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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from                      to
 Commission File Number: 0-13071
 INTERPHASE CORPORATION
  Texas
(State or other jurisdiction of incorporation or organization)
    
    75-1549797
(I.R.S. Employer Identification No.)
 Parkway Centre I
2901 North Dallas Parkway, Suite 200
Plano, Texas 75093
 (214) 654-5000
 þ o
  o o þ
 o þ




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##### 



INTERPHASE CORPORATION
 Index to Form 10-Q
Quarterly Period Ended September 30, 2006
 Part I  Financial InformationItem 1. Condensed Consolidated Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of September 30, 2006
and December 31, 2005
    
    
    2Condensed Consolidated Statements of Operations for the three
months and nine months ended September 30, 2006 and 2005
    
    
    3Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2006 and 2005
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    16Part II  Other InformationItem 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3. Defaults Upon Senior Securities
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    17Rule 13a-14(a)/15d-14(a) CertificationRule 13a-14(a)/15d-14(a) CertificationSection 1350 CertificationSection 1350 Certification




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##### Table of Contents



PART I
FINANCIAL INFORMATION
 
 Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 INTERPHASE CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 
 September 30,
    
    December 31,2006
    
    2005ASSETSCash and cash equivalents
    
    $
    7,788
    
    
    $
    3,180Marketable securities
    
    
    14,042
    
    
    
    15,388Trade accounts receivable, less allowances
of $149 and $126, respectively
    
    
    5,537
    
    
    
    5,195Inventories
    
    
    2,357
    
    
    
    3,109Prepaid expenses and other current assets
    
    
    838
    
    
    
    754Total current assets
    
    
    30,562
    
    
    
    27,626Machinery and equipment
    
    
    6,041
    
    
    
    5,899Leasehold improvements
    
    
    418
    
    
    
    411Furniture and fixtures
    
    
    547
    
    
    
    5457,006
    
    
    
    6,855Less-accumulated depreciation and amortization
    
    
    (6,122
    )
    
    
    (5,697
    )Total property and equipment, net
    
    
    884
    
    
    
    1,158Capitalized software, net
    
    
    663
    
    
    
    229Other assets
    
    
    189
    
    
    
    181Total assets
    
    $
    32,298
    
    
    $
    29,194LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesAccounts payable
    
    $
    954
    
    
    $
    255Deferred revenue
    
    
    126
    
    
    
    118Accrued liabilities
    
    
    919
    
    
    
    1,757Accrued compensation
    
    
    1,899
    
    
    
    942Total current liabilities
    
    
    3,898
    
    
    
    3,072Other non-current liabilities
    
    
    
    
    
    
    34Deferred lease obligations
    
    
    86
    
    
    
    90Long-term debt
    
    
    3,500
    
    
    
    3,500Total liabilities
    
    
    7,484
    
    
    
    6,696Commitments and ContingenciesShareholders EquityCommon stock, $0.10 par value; 100,000,000
shares authorized; 6,022,458 and
5,901,895 shares issued and outstanding,
respectively
    
    
    602
    
    
    
    590Additional paid in capital
    
    
    39,408
    
    
    
    38,817Retained deficit
    
    
    (14,517
    )
    
    
    (16,145
    )Cumulative other comprehensive loss
    
    
    (679
    )
    
    
    (764
    )Total shareholders equity
    
    
    24,814
    
    
    
    22,498Total liabilities and shareholders equity
    
    $
    32,298
    
    
    $
    29,194
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 2




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INTERPHASE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Revenues
    
    $
    7,758
    
    
    $
    6,924
    
    
    $
    25,280
    
    
    $
    23,296Cost of sales
    
    
    3,691
    
    
    
    3,433
    
    
    
    11,692
    
    
    
    11,003Gross margin
    
    
    4,067
    
    
    
    3,491
    
    
    
    13,588
    
    
    
    12,293Research and development
    
    
    2,019
    
    
    
    1,898
    
    
    
    5,865
    
    
    
    6,091Sales and marketing
    
    
    1,222
    
    
    
    1,680
    
    
    
    4,040
    
    
    
    4,756General and administrative
    
    
    851
    
    
    
    885
    
    
    
    3,047
    
    
    
    2,728Total operating expenses
    
    
    4,092
    
    
    
