our research,
clinical or sales and marketing programs or our entire business.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISKS RELATING TO OUR INTELLECTUAL PROPERTY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we are unable to protect our proprietary rights, we may not be able to compete effectively.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends significantly on our ability to protect our proprietary rights to the
technologies used in our products. We rely on patent protection, as well as a combination of
copyright, trade secret and trademark laws, and nondisclosure, confidentiality and other
contractual restrictions, to protect our proprietary technology. However, these legal means afford
only limited protection and may not adequately protect our rights or permit us to gain or keep any
competitive advantage. For example, our pending US and foreign patent applications may not issue as
patents at all, or if they do, they may not issue as patents in a form that will be advantageous to
us or may issue and be subsequently successfully challenged by others and invalidated.
Additionally, our family of issued patents and patent applications, if and when issued, relating to
our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test and TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> System, have
a range of expiration dates from 2007 to 2025. Upon the expiration of one or more patents relating
to our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test and TLi<SUB style="font-size: 85%; vertical-align: text-bottom">IQ</SUB><SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>System, we
may not be able to protect our proprietary rights relating to the technologies used in these
products. In addition, our pending patent applications include claims to material aspects of our
products and procedures that are not currently protected by issued patents. Both the patent
application process and the process of managing patent disputes can be time-consuming and
expensive. Competitors may be able to design around our patents or develop products that provide
outcomes comparable to ours. Although we have taken steps to protect our intellectual property and
proprietary technology, including entering into confidentiality agreements and intellectual
property assignment agreements with our employees, consultants and advisors, such agreements may
not be enforceable or may not provide meaningful protection for our trade secrets or other
proprietary information in the event of unauthorized use or disclosure or other breaches of the
agreements. In addition, the laws of some foreign countries may not protect our intellectual
property rights to the same extent as do the laws of the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of these events occur, our business will suffer and the market price of our common
stock may decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we may initiate litigation to stop the infringement of our patent claims or to
attempt to force an unauthorized user of our patented inventions or trade secrets to compensate us
for the infringement or unauthorized use, patent and trade secret litigation is complex and often
difficult and expensive, and would consume the time of our management and other significant
resources. If the outcome of litigation is adverse to us, third parties may be able to use our
technologies without payments to us. Moreover, other companies against whom we might initiate
litigation may be better able to sustain the costs of litigation because they have substantially
greater resources. Because of these factors relating to litigation, we may be effectively unable to
prevent misappropriation of our patent and other proprietary rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our rights to use technologies and patents licensed to us by third parties are not within our
control, and we may not be able to commercialize our products without these technologies.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have licensed a number of patents, including patents related to our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>,
The Fetal Fibronectin Test and our E-tegrity Test from third parties, including the Fred Hutchinson
Cancer Research Center, Inverness Medical and the University of Pennsylvania. Our business may
significantly suffer if one or more of these licenses terminate or expire, if we or our licensors
fail to abide by the terms of the licenses or fail to prevent infringement by third parties or if
the licensed patents are found to be invalid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we violate the terms of our licenses, or otherwise lose our rights to these patents, we may
be unable to continue developing and selling our products. Our licensors or others may dispute the
scope of our rights under any of these licenses. The licensors under these licenses may breach the
terms of their respective agreements or fail to prevent infringement of the licensed patents by
third parties. Loss of any of these licenses for any reason could materially harm our financial
condition and operating results.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, if we determine that our products do not incorporate the patented technology that
we have licensed from third parties, or that one or more of the patents that we have licensed is
not valid, we may dispute our obligation to pay royalties to our licensors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any dispute with a licensor could be complex, expensive and time-consuming and an outcome
adverse to us could materially harm our business and impair our ability to commercialize our
products, including our FullTerm<SUP style="font-size: 85%; vertical-align: text-top">&#153;</SUP>, The Fetal Fibronectin Test. As a result, our stock
price might be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If the use of our technologies conflicts with the intellectual property rights of third parties, we
may incur substantial liabilities, and we may be unable to commercialize products based on these
technologies in a profitable manner, if at all.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other companies may have or acquire patent rights that they could enforce against us. If they
do so, we may be required to alter our technologies, pay licensing fees or cease activities. If our
technologies conflict with patent rights of others, third parties could bring legal action against
us or our licensees, suppliers, customers or collaborators, claiming damages and seeking to enjoin
manufacturing and marketing of the affected products. If these legal actions are successful, in
addition to any potential liability for damages, we might have to obtain a license in order to
continue to manufacture or market the affected products. A required license under the related
patent may not be available on acceptable terms, if at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because patent applications can take many years to issue, there may be currently pending
applications unknown to us or reissuance applications that may later result in issued patents upon
which our technologies may infringe. There could also be existing patents of which we are unaware
that our technologies may infringe. In addition, if third parties file patent applications or
obtain patents claiming technology also claimed by us in pending applications, we may have to
participate in interference proceedings in the US Patent and Trademark Office to determine priority
of invention. If third parties file oppositions in foreign countries, we may also have to
participate in opposition proceedings in foreign tribunals to defend the patentability of the filed
foreign patent applications. We may have to participate in interference proceedings involving our
issued patents or our pending applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a third party claims that we infringe upon its proprietary rights, it could cause our
business to suffer in a number of ways, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may become involved in time-consuming and expensive litigation, even if the claim is
without merit;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may become liable for substantial damages for past infringement if a court decides
that our technologies infringe upon a competitor&#146;s patent;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a court may prohibit us from selling or licensing our product without a license from the
patent holder, which may not be available on commercially acceptable terms, if at all, or
which may require us to pay substantial royalties or grant cross-licenses to our patents;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may have to redesign our product so that it does not infringe upon others&#146; patent
rights, which may not be possible or could require substantial funds or time.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of these events occur, our business will suffer and the market price of our common
stock may decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we are involved in intellectual property claims and litigation, the proceedings may divert our
resources and subject us to significant liability for damages, substantial litigation expense and
the loss of our proprietary rights.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to protect or enforce our patent rights, we may initiate patent litigation. In
addition, others may initiate patent litigation against us. We may become subject to interference
proceedings conducted in patent and trademark offices to determine the priority of inventions.
There are numerous issued and pending patents in the medical device field. The validity and breadth
of medical technology patents may involve complex legal and factual questions for which important
legal principles may remain unresolved.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Litigation may be necessary to assert or defend against infringement claims, enforce our
issued and licensed patents, protect our trade secrets or know-how or determine the enforceability,
scope and validity of the proprietary rights of others. Our involvement in intellectual property
claims and litigation could:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>divert existing management, scientific and financial resources;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>subject us to significant liabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>allow our competitors to market competitive products without obtaining a license from us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cause product shipment delays and lost sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>require us to enter into royalty or licensing agreements, which may not be available on terms
acceptable to us, if at all; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>force us to discontinue selling or modify our products, or to develop new products.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The market for Gestiva may be very competitive because we have no patent protection for Gestiva,
and we may not obtain regulatory exclusivity for Gestiva.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no United States patent covering either the formulation of 17P, or the use of 17P for
the prevention of preterm birth in women who have a history of preterm delivery. Accordingly, we
currently have no patent protection with respect to Gestiva and do not expect to obtain patent
protection for Gestiva.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will have marketing exclusivity for Gestiva from competition from other pharmaceutical companies, but not
from compounding pharmacies, only if we obtain either Orphan Drug designation or three year
regulatory exclusivity for Gestiva. The FDA Orphan Drug designation is reserved for promising new
therapies being developed to treat life-threatening or very serious diseases that affect fewer than
200,000 people in the U.S. The Orphan Drug Act guarantees market exclusivity from any other
companies, other than potentially compounding pharmacies which are not regulated by the FDA, for
the FDA approved indication for seven years to the first sponsor that obtains market approval for
an orphan-designated product. Our initial request for Orphan Drug designation was denied, and we
plan to meet with the FDA to provide additional new information for further review. There can be
no assurance that our Orphan Drug designation request will be approved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the FDA approves the Gestiva NDA but does not approve our Orphan Drug application for
Gestiva, we may be granted regulatory exclusivity for three years from approval of the Gestiva NDA
because the use of 17P for the prevention of preterm birth in women who have a history of preterm
delivery would be a new indication of a previously approved active ingredient. An award of three
years of exclusivity to a drug product means that the FDA cannot approve an application submitted
under Section&nbsp;505(b)(2) of the Federal Food, Drug and Cosmetic Act or an abbreviated new drug
application for the same product for the same indication for three years. To obtain three-year
exclusivity, the NDA covering a subject drug must include reports of new clinical investigations
conducted by the sponsor that are essential to FDA approval of the new indication or dosage form.
As we may not meet the guidelines for obtaining exclusivity there can be no assurance that we will
receive three years of exclusivity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gestiva, if approved for the prevention of preterm birth in women who have a history of
preterm delivery, may compete with compounding pharmacies selling 17P for the prevention of preterm
birth, and, possibly, another company that is developing a product candidate for the prevention of
preterm birth. Our present and potential competitors include large compounding pharmacies and major
pharmaceutical companies which have considerably greater financial, technical and marketing
resources than we do.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because we have no patent covering the composition of 17P or the use of 17P for the prevention
of preterm birth in women who have a history of preterm delivery, if an NDA covering the use of 17P
for another indication is approved by the FDA, physicians could prescribe 17P labeled for other
indications for patients at risk for preterm birth in women who have a history of preterm delivery.
Monitoring and ensuring that patients who have a history of preterm delivery receive Gestiva rather
than another form of 17P may be difficult and costly.
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We may be subject to damages resulting from claims that we or our employees have wrongfully used or
disclosed alleged trade secrets of their former employers.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of our employees were previously employed at universities or other diagnostic or
biotechnology companies, including our potential competitors. Although no claims against us are
currently pending, we may be subject to claims that these employees or we have inadvertently or
otherwise used or disclosed trade secrets or other proprietary information of their former
employers. Litigation may be necessary to defend against these claims. Even if we are successful in
defending against these claims, litigation could result in substantial costs and be a distraction
to management. If we fail in defending such claims, in addition to paying monetary damages, we may
lose valuable intellectual property rights or personnel. A loss of key research personnel or their
work product could hamper or prevent our ability to market existing or new products, which could
severely harm our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we cannot obtain additional licenses to intellectual property owned by third parties that we
desire to incorporate into new products we plan to develop, we may not be able to develop or
commercialize these future products.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are developing diagnostic products designed to expand the utility of fetal fibronectin in
multiple applications. The technology that we ultimately may use in the development and
commercialization of these future products may be protected by patent and other intellectual
property rights owned by third parties. If we are unable to obtain rights to use necessary
third-party intellectual property under commercially reasonable terms, or at all, we may be unable
to develop these products, and this could harm our ability to expand our commercial product
offerings and to generate additional revenue from these products.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISKS RELATING TO OUR COMMON STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we are unable to timely satisfy regulatory requirements relating to internal controls, our stock
price could suffer.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;404 of the Sarbanes-Oxley Act of 2002 requires that certain companies perform a
comprehensive evaluation of their internal control over financial reporting. At the end of each
year, we must perform an evaluation of our internal control over financial reporting, include in
our annual report the results of the evaluation, and have our independent auditors attest to such
evaluation. If we fail to complete future evaluations on time, or if our independent auditors
cannot attest to our future evaluations, we could fail to meet our regulatory reporting
requirements and be subject to regulatory scrutiny and a loss of public confidence in our internal
controls, which could have an adverse effect on our stock price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If our principal stockholders, executive officers and directors choose to act together, they may be
able to control our management and operations, which may prevent us from taking actions that may be
favorable to our stockholders.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive officers, directors and principal stockholders, and entities affiliated with
them, beneficially owned in the aggregate approximately 32% of our common stock as of March&nbsp;31,
2006. This significant concentration of share ownership may adversely affect the trading price of
our common stock because investors often perceive disadvantages in owning stock in companies with
controlling stockholders. These stockholders, acting together, have the ability to exert
substantial influence over all matters requiring approval by our stockholders, including the
election and removal of directors and any proposed merger, consolidation or sale of all or
substantially all of our assets. In addition, they could dictate the management of our business and
affairs. This concentration of ownership could have the effect of delaying, deferring or preventing
a change in control of us or impeding a merger or consolidation, takeover or other business
combination that could be favorable to our stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The future sale of our securities could dilute our common stockholders&#146; investments and negatively
affect our stock price.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If our common stockholders sell substantial amounts of common stock in the public market, or
the market perceives that such sales may occur, the market price of our common stock could fall.
The holders of a substantial number of shares of our common stock, subject to some conditions,
could require us to file registration statements covering their shares or to include their shares
in registration statements that we may file for ourselves or other stockholders. Furthermore, if we
were to include in a company-initiated registration statement shares held by those holders pursuant
to the exercise of their registration rights, the sale of those shares could impair our ability to
raise needed capital by depressing the price at which we could sell our common stock. If we issue
equity or debt securities to raise additional funds, our existing stockholders may experience
dilution and the new equity or debt securities may have rights, preferences and privileges senior
to those of our existing stockholders. Furthermore, we may enter into financing transactions at
prices that represent a substantial discount to market
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">price. Raising funds through the issuance of equity securities will dilute the ownership of
our existing stockholders. A negative reaction by investors and securities analysts to any sale of
debt or our equity securities could result in a decline in the trading price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The price and volume of our common stock experience fluctuations, which could lead to costly
litigation for us.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our stock price has been volatile. From December&nbsp;10, 2004, the date of our initial public
offering, through September&nbsp;30, 2006, our stock has traded as high as $23.35 and as low as $10.97.
The market price of our common stock may fluctuate substantially due to a variety of factors,
including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>media reports and publications and announcements about women&#146;s health and cancer diagnostic
products or new cancer treatments or innovations that could compete with our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>new regulatory pronouncements, changes in regulatory guidelines, such as adverse changes in
reimbursement for women&#146;s health and cancer diagnostic products, and the timing of regulatory
approvals concerning the products in our pipeline;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market conditions or trends related to the medical devices and diagnostic products industries or the market in general;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in financial estimates or recommendations by securities analysts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the seasonal nature of our revenues and expenses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>analysts&#146; perceptions of our ability to compete successfully in both the diagnostic and therapeutic businesses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>variations in our quarterly operating results; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in accounting principles.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market prices of the securities of medical devices and diagnostic products companies,
particularly companies like ours without a long history of product sales and earnings, have been
highly volatile and are likely to remain highly volatile in the future. This volatility has often
been unrelated to the operating performance of particular companies. Moreover, market prices for
stocks of biotechnology and medical diagnostic related companies, particularly following an initial
public offering, frequently reach levels that bear no relationship to the operating performance of
these companies. These market prices may not be sustainable and are highly volatile. In the past,
companies that experience volatility in the market price of their securities have often faced
securities class action litigation. Whether or not meritorious, litigation brought against us could
result in substantial costs, divert our management&#146;s attention and resources and harm our ability
to grow our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law may
inhibit a change in control or a change in management that our stockholders consider favorable.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provisions in our certificate of incorporation and bylaws could delay or prevent a change of
control or change in management that would provide our stockholders with a premium to the market
price of our common stock. These provisions include those:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>authorizing the issuance without further approval of &#147;blank check&#148; preferred stock that could
be issued by our board of directors to increase the number of outstanding shares and thwart a
takeover attempt;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prohibiting cumulative voting in the election of directors, which would otherwise allow less
than a majority of stockholders to elect director candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limiting the ability to remove directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limiting the ability of stockholders to call special meetings of stockholders;</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prohibiting stockholder action by written consent, thereby requiring all stockholder actions
to be taken at a meeting of stockholders; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>establishing advance notice requirements for nominations for election to the board of
directors or for proposing matters that can be acted upon by stockholders at stockholder
meetings.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, Section&nbsp;203 of the Delaware General Corporation Law limits business combination
transactions with 15% stockholders that have not been approved by our board of directors. These
provisions and others could make it difficult for a third party to acquire us, or for members of
our board of directors to be replaced, even if doing so would be beneficial to our stockholders.
Because our board of directors is responsible for appointing the members of our management team,
these provisions could in turn affect any attempt to replace the current management team. If a
change of control or change in management is delayed or prevented, our stockholders may lose an
opportunity to realize a premium on their shares of common stock or the market price of our common
stock could decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We do not expect to pay dividends in the foreseeable future. As a result, our stockholders must
rely on stock appreciation for any return on their investment in our common stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not anticipate paying cash dividends on our common stock in the foreseeable future. Any
payment of cash dividends will depend on our financial condition, results of operations, capital
requirements and other factors and will be at the discretion of our board of directors.
