|  DELAWARE                           |  13-3714405                                              |
|------------------------------------------|---------------------------------------------------------------|
|  Incorporation                State |  Tax                Identification                number |

----

| Large                accelerated filer o |   | Accelerated                filer  x |   | Non-accelerated                filer  o |
|------------------------------------------|--------|-----------------------------------------------|--------|---------------------------------------------------|

----

**Table      of Contents**

|  **PART                  III**   |
|-------------------------------------------------|
|                                            |   | **Page** |
| Item                  10.                       |    | Directors,                  Executive Officers and Corporate Governance |    | 4 |
|                                            |   |   |
| Item                  11.                       |    | Executive                  Compensation |    | 8 |
|                                            |   |   |
| Item                  12.                       |    | Security                  Ownership of Certain Beneficial Owners and Management and Related                  Stockholder Matters |    | 16 |
|                                            |   |   |
| Item                  13.                       |    | Certain                  Relationships and Related Transactions, and Director                  Independence |    | 17 |
|                                            |   |   |
| Item                  14.                       |    | Principal                  Accounting Fees and Services |    | 17 |
|                                            |   |   |
|  **PART                  IV**    |
|                                            |   |   |
| Item                  15.                       |    | Exhibits,                  Financial Statement Schedules |    | 18 |

----

**EXPLANATORY      NOTE**

**PART      III**

**ITEM      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | **Director** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------|------------|
| **Name                  and Experience**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | **Since**    |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Joseph                  D. Calderone**,                  age 58, is the Associate Director of Campus Ministry at Villanova                  University. He formerly spent over eight years with the Loyola                  University                  Medical Center as the hospital Chaplain and taught multiple courses                  including Introduction to the Practice of Medicine and Business                  Ethics.                  Rev. Calderone recently retired as a Captain in the US Navy Reserves.                  He                  served as the Wing Chaplain for the 4th Marine Aircraft Wing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |         |  2003 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |         |       |   |
| **Charles                  P. Connolly, age 58,**is                  currently an independent director focusing on bank relationships,                  debt                  refinancing, merger and acquisition strategy and executive compensation                  design. Mr. Connolly spent 29 years at First                  Union Corp. that                  merged with Wachovia Bank in 2001. He retired in 2001 as the President                  and                  CEO of First Union Corp. Mr. Connolly serves on the Boards of numerous                  non-profit organizations. He holds an MBA from the University of                  Chicago                  and AB from Villanova University.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |         | 2006       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |         |       |   |
| **Bradley                  T. MacDonald,**age                  59, is the Chairman of the Board of Medifast, Inc.   Mr.                  MacDonald has been Chairman of the Board of Medifast, Inc. since                  January                  1998 and was also Chief Executive officer until March of 2007.  He                  was the principal architect of the turnaround of Medifast and formulated                  the “Direct to Consumer” business models that are the primary drivers of                  Revenue to this day. He also was the co-founder of Take Shape for                  Life and                  acquired the Clinic operations in 2002. During his time as CEO,                  he managed                  the company to 29 consecutive quarters of profits and improved                  shareholders equity from negative $4 million to over $27 million                  in less                  than seven years. He also increased the Company’s market cap from less                  than $1 million to over $100 million and listed the company on                  the NYSE.                  In 2006, Mr. MacDonald received the prestigious and audited Ernst                  and                  Young award of “Entrepreneur of the Year” for the state of Maryland in the                  consumer products category.  Also, he helped lead the Company to                  national recognition in Forbes Magazine ranking Medifast 28th                  of                  the top 200 small companies in America. Mr.                  MacDonald was previously employed by the Company as its Chief Executive                  Officer from September 1996 to August 1997. From 1991 through 1994,                  Colonel MacDonald returned to active duty to be Deputy Director                  and Chief                  Financial Officer of the Retail, Food, Hospitality and Recreation                  Businesses for the United States Marine Corps.  Prior thereto, Mr.                  MacDonald served as Chief Operating Officer of the Bonneau Sunglass                  Company, President of Pennsylvania Optical Co., Chairman and CEO                  of                  MacDonald and Associates, which had major financial interests in                  a retail                  drug, consumer candy, and pilot sunglass companies.  Mr. MacDonald                  was national president of the Marine Corps Reserve Officers Association                  and retired from the United States Marine Corps Reserve as a Colonel                  in                  1997, after 27 years of service.  He has been appointed to the                  Defense Advisory Board for Employer Support of the Guard and Reserve                  (ESGR) Mr.                  MacDonald serves on the Board of Directors of the Wireless Accessories                  Group (AMEX: XWG). He also serves on the Board of Directors of                  the Marine                  Corps Reserve Toys for Tots Foundation and is on the Board of Trustees                  of                  Villa Julie College of Stevenson, Maryland and the Institute of Notre                  Dame, the oldest Catholic girl’s urban high school in Maryland, located in                  Baltimore. |   |   |         |  1996 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |         |       |   |