    4,463
    
    
    
    12,952
    
    
    
    13,575(Loss) income from operations
    
    
    (25
    )
    
    
    (972
    )
    
    
    636
    
    
    
    (1,282
    )Interest income, net
    
    
    189
    
    
    
    104
    
    
    
    429
    
    
    
    269Other (expense) income, net
    
    
    (46
    )
    
    
    (8
    )
    
    
    314
    
    
    
    (62
    )Income (loss) before income tax
    
    
    118
    
    
    
    (876
    )
    
    
    1,379
    
    
    
    (1,075
    )Income tax (benefit) provision
    
    
    (57
    )
    
    
    36
    
    
    
    (249
    )
    
    
    153Net income (loss)
    
    $
    175
    
    
    $
    (912
    )
    
    $
    1,628
    
    
    $
    (1,228
    )Net income (loss) per share:Basic EPS
    
    $
    0.03
    
    
    $
    (0.15
    )
    
    $
    0.28
    
    
    $
    (0.21
    )Diluted EPS
    
    $
    0.03
    
    
    $
    (0.15
    )
    
    $
    0.27
    
    
    $
    (0.21
    )Weighted average common shares
    
    
    5,857
    
    
    
    5,895
    
    
    
    5,832
    
    
    
    5,823Weighted average common and
dilutive shares
    
    
    6,330
    
    
    
    5,895
    
    
    
    6,105
    
    
    
    5,823
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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INTERPHASE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Nine Months EndedSeptember 30,2006
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    1,628
    
    
    $
    (1,228
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Provision for uncollectible accounts and returns
    
    
    23
    
    
    
    57Provision for excess and obsolete inventories
    
    
    400
    
    
    
    600Depreciation and amortization
    
    
    491
    
    
    
    612Amortization of restricted stock
    
    
    211
    
    
    
    83Change in assets and liabilities:Trade accounts receivable
    
    
    (365
    )
    
    
    1,064Inventories
    
    
    352
    
    
    
    (305
    )Prepaid expenses and other current assets
    
    
    (81
    )
    
    
    (601
    )Income taxes receivable
    
    
    
    
    
    
    235Other assets
    
    
    1
    
    
    
    Accounts payable, deferred revenue and accrued liabilities
    
    
    (148
    )
    
    
    821Accrued compensation
    
    
    902
    
    
    
    (322
    )Other non-current liabilities
    
    
    (34
    )
    
    
    Deferred lease obligations
    
    
    (4
    )
    
    
    20Net cash provided by operating activities
    
    
    3,376
    
    
    
    1,036Cash flows from investing activities:Purchase of property and equipment
    
    
    (129
    )
    
    
    (496
    )Purchase of capitalized software
    
    
    (505
    )
    
    
    (24
    )Proceeds from the sale of marketable securities
    
    
    5,598
    
    
    
    9,378Purchase of marketable securities
    
    
    (4,195
    )
    
    
    (8,612
    )Net cash provided by investing activities
    
    
    769
    
    
    
    246Cash flows from financing activities:Proceeds from the exercise of stock options
    
    
    392
    
    
    
    50Net cash provided by financing activities
    
    
    392
    
    
    
    50Effect of exchange rate changes on cash and cash equivalents
    
    
    71
    
    
    
    (171
    )Net increase in cash and cash equivalents
    
    
    4,608
    
    
    
    1,161Cash and cash equivalents at beginning of period
    
    
    3,180
    
    
    
    4,928Cash and cash equivalents at end of period
    
    $
    7,788
    
    
    $
    6,089
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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INTERPHASE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 NOTE 1.    BASIS OF PRESENTATION
 ®
  NOTE 2.    STOCK-BASED COMPENSATION
    5




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INTERPHASE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Restricted Stock
    
    
    Weighted AverageShares
    
    
    Grant Date ValueNonvested Restricted Stock at January
1, 2006
    
    
    136,052
    
    
    $
    5.61Granted
    
    
    102,300
    
    
    
    5.66Vested
    
    
    (20,127
    )
    
    
    5.73Cancelled/Forefeited
    
    
    (65,800
    )
    
    
    5.46Shares at September 30, 2006
    
    
    152,425
    
    
    $
    5.60
  Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005Net loss as reported
    