Accordingly, our stockholders will have to rely on capital appreciation, if any, to earn a return
on their investment in our common stock. Furthermore, we may, in the future, become subject to
contractual restrictions on, or prohibitions against, the payment of dividends.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;10, 2004, we completed an initial public offering of 3,750,000 shares of our
common stock. The common stock sold in the offering was registered under the Securities Act of
1933, as amended, on the Registration Statement on Form S-1 (Reg. No.&nbsp;333-118012) that was declared
effective by the SEC on December&nbsp;9, 2004. The offering commenced on December&nbsp;10, 2004. On December
21, 2004, the underwriters in the offering exercised their over-allotment option to purchase an
additional 562,500 shares of our common stock to cover over-allotments. All 4,312,500 of the shares
sold in the offering were sold at the initial public offering price of $16.00 per share. After
deducting underwriting discounts and commissions and offering expenses, we received net proceeds
form the offering of approximately $61.9&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the nine months ended September&nbsp;30, 2006, we spent (i)&nbsp;approximately $20.0&nbsp;million of
the proceeds from the offering on sales and marketing efforts, (ii)&nbsp;approximately $5.8&nbsp;million on
research and development activities related to product development, clinical trials and regulatory
approvals for additional indications for our Fetal Fibronectin Test, and (iii)&nbsp;approximately $6.3
million on other general corporate purposes. The remaining proceeds from the offering have been
placed in temporary investments of marketable securities for future use as needed.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Defaults upon Senior Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Submission of Matters to a Vote of Security Holders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. Other Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. Exhibits</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Net Industrial Space Lease, executed on September&nbsp;19, 2006, between Adeza and Tasman V, LLC.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate pursuant to Rule&nbsp;13a-14(a) of the Securities Exchange Act of 1934, as amended
of Emory V. Anderson.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate pursuant to Rule&nbsp;13a-14(a) of the Securities Exchange Act of 1934, as amended
of Mark D. Fischer-Colbrie.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate pursuant to 18 U.S.C. Section&nbsp;1350 of Emory V.Anderson.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate pursuant to 18 U.S.C. Section&nbsp;1350 of Mark D. Fischer-Colbrie.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Signatures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on
this 7<SUP>th</SUP> day of November&nbsp;2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ADEZA BIOMEDICAL CORPORATION</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Emory V. Anderson
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Emory V. Anderson
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Exec<I>utive Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Mark D. Fischer-Colbrie
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Mark D. Fischer-Colbrie
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Vice President, Finance and Administration and Chief
Financial Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Net Industrial Space Lease, executed on September&nbsp;19, 2006, between Adeza and Tasman V, LLC.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate pursuant to Rule&nbsp;13a-14(a) of the Securities Exchange Act of 1934, as amended
of Emory V. Anderson.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate pursuant to Rule&nbsp;13a-14(a) of the Securities Exchange Act of 1934, as amended
of Mark D. Fischer-Colbrie.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate pursuant to 18 U.S.C. Section&nbsp;1350 of Emory V. Anderson.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate pursuant to 18 U.S.C. Section&nbsp;1350 Mark D. Fischer-Colbrie.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>2
<FILENAME>f24446exv10w18.htm
<DESCRIPTION>EXHIBIT 10.18
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w18</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="120"></A>
</DIV>
<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10.18
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>NET</B></FONT>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>INDUSTRIAL SPACE LEASE</B></FONT>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>by and between</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Tasman V, LLC</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>as Landlord</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>and</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Adeza Biomedical Corporation</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>as Tenant</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE I: REFERENCES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">1.1</FONT><FONT style="font-variant: SMALL-CAPS">REFERENCES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 2: LEASED PREMISES, TERM AND POSSESSION</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">2.1 DEMISE OF LEASED PREMISES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">2.2 RIGHT TO USE COMMON AREAS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">2.3 LEASE COMMENCEMENT DATE AND LEASE TERM</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">2.4 DELIVERY OF POSSESSION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">2.5 ACCEPTANCE OF POSSESSION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 3</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">2.6 SURRENDER OF POSSESSION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 3</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">2.7 EARLY OCCUPANCY</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 3</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 3: RENT, LATE CHARGES AND SECURITY DEPOSITS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">3.1 BASE MONTHLY RENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 3</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">3.2 ADDITIONAL RENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 4</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">3.3 YEAR-END ADJUSTMENTS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 4</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">3.4 LATE CHARGE AND INTEREST ON RENT IN DEFAULT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 4</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">3.5 PAYMENT OF RENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 4</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">3.6 PREPAID RENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 4</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">3.7 SECURITY DEPOSIT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 4</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 4: USE OF LEASED PREMISE AND COMMON AREAS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.1 PERMITTED USE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 5</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.2 GENERAL LIMITATIONS ON USE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 5</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.3 NOISE AND EMISSIONS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 5</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.4 TRASH DISPOSAL</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 5</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.5 PARKING</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 5</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.6 SIGNS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 6</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.7 COMPLIANCE WITH LAWS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 6</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 6</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.9 LANDLORD&#146;S RIGHT TO ENTER</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 6</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.10 CONTROL OF COMMON AREAS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 6</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.11 RULES AND REGULATIONS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 7</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">4.12 ENVIRONMENTAL PROTECTION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 7</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 5: REPAIRS, MAINTENANCE, SERVICES AND UTILITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">5.1 REPAIRS AND MAINTENANCE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 7</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">5.2 SERVICES AND UTILITIES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 7</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">5.3 ENERGY AND RESOURCE CONSUMPTION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 8</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">5.4 LIMITATION OF LANDLORD&#146;S LIABILITY</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 8</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 6: ALTERATIONS AND IMPROVEMENTS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">6.1 BY TENANT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 8</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">6.2 OWNERSHIP OF IMPROVEMENTS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 8</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">6.3 ALTERATIONS REQUIRED BY LAW</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 8</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">6.4 LIENS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 9</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 7: ASSIGNMENT AND SUBLETTING BY TENANT</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">7.1 BY TENANT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 9</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">7.2 MERGER OR REORGANIZATION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 9</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">7.3 LANDLORD&#146;S ELECTION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 9</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">7.4 CONDITIONS TO LANDLORD&#146;S CONSENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"> 9</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTAL DEFINED</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">10</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">7.6 PAYMENTS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">10</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">7.7 GOOD FAITH</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">10</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">7.8 EFFECT OF LANDLORD&#146;S CONSENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">10</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
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</TABLE>
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<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 8: LIMITATIONS ON LANDLORD&#146;S LIABILITY AND INDEMNITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"><B>10</B></FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">8.1 LIMITATION ON LANDLORD&#146;S LIABILITY AND RELEASE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">10</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">8.2 TENANT&#146;S INDEMNIFICATION OF LANDLORD</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">11</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 9: INSURANCE</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">9.1 TENANT&#146;S INSURANCE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">11</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">9.2 LANDLORD&#146;S INSURANCE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">12</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">9.3 MUTUAL WAIVER OF SUBROGATION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">12</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 10: DAMAGE TO LEASED PREMISES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">10.1 LANDLORD&#146;S DUTY TO RESTORE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">12</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">10.2 LANDLORD&#146;S RIGHT TO TERMINATE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">12</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">10.3 TENANT&#146;S RIGHT TO TERMINATE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">13</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">10.4 TENANT&#146;S WAIVER</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">13</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">10.5 ABATEMENT OF RENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">13</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 11: CONDEMNATION</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">11.1 LANDLORD&#146;S RIGHT TO TERMINATE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">13</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">11.2 TENANT&#146;S RIGHT TO TERMINATE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">13</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">11.3 TEMPORARY TAKING</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">13</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">11.4 RESTORATION AND ABATEMENT OF RENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">13</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">11.5 DIVISION OF CONDEMNATION AWARD</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">14</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 12: DEFAULT AND REMEDIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">12.1 EVENTS OF TENANT&#146;S DEFAULT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">14</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">12.2 LANDLORD&#146;S REMEDIES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">14</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">12.3 LANDLORD&#146;S DEFAULT AND TENANT&#146;S REMEDIES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">15</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">12.4 LIMITATION ON TENANT&#146;S RECOURSE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">15</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">12.5 TENANT&#146;S WAIVER</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">15</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 13: GENERAL PROVISIONS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.1 TAXES ON TENANT&#146;S PROPERTY</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">15</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.2 HOLDING OVER</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">16</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.3 SUBORDINATION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">16</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.4 TENANT&#146;S ATTORNMENT UPON FORECLOSURE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">16</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.5 LENDER PROTECTION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">16</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.6 ESTOPPEL CERTIFICATES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">16</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.7 TENANTS&#146; FINANCIAL INFORMATION</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">16</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.8 TRANSFER BY LANDLORD</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">17</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.9 FORCE MAJEURE</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">17</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.10 NOTICES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">17</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.11 ATTORNEY&#146;S FEES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">17</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.12 DEFINITIONS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">17</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.13 GENERAL WAIVERS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">18</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">13.14 MISCELLANEOUS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">18</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE 14: CORPORATE AUTHORITY, BROKERS AND ENTIRE AGREEMENT</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS"><B>19</B></FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">14.1 CORPORATE AUTHORITY</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">19</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">14.2 BROKERAGE COMMISSIONS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">19</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">14.3 ENTIRE AGREEMENT</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">19</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">14.4 LANDLORD&#146;S REPRESENTATIONS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">19</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ADDENDUM TO INDUSTRIAL SPACE LEASE</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">15.1 PAYMENT OF PROJECT MAINTENANCE COSTS</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">20</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">15.2 CONDITION OF THE PREMISES</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">20</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">15.3 EARLY OCCUPANCY</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">20</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">15.4 OPTION TO EXTEND</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">20</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS">15.6 EFFECT OF ADDENDUM</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-variant: SMALL-CAPS">20</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NET INDUSTRIAL SPACE LEASE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS LEASE, dated <U><B>July&nbsp;12, 2006</B></U> for reference purposes only, is made by and
between <U><B>Tasman V, LLC</B></U> (&#147;Landlord&#148;) and <U><B>Adeza Biomedical Corporation</B></U> (&#147;Tenant&#148;), to
be effective and binding upon the parties as of the date of the designated signatories to the Lease
shall have executed this Lease (the &#147;Effective Date of this Lease&#148;).
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I: REFERENCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>1.1 REFERENCES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All references in this Lease (subject to any further clarifications contained in this Lease)
to the following terms shall have the following meaning or refer to the respective address, person,
date, time period, amount, percentage, calendar year or fiscal year as below set forth.
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="97%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">A. Tenant&#146;s Address for Notices:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>1240 Elko Drive</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Sunnyvale, Ca 94089</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top" style="font-size:6pt">&nbsp;</TD></TR>
<TR style="font-size: 1pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">B. Tenant&#146;s Representative:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Emory V. Anderson</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;&nbsp;&nbsp;&nbsp;Phone Number:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>408-745-0975</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top" style="font-size:6pt">&nbsp;</TD></TR>
<TR style="font-size: 1pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">C. Landlord&#146;s Address for Notices:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>c/o SARATOGA MANAGEMENT CO.</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>4125 Blackford Avenue, Suite 250</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>San Jose, CA 95117</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top" style="font-size:6pt">&nbsp;</TD></TR>
<TR style="font-size: 1pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">D. Landlord&#146;s Representative:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Saratoga Management Co.</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;&nbsp;&nbsp;&nbsp;Phone Number:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>408-249-8105</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">E. Intended Commencement Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>August 1, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">F. Intended Term:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>1240 Elko, 1237 Reamwood and</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>1239 Reamwood to be bundled and</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>co-terminus, with a one-year lease</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>and 2 one-year options.</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">G. Lease Expiration Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>September 30, 2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">H. Tenant&#146;s Punch list Period:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>N/A</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">I. First Month&#146;s Prepaid Rent:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>$2,400.00 (for addition of 1239</B> <B>Reamwood)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Last Month&#146;s Prepaid Rent:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>none</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">K. Tenant&#146;s Security Deposit:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>$2,400.00 (for addition of 1239</B> <B>Reamwood)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">L. Late Charge Amount:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Five-(5%) percent</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">M. Real Property Tax Base Year:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>N/A, triple net</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">N. Insurance Base Year:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>N/A, triple net</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">O. Tenant&#146;s Required Liability Coverage:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>$1,000,000 single limit</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">P. Tenant&#146;s Number of Parking Spaces:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>94</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Q. Brokers:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Saratoga Management Co., Inc.</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top" style="font-size:6pt">&nbsp;</TD></TR>
<TR style="font-size: 1pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top" style="font-size:6pt">&nbsp;</TD></TR>
<TR style="font-size: 1pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top" style="font-size:6pt">&nbsp;</TD></TR>
<TR style="font-size: 1pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R.&nbsp;Project: That certain real property situated in the City of <U><B>Sunnyvale</B></U> County of<U>
<B>Santa Clara, </B></U>State of California, as presently improved
with <U><B>two</B></U> (<U><B>2</B></U>) building(s), which real property is shown on the Site Plan attached
hereto at Exhibit &#147;A&#148; and is commonly known as or otherwise described as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;<B>A. 17,600 square feet, more or less, of the complex at 1240 ElkoDrive, Sunnyvale, CA.</B><BR>
&nbsp;&nbsp;<B>B. 5,000 square feet, more or less, of the complex at 1237 Reamwood Ave., Sunnyvale, CA.</B><BR>
&nbsp;&nbsp;<B>C. 4,800 square feet, more or less, of the complex at 1239 Reamwood Ave., Sunnyvale, CA.</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S.&nbsp;Buildings: Those certain Buildings within the Project in which the leased Premises are
located, which Buildings are shown outlined in black on Exhibit &#147;A&#148; hereto.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T.&nbsp;Common Areas: The &#147;Common Areas&#148; shall mean those areas within the Project which are
located outside the buildings and which are provided and designated by Landlord from time to time
for general use by tenants of the Project including driveways, pedestrian walkways, parking spaces,
landscaped areas and enclosed trash disposal areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.&nbsp;Leased Premises: That certain interior space within the Buildings which space is shown
outlined in <U><B>black</B></U> on the Floor Plan attached hereto as Exhibit &#147;A&#148; consisting of
approximately <U><B>27,400 </B></U> square feet and, for purposes of this Lease, agreed to contain
said number of square feet. The Leased Premises are commonly known as or otherwise described as
follows: <B>that 9,800 square feet of a 20,000 square foot building at 1233-1239 Reamwood Avenue,
Sunnyvale CA. plus 17,600 square feet of a building at 1234-1240 Elko Drive, Sunnyvale, CA.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;V.&nbsp;Base Monthly Rent: The term &#147;Base Monthly Rent&#148; shall mean the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Period</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Base Monthly Rent</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>August&nbsp;1, 2006 to September&nbsp;30, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" align="center" nowrap><B>$</B></TD>
    <TD colspan="1" align="center" nowrap><B>19,860.00</B></TD>
    <TD colspan="1" align="center" nowrap><B>Total</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A. 1240 Elko Drive</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center">$</TD>
    <TD align="right">14,960.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">B. 1237 Reamwood Ave.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center">$</TD>
    <TD align="right">2,500.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">C. 1239 Reamwood Ave.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center">$</TD>
    <TD align="right">2,400.00</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;W.&nbsp;Permitted Use: The term &#147;Permitted Use&#148; shall mean the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Warehouse and office</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;X.&nbsp;Exhibits: The term &#147;Exhibits&#148; shall mean the Exhibits to this Lease which are described as
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit &#147;A&#148; &#151; Site Plan showing the Project and delineating the Buildings in which
the Leased Premises are located.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit &#147;B&#148; &#151; Floor Plans outlining the Leased Premises.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Y.&nbsp;Addenda: The term &#147;Addenda&#148; shall mean the Addendum (or Addenda) to this Lease which is (or
are) described as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paragraph <U><B>15.1</B></U> through <U><B>15.4</B></U>.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 2: LEASED PREMISES, TERM AND POSSESSION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>2.1 DEMISE OF LEASED PREMISES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord hereby leases to Tenant and Tenant hereby leases from Landlord for Tenant&#146;s own use
in the conduct of Tenant&#146;s business and not for purposes of speculating in real estate, for the
Lease Term and upon the terms and subject to the conditions of this Lease, that certain interior
space described in Article&nbsp;I as the Leased Premises, reserving and excepting to Landlord the
exclusive right to all profits to be derived from any assignments or sublettings by Tenant during
the Lease Term by reason of the appreciation in the fair market rental value of the Leased
Premises. Landlord further reserves the right to install, maintain, use and replace ducts, wires,
conduits and pipes leading through the Leased Premises in locations, which will not materially
interfere with Tenant&#146;s use of the Lease Premises. Tenant&#146;s Lease of the Leased Premises, together
with the appurtenant right to use the Common Areas as described in Paragraph&nbsp;2.2 below, shall be
conditioned upon and be subject to the continuing compliance by Tenant with (I)&nbsp;all the terms and
conditions of this Lease, (ii)&nbsp;all Laws governing the use of the Leased Premises and the Project,
(iii)&nbsp;all Private Restrictions, easements and other matters now of public record respecting the use
of the Leased Premises and the Project, and (iv)&nbsp;all reasonable rules and regulations from time to
time established by Landlord.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>2.2 RIGHT TO USE COMMON AREAS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an appurtenant right to Tenant&#146;s right to the use of the Leased Premises, Tenant shall have
the non-exclusive right to use the Common Areas in conjunction with other tenants of the Project
and their invitees, subject to the limitations on such use as set forth in Article&nbsp;4, and solely
for the purposes for which they were designed and intended. Tenant&#146;s right to use the Common Areas
shall terminate concurrently with any termination of this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>2.3 LEASE COMMENCEMENT DATE AND LEASE TERM</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The term of this Lease shall begin, and the Lease Commencement Date shall be deemed to have
occurred, on the Intended Commencement Date (as set forth in Article&nbsp;I) unless either (i)&nbsp;Landlord
is unable to deliver possession of the Leased Premises to Tenant on the Intended Commencement Date,
in which case the Lease Commencement Date shall be determined pursuant to Paragraph&nbsp;2.4 below or
(ii)&nbsp;Tenant enters into possession of the Leased Premises prior to the Intended Commencement Date,
in which case the Lease Commencement Date shall be as determined pursuant to Paragraph&nbsp;2.7 below
(the &#147;Lease Commencement Date&#148;). The term of this Lease shall end on the Lease Expiration Date (as
set forth in Article&nbsp;I), irrespective of whatever date the Lease Commencement Date is determined to
be pursuant to the foregoing sentence. The Lease Term shall be that period of time commencing on
the Lease Commencement Date and ending on the Lease Expiration Date (the &#147;Lease Term&#148;), <B>unless
Tenant chooses to exercise either the first and/or second of its options to extend the Lease
Expiration Date for a period of one (1)&nbsp;year each.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>2.4 DELIVERY OF POSSESSION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall deliver to Tenant possession of the Leased Premises on or before the Intended
Commencement Date (as set forth in Article&nbsp;I) in their presently existing condition, broom clean,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">unless Landlord shall have agreed, as a condition to Tenant&#146;s obligation to accept possession of
the Leased Premises, pursuant to an Addenda attached to and made a part of this Lease to modify
existing interior improvements or to make, construct and/or install additional specified
improvements within the Leased Premises, in which case Landlord shall deliver to Tenant possession
of the Leased Premises on or before the Intended Commencement Date as so modified and/or improved.