----

| **Michael                  C. MacDonald, age 53**,                  is president of global accounts and marketing operations for Xerox                  Corporation, Stamford, Conn. He was named to this position in October                  2004                  and was appointed a corporate senior vice president in July 2000.                  Mac                  Donald is responsible for directing the company’s largest global accounts,                  improving the customer experience, corporate marketing, xerox.com,                  advertising, worldwide public relations and marketing communications.                  Most                  recently, Mac Donald was president, North American Solutions Group                  responsible for all products, services and solutions sold by Xerox                  direct                  sales force in the United States and Canada. Prior to that, he                  served as                  the group’s senior vice president of marketing and chief of staff. Mac                  Donald is on the board of directors of the Rochester Institute                  of                  Technology, PAETEC, and the Jimmy V Foundation. He is also a board                  member                  of the CMO Council North American Advisory Board. Mr. MacDonald                  completed                  executive business and management programs at Columbia University                  in 1992                  and the International Senior Management Program at Harvard University                  in                  1998 |   |   |   | 1998       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |       |   |
| **Dennis                  M. McCarthy*****,***age                  62, practiced law for 21 years as a civil litigator in tort and                  contract                  cases. He was the founding member and managing partner of a Columbus,                  Ohio                  based law firm. Additionally, he served active duty in the U.S.                  Marine                  Corps for 23 years and served 18 years in reserve service. Mr.                  McCarthy                  retired from the Marine Corps in 2005 in the grade of Lieutenant                  General                  after four years in command of all Marine Reserve forces. Mr. McCarthy                  is                  currently the Executive Director of the Reserve Officers Association,                  a                  congressionally chartered association devoted to national defense.                  In                  addition to Medifast, he is a member of the Board of Directors                  of Rivada                  Networks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   | 2006       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |       |   |
| **Michael                  J. McDevitt,**age                  58, is a retired FBI Special Agent with over 29 years of government                  service with the United States Marine Corps and the FBI. He had                  attained                  Senior Executive status within the FBI's Investigative Technology                  Branch                  and is currently providing consulting services, focusing on physical                  threat and risk assessments and conducting specialized training                  for law                  enforcement and US Government entities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   | 2002       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |       |   |
| **Donald                  F. Reilly, OSA**,                  age                  59, holds a Doctorate in Ministry (Counseling) from New York Theological                  and an M.A. from Washington Theological Union as well as a B.A.                  from                  Villanova University. Reverend Don Reilly was ordained a priest                  in 1974.                  His assignments included Associate Pastor, Pastor at St. Denis,                  Havertown,                  Pennsylvania, Professor at Villanova University, Personnel Director                  of the                  Augustinian Province of St. Thomas of Villanova, Provincial Counselor,                  Founder of SILOAM Ministries where he ministers and counsels HIV/AIDS                  patients and caregivers. He is currently on the Board of Directors                  of                  Villanova University, and is Board Member of Prayer Power. Fr.                  Reilly was                  recently re-elected Provincial of the Augustinian Order at Villanova,                  PA.                  He oversees more than 220 Augustinian Friars and their service                  to the                  Church, teaching at universities and high schools, ministering                  to                  parishes, serving as chaplain in the Armed Forces and hospitals,                  ministering to AIDS victims, and serving missions in Japan and                  South                  America.                                                                                             |   |   |   |  1998 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |       |   |
| **Mary                  T. Travis,**                  age 56, is currently employed with Sunset Mortgage Company, L.P.                  in                  Pennsylvania as the Senior Vice President of wholesale operations                  and was                  formerly the Vice President of operations for the Financial Mortgage                  Corporation. Mrs. Travis is an expert in mortgage banking with                  over 36                  years of diversified experience. She is an approved instructor                  of the                  Mortgage Bankers Association Accredited School of Mortgage Banking.                  Mrs.                  Travis was also formally a delegate and 2nd Vice President of the                  Mortgage                  Bankers Association of Greater Philadelphia and the Board of Governors                  of                  the State of Pennsylvania.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   | 2002       |   |

**ADDITIONAL      INFORMATION ABOUT THE BOARD OF DIRECTORS AND      COMMITTEES**

**Director      Independence**

 

----

**Board      Meetings**

* Principles of Corporate Governance** www.choosemedifast.com*

**Committees      of the Board**

***Audit      Committee***

| Ÿ   | have                the sole authority and responsibility to hire, evaluate and, where                appropriate, replace the independent auditors; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | meet                and review with management and the independent auditors the interim                financial statements and the Company’s disclosures under Management’s                Discussion and Analysis of Financial Condition and Results of Operations                prior to the filing of the Company’s Quarterly Reports on Form 10-Q; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | meet                and review with management and the independent auditors the financial                statements to be included in the Company’s Annual Report on Form 10-K                (or the annual report to shareowners) including (i) their judgment                about the quality, not just acceptability, of the Company’s accounting                principles, including significant financial reporting issues and                judgments                made in connection with the preparation of the financial statements;                (ii) the clarity of the disclosures in the financial statements; and                (iii) the Company’s disclosures under Management’s Discussion and                Analysis of Financial Condition and Results of Operations, including                critical accounting policies; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | review                and discuss with management, the internal auditors and the independent                auditors the Company’s policies with respect to risk assessment and risk                management; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | review                and discuss with management, the internal auditors and the independent                auditors the Company’s internal controls, the results of the internal                audit program, and the Company’s disclosure controls and procedures, and                quarterly assessment of such controls and procedures; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | establish                procedures for handling complaints regarding accounting, internal                accounting controls and auditing matters, including procedures for                confidential, anonymous submission of concerns by employees regarding                accounting and auditing matters; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | review                and discuss with management, the internal auditors and the independent                auditors the overall adequacy and effectiveness of the Company’s legal,                regulatory and ethical compliance programs. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*      www.choosemedifast.com*