    $
    (912
    )
    
    $
    (1,228
    )Add: APB 25 expense
    
    
    
    
    
    
    Less: Total stock-based
employee compensation
expense determined under
fair value methods for all
awards
    
    
    (76
    )
    
    
    (657
    )Pro forma net loss
    
    $
    (988
    )
    
    $
    (1,885
    )Net loss per common share:As reported  basic
    
    $
    (0.15
    )
    
    $
    (0.21
    )Pro forma  basic
    
    $
    (0.17
    )
    
    $
    (0.33
    )As reported  diluted
    
    $
    (0.15
    )
    
    $
    (0.21
    )Pro forma  diluted
    
    $
    (0.17
    )
    
    $
    (0.33
    )
 NOTE 3.    INVENTORIES
  September 30,
    
    December 31,2006
    
    2005Raw materials
    
    $
    1,843
    
    
    $
    2,393Work-in-process
    
    
    371
    
    
    
    549Finished goods
    
    
    143
    
    
    
    167Total
    
    $
    2,357
    
    
    $
    3,109
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INTERPHASE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  NOTE 4.    DERIVATIVE FINANCIAL INSTRUMENTS
   NOTE 5.    INCOME TAXES
    NOTE 6.  RESTRUCTURING CHARGE
  7




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INTERPHASE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Cash
    
    Cash
    
    Cash
    
    Cashpayments and
    
    payments
    
    Payments
    
    paymentsnon-cash
    
    during
    
    during
    
    duringcharges during
    
    quarter
    
    quarter
    
    quarter
    
    Remainingquarter ended
    
    ended
    
    ended
    
    ended
    
    liability as ofDescription
    
    Restructuring
    
    December 31,
    
    March 31,
    
    June 30,
    
    September
    
    September(amounts in thousands)
    
    charge
    
    2005
    
    2006
    
    2006
    
    30, 2006
    
    30, 2006Severance & Fringe Benefits
    
    $
    586
    
    
    $
    307
    
    
    $
    253
    
    
    $
    26
    
    
    $
    
    
    
    $
    Lease Obligation
    
    
    8
    
    
    
    
    
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    Non-Utlized Fixed Assets
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    600
    
    
    $
    313
    
    
    $
    257
    
    
    $
    30
    
    
    $
    
    
    
    $
    
 NOTE 7.    CREDIT FACILITY
  NOTE 8.    COMPREHENSIVE INCOME
  Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Net income (loss)
    
    $
    175
    
    
    $
    (912
    )
    
    $
    1,628
    
    
    $
    (1,228
    )Other comprehensive income:Unrealized holding gain (loss) arising
during period,
net of tax
    
    
    43
    
    
    
    (24
    )
    
    
    49
    
    
    
    (39
    )Foreign currency translation adjustment
    
    
    (18
    )
    
    
    13
    
    
    
    36
    
    
    
    (139
    )Comprehensive income (loss)
    
    $
    200
    
    
    $
    (923
    )
    
    $
    1,713
    
    
    $
    (1,406
    )
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INTERPHASE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 9.    EARNINGS PER SHARE
  Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Basic earnings per share:Net income (loss)
    
    $
    175
    
    
    $
    (912
    )
    
    $
    1,628
    
    
    $
    (1,228
    )Weighted average common shares outstanding
    
    
    5,857
    
    
    
    5,895
    
    
    
    5,832
    
    
    
    5,823Basic earnings (loss) per share
    
    $
    0.03
    
    
    $
    (0.15
    )
    
    $
    0.28
    
    
    $
    (0.21
    )Diluted earnings per share:Net income (loss)
    
    $
    175
    
    
    $
    (912
    )
    
    $
    1,628
    
    
    $
    (1,228
    )Weighted average common shares outstanding
    
    
    5,857
    
    
    
    5,895
    
    
    
    5,832
    
    
    
    5,823Dilutive stock options and restricted stock
    
    
    473
    
    
    
    
    
    
    
    273
    
    
    
    Weighted average common shares outstanding
 assuming dilution
    
    
    6,330
    
    
    
    5,895
    
    
    
    6,105
    
    
    
    5,823Diluted earnings (loss) per share
    
    $
    0.03
    
    
    $
    (0.15
    )
    