If Landlord is unable to so deliver possession of the Leased Premises to Tenant on or before the
Intended Commencement Date, for whatever reason, Landlord shall not be in default under this Lease,
nor shall this Lease be void, voidable or cancelable by Tenant until the lapse of one hundred
twenty days after the Intended Commencement Date (the &#147;delivery grace period&#148;); however, the Lease
Commencement Date shall not be deemed to have occurred until such date as Landlord notifies Tenant
that the Leased Premises are Ready for Occupancy. Additionally, the delivery grace period above
set forth shall be extended for such number of days as Landlord may be delayed in delivering
possession of the Leased Premises to Tenant by reason of Force Majeure or the actions of Tenant.
If Landlord is unable to deliver possession of the Leased Premises to Tenant within the described
delivery grace period (including any extensions thereof by reason of Force Majeure or the actions
of the Tenant), then Tenant&#146;s sole remedy shall be to cancel and terminate this Lease, and in no
event shall Landlord be liable to Tenant for such delay. Tenant may not cancel this Lease at any
time after the Landlord notifies Tenant the Leased Premises are Ready for Occupancy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>2.5 ACCEPTANCE OF POSSESSION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant acknowledges that it has inspected the Leased Premises and is willing to accept them in
their existing condition, broom clean, unless Landlord shall have agreed, as a condition to
Tenant&#146;s obligation to accept possession of the Leased Premises, pursuant to an Addenda attached to
and made a part of this Lease to modify existing interior improvements or to make construction
and/or install additional specified improvements within the Leased premises, in which case Tenant
agrees to accept possession of the Leased Premises when Landlord has substantially completed such
modifications or improvements and the Leased Premises are Ready for Occupancy. If Landlord shall
have so modified existing improvements or constructed additional improvements within the Leased
Premises for Tenant, Tenant shall, within Tenant&#146;s Punch list Period (as set forth in Article&nbsp;I)
which shall commence on the date that Landlord notifies Tenant that the Leased Premises are Ready
for Occupancy, submit to Landlord a punch list of all incomplete and/or improper work performed by
Landlord. Upon the expiration of Tenant&#146;s Punch list Period, Tenant shall be conclusively deemed
to have accepted the Leased Premises in their then-existing condition as so delivered by Landlord
to Tenant, except as to those items reasonably set forth in the punch list submitted to Landlord
prior to the expiration of said period. Landlord agrees to correct all items reasonably set forth
in Tenant&#146;s Punch list, provided that such punch list was submitted to Landlord within Tenant&#146;s
Punch list Period. Additionally, Landlord agrees to place in good working order all existing
plumbing, lighting, heating, ventilating and air conditioning systems within the Leased Premises
and all man doors and roll-up truck doors serving the Leased Premises to the extent that such
systems and/or items are not in good operating condition as of the date Tenant accepts possession
of the Leased Premises; provided that, and only if, Tenant notifies Landlord in writing of such
failures or deficiencies within five business days from the date Tenant so accepts possession of
the Lease Premises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>2.6 SURRENDER OF POSSESSION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Immediately prior to the expiration or upon the sooner termination of this Lease, Tenant shall
remove all of Tenant&#146;s signs from the exterior of the Building and shall remove all of Tenant&#146;s
equipment, trade fixtures, furniture, supplies, wall decorations and other personal property from
the Leased Premises, and shall vacate and surrender the Leased Premises to Landlord in the same
condition, broom clean, as existed at the Lease Commencement Date, reasonable wear and tear
excepted. Tenant shall repair all damage to the Leased Premises caused by Tenant&#146;s removal of
Tenant&#146;s property and all damage to the exterior of the building caused by Tenant&#146;s removal of
Tenant&#146;s signs. Tenant shall patch and refinish, to Landlord&#146;s reasonable satisfaction, all
penetrations made by Tenant or its employees to the floor, walls or ceiling of the Leased Premises,
whether such penetrations were made with Landlord&#146;s approval or not. Tenant shall repair or
replace all stained or damaged ceiling tiles, wall coverings and floor coverings to the reasonable
satisfaction of Landlord. Tenant shall repair all damage caused by Tenant to the exterior surface
of the Building and the paved surfaces of the outside areas adjoining the Leased Premises and,
where necessary, replace or resurface the same. Additionally, Tenant shall, prior to the
expiration or sooner termination of this Lease, remove any improvements constructed or installed by
Tenant which Landlord requests be so removed by Tenant and repair all damage caused by such
removal. If the Leased Premises are not surrendered to Landlord in the condition required by this
Paragraph at the expiration or sooner termination of this Lease, Landlord may, at Tenant&#146;s expense,
so remove Tenant&#146;s signs, property and/or improvements not so removed and make such repairs and
replacements not so made or hire, at Tenant&#146;s expense, independent contractors to perform such
work. Tenant shall be liable to Landlord all costs incurred by Landlord in returning the Leased
Premises to the required condition, plus interest on all costs incurred from the date paid by
Landlord at the then maximum rate of interest not prohibited by Law until paid, payable by Tenant
to Landlord within ten days after receipt of a statement therefore from Landlord. Tenant shall
indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the
Leased Premises, including, without limitation, any claims made by any succeeding tenant or any
losses to Landlord due to lost opportunities to lease to succeeding tenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>2.7 EARLY OCCUPANCY</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Tenant enters into possession of the Leased Premises prior to the Intended Commencement
Date (or permits its contractors to enter the Leased Premises prior to the Intended Commencement
Date), unless otherwise agreed in writing by Landlord, the Lease Commencement Date shall be deemed
to have occurred on such sooner date, and Tenant shall be obligated to perform all its obligations
under this Lease, including the obligation to pay rent, from that sooner date.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 3: RENT, LATE CHARGES AND SECURITY DEPOSITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.1 BASE MONTHLY RENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commencing on the Lease Commencement Date (as determined pursuant to Paragraph&nbsp;2.3 above) and
continuing throughout the Lease Term, Tenant shall pay to Landlord, without prior demand therefore,
in advance on the first day of each calendar month, as base monthly rent, the amount set forth as
&#147;Base Monthly Rent&#148; in Article&nbsp;I (the &#147;Base Monthly Rent&#148;).
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.2 ADDITIONAL RENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commencing on the Lease Commencement Date (as determined pursuant to Paragraph&nbsp;2.3 above) and
continuing throughout the Lease Term, in addition to the Base Monthly Rent, Tenant shall pay to
Landlord as additional rent (the &#147;Additional Rent&#148;) the following amounts:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Tenant&#146;s Proportionate share of all Project Maintenance Costs. Landlord may bill Tenant,
on a periodic basis not more frequently than monthly, Tenant&#146;s Proportionate Share of such costs as
paid or incurred by Landlord, and Tenant shall pay to Landlord such share of such costs together
with an accounting fee equal to five percent of the amount so billed within ten days from the date
Landlord shall have billed Tenant for same.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Tenant&#146;s Proportionate Share of Landlord&#146;s Insurance Costs and Real Property Taxes plus an
accounting fee equal to five percent of such amount. Payment shall be made by whichever of the
following methods is from time to time designated by Landlord:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;Landlord may bill to tenant, on a periodic basis not more frequently than monthly,
Tenant&#146;s Proportionate Share of Landlord&#146;s Insurance Costs or Real Property Taxes, as paid or
incurred by Landlord during the current period together with an accounting fee equal to five
percent of the amount billed, within ten days after receipt of a written bill therefore from
Landlord; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;Landlord may deliver to Tenant Landlord&#146;s reasonable estimate of Landlord&#146;s Insurance
Costs and/or Real Property Taxes it anticipates will be paid or incurred for the ensuring calendar
or fiscal year, as the case requires, and Tenant shall pay its Proportionate Share for such year,
together with an accounting fee equal to five percent of the estimated amount, in equal monthly
installments during such year with the installments of Base Monthly Rent. Landlord reserves the
right to change from time to time the method of billing Tenants its Proportionate Share or the
periodic basis on which such increases are billed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Landlord&#146;s share of the consideration received by Tenant upon certain assignments and
sublettings as required by Article&nbsp;7;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Any legal fees and costs that Tenant is obligated to pay or reimburse to Landlord pursuant
to Article&nbsp;13; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. Any other charges or reimbursements due Landlord from Tenant pursuant to the terms of this
Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.3 YEAR-END ADJUSTMENTS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Landlord shall have elected to charge Tenant its Proportionate Share of Landlord&#146;s
Insurance Costs and/or Real Property Taxes on an estimated basis in accordance with the provisions
of Paragraph&nbsp;3.2B(2) above, Landlord shall furnish to Tenant within three months following the end
of the applicable calendar or fiscal year, as the case may be, a statement setting forth (i)&nbsp;the
amount of Landlord&#146;s Insurance Costs and/or Real Property Taxes paid or incurred during the just
ended calendar or fiscal year, as appropriate, (ii)&nbsp;the amount of Landlord&#146;s Insurance Costs and/or
Real Property Taxes paid during the applicable Base Year, and (iii)&nbsp;Tenant&#146;s Proportionate Share of
Landlord&#146;s Insurance Costs and/or Real Property taxes for the just ended fiscal or calendar year,
as appropriate. If Tenant shall have paid more than its Proportionate Share for the previous year,
Landlord shall, at its election, either (i)&nbsp;credit the amount of such overpayment toward the next
ensuing payment or payments of Additional Rent that would otherwise be due or (ii)&nbsp;refund in cash
to Tenant the amount of such overpayment. If such year-end statements shall show that Tenant did
not pay its Proportionate Share in full, then Tenant shall pay to Landlord the amount of such
underpayment, together with the accounting fee applicable thereto, within ten days from Landlord&#146;s
billing of same to Tenant. The provisions of this Paragraph shall survive the expiration or sooner
termination of this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.4 LATE CHARGE AND INTEREST ON RENT IN DEFAULT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant acknowledges that the late payment by Tenant of any monthly installment of Base Monthly
Rent or any Additional Rent will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amounts of which are extremely difficult or impractical to
fix. Such costs and expenses will include, without limitation, administration and collection costs
and processing and accounting expenses. Therefore, if any installment of base Monthly Rent is not
received by Landlord from Tenant within six calendar days after the same becomes due, Tenant shall
immediately pay to Landlord a late charge in an amount equal to the amount set forth in Article&nbsp;I
as the &#147;Late Charge Amount&#148;, and if any Additional Rent is not received by Landlord within six
calendar days after same becomes due, Tenant shall immediately pay to Landlord a late charge in an
amount equal to ten percent of the Additional Rent not so paid. Landlord and Tenant agree that
this late charge represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for its loss suffered by reason of Tenant&#146;s failure to make timely
payment. In no event shall this provision for a late charge be deemed to grant to Tenant a grace
period or extension of time within which to pay any rental installment or prevent Landlord from
exercising any right or remedy available to Landlord upon Tenant&#146;s failure to pay each rental
installment due under this Lease when due, including the right to terminate this Lease. If any
rent remains delinquent for a period in excess of six calendar days, then, in addition to such late
charge, Tenant shall pay to Landlord interest on any rent that is not so paid from said sixth day
at the then maximum rate of interest not prohibited by Law until paid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.5 PAYMENT OF RENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All rent shall be paid in lawful money of the United States, without any abatement, deduction
of offset for any reason whatsoever, to Landlord at such address as Landlord may designate from
time to time. Tenant&#146;s obligation to pay Base Monthly Rent and all Additional Rent shall be
prorated at the commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the same as a failure
by Tenant to pay Base Monthly Rent when due, and Landlord shall have the same rights and remedies
against Tenant as Landlord would have if Tenant failed to pay the Base Monthly rent when due.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.6 PREPAID RENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant has paid to Landlord the amount set forth in Article&nbsp;I as &#147;First Month&#146;s Prepaid Rent&#148;
as prepayment of rent for credit against the first installment(s) of Base Monthly Rent due
hereunder. Additionally, Tenant has paid to Landlord the amount set forth in Article&nbsp;I as &#147;Last
Month&#146;s Prepaid Rent&#148; as prepayment of rent for credit against the last installment(s) of Base
Monthly Rent due hereunder, subject, however, to the provisions of Paragraph&nbsp;3.7 below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.7 SECURITY DEPOSIT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant has deposited with Landlord the amount set forth in Article&nbsp;I as the &#147;Security Deposit&#148;
as security for the performance by Tenant of the terms of this Lease to be performed by Tenant, and
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">not as prepayment of rent. Landlord may apply such portion or portions of the Security Deposit as
are reasonably necessary for the following purposes: (i)&nbsp;to remedy any default by Tenant in the
payment of Base Monthly Rent or Additional Rent or a late charge or interest on defaulted rent;
(ii)&nbsp;to repair damage to the Leased Premises caused by Tenant; (iii)&nbsp;to clean and repair the Leased
Premises following their surrender to Landlord if not surrendered in the condition required
pursuant to the provisions of Article&nbsp;2; and (iv)&nbsp;to remedy any other default of Tenant to the
extent permitted by Law including, without limitation, paying in full on Tenant&#146;s behalf any sums
claimed by material men or contractors of Tenant to be owing to them by Tenant for work done or
improvements made at Tenant&#146;s request to the Leased Premises. In this regard, Tenant hereby waives
any restriction on the uses to which the Security Deposit may be applied as contained in Section
1950.7(c) of the California Civil Code and/or any successor statute. In the event the Security
Deposit or any portion thereof is so used, Tenant shall pay to Landlord, promptly upon demand, an
amount in cash sufficient to restore the Security Deposit to the full original sum. If Tenant
fails to promptly restore the Security Deposit and if Tenant shall have paid to Landlord any sums
and &#147;Last Month&#146;s Prepaid Rent&#148;, Landlord may, in addition to any other remedy Landlord may have
under this Lease, reduce the amount of Tenant&#146;s Last Month&#146;s Prepaid Rent by transferring all or
portions of such Last Month&#146;s Prepaid Rent to Tenant&#146;s Security Deposit until such Security Deposit
is restored to the amount set forth in Article&nbsp;I. Landlord shall not be deemed a trustee of the
Security Deposit. Landlord may use the Security Deposit in Landlord&#146;s ordinary business and shall
not be required to segregate it from its general accounts. Tenants shall not be entitled to any
interest on the Security Deposit. If Landlord transfer the Building during the Lease Term,
Landlord may pay the Security Deposit to any subsequent owner in conformity with the provisions of
Section&nbsp;1950.7 of the California Civil Code and/or any successor statute, in which event the
transferring Landlord shall be released from all liability for the return of the Security Deposit.
Tenant specifically grants to Landlord (and hereby waives the provisions of California Civil Code
Section&nbsp;1950.7 to the contrary) a period of sixty days following a surrender of the Leased Premises
by Tenant to Landlord within which to restore the Security Deposit (less permitted deductions) to
Tenant, it being agreed between Landlord and Tenant that sixty days is a reasonable period of time
within which to inspect the Leased Premises, make required repairs, receive and verify workmen&#146;s
billings therefore, and prepare a final accounting with respect to such deposit. In no event shall
the Security Deposit or any portion thereof, be considered prepaid rent.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 4: USE OF LEASED PREMISE AND COMMON AREAS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.1 PERMITTED USE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall be entitled to use the Leased Premises solely for the &#147;Permitted Use&#148; as set
forth in Article&nbsp;I and for no other purpose whatsoever. Tenant shall continuously and without
interruption use the Leased Premises for such purpose for the entire Lease Term. Any
discontinuance of such use for a period of thirty consecutive calendar days shall be, at Landlord&#146;s
election, a default by Tenant under the terms of this Lease. Subject to the limitations contained
in this Article&nbsp;4, Tenant shall have the right to use the Common Area, in conjunction with other
tenants and during normal business hours, solely for the purposes for which they were intended and
for no other purposes whatsoever. Tenant shall not have the right to use the exterior surfaces of
exterior walls, the area beneath the floor or the area above the ceiling of the Leased Premises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.2 GENERAL LIMITATIONS ON USE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall not do or permit anything to be done in or about the Leased Premises, the
Building, the Common Areas or the Project which does or could (i)&nbsp;interfere with the rights of
other tenants or occupants of the Building or the Project, (ii)&nbsp;jeopardize the structural integrity
of the Building or (iii)&nbsp;cause damage to any part of the Building or the Project. Tenant shall not
operate any equipment within the Leased Premises which does or could (i)&nbsp;injure, vibrate or shake
the Leased Premises or the Building, (ii)&nbsp;damage, overload or impair the efficient operation of any
electrical, plumbing, heating, ventilating or air conditioning systems within or servicing the
Leased Premises or the Building or (iii)&nbsp;damage or impair the efficient operation of the sprinkler
system (if any) within or servicing the Leased Premises or the Building. Tenant shall not install
any equipment or antennas on or make any penetrations of the exterior walls or roof of the
Building. Tenant shall not affix any equipment to or make any penetrations or cuts in the floor,
ceiling or walls of the Leased Premises. Tenant shall not place any loads upon the floors, walls,
ceiling or roof systems, which could endanger the structural integrity of the Building or damage
its floors, foundations or supporting structural components. Tenants shall not place any
explosive, flammable or harmful fluids or other waste materials in the drainage systems of the
Building or the Project. Tenant shall not drain or discharge any fluids in the landscaped areas or
across the paved areas of the Project. Tenant shall not use any area located outside the Leased
Premises for the storage of its materials, supplies, inventory or equipment, and all such
materials, supplies, inventory and equipment shall at all times be stored within the Leased
Premises. Tenant shall not commit or permit to be committed any waste in or about the Leased
Premises, the Common Areas or the Project.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.3 NOISE AND EMISSIONS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All noise generated by Tenant in its use of the Leased Premises shall be confined or muffled
so that it does not interfere with the business of or annoy other tenants of the Building or the
Project. All dust, fumes, odors and other emissions generated by Tenant&#146;s use of the Leased
Premises shall be sufficiently dissipated in accordance with sound environmental practices and
exhausted from the Leased Premises in such a manner so as not to interfere with the business of or
annoy other tenants of the Building or the Project, or cause any damage to the Leased Premises or
the Building or any component part thereof or the property of other tenants of the Building or the
Project.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.4 TRASH DISPOSAL</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall provide trash and garbage disposal facilities inside the Leased Premises for all
of its trash, garbage and waste requirements and shall cause such trash, garbage and waste to be
regularly removed from the Leased Premises at Tenant&#146;s sole cost. Tenant shall keep all areas
outside the Leased Premises and all fire corridors and mechanical equipment rooms in or about the
Leased Premises free and clear of all trash, garbage, waste and boxes containing same at all times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.5 PARKING</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant is allocated, and Tenant and its employees and invitees shall have the non-exclusive
right to use, not more than the number of parking spaces set forth in Article&nbsp;I as &#147;Tenant&#146;s Number
of Parking Spaces&#148;. Tenant shall not, at any time, use or permit its employees or invitees to use
more parking spaces than the number so allocated to Tenant. Tenant shall not have the exclusive
right to
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">use any specific parking space, and Landlord reserves the right to designate from time to time the
location of the parking spaces allocated for Tenant&#146;s use. In the event Landlord elects or is
required by any Law to limit or control parking within the Project, whether by validation of
parking tickets or any other method, Tenant agrees to participate in such validation or other
programs as reasonably established by Landlord. Tenant shall not, at any time, park or permit to
be parked any trucks or vehicles adjacent to entryways or loading areas within the Project so as to
interfere in any way with the use of such areas, nor shall Tenant, at any time, park or permit the
parking of Tenant&#146;s trucks or other vehicles, or the trucks and vehicles of Tenant&#146;s supplier or
others, in any portion of the Common Areas not designated by Landlord for such use by Tenant.