***Nominating      and Corporate Governance Committee***

|   |          |                                                                                                                                                                                                                                                       |
|--------|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | •  | to                recommend to our Board of Directors proposed nominees for election                to the                Board of Directors both at annual general meetings and to fill vacancies                that occur between general meetings; and |
|   |          |
|   | •  | to                make recommendations to the Board of Directors regarding the Company’s                corporate governance matters and                practices.                                                                                   |

----

* www.choosemedifast.com*

* www.choosemedifast.com*

***Compensation      Committee***

| Ÿ   | measure                the Chief Executive Officer’s performance against his goals and objectives                pursuant to the Company plans; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | determine                the compensation of the Chief Executive Officer after considering                the                evaluation by the Board of Directors of his performance; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | review                and approve compensation of elected officers and all senior executives                based on their evaluations, taking into account the evaluation by                the                Chief Executive Officer; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | review                and approve any employment agreements, severance arrangements, retirement                arrangements, change in control agreements/provisions, and any special                or                supplemental benefits for each elected officer and senior executive                of the                Company; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | approve,                modify or amend all non-equity plans designed and intended to provide                compensation primarily for elected officers and senior executives                of the                Company; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ÿ   | make                recommendations to the Board regarding adoption of equity plans;                and |
|--------------------|---------------------------------------------------------------------------------------------------------|

| Ÿ   | modify                or amend all equity plans. |
|--------------------|--------------------------------------------------|

*      www.choosemedifast.com*

***Executive      Committee***

**ADDITIONAL      INFORMATION**

**Section 16(a)      Beneficial Ownership Reporting Compliance**

----

**Codes      of Business Conduct and Ethics and Corporate Governance      Guidelines**

*      www.choosemedifast.com*

*      www.choosemedifast.com.*

**ITEM      11. EXECUTIVE COMPENSATION. **

**COMPENSATION      DISCUSSION AND ANALYSIS**

**Overview      of Compensation Program**

**Objectives      of Compensation Program**

**Decision-Making;      Role of Executive Officers in Compensation Decisions**

|   | • |   | Performance                against corporate, individual and organizational objectives for the                fiscal                year; |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Importance                of particular skill sets and professional abilities to the achievement                of                long-term strategic goals; and |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Contribution                as a leader, corporate representative and member of the senior management                team. |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------|

----

----

**2006      Summary Compensation Table**

|                                                                             |     |       |   |                |   |                               |   |       |   |                                                                        |   |                           |   |      |
|----------------------------------------------------------------------------------|----------|------------|--------|---------------------|--------|------------------------------------|--------|------------|--------|-----------------------------------------------------------------------------|--------|--------------------------------|--------|-----------|
|                                                                             |     | **Salary** |   | **Stock****Awards** |   | **Option                  Awards** |   | **Bonus**  |   | **Nonqualified****Deferred****Compensation                  Contributions** |   | **All                  Other** |   | **Total** |
| **Name                  and Pricipal Position**                                  | **Year** | **($)**    |   | **($)(1)**          |   | **($)(1)**                         |   | **($)(2)** |   | **($)**                                                                     |   | **($)(3)**                     |   | **($)**   |
| Bradley                  T. MacDonald                                            | 2006     | $225,000   |   | -                   |   | -                                  |   | -          |   | $100,000                                                                    |   | $6,600                         |   | $331,600  |
|   Chairman,                  Chief                  Executive Officer  |     |       |   |                |   |                               |   |       |   |                                                                        |   |                           |   |      |
| Michael                  S. McDevitt                                             | 2006     | 99,000     |   | 289,000             |   | -                                  |   | 27,500     |   |                                                                        |   | 3,800                          |   | 419,300   |
|   President,                  Chief                  Financial Officer |     |       |   |                |   |                               |   |       |   |                                                                        |   |                           |   |      |
| Leo                  Williams                                                    | 2006     | 125,000    |   | -                   |   | -                                  |   | 25,000     |   |                                                                        |   | 3,800                          |   | 153,800   |
|   Executive                  Vice                  President           |     |       |   |                |   |                               |   |       |   |                                                                        |   |                           |   |      |
| Margaret                  MacDonald                                              | 2006     | 81,000     |   | 237,000             |   | -                                  |   | 4,000      |   |                                                                        |   | 2,400                          |   | 324,400   |
|   Executive                  VP of                  Operations         |     |       |   |                |   |                               |   |       |   |                                                                        |   |                           |   |      |
| Brendan                  N. Connors                                              | 2006     | 80,000     |   | 47,000              |   | -                                  |   | 4,000      |   |                                                                        |   | 1,400                          |   | 132,400   |
|   VP                  of                  Finance                      |     |       |   |                |   |                               |   |       |   |                                                                        |   |                           |   |      |