    $
    0.27
    
    
    $
    (0.21
    )Outstanding stock options that were not
included in the diluted calculation because
their effect would be anti-dilutive
    
    
    813
    
    
    
    2,142
    
    
    
    1,389
    
    
    
    1,807
 NOTE 10.    SEGMENT INFORMATION
   Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Revenues:North America
    
    $
    2,495
    
    
    $
    3,903
    
    
    $
    9,007
    
    
    $
    12,321Europe
    
    
    3,857
    
    
    
    1,791
    
    
    
    10,795
    
    
    
    7,437Pacific Rim
    
    
    1,406
    
    
    
    1,230
    
    
    
    5,478
    
    
    
    3,538Total
    
    $
    7,758
    
    
    $
    6,924
    
    
    $
    25,280
    
    
    $
    23,296
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INTERPHASE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Product Revenues:Broadband telecom
    
    $
    6,261
    
    
    $
    4,519
    
    
    $
    19,866
    
    
    $
    15,389Enterprise
SlotOptimizer
    
    
    1,146
    
    
    
    1,877
    
    
    
    3,301
    
    
    
    5,624Storage
    
    
    121
    
    
    
    160
    
    
    
    531
    
    
    
    457LAN/WAN
    
    
    39
    
    
    
    99
    
    
    
    144
    
    
    
    433Professional services
    
    
    
    
    
    
    15
    
    
    
    143
    
    
    
    351Other
    
    
    191
    
    
    
    254
    
    
    
    1,295
    
    
    
    1,042Total
    
    $
    7,758
    
    
    $
    6,924
    
    
    $
    25,280
    
    
    $
    23,296
 NOTE 11.    RECENTLY ISSUED ACCOUNTING PROUNOUCEMENTS
   10




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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS
  RESULTS OF OPERATIONS
 Revenues
    Gross Margin
  11




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Research and Development
   Sales and Marketing
   General and Administrative
  12




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Interest Income, Net
  Other (Expense) Income, Net
  Income Taxes
   Net Income (Loss)
  13




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LIQUIDITY AND CAPITAL RESOURCES
 Consolidated Cash Flows
  Operating Activities
   Investing Activities
  Financing Activities
  Commitments
 Commitments
  14




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Off-Balance Sheet Arrangements
  Other
    
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Currency Risk
   15




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Market Price Risk
  Interest Rate Risk
    
 Item 4. CONTROLS AND PROCEDURES
 (a)
    
    Evaluation of Disclosure Controls and Procedures. The Companys management,
under the supervision of our Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), performed an evaluation of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as of the end of the period covered by this
quarterly report. Based on that evaluation, the CEO and CFO concluded that the Companys
disclosure controls and procedures are effective, to give reasonable assurance that the
information required to be disclosed by the Company in reports that it files under the
Exchange Act is accumulated and communicated to management, including the CEO and CFO, to
allow timely decisions regarding disclosure and that information is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the
SEC.(b)
    
    Changes in Internal Controls. The Company maintains a system of internal
controls that are designed to provide reasonable assurance that its books and records
accurately reflect, in all material respects, the transactions of the Company and that its
established policies and procedures are adhered to. There were no changes to the Companys
internal controls or in other factors that could significantly affect the Companys
internal controls subsequent to the date of the evaluation by the Companys CEO and CFO,
including any corrective actions with regard to significant deficiencies and material
weaknesses.
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PART II
OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  
 Item 1A. RISK FACTORS
  
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 Item 3. DEFAULTS UPON SENIOR SECURITIES
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 Item 5. OTHER INFORMATION
  
 Item 6. EXHIBITS
 Exhibits2 (a)
    
    Stock Purchase Agreement, dated as of June 29, 1996, among Interphase Corporation,
Synaptel and Philippe Oros, Xavier Sutter, Francois Lecerf, Schroder Ventures French
Enterprise Fund LPI (USA), Schroder ventures French Enterprise Fund UKLP (UK) and Schroder
Ventures Holding Limited (UK). (3)3 (a)
    
    Certificate of Incorporation of the registrant. (1)3 (b)
    
    Amendment to Articles of Incorporation of the registrant. (5)3 (c)
    