Tenant shall not, at any time, park or permit to be parked any recreational vehicles, inoperative
vehicles or equipment on any portion of the common parking area or other Common Areas of the
Project. Tenant agrees to assume responsibility for compliance by its employees and invitees with
the parking provisions contained herein. If Tenant or its employees park any vehicle within the
Project in violation of these provisions, then Landlord may charge Tenant, as Additional Rent, and
Tenant agrees to pay, as Additional Rent, Ten Dollars per day for each day or partial day that each
such vehicle is parked in any area other than that designated. Tenant hereby authorizes Landlord,
at Tenant&#146;s sole expense, to tow away from the Project and store until redeemed by its owner any
vehicle belonging to Tenant or Tenant&#146;s employees parked in violation of these provisions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.6 SIGNS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall not place or install on or within any portion of the Lease Premises, the
Building, the Common Areas or the Project any sign (other than a business identification sign first
approved by Landlord in accordance with this Paragraph), advertisements, banners, placards or
pictures which are visible from the exterior of the Leased Premises. Tenant shall not place or
install on or within any portion of the Leased Premises, the Building, the Common Areas or the
Project any business identification sign which is visible from the exterior of the Leased Premises
until Landlord shall have first approved in writing the location, size, content, design, method of
attachment and material to be used in the making of such sign. Any signs, once approved by
Landlord, shall be installed only in strict compliance with Landlord&#146;s approval, at Tenant&#146;s
expense, using a person first approved by Landlord to install same. Landlord may remove any signs
(not first approved in writing by Landlord), advertisements, banners, placards or pictures so
placed by Tenant on or within the Leased Premises, the Building, the Common Areas or the Project
and charge to Tenant the cost of such removal, together with any costs incurred by Landlord to
repair any damage caused thereby, including any cost incurred to restore the surface upon which
such sign was so affixed to its original condition. Tenant shall remove any such signs, repair any
damage caused thereby, and restore the surface upon which the sign was affixed to its original
condition, all to Landlord&#146;s reasonable satisfaction, upon the termination of this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.7 COMPLIANCE WITH LAWS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall not use or permit any person to use the Leased Premises in any manner, which
violates any Laws. Tenant shall abide by and shall promptly observe and comply with, at its sole
cost and expense, all Laws respecting the use and occupancy of the Leased Premises, the Building,
the Common Areas or the Project and shall defend with competent counsel, indemnify and hold
Landlord harmless from any claims, damages or liability resulting from Tenant&#146;s failure to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to any insurance policies carried by Landlord in accordance with the provisions
of this Lease, Tenant shall not conduct (nor permit any other person to conduct) any activities
within the Leased Premises, or store, keep or use anything within the Leased Premises which (i)&nbsp;is
prohibited under the terms of any such policies, (ii)&nbsp;could result in the termination of the
coverage afforded under any such policies, (iii)&nbsp;could give to the insurance carrier the right to
cancel any of such policies, or (iv)&nbsp;could cause an increase in the rates (over standard rates)
charged for the coverage afforded under any of such policies. Tenant shall comply with all
requirements of any insurance company, insurance underwriter, or Board of Fire Underwriters, which
are necessary to maintain, at standard rates, the insurance coverages carried by either Landlord or
Tenant pursuant to this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.9 LANDLORD&#146;S RIGHT TO ENTER</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord and its agents shall have the right to enter the Leased Premises during normal
business hours and subject to Tenant&#146;s reasonable security measures for the purpose of (i)
inspecting the same; (ii)&nbsp;supplying any services to be provided by Landlord to Tenant; (iii)
showing the Leased Premises to prospective purchasers, mortgagee or tenants; (iv)&nbsp;making necessary
alterations, additions or repairs; (v)&nbsp;performing any of Tenant&#146;s obligations when Tenant has
failed to do so after giving Tenant reasonable written notice of its intent to do so; and (vi)
posting notices of non-responsibility. Additionally, Landlord shall have the right to enter the
Leased Premises at times of emergency. Any entry into the Leased Premises or portions thereof
obtained by Landlord in accordance with this Paragraph shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry or a detainer of the Leased Premises, or an
eviction, actual or constructive, of Tenant from the Leased Premises or any portion thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.10 CONTROL OF COMMON AREAS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall at all times have exclusive control of the Common Areas. Landlord shall have
the right, without the same constituting an actual or constructive eviction and without entitling
Tenant to any reduction of or abatement of rent, to: (i)&nbsp;temporarily close any part of the Common
Areas to whatever extent required in the opinion of Landlord&#146;s counsel to prevent a dedication
thereof or the accrual of any prescriptive rights therein; (ii)&nbsp;temporarily close all or any part
of the Common Areas to perform maintenance or for any other reason deemed sufficient by Landlord;
(iii)&nbsp;change the shape, size, location, number and extent of improvements within the Common Areas
including, without limitation, changing the location of driveways, entrances, exits, parking
spaces, parking areas, sidewalks, directional or locator signs, or the direction of the flow of
traffic; and (iv)&nbsp;to make additions to the Common Areas including, without limitation, the
construction of parking structures. Landlord shall have the right to change the name or address of
the building. Tenant, in its use of the Common Areas, shall keep the Common Areas free and clear
of all obstructions created for or permitted by Tenant. If, in the opinion of Landlord,
unauthorized persons are using any of the Common Areas by reason of, or under claim of, the express
or implied authority or consent of Tenant, then Tenant, upon demand of Landlord, shall restrain, to
the fullest extent then allowed by Law, such unauthorized use, and shall initiate such appropriate
proceedings as may be required to so restrain such use. Nothing contained herein shall affect the
right of Landlord at any time to remove any unauthorized person from the Common Areas or to
prohibit the use of the Common Areas by unauthorized persons, including, without limitation, the
right to prohibit mobile food and beverage
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">vendors. In exercising any such right regarding the Common Areas, Landlord shall make a reasonable
effort to minimize any disruption to Tenant&#146;s business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.11 RULES AND REGULATIONS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall have the right from time to time to establish reasonable rules and regulations
and/or amendments or additions thereto respecting the use of space within the Project and the use
of the Common Areas for the care and orderly management of the Project and the safety of its
tenants, occupants and invitees. Upon delivery to Tenant of a copy of such rules and regulations
or any amendment or additions thereto, Tenant shall comply with such rules and regulations. A
violation by Tenant of any of such rules and regulations shall constitute a default by Tenant under
this Lease. If there is a conflict between the rules and regulations and any of the provisions of
this Lease, the provisions of this Lease shall prevail. Landlord shall not be responsible or
liable to Tenant for the violation of such rules and regulations by any other tenant of the
Project.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.12 ENVIRONMENTAL PROTECTION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord may voluntarily cooperate in a reasonable manner with the efforts of all governmental
agencies in reducing actual or potential environmental damage. Tenant shall not be entitled to
terminate this Lease or to any reduction in or abatement of rent by reason of such compliance or
cooperation. Tenant agrees at all times to cooperate fully with Landlord and to abide by all rules
and regulations and requirements which Landlord may reasonably prescribe in order to comply with
the requirements and recommendations of governmental agencies regulating, or otherwise involved in,
the protection of the environment.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 5: REPAIRS, MAINTENANCE, SERVICES AND UTILITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.1 REPAIRS AND MAINTENANCE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except in the case of damage to or destruction of the Leased Premises, the Building or the
Project caused by an Act of God or other peril, in which case the provisions of Article&nbsp;10 shall
control, the parties shall have the following obligations and responsibilities with respect to the
repair and maintenance of the Leased Premises, the Building and the Common Areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Tenant&#146;s Obligation: Tenant shall, at all times during the Lease Term at its sole cost and
expense, regularly clean and continuously keep and maintain in good order, condition and repair the
Leased Premises and every part thereof and all appurtenances thereto, including, without limiting
the generality of the foregoing, (i)&nbsp;all interior walls, floor and ceilings, (ii)&nbsp;all windows,
doors and skylights, (iii)&nbsp;all electrical wiring, conduits, connectors and fixtures, (iv)&nbsp;all
plumbing, pipes, sinks, toilets, faucets and drains, (v)&nbsp;all lighting fixtures, bulbs, and lamps,
(vi)&nbsp;all heating, ventilating and air conditions equipment located within the Leased Premises or
located outside the Leased Premises (e.g. rooftop compressors) and serving the Leased Premises
(other than Common Area HVAC as defined in Subparagraph B below), and (vii)&nbsp;all entranceways to the
Leased Premises. Tenant, if requested to do so by Landlord, shall hire, at Tenant&#146;s sole cost and
expense, a licensed heating, ventilating and air conditioning contractor to regularly and
periodically inspect (not less frequently than every three months) and perform required maintenance
on the heating, ventilating and air conditioning equipment and systems serving the Leased Premises,
or alternatively, Landlord may, at its election, contract in its own name for such regular and
periodic inspections of and maintenance on such heating, ventilating and air conditioning equipment
and systems and charge to Tenant, as Additional Rent, the cost thereof. Tenant shall, at its sole
cost and expense, repair all damage to the Building, the Common Areas or the Project caused by the
activities of Tenant, its employees, invitees or contractors promptly following written notice from
Landlord to so repair such damage. If Tenant shall fail to perform the required maintenance or
fail to make repairs required of it pursuant to this Paragraph within a reasonable period of time
following notice from Landlord to do so, then Landlord may, at its election and without waiving any
other remedy it may otherwise have under this Lease or at Law, perform such maintenance or make
such repairs and charge to Tenant, as Additional Rent, the costs so incurred by Landlord for same.
All glass within or a part of the Leased Premises, both interior and exterior, is at the sole risk
of Tenant and Tenant shall promptly replace any broken glass at Tenant&#146;s expense with glass of the
same kind, size and quality.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Landlord&#146;s Obligation: Landlord shall, at all times during the Lease Term, maintain in good
condition and repair: (i)&nbsp;the exterior and structural parts of the Building (including the
foundation, sub flooring, load-bearing and exterior walls, and roof); (ii)&nbsp;the Common Areas; and
(iii)&nbsp;the electrical and plumbing systems located outside the Leased Premises which serve the
Building. Additionally, to the extent that the Building contains central heating, ventilating
and/or air conditioning systems located outside the Leased Premises which are designed to serve,
and are then servicing, more than a single tenant within the Building (&#147;Common HVAC&#148;), Landlord
shall maintain in good operating condition and repair such Common HVAC equipment and systems. The
provisions of this Subparagraph B shall in no way limit the right of Landlord to charge to tenants
of the Project, as Additional Rent pursuant to Article&nbsp;3, the costs incurred by Landlord in making
such repairs and/or performing such maintenance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.2 SERVICES AND UTILITIES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties shall have the following responsibilities and obligations with respect to
obtaining and paying the cost of providing the following utilities and other services to the Leased
Premises:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Gas and Electricity: Tenant shall arrange, at its sole cost and expense and its own name,
for the supply of gas and electricity to the Leased Premises. In the event that such services are
not separately metered, Tenant shall, at its sole expense, cause such meters to be installed.
Tenant shall be responsible for determining if the local supplier of gas and/or electricity can
supply the needs of Tenant and whether or not the existing gas and/or electrical distribution
systems within the Building and the Leased Premises are adequate for Tenant&#146;s needs. Tenant shall
pay all charges for gas and electricity as so supplied to the Leased Premises.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Water: Landlord shall provide the Leased Premises with water for lavatory and drinking
purposes only. Tenant shall pay, as Additional Rent, the cost to Landlord of providing water to
the Leased Premises. In the event Landlord determines that Tenant is using more water than what
normally would be required for lavatory and drinking purposes, Landlord at its election may install
(or require Tenant to install at Tenant&#146;s sole cost) a separate meter for purposes of measuring
Tenant&#146;s water usage and, based upon such meter readings, periodically charge Tenant, as Additional
Rent, a sum equal to Landlord&#146;s estimate of the cost of Tenant&#146;s excess water usage. In the event
that Landlord shall so install such a separate meter, Tenant shall pay to Landlord, upon demand,
the cost
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">incurred by Landlord in purchasing and installing such meter and thereafter all costs incurred
by Landlord in maintaining said meter. The cost of Tenant&#146;s excess water usage shall include any
costs to Landlord in keeping account of such usage and all governmental fees, public charges of the
like attributable to or based upon (such as sewer usage fees) the use of water to the extent of
such excess usage.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Security Service: Tenant acknowledges that Landlord is not responsible for the security of
the Leased Premises or the protection of Tenant&#146;s property or Tenant&#146;s employees, invitees or
contractors, and that to the extent Tenant determines that such security or protection services are
advisable or necessary, Tenant shall arrange for and pay the costs of providing same.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Trash Disposal: Tenant acknowledges that Landlord is not responsible for the disposal of
Tenant&#146;s waste, garbage or trash and that Tenant shall arrange, in its own name and at its sole
cost, for the regular and periodic removal of such waste, garbage or trash from the Leased
Premises. In no event shall Landlord be required to provide trash bins for the disposal of
Tenant&#146;s waste, garbage or trash.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.3 ENERGY AND RESOURCE CONSUMPTION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord may voluntarily cooperate in a reasonable manner with the efforts of governmental
agencies and/or utility suppliers in reducing energy or other resource consumption within the
Project. Tenant shall not be entitled to terminate this Lease or to any reduction in or abatement
of rent by reason of such compliance or cooperation. Tenant agrees at all times to cooperate fully
with Landlord and to abide by all reasonable rules established by Landlord (i)&nbsp;in order to maximize
the efficient operation of the electrical, heating, ventilating and air conditioning systems and
all other energy or other resource consumption systems within the Project and/or (ii)&nbsp;in order to
comply with the requirements and recommendations of utility suppliers and governmental agencies
regulating the consumption of energy and/or other resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.4 LIMITATION OF LANDLORD&#146;S LIABILITY</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall not be liable to Tenant for injury to Tenant, its employees, agents, invitees
or contractors, damage to Tenant&#146;s property or loss of Tenant&#146;s business or profits, nor shall
Tenant be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of
(i)&nbsp;Landlord&#146;s failure to perform any maintenance or repairs to the Project until Tenant shall have
first notified Landlord, in writing, of the need for such maintenance or repairs, and then only
after Landlord shall have had a reasonable period of time following its receipt of such notice
within which to perform such maintenance or repairs, or (ii)&nbsp;any failure, interruption, rationing
or other curtailment in the supply of water, electric current, gas or other utility service to the
Leased Premises, the Building or the Project from whatever cause (other than Landlord&#146;s active
negligence or willful misconduct), or (iii)&nbsp;the unauthorized intrusion or entry into the Leased
Premises by third parties (other than Landlord).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 6: ALTERATIONS AND IMPROVEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>6.1 BY TENANT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall not make any alterations to or modifications of the Leased Premises or construct
any improvements to or within the Leased Premises without Landlord&#146;s prior written approval, and
then not until Landlord shall have first approved, in writing, the plans and specifications
therefore, which approval shall not be unreasonably withheld. All such modifications, alterations
or improvements, once so approved, shall be made, constructed or installed by Tenant at Tenant&#146;s
expense, using a licensed contractor first approved by Landlord, in substantial compliance with the
Landlord-approved plans and specifications therefore. All work undertaken by Tenant shall be done
in accordance with all Laws and in a good and workmanlike manner using new materials of good
quality. Tenant shall not commence the making of any such modifications or alterations or the
construction of any such improvements until (i)&nbsp;all required governmental approvals and permits
shall have been obtained, (ii)&nbsp;all requirements regarding insurance imposed by this Lease have been
satisfied, (iii)&nbsp;Tenant shall have given Landlord at least five business days prior written notice
of its intention to commence such work so that Landlord may post and file notices of
non-responsibility, and (iv)&nbsp;if requested by Landlord, Tenant shall have obtained contingent
liability and broad form builder&#146;s risk insurance in an amount satisfactory to Landlord to cover
any perils relating to the proposed work not covered by insurance carried by Tenant pursuant to
Article&nbsp;9. In no event shall tenant make any modifications, alterations or improvements to the
Common Areas or any areas outside of the Leased Premises. As used in this Article, the term
&#147;modifications, alterations and/or improvements&#148; shall include, without limitation, the
installation of additional electrical outlets, overhead lighting fixtures, drains, sinks,
partitions, doorways, or the like.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>6.2 OWNERSHIP OF IMPROVEMENTS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All modifications, alterations and improvements made or added to the Leased Premises by Tenant
(other than Tenant&#146;s inventory, equipment, movable furniture, wall decorations and trade fixtures)
shall be deemed real property and a part of the Leased Premises, but shall remain the property of
Tenant during the Lease Term. Any such modifications, alterations or improvements, once completed,
shall not be altered or removed from the Leased Premises during the Lease Term without Landlord&#146;s
written approval first obtained in accordance with the provisions of Paragraph&nbsp;6.1 above. At the
expiration or sooner termination of this Lease, all such modifications, alterations and
improvements (other than Tenant&#146;s inventory, equipment, movable furniture, wall decorations and
trade fixtures) shall automatically become the property of Landlord and shall be surrendered to
Landlord as a part of the Leased Premises as required pursuant to Article&nbsp;2, unless Landlord shall
require Tenant to remove any of such modifications, alterations or improvements in accordance with
the provisions of Article&nbsp;2, in which case Tenant shall so remove same. Landlord shall have no
obligation to reimburse to Tenant all or any portion of the cost or value of any such
modifications, alterations or improvements so surrendered to Landlord. All modifications,
alterations or improvements which are installed or constructed on or attached to the Leased
Premises by Landlord at Landlord&#146;s expense shall be deemed real property and a part of the Leased
Premises and shall be the property of the Landlord. All lighting, plumbing, electrical, heating,
ventilating and air conditioning fixtures, partitioning, window coverings, wall coverings and floor
coverings installed by Tenant shall be deemed improvements to the Leased Premises and not trade
fixtures of Tenant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>6.3 ALTERATIONS REQUIRED BY LAW</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall make all modifications, alterations and improvements to the Leased Premises, at
its sole cost, that are required by Law because of (i)&nbsp;Tenant&#146;s use or occupancy of the Leased
Premises, (ii)&nbsp;Tenant&#146;s application for any permit or governmental approval, or (iii)&nbsp;Tenant&#146;s
making of any
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">modifications, alterations or improvements to or within the Leased Premises. If Landlord shall, at
any time during the Lease Term, be required by any governmental authority to make any
modifications, alterations or improvements to the Building or the Project, the cost incurred by
Landlord in making such modifications, alterations or improvements, including an eighteen percent
per annum cost of money factor, shall be amortized by Landlord over the useful like of such
modifications, alterations or improvements, as determined in accordance with generally accepted
accounting standards, and the monthly amortized cost of such modifications, alterations and
improvement as so amortized shall be considered a Project Maintenance Costs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>6.4 LIENS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall keep the Leased Premises, the Building and the Project free from any liens and
shall pay when due all bills arising out of any work performed, materials furnished, or obligations
incurred by Tenant, its agents, employees or contractors relating to the Leased Premises. If any
such claim of lien is recorded against Tenant&#146;s interest in this Lease, the Leased Premises, the
Building or the Project, Tenant shall bond against, discharge or otherwise cause such lien to be
entirely released within ten days after the same has been so recorded.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 7: ASSIGNMENT AND SUBLETTING BY TENANT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.1 BY TENANT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall not sublet the Leased Premises (or any portion thereof) or assign or encumber its
interest in this Lease, whether voluntarily or by operation of Law, without Landlord&#146;s prior
written consent first obtained in accordance with the provisions of this Article&nbsp;7. Any attempted
subletting, assignment or encumbrance without Landlord&#146;s prior written consent, which should not be
unreasonably withheld, at Landlord&#146;s election, shall constitute a default by Tenant under the terms
of this Lease. The acceptance of rent by Landlord from any person or entity other than Tenant, or
the acceptance of rent by Landlord from Tenant with knowledge of a violation of the provisions of
this Paragraph, shall not be deemed to be a waiver by Landlord of any provision of this Article or
this Lease or to be a consent to any subletting by Tenant or any assignment
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.2 MERGER OR REORGANIZATION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of
Tenant, or the sale or other transfer in the aggregate over the Lease Term of a controlling
percentage of the capital stock of Tenant, shall be deemed a voluntary assignment of Tenant&#146;s
interest in this Lease. The phrase &#147;controlling percentage&#148; means the ownership of and the right
to vote stock possessing more than fifty percent of the total combined voting power of all classes
of Tenant&#146;s capital stock issued, outstanding and entitled to vote for the election of directors.