| (1)    |   | Amounts                are calculated based on provisions of SFAS, No 123R, “Share Based                Payments.” See note 1                of the consolidated financial statements of the Company’s Annual Report on                Form 10-K for the year ended December 31, 2006 regarding                assumptions underlying valuation of equity awards. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
| (2)    |   | Bonus                amounts determined as more specifically discussed above under                “—Compensation Discussion and Analysis”                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                    |
| (3)    |   | The                amounts represent the Company’s matching contributions under the 401(K)                plan.                                                                                                                                                                                                                                                                                   |

----

**2006      Grants of Plan-Based Awards**

**Outstanding      Equity Awards at Fiscal Year-End Table**

|                                                                             | **Option                  Awards**                                                                                 |   |  **Stock                Awards**                                                                                   |
|----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|
| **Name**                                                                         | **Number                  of****Securities****Underlying                  Unexercised****Options                  (#)** |   | **Number                  of****Securities****Underlying                  Unexercised****Options                  (#)** |   | **Option****Exercise** |   | **Option****Expiration** |   | **Number****Shares                  or****Units                  of****Stock                  That****Have                  Not****Vested** |   | **Market****Value                  of****Shares                  or****Units                  of****Stock                  that****have                  not****Vested** |   | **Equity****Incentive****Plan****Awards:****Number                  of Unearned****Shares,****Units                  or****Other****rights** |   | **Equity****Incentive                  Plan Awards:****Market                  or Payout Value****of                  Unearned Shares, Units****or                  Other**** rights                  That Have Not****Vested** |
|                                                                             | **Exercisable**                                                                                                         |   | **Un-Exercisable**                                                                                                      |   | **Price                  ($)** |   | **Date** |   | **Vested                  (#) (1)** |   | **($)                  (2)** |   | **(#)** |   | **($)** |
| Bradley                  T. MacDonald                                            | -                                                                                                                       |   | 100,000                                                                                                                 |   | $6.25 |   | 2/8/2011 |   | - |   | - |   | - |   | - |
|   Chief                  Executive                  Officer            |                                                                                                                    |   |                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Michael                  S. McDevitt                                             | 100,000                                                                                                                 |   | -                                                                                                                       |   | 2.87 |   | 3/31/2010 |   | 226,666 |   | 2,849,191 |   | - |   | - |
|   President,                  Chief                  Financial Officer |                                                                                                                    |   |                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Leo                  Williams                                                    | 6,666                                                                                                                   |   | 3,333                                                                                                                   |   | 3.83 |   | 10/28/2010 |   | - |   | - |   | - |   | - |
|   Executive                  Vice                  President           |                                                                                                                    |   |                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Margaret                  MacDonald                                              | -                                                                                                                       |   | -                                                                                                                       |   | - |   | - |   | 185,000 |   | 2,325,450 |   | - |   | - |
|   Executive                  VP of                  Operations         |                                                                                                                    |   |                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Brendan                  N. Connors                                              | 23,334                                                                                                                  |   |                                                                                                                    |   | 2.87 |   | 3/31/2010 |   | 37,000 |   | 465,090 |   | - |   | - |
|   VP                  of                  Finance                      |                                                                                                                    |   |                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |

| (1) | The                restricted stock grants vest over five and six years of service as                described below under “Narrative                Disclosure to Summary Compensation Table and Grants of Plan-Based                Awards” |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The                market value of shares of stock that have not vested is based on                the                closing price of our common stock on December 29, 2006, or $12.57                per                share. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**2006      Option Exercises and Stock Vested Table**