    Amended and Restated Bylaws of the registrant adopted on December 5, 1995 and
amended on January 19, 1999. (7)4 (a)
    
    Rights Agreement dated as of December 7, 2000 by and between the Company and
Computershare Investor Services, LLC as Rights Agent. (6)10 (a)
    
    Registrants Amended and Restated Stock Option Plan and Amendment No. 1 and 2 thereto.*(4)10 (b)
    
    Registrants Amended and Restated Stock Option Plan Amendment No. 4. *(5)10 (c)
    
    Directors Stock Option Plan and Amendment No. 1 thereto. *(2)10(d)
    
    Directors Stock Option Plan Amendment No. 2. *(5)10 (e)
    
    Registrants France Incentive Stock Option Sub-Plan. *(7)10 (f)
    
    Lease on Facility at Parkway Center, Phase I, Plano, Texas. (8)10 (g)
    
    Lease on Facility at 2105 Luna Road, Carrollton, Texas. (8)10 (h)
    
    Note and Credit Agreement between Interphase Corporation and Comerica Bank, including
Amendment dated November 5, 2004. (11)10 (i)
    
    Employment Agreement with Gregory B. Kalush, dated March 12, 1999. *(13)10 (j)
    
    Employment Agreement for Chief Technology Officer with Felix V. Diaz,
dated May 22, 1996. *(13)10 (k)
    
    Employment, Confidentiality, and Non-Competition Agreement with Thomas N. Tipton, Jr.,
dated December 19, 2005. *(13)10 (l)
    
    Employment, Confidentiality, and Non-Competition Agreement with Randall E. McComas,
dated February 15, 2002. *(13)
 17




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##### Table of Contents



Exhibits10 (m)
    
    Employment Agreement with Deborah A. Shute, dated November 24, 1999. *(13)10 (n)
    
    Employment, Confidentiality, and Non-Competition Agreement with James W. Gragg,
dated November 1, 2004. *(13)10 (o)
    
    Employment, Confidentiality, and Non-Competition Agreement with Prasad Kallur,
dated May 23, 2005. *(13)10 (p)
    
    Employment Agreement with Steven P. Kovac, dated May 11, 1999. *(13)10 (q)
    
    Interphase Corporation 2004 Long-Term Stock Incentive Plan *(12)31 (a)
    
    Rule 13a-14(a)/15d-14(a) Certification. (14)31 (b)
    
    Rule 13a-14(a)/15d-14(a) Certification. (14)32 (a)
    
    Section 1350 Certification. (14)32 (b)
    
    Section 1350 Certification. (14)
 
 (1)
    
    Filed as an exhibit to Registration Statement No. 2-86523 on Form S-1 and incorporated
herein by reference.(2)
    
    Filed as an exhibit to Report on Form 10-K for the year ended October 31, 1995, and
incorporated herein by reference.(3)
    
    Filed as an exhibit to Report on Form 8-K on August 6, 1996, and incorporated herein by
reference.(4)
    
    Filed as an exhibit to Report on Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.(5)
    
    Filed as an exhibit to Report on Form 10-K for the year ended December 31, 1999, and
incorporated herein by reference.(6)
    
    Filed as an exhibit to Form 8-K on January 9, 2001, and incorporated herein by
reference.(7)
    
    Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2001, and
incorporated herein by reference.(8)
    
    Filed as an exhibit to Report on Form 10-Q for the quarter ended September 30, 2002, and
incorporated herein by reference.(9)
    
    Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2002, and
incorporated herein by reference.(10)
    
    Filed as an exhibit to Form 8-K on September 13, 2004, and incorporated herein by
reference.(11)
    
    Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2004, and
incorporated herein by reference.(12)
    
    Filed as an exhibit to Schedule 14a on March 31, 2005 and incorporated herein by
reference.(13)
    
    Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2005 and
incorporated herein by reference.(14)
    
    Filed herewith*
    
    Management contract or compensatory plan or arrangement. SIGNATURE
  INTERPHASE CORPORATION
(Registrant)Date: November 10, 2006
    By:
    /s/ Thomas N. Tipton Jr.Thomas N. Tipton Jr.Chief Financial Officer,
Vice President of Finance and  Treasurer
(Principal Financial and Accounting Officer) 18