If Tenant is a partnership, a withdrawal or change, voluntary, involuntary or by operation of Law,
of a general partner, or the dissolution of the partnership, shall be deemed a voluntary assignment
of Tenant&#146;s interest in this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.3 LANDLORD&#146;S ELECTION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Tenant shall desire to assign its interest under this Lease or to sublet the Leased
Premises, Tenant must first notify Landlord, in writing, of its intent to so assign or sublet, at
least ninety days in advance of the date it intends to so assign its interest in this Lease or
sublet the Leased Premises but not sooner than one hundred eighty days in advance of such date,
specifying in detail the terms of such proposed assignment or subletting, including the name of the
proposed assignee or sublessee, the proposed assignee&#146;s or sublessee&#146;s intended use of the Leased
Premises, a current financial statement of such proposed assignee or sublessee and the form of
documents to be used in effectuating such assignment or subletting. Landlord shall have a period
of fifteen days following receipt of such notice within which to do one of the following: (a)
cancel and terminate this Lease effective as of the intended subletting or assignment date set
forth in Tenant&#146;s notice, or (b)&nbsp;if Landlord shall not have elected to cancel and terminate this
Lease, to either (i)&nbsp;consent to such requested assignment or subletting subject to Tenant&#146;s
compliance with the conditions set forth in Paragraph&nbsp;7.4 below or (ii)&nbsp;refuse to so consent to
such requested assignment or subletting, provided that such consent shall not be unreasonably
refused. During said fifth day period, Tenant covenants and agrees to supply to Landlord, upon
request, all necessary or relevant information which Landlord may reasonably request respecting
such proposed assignment or subletting and/or the proposed assignee or sublessee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.4 CONDITIONS TO LANDLORD&#146;S CONSENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Landlord elects to consent, or shall have been ordered to so consent by a court of
competent jurisdiction to such requested assignment, subletting or encumbrance, such consent shall
be expressly conditioned upon the occurrence of each of the conditions below set forth, and any
purported assignment, subletting or encumbrance made or ordered prior to the full and complete
satisfaction of each of the following conditions shall be void and, at the election of Landlord,
which election may be exercised at any time following such a purported assignment, subletting or
encumbrance but prior to the satisfaction of each of the stated conditions, shall constitute a
material default by Tenant under this Lease giving Landlord the absolute right to terminate this
Lease unless such default is promptly cured by satisfying in full each such condition by the
assignee, sublessee or encumbrancer. The conditions are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Landlord having approved in form and substance the assignment or sublease agreements (or
the encumbrance agreement), which approval shall not be unreasonably withheld by Landlord if the
requirements of this Article&nbsp;7 are otherwise complied with.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Each such sublessee or assignee having agreed, in writing satisfactory to Landlord and its
counsel and for the benefit of Landlord, to assume, to be bound by, and to perform the obligations
of this Lease to be performed by Tenant (or, in the case of an encumbrance, each encumbrancer
having similarly agreed to assume, be bound by and to perform Tenant&#146;s obligations upon a
foreclosure or transfer in lieu thereof).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Tenant having fully and completely performed all of its obligations under the terms of this
Lease through and including the date of such assignment or subletting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Tenant having reimbursed to Landlord all reasonable costs and attorneys&#146; fees incurred by
Landlord in conjunction with the processing and documentation of any such requested subletting,
assignment or encumbrance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. Tenant having delivered to Landlord a complete and fully executed duplicate original of
such sublease agreement, assignment agreement or encumbrance (as applicable) and all related
agreements.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. Tenant having paid, or having agreed in writing to pay as to future payments, to Landlord
one hundred percent of all assignment consideration or excess rentals to be paid to Tenant or to
any other on Tenant&#146;s behalf or for Tenant&#146;s benefit for such assignment or subletting as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;If Tenant assigns its interest under this Lease and if all or a portion of the
consideration for such assignments is to be paid by the assignee at the time of the assignment,
that Tenant shall have paid to Landlord and Landlord shall have received an amount equal to one
hundred percent of the assignment consideration so paid or to be paid (whichever is greater) at the
time of the assignment by the assignee or;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;If Tenant assigns its interest under this Lease and if Tenant is to receive all or a
portion of the consideration for such assignment in future installments, that Tenant and Tenant&#146;s
assignee shall have entered into a written agreement with and for the benefit of Landlord
satisfactory to Landlord and its counsel whereby Tenant and Tenant&#146;s assignee jointly agree to pay
to Landlord an amount equal to one hundred percent of all such future assignment consideration
installments to be paid by such assignee as and when such assignment consideration is so paid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;If Tenant subleases the Leased Premises, that Tenant and Tenant&#146;s sublessee shall have
entered into a written agreement with and for the benefit of Landlord satisfactory to Landlord and
its counsel whereby Tenant and Tenant&#146;s sublessee jointly agree to pay to Landlord one hundred
percent of all excess rentals to be paid by such sublessee as and when such excess rentals are so
paid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTAL DEFINED</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this Article, the term &#147;assignment consideration&#148; shall mean all consideration
to be paid by the assignee to Tenant or to any other on Tenant&#146;s behalf or for Tenant&#146;s benefit as
consideration for such assignment, less any commissions paid by Tenant to a licensed real estate
broker for arranging such assignment (not to exceed then standard rates), and the term &#147;excess
rentals&#148; shall mean all consideration to be paid by the sublessee to Tenant or to any other on
Tenant&#146;s behalf or for Tenant&#146;s benefit for the sublease of the Leased Premises in excess of the
rent due Landlord under the terms of this Lease for the same period, less any commissions paid by
Tenant to a licensed real estate broker for arranging such sublease (not to exceed then standard
rates). Tenant agrees that the portion of any assignment consideration and/or excess rentals
arising from any assignment or subletting by Tenant which is to be paid to Landlord pursuant to
this Article now is and shall then be the property of Landlord and not the property of Tenant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.6 PAYMENTS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All payments required by this Article to be made to Landlord shall be made in cash in full as
and when they become due. At the time when Tenant, Tenant&#146;s assignee or sublessee makes each such
payment to Landlord, Tenant or Tenant&#146;s assignee or sublessee, as the case may be, shall deliver to
Landlord an itemized statement in reasonable detail showing the method by which the amount due
Landlord was calculated and certified by the party making such payment as true and correct.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.7 GOOD FAITH</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rights granted to Tenant by this Article are granted in consideration of Tenant&#146;s express
covenant that all pertinent allocations which are made by Tenant between the rental value of the
Leased Premises and the value of any of Tenant&#146;s personal property which may be conveyed or leased
generally concurrently with and which may reasonably be considered a part of the same transaction
as the permitted assignment or subletting shall be made fairly, honestly and in good faith. If
Tenant shall breach this Covenant of Good Faith, Landlord may immediately declare Tenant to be in
default under the terms of this Lease and terminate this Lease and/or exercise any other rights and
remedies Landlord would have under the terms of this Lease in the case of a material default by
Tenant under this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.8 EFFECT OF LANDLORD&#146;S CONSENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No subletting, assignment or encumbrance, even with the consent of Landlord, shall relieve
Tenant of its personal and primary obligation to pay rent and to perform all of the other
obligations to be performed by Tenant hereunder. Consent by Landlord to one or more assignments or
encumbrances of Tenant&#146;s interest in this Lease to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment, encumbrance or subletting. If
Landlord shall have been ordered by a court of competent jurisdiction to consent to a requested
assignment or subletting, or such and assignment or subletting shall have been ordered over the
objection of Landlord, such assignment or subletting shall not be binding between the assignee (or
sublessee) and Landlord until such time as all conditions set forth in Paragraph&nbsp;7.4 above have
been fully satisfied (to the extent not then satisfied) by the assignee or sublessee, including,
without limitation, the payment to Landlord of all agreed assignment considerations and/or excess
rentals then due Landlord.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 8: LIMITATIONS ON LANDLORD&#146;S LIABILITY AND INDEMNITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>8.1 LIMITATION ON LANDLORD&#146;S LIABILITY AND RELEASE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall not be liable to Tenant for, and Tenant hereby releases Landlord and its
partners and officers from, any and all liability, whether in contract, tort or on any other basis,
for any injury to or any damages sustained by Tenant, its agents, employees, contractors or
invitees; any damage to Tenant&#146;s property; or any loss to Tenant&#146;s business, loss of Tenant&#146;s
profits or other financial loss of Tenant resulting from or attributable to the condition of, the
management of, the maintenance of, or the protection of the Leased Premises, the Building, the
Project or the Common Areas, including, without limitation, any such injury, damage or loss
resulting from (i)&nbsp;the failure, interruption, rationing or other curtailment or cessation in the
supply of electricity, water, gas or other utility service to the Project, the Building or the
Leased Premises; (ii)&nbsp;the vandalism or forcible entry into the Building or the Leased Premises;
(iv)&nbsp;the failure to provide security and/or adequate lighting in or about the Project, the Building
or the Leased Premises; (v)&nbsp;the existence of any design or construction defects within the Project,
the Building or the Leased Premises; (vi)&nbsp;the failure of any mechanical systems to function
property (such as the HVAC systems; or (vii)&nbsp;the blockage of access to any portion of the Project,
the Building or the Leased Premises, except to the extent such damage was proximately caused by
Landlord&#146;s active negligence or willful misconduct, or Landlord&#146;s failure to perform an obligation
expressly undertaken pursuant to this Lease but only if Tenant shall have given Landlord prior
written notice to perform such obligation and Landlord shall have failed to perform such obligation
within a reasonable period of time following receipt of written notice from Tenant to so perform
such obligation. In this regard, Tenant acknowledges that it is fully apprised of the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">provisions of Law relating to releases, and particularly to those provisions contained in Section
1542 of the California Civil Code, which reads as follows:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">A general release does not extend to claims which the creditor does not know or
suspect in his favor at the time of executing this release, which, if known by him
must have materially affected his settlement with the debtor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding such statutory provision, and for the purpose of implementing a full and
complete release and discharge, Tenant hereby (i)&nbsp;waives the benefit of such statutory provision
and (ii)&nbsp;acknowledges that, subject to the exceptions specifically set forth herein, the release
and discharge set forth in this Paragraph is a full and complete settlement and release and
discharge of all claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its favor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>8.2 TENANT&#146;S INDEMNIFICATION OF LANDLORD</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall defend, with competent counsel satisfactory to Landlord, any claims made or legal
actions filed or threatened by third parties against Landlord with respect to the death, bodily
injury, personal injury, damage to property or interference with contractual or other rights
suffered by any third party (including other tenants within the Project) which (i)&nbsp;occurred within
the Leased Premises or (ii)&nbsp;resulted from Tenant&#146;s use or occupancy of the Leased Premises or the
Common Area or (iii)&nbsp;resulted from Tenant&#146;s activities in or about the Leased Premises, the
Building or the Project, and Tenant shall indemnify and hold Landlord, Landlord&#146;s principals,
employees and agents harmless from any loss (including loss of rents by reason of vacant space
which otherwise would have been leased but for such activities), liability, penalties, or expense
whatsoever (including any legal fees incurred by Landlord with respect to defending such claims)
resulting therefrom, except to the extent proximately caused by the active negligence or willful
misconduct of Landlord. This indemnity agreement shall survive until the latter to occur of (i)
the date of the expiration, or sooner termination, of this Lease, or (ii)&nbsp;the date Tenant actually
vacates the Leased Premises.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 9: INSURANCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.1 TENANT&#146;S INSURANCE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall maintain insurance complying with all of the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Tenant shall procure, pay for and keep in full force and effect, at all times during the
Lease Term, the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;Comprehensive general liability insurance insuring Tenant against liability for personal
injury, death and damage to property occurring within the Leased Premises, or resulting from
Tenant&#146;s use or occupancy of the Leased Premises or the Common Areas, or resulting from Tenant&#146;s
activities in or about the Leased Premises, with combined single limit coverage of not less than
the amount of Tenant&#146;s Required Liability Coverage (as set forth in Article&nbsp;I), which insurance
shall contain a &#147;broad form liability&#148; endorsement insuring Tenant&#146;s performance of Tenant&#146;s
obligation in indemnifying Landlord as contained in Article&nbsp;8.2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;Fire and property damage insurance or &#147;fire and extended coverage&#148; insuring Tenant against
loss from physical damage to Tenant&#146;s personal property, inventory, trade fixtures and improvements
within the Leased Premises with coverage for the full actual replacement cost thereof;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;Plate-glass insurance, at actual replacement cost;<BR>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;Pressure vessel insurance, if applicable;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp;Product Liability insurance (including, without limitation, if food and/or beverages are
distributed, sold and/or consumed within the Leased Premises, to the extent obtainable, coverage
for liability arising out of the distribution, sale or consumption of food and/or beverages
&#091;including alcoholic beverages, if applicable&#093; at the Leased Premises) for not less than Tenant&#146;s
Required Liability Coverage (as set forth in Article&nbsp;1);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)&nbsp;Worker&#146;s compensation insurance and any other employee benefit insurance sufficient to
comply with all Laws; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)&nbsp;With respect to making of alterations or the construction of improvements or the like
undertaken by Tenant, contingent liability and builder&#146;s risk insurance, in an amount and with
coverage satisfactory to Landlord.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Each policy of liability insurance required to be carried by Tenant pursuant to this
Paragraph or actually carried by Tenant with respect to the Leased Premises (i)&nbsp;shall, except with
respect to insurance required by Subparagraph A(6) above, name Landlord, and such others as are
designated by Landlord, as additional insured; (ii)&nbsp;shall be primary insurance providing that the
insurer shall be liable for the full amounts of the loss, up to and including the total amount of
liability set forth in the declaration of coverage, with the right of contribution from or prior
payment by any other insurance coverage of Landlord; (iii)&nbsp;shall be in a form satisfactory to
Landlord; (iv)&nbsp;shall be carried with companies reasonably acceptable to Landlord; (v)&nbsp;shall provide
that such policy shall not be subject to cancellation, lapse or change except after at least thirty
days prior written notice to Landlord; and (vi)&nbsp;shall contain a so-called &#147;severability&#148; or &#147;cross
liability&#148; endorsement. Each policy of property insurance maintained by Tenant with respect to the
Leased Premises or any property therein (i)&nbsp;shall provide that such policy shall not be subject to
cancellation, lapse or change except after at least thirty days prior written notice to Landlord
and (ii)&nbsp;shall contain a waiver and/or a permission to waive by the insurer of any right of
subrogation against Landlord, its principals, employees, agents and contractors, which might arise
by reason of any payment under such policy or by reason of any act or omission of Landlord, its
principals, employees, agents or contractors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Prior to the time Tenant or any of its contractors enters the Leased Premises, Tenant shall
deliver to Landlord, with respect to each policy of insurance required to be carried by Tenant
pursuant to the Article, a copy of such policy (appropriately authenticated by the insurer as
having been issued, premium paid) or a certificate of the insurer certifying in form satisfactory
to Landlord that a policy has been issued, premium paid, providing the coverage required by this
Paragraph and containing the provisions specified herein. With respect to each renewal or
replacement of any such insurance, the requirements of this Paragraph must be complied with not
less than thirty days prior to the expiration or cancellation of the policy being renewed or
replaced. Landlord may, at any time and from time to time, inspect and/or copy any and all
insurance policies required to be carried by Tenant pursuant to this Article. If Landlord&#146;s
Lender, insurance broker or advisor or counsel reasonably determines at any time that the amount of
coverage set forth in Paragraph&nbsp;9.1A for any policy of insurance Tenant is required to carry
pursuant to this Article is not
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">adequate, then Tenant shall increase the amount of coverage for such insurance to such greater
amount as Landlord&#146;s Lender, insurance broker or advisor or counsel reasonably deems adequate;
provided, however, such increased level of coverage may not exceed the level of coverage for such
insurance commonly carried by comparable business similarly situated and operating under similar
circumstances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.2 LANDLORD&#146;S INSURANCE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to insurance maintained by Landlord:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Landlord shall maintain, as the minimum coverage required of it by this Lease, fire and
property damage insurance in so-called &#147;fire and extended coverage&#148; form insuring Landlord (and
such others as Landlord may designate) against loss from physical damage to the Building with
coverage of not less than ninety percent of the full actual replacement cost thereof and against
loss of rents for a period of not less than six months. Such fire and property damage insurance,
at Landlord&#146;s election but without any requirement on Landlord&#146;s behalf to do so, (i)&nbsp;may be
written in so-called &#147;all risk&#148; form, excluding only those perils commonly excluded from such
coverage by Landlord&#146;s then property damage insurer; (ii)&nbsp;may provide coverage for physical damage
to the improvements so insured for up to the entire full actual replacement cost thereof; (iii)&nbsp;may
be endorsed to cover loss or damage caused by any additional perils against which Landlord may
elect to insure, including earthquake and/or flood; (iv)&nbsp;may provide coverage for loss of rents for
a period of up to twelve months; and/or (v)&nbsp;may contain &#147;deductibles&#148; not exceeding One Thousand
Dollars per occurrence (or up to five percent of the Building&#146;s replacement value in the case of
earthquake and/or flood insurance). Landlord shall not be required to cause such insurance to
cover any of Tenant&#146;s personal property, inventory and trade fixtures, or any modifications,
alterations or improvements made or constructed by Tenant to or within the Leased Premises.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Landlord shall maintain comprehensive general liability insurance insuring Landlord (and
such others as are designated by Landlord) against liability for personal injury, bodily injury,
death, and damage to property occurring in, on or about, or resulting from the use or occupancy of
the Project, or any portion thereof, with combined single limit coverage of at least Two Million
Dollars. Landlord may carry such greater coverage as Landlord or Landlord&#146;s Lender, insurance
broker or advisor or counsel may from time to time determine is reasonably necessary for the
adequate protection of Landlord and the Project.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Landlord may maintain any other insurance, which in the opinion of its insurance broker or
advisor or legal counsel is prudent to carry under the given circumstances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.3 MUTUAL WAIVER OF SUBROGATION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord hereby releases Tenant, and Tenant hereby releases Landlord and its respective
partners and officers, agents, employees and servants, from any and all liability for loss, damage
or injury to the property of the other in or about the Leased Premises which is caused by or
results from a peril or event or happening which would be covered by insurance required to be
carried under the terms of this Lease, or is covered by insurance actually carried and in force at
the time of the loss, by the party sustaining such loss; provided, however, that such waiver shall
be effective only to the extent permitted by the insurance covering loss and to the extent such
insurance is not prejudiced thereby.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 10: DAMAGE TO LEASED PREMISES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>10.1 LANDLORD&#146;S DUTY TO RESTORE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Leased Premises are damaged by any peril after the Effective Date of this Lease,
Landlord shall restore the Leased Premises, as and when required by this Paragraph, unless this
Lease is terminated by Landlord pursuant to Paragraph&nbsp;10.2 or by Tenant pursuant to Paragraph&nbsp;10.3.