** **

|                                                            |   |                                                                                 |                              |                                                  |   |                                                                                |   |                                                 |
|-----------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|-----------------------------------|-------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                            |   | **Option                  Awards**                                                   | **Stock                  Awards** |
|                                                            |   | **Number                  of****Shares****Acquired                  on****Exercise** |                              | **Value****Realized                  on****Exercise** |   | **Number                  of****Shares****Acquired****on                  Vesting** |   | **Value****Realized                  on****Vesting** |
| **Name**                                                        |   | **(#)**                                                                              |                              | **($)(1)**                                            |   | **(#)**                                                                             |   | **($)(2)**                                           |
| Bradley                  T. MacDonald                           |   | 26,667                                                                               |                              | $172,002                                              |   | -                                                                                   |   | -                                                    |
|   Chief                  Executive Officer            |   | -                                                                                    |                              | -                                                     |   | -                                                                                   |   | -                                                    |
|                                                            |   |                                                                                 |                              |                                                  |   |                                                                                |   |                                                 |
| Michael                  S. McDevitt                            |   | 7,696                                                                                |                              | 149,553                                               |   | 15,000                                                                              |   | 81,000                                               |
|   President,                  Chief Financial Officer |   | -                                                                                    |                              | -                                                     |   | 33,333                                                                              |   | 208,331                                              |
|                                                            |   |                                                                                 |                              |                                                  |   |                                                                                |   |                                                 |
| Leo                  Williams                                   |   | -                                                                                    |                              | -                                                     |   | -                                                                                   |   | -                                                    |
|   Executive                  Vice President           |   |                                                                                 |                              |                                                  |   |                                                                                |   |                                                 |
|                                                            |   |                                                                                 |                              |                                                  |   |                                                                                |   |                                                 |
| Margaret                  MacDonald                             |   | 16,667                                                                               |                              | 126,669                                               |   | 15,000                                                                              |   | 81,000                                               |
|   Executive                  VP of Operations         |   | -                                                                                    |                              | -                                                     |   | 25,000                                                                              |   | 156,250                                              |
|                                                            |   |                                                                                 |                              |                                                  |   |                                                                                |   |                                                 |
| Brendan                  N. Connors                             |   | 10,176                                                                               |                              | 183,473                                               |   | 3,000                                                                               |   | 16,200                                               |
|   VP                  of Finance                      |   | -                                                                                    |                              | -                                                     |   | 5,000                                                                               |   | 31,250                                               |

| (1)   | Represents                the difference between the exercise price and the fair market value                of the                common stock on the date of exercise, multiplied by the number of                options                exercised. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Represents                the number of restricted shares vested, and the number of shares                vested                multiplied by the fair market value of the common stock on the vesting                date. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Equity          Compensation Plan Information at Fiscal Year Ended December 31,          2006**

|                                                                                         |         |                                                                                                                                                                                         |   |   |                                                                                                                                 |         |                                                                                                                                                                                                                                                                   |    |   |
|----------------------------------------------------------------------------------------------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|
| **Plan                category**                                                             |    | **Number                of****securities to be****issued                upon****exercise                of****outstanding****options, warrants****and                rights** |   |   | **Weighted****average exercise****price                of****outstanding****options,****warrants                and****rights** |    | **Number                of****securities****remaining available****for                future issuance****under                equity****compensation****plans                (excluding****securities                reflected****in                column (a))** |    |
|                                                                                         |    | **(a)**                                                                                                                                                                                      |   |   | **(b)**                                                                                                                              |    | **(c)**                                                                                                                                                                                                                                                                |    |
| **Equity                compensation plans approved by security holders**                    |    | 524,079                (1)                                                                                                                                                                   |   |   | $6.12                                                                                                                                |         |                                                                                                                                                                                                                                                              | 928,421 |   |
| **Equity                compensation plans not approved by security                holders** |         | -                                                                                                                                                                                            |   |   | -                                                                                                                                    |         |                                                                                                                                                                                                                                                                   | -       |   |

| (1)   | Consists                of 321,579 shares of common stock issuable upon the exercise of                outstanding options and 202,500 shares of common stock issuable upon                the                exercise of outstanding warrants. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**2006      Non-Qualified Deferred Compensation Table**

|                                                            | **Executive****Contributions**** in                  Last FY** |   | **Company**** Contributions****in                  Last FY** |   | **Aggregate****Earnings                  in****Last                  FY** |   | **Aggregate****Withdrawals/Distributions** |   | **Aggregate****Balance                  at****Last                  FYE** |
|-----------------------------------------------------------------|---------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|--------------------------------------------|--------|---------------------------------------------------------------------------|
|                                                            | **($)**                                                             |   | **($)(1)**                                                        |   | **($)**                                                                   |   | **($)**                                    |   | **($)**                                                                   |
| Bradley                  T. MacDonald                           |                                                                |   | $100,000                                                          |   | $80,120                                                                   |   | -                                          |   | $933,921                                                                  |
|   Chairman,                  Chief Executive Officer  |                                                                |   |                                                              |   |                                                                      |   |                                       |   |                                                                      |
| Michael                  S. McDevitt                            | -                                                                   |   | -                                                                 |   | -                                                                         |   | -                                          |   | -                                                                         |
|   President,                  Chief Financial Officer |                                                                |   |                                                              |   |                                                                      |   |                                       |   |                                                                      |
| Leo                  Williams                                   | -                                                                   |   | -                                                                 |   | -                                                                         |   | -                                          |   | -                                                                         |
|   Executive                  Vice President           |                                                                |   |                                                              |   |                                                                      |   |                                       |   |                                                                      |
| Margaret                  MacDonald                             | -                                                                   |   | -                                                                 |   | -                                                                         |   | -                                          |   | -                                                                         |
|   Executive                  VP of Operations         |                                                                |   |                                                              |   |                                                                      |   |                                       |   |                                                                      |
| Brendan                  N. Connors                             | -                                                                   |   | -                                                                 |   | -                                                                         |   | -                                          |   | -                                                                         |
|   VP                  of Finance                      |                                                                |   |                                                              |   |                                                                      |   |                                       |   |                                                                      |

| (1)   | All                amounts are reported in compensation on the “2006 Summary Compensation                Table” |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------|

**Deferred      Compensation Plans **

**Narrative      Disclosure to Summary Compensation Table and Grants of Plan-Based      Awards**

**Bradley      T. MacDonald**

**Michael      S. McDevitt.**

----

**Margaret      MacDonald. **

**Brendan      N. Connors.**

**Potential      Payments Upon Termination or Change in Control **

**2006      Director Compensation**

| **Name**                                    |   | **Fees****Earned****or                  Paid****in                  Cash**** ($)** |   | **Stock****Awards****($)(1)** |   | **Option****Awards                  ($)** |   | **Non-Equity****Incentive                  Plan Compensation**** ($)** |   | **Change                  in Pension**** Value                  and**** Nonqualified****Deferred****Compensation****Earnings                  ($)** |   | **All                  other****Compensation**** ($)** |   | **Total                  ($)** |
|---------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|-------------------------------|--------|-------------------------------------------|--------|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|--------------------------------|
| Joseph                  D. Calderone, OSA   |   | -                                                                                       |   | $9,375                        |   | -                                         |   | -                                                                           |   | -                                                                                                                                                             |   | -                                                           |   | $9,375                         |
| Charles                  P. Connolly        |   | -                                                                                       |   | 3,206                         |   | -                                         |   | -                                                                           |   | -                                                                                                                                                             |   | -                                                           |   | 3,206                          |
| George                  Lavin, Jr., Esq.    |   | -                                                                                       |   | 9,375                         |   | -                                         |   | -                                                                           |   | -                                                                                                                                                             |   | -                                                           |   | 9,375                          |
| Michael                  C. MacDonald       |   | -                                                                                       |   | 9,375                         |   | -                                         |   | -                                                                           |   | -                                                                                                                                                             |   | -                                                           |   | 9,375                          |
| Dennis                  M. McCarthy         |   | -                                                                                       |   | 3,206                         |   | -                                         |   | -                                                                           |   | -                                                                                                                                                             |   | -                                                           |   | 3,206                          |
| Michael                  J. McDevitt        |   | -                                                                                       |   | 9,375                         |   | -                                         |   | -                                                                           |   | -                                                                                                                                                             |   | -                                                           |   | 9,375                          |
| Rev.                  Donald F. Reilly, OSA | -      |                                                                                    | 12,500 |                          | -      |                                      | -      |                                                                        | -      |                                                                                                                                                          | -      |                                                        | 12,500 |
| Mary                  T. Travis             |   | -                                                                                       |   | 12,500                        |   | -                                         |   | -                                                                           |   | -                                                                                                                                                             |   | -                                                           |   | 12,500                         |

| (1) |   | Amounts                are calculated based on provisions of Statement of Financial Accounting                Standards, or SFAS, No 123R, “Share Based Payments.” See note 1                of the consolidated financial statement of the Company’s Annual Report on                Form 10-K for the year ended December 31, 2006 regarding                assumptions underlying valuation of equity                awards. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                        |   | **Option                  Awards**                                           |   | **Stock                  Awards**                                            |
|---------------------------------------------|--------|------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| **Name**                                    |   | **Number                  of Securities Underlying Unexercised Options (#)** |   | **Number                  of Securities Underlying Unexercised Options (#)** |   | **Option                  Exercise** |   | **Option                  Expiration** |   | **Number                  Shares or Units of Stock That Have Not Vested** |   | **Market                  Value of Shares or Units of Stock that have not                  Vested** |
|                                        |   | **Exercisable**                                                              |   | **Un-Exercisable**                                                           |   | **Price                  ($)** |   | **Date** |   | **Vested                  (#)** |   | **($)** |
| Joseph                  D. Calderone        |   | 2,500                                                                        |   | -                                                                            |   | $4.80 |   | 4/4/2008 |   | - |   | - |
| Charles                  P. Connolly        |   | -                                                                            |   | -                                                                            |   | - |   |   |   | - |   | - |
| George                  Lavin               |   | -                                                                            |   | -                                                                            |   | - |   |   |   | - |   | - |
| Michael                  C. MacDonald       |   | 2,500                                                                        |   | -                                                                            |   | 4.80 |   | 4/4/2008 |   | - |   | - |
| Dennis                  M. McCarthy         |   | -                                                                            |   | -                                                                            |   | 4.80 |   | 4/4/2008 |   | - |   | - |
| Michael                  J. McDevitt        |   | 2,500                                                                        |   | -                                                                            |   | 4.80 |   | 4/4/2008 |   | - |   | - |
| Rev.                  Donald F. Reilly, OSA |   | 2,500                                                                        |   | -                                                                            |   | 4.80 |   | 4/4/2008 |   | - |   | - |
| Mary                  T. Travis             |   | 2,500                                                                        |   | -                                                                            |   | 4.80 |   | 4/4/2008 |   | - |   | - |
|                                        |   |                                                                         |   |                                                                         |   |   |   |   |   |   |   |   |