All insurance proceeds available from the fire and property damage insurance carried by Landlord
shall be paid to and become the property of Landlord. If this Lease is terminated pursuant to
either Paragraph&nbsp;10.2 or 10.3, all insurance proceeds available from insurance carried by Tenant
which cover loss to property that is Landlord&#146;s property or would become Landlord&#146;s property on
termination of this Lease shall be paid to and become the property of Landlord, and the remainder
of such proceeds shall be paid to and become the property of Tenant. If this Lease is not
terminated pursuant to either Paragraph&nbsp;10.2 or 10.3, all insurance proceeds available from
insurance carried by Tenant which cover loss to property that is Landlord&#146;s property shall be paid
to and become the property of Landlord, and all proceeds available which cover loss to property
which would become the property of Landlord upon the termination of this Lease shall be paid to and
remain the property of Tenant. If this Lease is not to terminated, then upon receipt of the
insurance proceeds (if the loss is covered by insurance) and the issuance of all necessary
governmental permits, Landlord shall commence and diligently prosecute to completion then
restoration of the Leased Premises, to the extent then allowed by Law, to substantially the same
condition in which the Leased Premises existed as of the Lease Commencement Date. Landlord&#146;s
obligation to restore shall be limited to the Leased Premises and interior improvements constructed
by Landlord. Landlord shall have no obligation to restore any other improvements to the Leased
Premises or any of Tenant&#146;s personal property, inventory or trade fixtures. Upon completion of the
restoration by Landlord, Tenant shall forthwith replace or fully repair all of Tenant&#146;s personal
property, inventory, trade fixtures and other improvements constructed by Tenant to like or similar
conditions at the time of such damage or destruction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>10.2 LANDLORD&#146;S RIGHT TO TERMINATE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall have the option to terminate this Lease in the event any of the following
occurs, which option may be exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The Building is damaged by any peril covered by valid and collectible insurance actually
carried by Landlord and in force at the time of such damage or destruction (an &#147;insured peril&#148;) to
such an extent that the estimated cost to restore the Building exceeds the lesser of (i)&nbsp;the
insurance proceeds available from insurance actually carried by Landlord, or (ii)&nbsp;seventy-five
percent of the then actual replacement cost thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The Building is damaged by an uninsured peril, which peril Landlord was required to insure
against pursuant to the provisions of Article&nbsp;9 of this Lease, to such an extent that the estimated
cost to restore the Building exceeds the lesser of (i)&nbsp;the insurance proceeds which would have been
available had Landlord carried such required insurance, or (ii)&nbsp;seventy-five percent of the then
actual replacement cost thereof;
</DIV>


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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. The Building is damaged by an uninsured peril, which peril Landlord was not required to
insure against pursuant to the provisions of Article&nbsp;9 of this Lease, to any extent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. The Building is damaged by any peril and, because of the Laws then in force; the Building
(i)&nbsp;can not be restored at reasonable cost or (ii)&nbsp;if restored, cannot be used for the same use
being made thereof before such damage.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>10.3 TENANT&#146;S RIGHT TO TERMINATE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Leased Premises are damaged by any peril and Landlord does not elect to terminate this
Lease or is not entitled to terminate this Lease pursuant to this Article, then as soon as
reasonably practicable, Landlord shall furnish Tenant with the written opinion of Landlord&#146;s
architect or construction consultant as to when the restoration work required of Landlord may be
complete. Tenant shall have the option to terminate this Lease in the event any of the following
occurs, which option may be exercised in the case of A or B below only by delivery to Landlord of a
written notice of election to terminate within seven days after Tenant receives from Landlord the
estimate of the time needed to complete such restoration:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The Leased Premises are damaged by any peril and, in the reasonable opinion of Landlord&#146;s
architect or construction consultant, the restoration of the Leased Premises cannot be
substantially completed within nine months after the date of such damage; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The Leased Premises are damaged by any peril within nine months of the last day of the
Lease Term and, in the reasonable opinion of Landlord&#146;s architect or construction consultant, the
restoration of the Leased Premises cannot be substantially completed within ninety days after the
date such restoration is commenced; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Landlord does not complete the restoration of the Leased Premises within nine months from
the date of the damage, provided that such nine-month period of time shall be extended for such
number of days as Landlord may be delayed by reason of Force Majeure.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>10.4 TENANT&#146;S WAIVER</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord and Tenant agree that the provision of Paragraph&nbsp;10.3 above, captioned &#147;Tenant&#146;s
Right to Terminate&#148;, are intended to supersede and replace the provisions contained in California
Civil Code, Section&nbsp;1932, Subdivision 2, and California Civil Code, Section&nbsp;1934, and accordingly,
Tenant hereby waives the provisions of said Civil Code Sections and the provisions of any successor
Code Sections or similar Laws hereinafter enacted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>10.5 ABATEMENT OF RENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of damage to the Leased Premises, which does not result in the termination of
this Lease, the Base Monthly Rent (and any Additional Rent) shall be temporarily abated during the
period of restoration in proportion to the degree to which Tenant&#146;s use of the Leased Premises is
impaired by such damage.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 11: CONDEMNATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>11.1 LANDLORD&#146;S RIGHT TO TERMINATE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to Paragraph&nbsp;11.3, Landlord shall have the option to terminate this lease if, as a
result of a taking by means of the exercise of the power of eminent domain (including inverse
condemnation and/or a voluntary sale or transfer by Landlord to an entity having the power of
eminent domain under the threat of condemnation), (i)&nbsp;all or any part of the Leased Premises is so
taken, (ii)&nbsp;more than thirty-three and one-third percent of the Building&#146;s leasable area is so
taken, (iii)&nbsp;more than thirty-three and one-third percent of the Common Areas is so taken, or (iv)
because of the Laws then in force, the Leased Premises may not be used for the same use being made
thereof before such taking, whether or not restored as required by Paragraph&nbsp;11.4 below. Any such
option to terminate by Landlord must be exercisable within a reasonable period of time; to be
effective as of the date possession is taken by the condemnor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>11.2 TENANT&#146;S RIGHT TO TERMINATE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to Paragraph&nbsp;11.3, Tenant shall have the option to terminate this Lease if, as a
result of any taking by means of the exercise of the power of eminent domain (including inverse
condemnation and/or a voluntary sale or transfer by Landlord to an entity having the power of
eminent domain under threat of condemnation), (i)&nbsp;all of the Leased Premises is so taken, (ii)
thirty-three and one-third percent or more of the Leased Premises is so taken and the part of the
Leased Premises that remains cannot, within a reasonable period of time, be made reasonably
suitable for the continued operation of the Tenant&#146;s business or, (iii)&nbsp;there is a taking of a
portion of the Common Areas, as a result of such taking, Landlord cannot provide parking spaces
within the Project (or within a reasonable distance therefrom) equal in number to at least
sixty-six and two-thirds percent of Tenant&#146;s Number of Parking Spaces (as set forth in Article&nbsp;1),
whether by rearrangement of the remaining parking areas in the Common Area (including, if Landlord
elects, construction of multi-deck parking structures or restriping for compact cars where
permitted by Law), or by providing alternative parking facilities on other land within reasonable
walking distance of the Leased Premises. Tenant must exercise such option within a reasonable
period of time, to be effective on the later to occur of (i)&nbsp;the date that possession of that
portion of the Common area or the Leased Premises that is condemned and taken by the condemnor or
(ii)&nbsp;the date Tenant vacates the Leased Premises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>11.3 TEMPORARY TAKING</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any portion of the Leased Premises is temporarily taken for one year or less, this Lease
shall remain in effect. If any portion of the Leased Premises is temporarily taken for a period
which either exceeds one year or which extends beyond the natural expiration of the Lease Term,
then Landlord and Tenant shall each independently have the option to terminate this Lease,
effective on the date possession is taken by the condemnor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>11.4 RESTORATION AND ABATEMENT OF RENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any part of the Leased Premises is taken by condemnation and this Lease is not terminated,
then Landlord shall repair any damage occasioned thereby to the remainder of the Leased Premises to
a condition reasonably suitable for Tenant&#146;s continued operations and otherwise, to the extent
practicable, in the manner and to the extent provided in Paragraph&nbsp;10.1. As of the date possession
is taken by the condemning authority, (i)&nbsp;the Base Monthly Rent shall be reduced in the same
proportion that the area of that part of the Leased Premises so taken (less any addition to the
area of the Leased
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Premises by reason of any construction) bears to the area of the Leased Premises immediately prior
to such taking, and (ii)&nbsp;Tenant&#146;s Proportionate Share shall be appropriately adjusted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>11.5 DIVISION OF CONDEMNATION AWARD</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any award made for any condemnation of the Project, the Building, the Common Areas or the
Leased Premises, or any portion thereof, shall belong to and be paid to Landlord, and Tenant hereby
assigns to Landlord all of its right, title and interest in any such award; provided, however, that
Tenant shall be entitled to receive any condemnation award that is made directly to Tenant (i)&nbsp;for
the taking of personal property, inventory or trade fixtures belonging to Tenant, (ii)&nbsp;for the
interruption of Tenant&#146;s business or its moving costs, (iii)&nbsp;for loss of Tenant&#146;s goodwill, or (iv)
for any temporary taking where this Lease is not terminated as a result of such taking. The rights
of Landlord and Tenant regarding any condemnation shall be determined as provided in this Article,
and each party hereby waives the provisions of Section&nbsp;1265.130 of the California Code of Civil
Procedure, and the provisions of any similar law hereinafter enacted, allowing either party to
petition the Superior Court to terminate this Lease and/or allocating condemnation awards between
Landlord and Tenant in the event of a taking of the Leased Premises.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 12: DEFAULT AND REMEDIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>12.1 EVENTS OF TENANT&#146;S DEFAULT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall be in default of its obligations under this Lease if any of the following events
occur:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Tenant shall have failed to pay Base Monthly Rent or any Additional Rent when due; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Tenant shall have done or permitted to have been done any act, use or thing in its use,
occupancy or possession of the Leased Premises or in its use of the Common Areas which is
prohibited by the terms of this Lease; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Tenant shall have failed to perform any term, covenant or condition of this Lease, except
those requiring the payment of Base Monthly Rent or Additional Rent, within ten days after written
notice from Landlord to Tenant specifying the nature of such failure and requesting Tenant to
perform same.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Tenant shall have sublet the Leased Premises or assigned or encumbered its interest in this
Lease in violation of the provisions contained in Article&nbsp;7, whether voluntarily or by operation of
Law; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. Tenant shall have abandoned the Leased Premises; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. Tenant or any Guarantor of this Lease shall have permitted or suffered the sequestration or
attachment of, or execution on, or the appointment of a custodian or receiver with respect to, all
or any substantial part of the property or assets of Tenant (or such Guarantor) or any property or
asset essential to the conduct of Tenant&#146;s (or such Guarantor&#146;s) business, and Tenant (or such
Guarantor) shall have failed to obtain a return or release of the same within thirty days
thereafter, or prior to sale pursuant to such sequestration, attachment or levy, whichever is
earlier; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. Tenant or any Guarantor of this Lease shall have made a general assignment of all or a
substantial part of its assets for the benefit of its creditors; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H. Tenant or any Guarantor of this Lease shall have allowed (or sought) to have entered
against it a decree or order which: (i)&nbsp;grants or constitutes an order for relief, appointment of a
trustee, or confirmation of a reorganization plan under the bankruptcy laws of the United States;
(ii)&nbsp;approves as property filed a petition seeking liquidation or reorganization under said
bankruptcy laws or any other debtor&#146;s relief law or similar statute of the United States or any
state thereof; or (iii)&nbsp;otherwise directs the winding up or liquidation of Tenant; provided,
however, if any decree or order was entered without Tenant&#146;s consent or over Tenant&#146;s objection,
Landlord may not terminate this Lease pursuant to this Subparagraph if such decree or order is
rescinded or reversed within thirty days after its original entry.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. Tenant or any Guarantor of this Lease shall have availed itself of the protection of any
debtor&#146;s relief law, moratorium law or other similar Law, which does not require the prior entry of
a decree or order.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>12.2 LANDLORD&#146;S REMEDIES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of any default by Tenant, and without limiting Landlord&#146;s right to
indemnification as provided in Article&nbsp;8.2, Landlord shall have the following remedies, in addition
to all other rights and remedies provided by law or otherwise provided in this Lease, to which
Landlord may resort cumulatively, or in the alternative:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Landlord may, at Landlord&#146;s election, keep this Lease in effect and enforce, by an action
at law or in equity, all of its rights and remedies under this Lease including, without limitation,
(i)&nbsp;the right to recover the rent and other sums as they become due by appropriate legal action,
(ii)&nbsp;the right to make payments required of Tenant, or perform Tenant&#146;s obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate of interest not
prohibited by Law from the date the sum is paid by Landlord until Landlord is reimbursed by Tenant,
and (iii)&nbsp;the remedies of injunctive relief and specific performance to prevent Tenant from
violating the terms of this Lease and/or to compel Tenant to perform its obligations under this
Lease, as the case may be.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Landlord may, at Landlord&#146;s election, terminate this Lease by giving Tenant written notice
of termination, in which event this Lease shall terminate on the date set forth for termination in
such notice. Any termination under this Subparagraph shall not relieve Tenant from its obligation
to pay to Landlord all Base Monthly Rent and Additional Rent then or thereafter due, or any other
sums due or thereafter accruing to Landlord, or from any claim against Tenant for damages
previously accrued or then or thereafter accruing. In no event shall any one or more of the
following actions by landlord, in the absence of a written election by Landlord to terminate this