**COMPENSATION      COMMITTEE OF THE BOARD OF DIRECTORS**

----

**ITEM      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.**

|                                                                                                                                     |         |                                         |         |                                                              |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------------|----------------------------------------------|--------------|-------------------------------------------------------------------|--------|
| **Name                and Address of****5%                Beneficial Owner**                                                             |    | **Shares****Beneficially****Owned (1)** |    | **Percent                of****Outstanding****Common Stock** |   |
|                                                                                                                                     |         |                                         |
| Bjurman,                Barry & Associates (2)10100                Santa Monica Blvd. Suite 1200Los                Angeles, CA 90067 |    | 739,538                                      |    | 5.4                                                               | %      |

| **Name                  of Beneficial Owner**                                                             |   | **Shares                  Beneficially****Owned                  (1)(3))** |   | **Shares****Acquirable****Within                  60 days**** (4)** |   | **Percent                  of****Outstanding****Common                  Stock****(%)** |
|-----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|
|                                                                                                      |   |                                                                       |   |                                                                     |   |                                                                                   |
| Bradley                  T. MacDonald (5)                                                                 |   | 829,550                                                                    |   | -                                                                        |   | 6.09%                                                                                  |
| Michael                  S. McDevitt                                                                      |   | 264,118                                                                    |   | -                                                                        |   | 1.94%                                                                                  |
| Margaret                  MacDonald                                                                       |   | 139,900                                                                    |   | -                                                                        |   | 1.03%                                                                                  |
| Donald                  F. Reilly                                                                         |   | 58,350                                                                     |   | -                                                                        |   | *                                                                                      |
| Michael                  C. MacDonald                                                                     |   | 56,119                                                                     |   | -                                                                        |   | *                                                                                      |
| Brendan                  Connors                                                                          |   | 51,509                                                                     |   | -                                                                        |   | *                                                                                      |
| Mary                  Travis                                                                              |   | 20,200                                                                     |   | -                                                                        |   | *                                                                                      |
| Michael                  J. McDevitt                                                                      |   | 17,400                                                                     |   | -                                                                        |   | *                                                                                      |
| Joseph                  D. Calderone, OSA                                                                 |   | 9,200                                                                      |   | -                                                                        |   | *                                                                                      |
| Leo                  Williams                                                                             |   | 8,436                                                                      |   | -                                                                        |   | *                                                                                      |
| Charles                  P. Connolly                                                                      |   | 6,575                                                                      |   | -                                                                        |   | *                                                                                      |
| George                  Lavin, Jr., Esq.                                                                  |   | 3,200                                                                      |   | -                                                                        |   | *                                                                                      |
| Dennis                  M. McCarthy, Esq.                                                                 |   | 1,575                                                                      |   | -                                                                        |   | *                                                                                      |
|                                                                                                      |   |                                                                       |   |                                                                     |   |                                                                                   |
| All                  directors, nominees for directors and executive officers as a                  group |   | 1,466,132                                                                  |   |                                                                     |   | 10.76%                                                                                 |
|   (13                  persons)                                                                 |   |                                                                       |   |                                                                     |   |                                                                                   |
|                                                                                                      |   |                                                                       |   |                                                                     |   |                                                                                   |
|                                                                                                      |   |                                                                       |   |                                                                     |   |                                                                                   |

| * | less                than 1%. |
|---|------------------------------|

| (1) | Beneficial                ownership is determined in accordance with the rules of the Securities                and                Exchange Commission. Under those rules and for purposes of the table                above                (a) if a person has decision making power over either the voting or                the disposition of any shares, that person is generally deemed to                be a                beneficial owner of those shares; (b) if two or more persons have                decision making power over either the voting or the disposition of                any                shares, they will be deemed to share beneficial ownership of those                shares,                in which case the same shares will be included in share ownership                totals                for each of those persons; and (c) if a person held options to                purchase shares that were exercisable on, or became exercisable within                60                days of, April 24, 2007, that person will be deemed to be the beneficial                owner of those shares and those shares (but not shares that are subject                to                options held by any other stockholder) will be deemed to be outstanding                for purposes of computing the percentage of the outstanding shares                that                are beneficially owned by that person. Information supplied by officers                and directors. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | This                information is based on Schedule 13G filed with the SEC on December                27,                2006. |
|-----|---------------------------------------------------------------------------------------------------------------------------------|

| (3) | The                shares set forth as beneficially owned by our executive officers                and                directors do not include the following outstanding options because                they                are not exercisable within 60 days of April 24, 2007: Mr. Bradley T.                MacDonald (80,000); and Mr. Leo Williams (3,333); |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Unless                otherwise noted, reflects the number of shares that could be purchased                by                exercise of options available at April 24, 2007, or within 60 days                thereafter under our stock option plans. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | The                shares set forth as beneficially owned by Mr. Bradley T. MacDonald                include 396,402 shares owned by his wife Shirley MacDonald, and 46,447                shares owned by the MacDonald Family Trust. His daughter, Margaret                MacDonald, beneficially owns 139,900 shares which added to Bradley                T.                MacDonald’s 829,500 beneficially owned shares results in 969,450 shares                owned by the MacDonald family. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**ITEM      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