Lease, constitute a termination of this Lease:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;Appointment of a receiver or keeper in order to protect Landlord&#146;s interest hereunder;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;Consent to any subletting of the Leased Premises or assignment of this Lease by Tenant,
whether pursuant to the provisions hereof or otherwise; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;Any other action by Landlord or Landlord&#146;s agents intended to mitigate the adverse effects
of any breach of this Lease by Tenant, including, without limitation, any action taken to maintain
and preserve the Leased Premises or any action taken to relet the Leased Premises, or any portion
thereof, for the account of Tenant and in the name of Tenant.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. In the event Tenant breaches this Lease and abandons the Leased Premises, Landlord may
terminate this Lease, but this Lease shall not terminate unless Landlord gives Tenant written
notice of termination. No act by or on behalf of Landlord intended to mitigate the adverse effect
of such breach, including those described by Subparagraphs B(1), (2)&nbsp;and (3)&nbsp;immediately preceding,
shall constitute a termination of Tenant&#146;s right to possession unless Landlord gives Tenant written
notice of termination. If Landlord does not terminate this Lease by giving written notice of
termination, Landlord may enforce all its rights and remedies under this lease, including the right
to recover rent as it becomes due under this Lease as provided in California Civil Code Section
1951.4, as in effect on the Effective Date of this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. In the event Landlord terminates this Lease, Landlord shall be entitled, at Landlord&#146;s
election, to damages in an amount as set forth in California Civil Code Section&nbsp;1951.2, an interest
rate equal to the maximum rate of interest then not prohibited by Law shall be used where
permitted. Such damages shall include, without limitation:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;The worth at the time of award of the amount by which the unpaid rent for the balance of
the term after the time of award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided, computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;Any other amount necessary to compensate Landlord for all detriment proximately caused by
Tenant&#146;s failure to perform Tenant&#146;s obligations under this lease, or which in the ordinary course
of things would be likely to result therefrom, including, without limitation, the following (i)
expenses for cleaning, repairing or restoring the Leased Premises; (ii)&nbsp;expenses for altering,
remodeling or otherwise improving the Leased Premises for the purpose of reletting, including
removal of existing leasehold improvements and/or installation of additional leasehold improvements
(regardless of how the same is funded, including reduction of rent, a direct payment or allowance
to a new tenant, or otherwise); (iii)&nbsp;broker&#146;s fees, advertising costs and other expenses of
reletting the Leased Premises; (iv)&nbsp;costs of carrying the Leased Premises, such as taxes, insurance
premiums, utility charges and security precautions; (v)&nbsp;expenses incurred in removing, disposing of
and/or storing any of Tenant&#146;s personal property, inventory or trade fixtures remaining therein;
(vi)&nbsp;attorney&#146;s fees, expert witness fees, court costs and other reasonable expenses incurred by
landlord (but not limited to taxable costs) in retaking possession of the Leased Premises,
establishing damages hereunder, and releasing the Leased Premises; and (vii)&nbsp;any other expenses,
costs or damages otherwise incurred or suffered as a result of Tenant&#146;s default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>12.3 LANDLORD&#146;S DEFAULT AND TENANT&#146;S REMEDIES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event Landlord fails to perform any of its obligations under this Lease, Landlord shall
nevertheless not be in default under the terms of this Lease until such time as Tenant shall have
first given Landlord written notice specifying the nature of such failure to perform its
obligations, and then only after Landlord shall have had a reasonable period of time following its
receipt of such notice within which to perform such obligations. In the event of Landlord&#146;s
default as above set forth, then, and only then, Tenant shall have the following remedies only:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Tenant may then proceed in equity or at law to compel Landlord to perform its obligations
and/or to recover damages proximately caused by such failure to perform (except as and to the
extent Tenant has waived its right to damages as provided in this Lease).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Tenant, at its option, may then cure any default of Landlord at Landlord&#146;s cost. If,
pursuant to this Subparagraph, Tenant reasonably pays any sum to any third party or does any act
that requires the payment of any sum to any third party at any time by reason of Landlord&#146;s
default, the sum paid by Tenant shall be immediately due from Landlord to Tenant at the time Tenant
supplies Landlord with an invoice therefore (provided such invoice sets forth and is accompanied by
a written statement of Tenant setting forth in reasonable detail the amount paid, the party to whom
it was paid, the date it was paid, and the reasons giving rise to such payment), together with
interest at twelve percent per annum from the date of such invoice until Tenant is reimbursed by
Landlord. Tenant may not offset such sums against any installment of rent due Landlord under the
terms of this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>12.4 LIMITATION ON TENANT&#146;S RECOURSE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Landlord is a corporation, trust, partnership, joint venture, unincorporated association,
or other form of business entity, Tenant agrees that (i)&nbsp;the obligations of Landlord under this
Lease shall not constitute personal obligations of the officers, directors, trustees, partners,
joint venturers, members, owners, stockholders, or other principals of such business entity and
(ii)&nbsp;Tenant shall have recourse only to the assets of such business entity for the satisfaction o
such obligations and not against the assets of such officers, directors, trustees, partners, joint
venturers, members, owners, stockholders or principals (other than to the extent of their interest
in the assets owned by such business entity). Additionally, if Landlord is a partnership, then
Tenant covenants and agrees:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. No partner of Landlord shall be sued or named as a party in any suit or action brought by
Tenant with respect to any alleged breach of this Lease (except to the extent necessary to secure
jurisdiction over the partnership and then only for that sole purpose);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. No service of process shall be made against any partner of Landlord except for the sole
purpose of securing jurisdiction over the partnership; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. No writ of execution shall be levied against the assets of any partner of Landlord other
than to the extent of his interest in the assets of the partnership.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>12.5 TENANT&#146;S WAIVER</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord and Tenant agree that the provisions of Paragraph&nbsp;12.3 above are intended to
supersede and replace the provisions of California Civil Code 1932(1), 1941 and 1942, and
accordingly, Tenant hereby waives the provisions of Section&nbsp;1932(1), 1941 and 1942 of the
California Civil Code and/or any similar or successor Law regarding Tenant&#146;s right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from the rent due under this
Lease. Tenant hereby waives any right to redemption or relief from forfeiture under the Laws of
the State of California, or under any other present or future Law, in the event Tenant is evicted
or Landlord takes possession of the Leased Premises by reason of any default by Tenant.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 13: GENERAL PROVISIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.1 TAXES ON TENANT&#146;S PROPERTY</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall pay before delinquency any and all taxes, assessments, license fees, use fees,
permit fees and public charges of whatever nature or description levied, assessed or imposed
against
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Tenant or Landlord by a governmental agency arising out of, caused by reason of or based upon
Tenant&#146;s estate in this Lease, Tenant&#146;s ownership of property, improvements made by Tenant to the
Leased Premises, improvements made by Landlord for Tenant&#146;s use within the Leased Premises, Tenants
use (or estimated use) of public facilities or services or Tenant&#146;s consumption (or estimated
consumption) of public utilities, energy, water or other resources. On demand by Landlord, Tenant
shall furnish Landlord with satisfactory evidence of these payments. If any such taxes,
assessments, fees or public charges are levied against Landlord, Landlord&#146;s property, the Building,
or the Project, or if the assessed value of the Building or the Project is increased by the
inclusion therein of a value placed upon the same, then Landlord, after giving written notice to
Tenant, shall have the right, regardless of the validity thereof, to pay such taxes, assessment,
fee or public charge and bill Tenant, as Additional Rent, the amount of such taxes, assessment, fee
or public charge so paid on Tenant&#146;s behalf. Tenant shall, within ten days from the date it
receives an invoice from Landlord setting forth the amount of such taxes, assessment, fee or public
charge so levied, pay to Landlord, as Additional Rent, the amount set forth in said invoice.
Failure by Tenant to pay the amount so invoiced within said ten-day period shall be conclusively
deemed a default by Tenant under this Lease. Tenant shall have the right, and with Landlord&#146;s full
cooperation if Tenant is not then in default under the terms of this Lease, to bring suit in any
court of competent jurisdiction to recover from the taxing authority the amount of any such taxes,
assessment, fee or public charge so paid.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.2 HOLDING OVER</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Lease shall terminate without further notice on the Lease Expiration Date (as set forth
in Article&nbsp;1). Any holding over by Tenant after expiration of the Lease Term shall neither
constitute a renewal nor extension of this Lease nor give Tenant any rights in or to the Leased
Premises except as expressly provided in this Paragraph. Any such holding over shall be deemed an
unlawful detainer of the Leased Premises unless Landlord has consented to same. Any such holding
over to which Landlord has consented shall be construed to be a tenancy from month to month, on the
same terms and conditions herein specified insofar as applicable, except that the Base Monthly Rent
shall be increased to an amount equal to one hundred fifty percent of the Base Monthly Rent payable
during the last full month immediately preceding such holding over.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.3 SUBORDINATION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Lease is subject and subordinate to all deeds of trust, which affect the Building and are
of public record as of the Effective Date of this Lease, and to all renewals, modifications,
consolidations, replacements and extensions thereof. However, if any Lender holding any such deed
of trust shall advise Landlord that it desires or requires this Lease to be made prior and superior
thereto, then, upon written request of Landlord to Tenant, Tenant shall promptly execute,
acknowledge and deliver any and all documents or instruments which Landlord and such Lender deem
necessary or desirable to make this Lease prior thereto. Tenant hereby consents to Landlord&#146;s
encumbering the Building as security for future loans on such terms as Landlord shall desire, which
future deeds of trust shall be subject and subordinate to this Lease. However, if any Lender
holding such future deed of trust shall desire or require that this Lease be made subject and
subordinate to such future deed of trust, then Tenant agrees, within ten days after Landlord&#146;s
written request therefore, to execute, acknowledge and deliver to Landlord any and all documents or
instruments requested by Landlord or such Lender as may be necessary or proper to assure the
subordination of this Lease to such future deed of trust; but only if such Lender agrees to
recognize Tenant&#146;s rights under this Lease and not to disturb Tenant&#146;s quiet possession of the
Leased Premises so long as Tenant is not in default under this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.4 TENANT&#146;S ATTORNMENT UPON FORECLOSURE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall, upon request, attorn (i)&nbsp;to any purchaser of the Building at any foreclosure
sale or private sale conducted pursuant to any security instrument encumbering the Building, or
(ii)&nbsp;to any grantee or transferee designated in any deed given in lieu of foreclosure of any
security interest encumbering the Building.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.5 LENDER PROTECTION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of any default on the part of the Landlord, Tenant will give notice by certified
mail to any Lender who shall have requested, in writing, to Tenant that it be provided with such
notice, and Tenant shall offer such Lender a reasonable opportunity to cure the default, including
time to obtain possession of the Leased Premises by power of sale of judicial foreclosure or other
appropriate legal proceedings if reasonably necessary to effect a cure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.6 ESTOPPEL CERTIFICATES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant will, following any request by Landlord, promptly execute and deliver to Landlord an
estoppel certificate (i)&nbsp;certifying that this Lease is unmodified and in full force and effect, or,
if modified, stating the nature of such modification and certifying that this Lease, as so
modified, is in full force and effect, (ii)&nbsp;stating the date to which the rent and other charges
are paid in advance, if any, (iii)&nbsp;acknowledging that there are not, to Tenant&#146;s knowledge, any
uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed,
and (iv)&nbsp;certifying such other information about this Lease as may be reasonably requested by
Landlord. Tenant&#146;s failure to execute and deliver such estoppel certificate within ten days after
Landlord&#146;s request therefore shall be a material default by Tenant under this Lease, and Landlord
shall have all of the rights and remedies available to Landlord as Landlord would otherwise have in
the case of any other material default by Tenant, including the right to terminate this Lease and
sue for damages proximately caused thereby, it being agreed and understood by Tenant that Tenant&#146;s
failure to so deliver such estoppel certificate in a timely manner could result in Landlord being
unable to perform committed obligations to other third parties which were made by Landlord in
reliance upon this covenant of Tenant. Landlord and Tenant understand that any statement delivered
pursuant to this Paragraph may be relied upon by any Lender or purchaser or prospective Lender or
purchaser of the Building, the Project, or any interest therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.7 TENANTS&#146; FINANCIAL INFORMATION</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall, within ten business days after Landlord&#146;s request therefore, deliver to Landlord
a copy of a current financial statement and any such other information reasonably requested by
Landlord regarding Tenant&#146;s financial condition. Landlord shall be entitled to disclose such
financial statements or other information to its Lender, to any present or prospective principal of
or investor in Landlord, or to any prospective Lender or purchaser of the Building, the Project or
any portion thereof or interest therein. Any such financial statement or other information which
is marked &#147;confidential&#148; or &#147;company secrets&#148; (or is otherwise similarly marked by Tenant) shall be
confidential and shall not be disclosed by Landlord to any third party except as specifically
provided in this Paragraph, unless the same becomes a part of the public domain without the fault
of Landlord.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.8 TRANSFER BY LANDLORD</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord and its successors in interest shall have the right to transfer their interest in the
Building, the Project, or any portion thereof at any time and to any person or entity. In the
event of any such transfer, the Landlord originally named herein (and in the case of any subsequent
transfer, the transferor), from the date of such transfer, (i)&nbsp;shall be automatically relieved,
without any further act by any person or entity, of all liability for the performance of the
obligations of the Landlord hereunder which may accrue after the date of such transfer and (ii)
shall be relieved of all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to assume and perform all
such prior obligations of the Landlord hereunder. Tenant shall attorn to any such transferee.
After the date of any such transfer, the term &#147;Landlord&#148; as used herein shall mean the transferee
of such interest in the Building or the Project.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.9 FORCE MAJEURE</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of each of the parties under this Lease (other than the obligation to pay
money) shall be temporarily excused if such party is prevented or delayed in performing such
obligation by reason of any strikes, lockouts or labor disputes; inability to obtain labor,
materials, fuels or reasonable substitutes therefore; governmental restrictions, regulations,
controls, action or inaction; civil commotion; inclement weather, fire or other acts of God; or
other causes (except financial inability) beyond the reasonable control of the party obligated to
perform (including acts or omissions of the other party) for a period equal to the period of any
such prevention, delay or stoppage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.10 NOTICES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any notice required or desired to be given by a party regarding this Lease shall be in writing
and shall be personally served, or in lieu of personal service may be given by depositing such
notice in the United States mail, registered or certified, postage prepaid, addressed to the other
party as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. If addressed to Landlord, to Landlord at its Address for Notices (as set forth in Article
1).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. If addressed to Tenant, to Tenant at its Address for Notices (as set forth in Article&nbsp;1).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any notice given by registered mail shall be deemed to have been given on the third business
day after its deposit in the United States mail. Any notice given by certified mail shall be
deemed given on the date receipt was acknowledged to the postal authorities. Any notice given by
mail other than registered or certified mail shall be deemed given only if received by the other
party, and then on the date of receipt. Each party may, by written notice to the other in the
manner aforesaid, change the address to which notices addressed to it shall thereafter be mailed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.11 ATTORNEY&#146;S FEES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event any party shall bring any action, arbitration proceeding or legal proceeding
alleging a breach of any provision of this Lease, to recover rent, to terminate this Lease, or to
enforce, protect, determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover from the
non-prevailing party as a part of such action or proceeding, or in a separate action for that
purpose brought within one year from the determination of such proceeding, reasonable attorney&#146;s
fees, expert witness fees, court costs and other reasonable expenses incurred by the prevailing
party. In the event that Landlord shall be required to retain counsel to enforce any provision of
this Lease, and if Tenant shall thereafter cure (or desire to cure) such default, Landlord shall be
conclusively deemed the prevailing party and Tenant shall pay to Landlord all attorney&#146;s fees,
expert witness fees, court costs and other reasonable expenses so incurred by Landlord promptly
upon demand. Landlord may enforce this provision by either (i)&nbsp;requiring Tenant to pay such fees
and costs as a condition to curing its default or (ii)&nbsp;bringing a separate action to enforce such
payment, it being agreed by and between Landlord and Tenant that Tenant&#146;s failure to pay such fees
and costs upon demand shall constitute a breach of this Lease in the same manner as a failure by
Tenant to pay the Base Monthly Rent, giving Landlord the same rights and remedies as if Tenant
failed to pay the Base Monthly Rent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.12 DEFINITIONS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any term that is given a special meaning by any provision in this Lease shall, unless
otherwise specifically stated, have such meaning whenever used in this Lease or in any Addenda or
Amendment hereto. In addition to the terms defined in Article&nbsp;1, the following terms shall have
the following meaning:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. REAL PROPERTY TAXES: The term &#147;Real Property Tax&#148; or &#147;Real Property Taxes&#148; shall each mean
(i)&nbsp;all taxes, assessments, levies and other charges of any kind or nature whatsoever, general and
special, foreseen and unforeseen (including all installments of principal and interest required to
pay any general or special assessments for public improvements and any increases resulting from
reassessments caused by any change in ownership or new construction), now or hereafter imposed by
any governmental or quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed for whatever reason against the
Project or any portion thereof, or Landlord&#146;s interest therein, or the fixtures, equipment and
other property of Landlord that is an integral part of the Project and located thereon, or
Landlord&#146;s business of owning, leasing or managing the Project or the gross receipts, income, or
rentals from the Project: (ii)&nbsp;all charges, levies or fees imposed by any governmental authority
against Landlord by reason of or based upon the use of or number of parking spaces within the
Project, the amount of public services or public utilities used or consumed (e.g. water, gas,
electricity, sewage, or surface water disposal) at the Project, the number of persons employed by
tenants of the Project, the size (whether measured in area, volume, number of tenants or whatever)
or the value of the Project, or the type of use or uses conducted within the Project; and (iii)&nbsp;all
costs and fees (including attorneys&#146; fees) incurred by Landlord in contesting any Real Property Tax
and in negotiating with public authorities as to any Real Property Tax. If, at any time during the
Lease Term, the taxation or assessment of the Project prevailing as of the Effective Date of this
Lease shall be altered so that in lieu of or in addition to any Real Property Tax described above
there shall be levied, assessed or imposed (whether by reason of a change in the method of taxation
or assessment, creation of a new tax or charge, or any other cause) an alternate, substitute, or
additional tax or charge (i)&nbsp;on the value, size, use or occupancy of the Project or Landlord&#146;s
interest therein or (ii)&nbsp;on or measured by the gross receipts, income or rental from the Project,
or on Landlord&#146;s business of owning, leasing or managing the Project or (iii)&nbsp;computed in any
manner with respect to the operation of the Project, then any such
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">tax or charge, however designated, shall be included within the meaning of the terms &#147;Real
Property Tax&#148; or &#147;Real Property Taxes&#148; for purposes of this Lease. If any Real Property Tax is
partly based upon property or rents unrelated to the Project, then only that part of such Real
Property Tax that is fairly allocable to the Project shall be included within the meaning of the
terms &#147;Real Property Tax&#148; or &#147;Real Property Taxes&#148;. Notwithstanding the foregoing, the terms &#147;Real
Property Tax&#148; or &#147;Real Property Taxes&#148; shall not include estate, inheritance, transfer, gift or
franchise taxes of Landlord or the federal or state income tax imposed on Landlord&#146;s income from
all sources.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. LANDLORD&#146;S INSURANCE COSTS: The term &#147;Landlord&#146;s Insurance Costs&#146; shall mean the costs to
Landlord to carry and maintain the policies of fire and property damage insurance for the Project
and general liability insurance required, or permitted, to be carried by Landlord pursuant to
Article&nbsp;9, together with any deductible amounts paid by Landlord upon the occurrence of any insured
casualty or loss.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. PROJECT MAINTENANCE COSTS: The term &#147;Project Maintenance Costs&#148; shall mean all costs and
expenses (except Landlord&#146;s Insurance Costs and Real Property Taxes) paid or incurred by Landlord
in protecting, operating, maintaining, repairing and preserving the Project and all parts thereof,
including without limitation, (i)&nbsp;professional management fees (not to exceed three percent of the
Project&#146;s scheduled gross rental income), (ii)&nbsp;the amortizing portion of any costs incurred by
Landlord in the making of any modifications, alterations or improvements required by any
governmental authority as set forth in Article&nbsp;6, which are so amortized during the Lease Term, and
(iii)&nbsp;such other costs as may be paid or incurred with respect to operating, maintaining and
preserving the Project, such as repairing and resurfacing the exterior surfaces of the buildings
(including roofs), repairing and resurfacing paved areas, repairing structural parts of the
building, and replacing, when necessary, electrical, plumbing, heating, ventilating and air
conditioning systems serving the buildings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. READY FOR OCCUPANCY: The term &#147;Ready for Occupancy&#148; shall mean the date upon which (i)&nbsp;the
Leased Premises are available for Tenant&#146;s occupancy in a broom clean condition and (ii)&nbsp;the
improvements, if any, to be made to the Leased Premises by Landlord as a condition to Tenant&#146;s
obligation to accept possession of the Leased Premises have been substantially completed and the
appropriate governmental building department (i.e. the City building department, if the Project is
located within a City, or otherwise the County building department) shall have approved the
construction of the improvements as complete or is willing to so approve the construction of the
improvements as complete subject only to compliance with specified conditions which are the
responsibility of Tenant to satisfy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. TENANT&#146;S PROPORTIONATE SHARE: The term &#147;Tenant&#146;s Proportionate Share&#148; or &#147;Tenant&#146;s Share&#148;,
as used with respect to an item pertaining to the Building, shall each mean that percentage
obtained by dividing the leasable square footage contained within the Leased Premises (as set forth
in Article&nbsp;1) by the total leasable square footage contained within the Building as the same from
time to time exists or, as used with respect to an item pertaining to the Project, shall each mean
that percentage obtained by dividing the leasable square footage contained within the Leased
Premises (as set forth in Article&nbsp;1) by the total leasable square footage contained within the
Project as the same from time to time exists, unless, as to any given item, such a percentage
allocation unfairly burdens or benefits a given tenant(s), in which case Landlord shall have the
exclusive right to equitably allocate such item so as to not unfairly burden or benefit any given
tenant(s). Landlord&#146;s determination of any such special allocation shall be final and binding upon
Tenant unless made in bad faith.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. BUILDING&#146;S PROPORTIONATE SHARE: The term &#147;Building&#146;s Proportionate Share&#148; or &#147;Building&#146;s
Share&#148; shall each mean that percentage which is obtained by dividing the leasable square footage
contained within the Building by the leasable square footage contained within all buildings located
within the Project, unless, as to any given item, such a percentage allocation unfairly burdens or
benefits a given building(s), in which case Landlord shall have the exclusive right to equitably
allocate such item so as to not unfairly burden or benefit any given building(s). Landlord&#146;s
determination of any such special allocation shall be final and binding upon Tenant unless made in
bad faith.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. LAW: The term &#147;Law&#148; shall mean any judicial decision and any statute, constitution,
ordinance, resolution, regulation, rule, administrative order, or other requirement of any
municipal, county, state, federal, or other governmental agency or authority having jurisdiction
over the parties to this Lease, the Leased Premises, the Building or the Project, or any of them in
effect either at the Effective Date of this Lease or at any time during the Lease Term, including,
without limitation, any regulation, order, or policy of any quasi-official entity or body (e.g. a
board of fire examiners or a public utility or special district).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H. LENDER: The term &#147;Lender&#148; shall mean the holder of any Note or other evidence of
indebtedness secured by the Project or any portion thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. RENT: The term &#147;rent&#148; shall mean collectively Base Monthly Rent and all Additional Rent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.13 GENERAL WAIVERS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One party&#146;s consent to or approval of any act by the other party requiring the first party&#146;s
consent or approval shall not be deemed to waive or render unnecessary the first party&#146;s consent to
or approval of any subsequent similar act by the other party. No waiver of any provision hereof or
any breach of any provision hereof shall be effective unless in writing and signed by the waiving
party. The receipt by Landlord of any rent or payments with or without knowledge of the breach of
any other provision hereof shall not be deemed a waiver of any such breach. No waiver of any
provision of this Lease shall be deemed a continuing waiver unless such waiver specifically states
so in writing and is signed by both Landlord and Tenant. No delay or omission in the exercise of
any right or remedy or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by either party of any breach of any provision of this Lease shall not be
deemed to be a waiver of any subsequent breach of the same or any other provisions herein
contained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>13.14 MISCELLANEOUS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Should any provision of this Lease prove to be invalid or illegal, such invalidity or
illegality shall in no way affect, impair or invalidate any other provision hereof, and such
remaining provisions shall remain in full force and effect. Time is of the essence with respect to
the performance of every provision of this Lease in which time of performance is a factor. Any
copy of this Lease, which is executed by the parties, shall be deemed an original for all purposes.
This Lease shall, subject to the provisions regarding assignment, apply to and bind the respective
heirs, successors, executors, administrators and assigns of Landlord and Tenant. The term &#147;party&#148;
shall mean Landlord or Tenant as the context implies. If Tenant consists of more than one person
or entity, then all members of Tenant shall be jointly and severally liable hereunder. This Lease
shall be construed and enforced in accordance with the Laws of the State in which the Leased
Premises are located. The language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning, and not strictly for or against either Landlord or Tenant.
The captions used in this Lease are for convenience
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">only and shall not be considered in the construction or interpretation of any provision hereof.
When the context of this Lease requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the plural. The terms
&#147;must&#148;, &#147;shall&#148;, &#147;will&#148; and &#147;agree&#148; are mandatory. The term &#147;may&#148; is permissive. When a party is
required to do something by this Lease, it shall do so at its sole cost and expense without right
of reimbursement from the other party unless specific provision is made therefore. Where Tenant is
obligated not to perform any act or is not permitted to perform any act, Tenant is also obligated
to restrain any others reasonably within its control, including agents, invitees, contractors,
subcontractors and employees, from performing said act. Landlord shall not become or be deemed a
partner or a joint venturer with Tenant by reason of any of the provisions of this Lease.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 14: CORPORATE AUTHORITY, BROKERS AND ENTIRE AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>14.1 CORPORATE AUTHORITY</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Tenant is a corporation, each individual executing this Lease on behalf of said Corporation
represents and warrants that Tenant is validly formed and duly authorized and existing, that Tenant
is qualified to do business in the State in which the Leased Premises are located, that Tenant has
the full right and legal authority to enter into this Lease, that he is duly authorized to execute
and deliver this Lease on behalf of Tenant in accordance with the bylaws and/or a board of
directors&#146; resolution of Tenant, and that this Lease is binding upon Tenant in accordance with its
terms. Tenant shall, within thirty days after execution of this Lease, deliver to Landlord a
certified copy of the resolution of its Board of Directors authorizing or ratifying the execution
of this Lease, and if Tenant fails to do so, Landlord at its sole election may elect to (i)&nbsp;extend
the intended Commencement Date by such number of days that Tenant shall have delayed in so
delivering such corporate resolution to Landlord or (ii)&nbsp;terminate this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>14.2 BROKERAGE COMMISSIONS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant warrants that it has not had any dealings with any real estate broker(s), leasing
agent(s), finder(s) or salesmen, other than those persons or entities named in Article&nbsp;1 as the
&#147;Brokers&#148; with respect to the Lease by it of the Leased Premises pursuant to this Lease, and that
it will indemnify, defend with competent counsel, and hold Landlord harmless from any liability for
the payment of any real estate brokerage commissions, leasing commissions or finder&#146;s fees claimed
by any other real estate broker(s), leasing agent(s), finder(s) or salesmen to be earned or due and
payable by reason of Tenant&#146;s agreement or promise (implied or otherwise) to pay (or have Landlord
pay) such a commission or finder&#146;s fee by reason of its leasing the Leased Premises pursuant to
this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>14.3 ENTIRE AGREEMENT</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Lease, the Exhibits (as described in Article&nbsp;1) and the Addenda (as described in Article
1), which Exhibits and Addenda are by this reference incorporated herein, constitute the entire
agreement between the parties, and there are no other agreements, understanding or representations
between the parties relating to the Lease by Landlord of the Leased Premises to Tenant, except as
expressed herein. No subsequent changes, modifications or additions to this Lease shall be binding
upon the parties unless in writing and signed by both Landlord and Tenant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>14.4 LANDLORD&#146;S REPRESENTATIONS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant acknowledges that neither Landlord nor any of its agents made any representations or
warranties respecting the Project, the Building or the Leased Premises, upon which Tenant relied in
entering into this Lease, which are not expressly set forth in this Lease. Tenant further
acknowledges that neither Landlord nor any of its agents made any representations as to (i)&nbsp;whether
the Leased Premises may be used for Tenant&#146;s intended use under existing Law or (ii)&nbsp;the
suitability of the Leased Premises for the conduct of Tenant&#146;s business or (iii)&nbsp;the exact square
footage of the Leased Premises, and that Tenant relied solely upon its own investigations
respecting said matters. Tenant expressly waives any and all claims for damage by reason of any
statement, representation, warranty, promise or other agreement of Landlord or Landlord&#146;s agent(s),
if any, not contained in this Lease or in any Addenda hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the respective dates
below set forth with the intent to be legally bound thereby as of the Effective Date of this Lease
first above set forth.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AS LANDLORD:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tasman V, LLC</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9/19/06</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jack E. Horton</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AS TENANT:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Adeza Biomedical Corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9/15/06</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mark D. Fischer-Colbrie</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Vice President, Finance and
Administration</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">and Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Tenant is a CORPORATION, the authorized officers must sign on behalf of the Corporation
and indicate the capacity in which they are signing. This Lease must be executed by the Chairman
of the Board, President or Vice-President, and the Secretary, Assistant Secretary, the Chief
Financial Officer or Assistant Treasurer, unless the bylaws or a resolution of the Board of
Directors shall otherwise provide, in which event a certified copy of the bylaws or a certified
copy of the resolution, as the case may be, must be attached to this Lease.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADDENDUM TO INDUSTRIAL SPACE LEASE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This Addendum relates to that Net Industrial Space Lease (&#147;Lease&#148;) dated <U><B>July&nbsp;12, 2006</B>
</U>for reference purposes, between <U><B>Tasman V, LLC</B></U>, as Landlord and <U><B>Adeza Biomedical
Corporation</B></U>, as Tenant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Addendum shall be part of the Lease and shall include the following provisions:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>15.1 PAYMENT OF PROJECT MAINTENANCE COSTS</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall have the option to deliver to Tenant a written estimate of Tenant&#146;s share of
the Project Maintenance Costs for the ensuing lease year. In the event that Landlord delivers such
a written estimate to Tenant, Tenant shall then pay to Landlord the estimated amount of the Project
Maintenance Costs in twelve (12)&nbsp;equal installments, in advance, commencing on the first day of
each month provided that such written notice shall be delivered to Tenant ten (10)&nbsp;days in advance
of the due date. Within sixty (60)&nbsp;days after the end of each lease year, Landlord shall furnish
to Tenant a statement showing in reasonable details the actual Project Maintenance Costs incurred
by Landlord during such lease year. If Tenant paid more than Tenant&#146;s proportionate share,
Landlord shall either credit the amount of such overpayment toward the next subsequent payment or
payments due for Project Maintenance Costs that would otherwise become due, or refund in cash the
amount of such overpayment. If Tenant did not pay Tenant&#146;s proportionate share in full, then
Tenant shall pay to Landlord the sum of such underpayment within ten (10)&nbsp;days from Landlord&#146;s
written demand. Landlord reserves the right to change from time to time the method of billing
Tenant for Tenant&#146;s proportionate share of the Project Maintenance Costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>15.2 CONDITION OF THE PREMISES</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant has inspected the premises and agrees to accept possession of the premises in the &#147;as
is&#148; condition, without warranty, expressed or implied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>15.3 OPTION TO EXTEND</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provided Tenant is not in default under any provision of the Lease, Landlord hereby grants to
Tenant two one year options to extend the term of this Lease for an additional term when the
existing term expires, on the terms and conditions set forth in this paragraph. Tenant may
exercise this option by giving Landlord written notice of its intention not less than sixty (60)
days prior to the expiration of the existing term of this Lease. If this Option is exercised, the
Base Monthly Rent for the Premises shall equal the then current fair market monthly rent (&#147;Fair
Market Rent&#148;), which shall not be less than $<U><B>19,860.00</B></U> per month for the Premises as of the
commencement date of the applicable extended term. If the parties cannot agree on the amount of the
&#147;Fair Market Rent&#148; and the annual adjustment to such Fair Market Rent within sixty (60)&nbsp;days prior
to the commencement of such extended term, then the Fair Market Rent and the annual adjustment
thereto shall be determined by an appraisal. All other terms and conditions contained in the Lease
and this Addendum, as the same may be amended from time to time by the parties in accordance with
the provisions of the Lease, shall remain in full force and effect and shall apply during the
Option term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the fair market rental value for the Premises needs to be determined by appraisal, Landlord
and Tenant shall either agree to select one real estate appraiser or three real estate appraisers.
Any real estate appraiser selected shall be a member of the American Institute of Real Estate
Appraisers, shall have at least five (5)&nbsp;years experience appraising commercial space located in
the vicinity of the Premises, and shall act in accordance with the rules of the American Institute
of Real Estate Appraisers. The Fair Market Rent shall be based on rental of space of the same age,
construction, size and location as the Premises with the improvements installed therein. If only
one appraiser is selected, then each party shall pay one-half of the fees and expenses of that
appraiser. If proceeding with three appraisers, each party shall select one appraiser, who in turn
shall select the third appraiser. If three appraisers are selected, each party shall bear the fees
and expenses of the appraiser it selects and one-half of the fees and expenses of the third
appraiser.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>15.4 EFFECT OF ADDENDUM</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each term used herein with initial capital letters shall have the meaning ascribed to such
term in the Lease unless specifically otherwise defined herein. In the event of any inconsistency
between this Addendum and the Lease, the terms of this Addendum shall prevail.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">LANDLORD:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">TENANT:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Tasman V, LLC</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Adeza Biomedical Corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Jack E. Horton</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Mark D. Fischer-Colbrie</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mark D. Fischer-Colbrie</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap><I>Vice President, Finance and
Administration and<BR>Chief Financial Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9/19/06
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Date:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9/15/06</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>f24446exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="121"></A>
</DIV>
<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO RULE 13a-14(a)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Emory V. Anderson, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Quarterly Report of Adeza Biomedical Corporation;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officers 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 the registrant&#146;s board of directors (or persons performing the equivalent
function):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">November&nbsp;7, 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Emory V. Anderson
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Emory V. Anderson
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Chief Executive Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>f24446exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="122"></A>
</DIV>
<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;31.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO RULE 13a-14(a)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Mark D. Fischer-Colbrie, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Quarterly Report of Adeza Biomedical Corporation;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officers 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 the registrant&#146;s board of directors (or persons performing the equivalent
function):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">November&nbsp;7, 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Mark D. Fischer-Colbrie
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Mark D. Fischer-Colbrie
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Chief Financial Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>f24446exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="123"></A>
</DIV>
<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADEZA BIOMEDICAL CORPORATION</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Quarterly Report of Adeza Biomedical Corporation (the &#147;Company&#148;) on
Form 10-Q for the period ended September&nbsp;30, 2006, as filed with the Securities and Exchange
Commission on the date hereof (the &#147;Report&#148;), I, Emory V. Anderson, President and Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Emory V. Anderson
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Emory V. Anderson
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>President and Chief Executive Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">November&nbsp;7, 2006
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>6
<FILENAME>f24446exv32w2.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left">
<A name="124"></A>
</DIV>
<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;32.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADEZA BIOMEDICAL CORPORATION</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Quarterly Report of Adeza Biomedical Corporation (the &#147;Company&#148;) on
Form 10-Q for the period ended September&nbsp;30, 2006, as filed with the Securities and Exchange
Commission on the date hereof (the &#147;Report&#148;), I, Mark D. Fischer-Colbrie, Vice President of Finance
and Administration and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Mark D. Fischer-Colbrie
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Mark D. Fischer-Colbrie
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3"><I>Vice President, Finance and Administration and</I></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Chief Financial Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">November&nbsp;7, 2006
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SUBMISSION>