**ITEM      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

**Fees      to Independent Registered Public Accountants for Fiscal 2005 and      2006**

|                            |   | **2005** |   | **2006** |
|---------------------------------|--------|----------|--------|----------|
|                            |   |     |   |     |
| Audit                  Fees(1)  |   | $90,000  |   | $179,000 |
| Tax                  fees(2)    |   | 10,000   |   | 21,000   |
| All                  other fees |   | -        |   | -        |
|                            |   |     |   |     |
| Total                           |   | $100,000 |   | $200,000 |

| (1)    |   | Audit                fees consist of fees for professional services rendered for the audit                of                the Company’s consolidated financial statements included in the Company’s                Annual Report on Form 10-K, including the audit of internal controls                required by Section 404 of the Sarbanes-Oxley Act of 2002, and the                review of financial statements included in the Company’s Quarterly Reports                on Form 10-Q, and for services that are normally provided by the                auditor                in connection with statutory and regulatory filings or                engagements. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
| (2)    |   | Tax                fees were billed for tax compliance                services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

**Audit        Committee Pre-Approval of Audit and Permissible Non-Audit Services of        Independent Auditors**

| Ÿ   | registration                statements under the Securities Act of 1933 (for example, comfort                letters                or consents); |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| Ÿ   | due                diligence work for potential acquisitions or dispositions; |
|--------------------|-------------------------------------------------------------------------------|
| Ÿ   | attest                services not required by statute or regulation; |
|--------------------|-----------------------------------------------------------------------|
| Ÿ   | adoption                of new accounting pronouncements or auditing and disclosure requirements                and accounting or regulatory consultations; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Ÿ   | internal                control reviews and assistance with internal control reporting                requirements; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|
| Ÿ   | review                of information systems security and controls; |
|--------------------|---------------------------------------------------------------------|
| Ÿ   | tax                compliance, tax planning and related tax services, excluding any                tax                service prohibited by regulatory or other oversight authorities;                expatriate and other individual tax services;                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Ÿ   | assistance                and consultation on questions raised by regulatory agencies. |
|--------------------|----------------------------------------------------------------------------------------|

----

**PART        IV**

**ITEM        15. EXHIBITS AND FINACIAL STATEMENT SCHEDULES**

 

**INDEX          TO EXHIBITS**

|  **No.** |                                                                                                                                                                                                                              |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  3.1     | Certificate                  of Incorporation of the Company and amendments thereto*                                                                                                                                              |
|          |                                                                                                                                                                                                                              |
|  3.2     | By-Laws                  of the Company*                                                                                                                                                                                          |
|          |                                                                                                                                                                                                                              |
|  10.1    | 1993                  Stock Option Plan of the Company as amended*                                                                                                                                                                |
|          |                                                                                                                                                                                                                              |
|  10.3    | Lease                  relating to the Company's Owings Mills, Maryland facility**                                                                                                                                                |
|          |                                                                                                                                                                                                                              |
|  10.4    | Employment                    agreement with Bradley T.                    MacDonald***                                                                                                                                           |
|          |                                                                                                                                                                                                                              |
|  31.1    | Certification                  of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation                  S-K,                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of                  2002. |
|          |                                                                                                                                                                                                                              |
|  31.2    | Certification                  of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation                  S-K,                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of                  2002. |
|          |                                                                                                                                                                                                                              |
|  32.1    | Certification                  of Chief Executive Officer and Chief Financial Officer pursuant                  to Section                  906 of the Sarbanes- Oxley Act of 2002                                                |

----

**SIGNATURES**

| Name                                                                                                   | Title                                              | Date                                    |
|--------------------------------------------------------------------------------------------------------|----------------------------------------------------|-----------------------------------------|
|                                                                                                   |                                               |                                    |
| /s/                    BRADLEY T. MACDONALD   Bradley                    T. MacDonald   | Chairman                    of the Board, Director | April                    30, 2007       |
|                                                                                                   |                                               |                                    |
| /s/                    GEORGE LAVIN    George                    Lavin             | Director                                           | April                    30, 2007       |
|                                                                                                   |                                               |                                    |
| /s/                    MICHAEL C. MACDONALDMichael                    C. MacDonald                     | Director                                           | April                    30, 2007  |
|                                                                                                   |                                               |                                    |
| /s/                    MARY T. TRAVISMary                    T. Travis                                 | Director                                           | April                    30, 2007       |
|                                                                                                   |                                               |                                    |
| /s/                    REV. DONALD F. REILLY, OSARev.                    Donald F. Reilly, OSA         | Director                                           | April                    30, 2007       |
|                                                                                                   |                                               |                                    |
| /s/                    MICHAEL J. MCDEVITT   Michael                    J. McDevitt     | Director                                           | April                    30, 2007       |
|                                                                                                   |                                               |                                    |
| /s/                    JOSEPH D. CALDERONE   Joseph                    D. Calderone     | Director                                           | April                    30, 2007       |
|                                                                                                   |                                               |                                    |
| /s/                    CHARLES P. CONNOLLY   Charles                    P. Connolly     | Director                                           | April                    30, 2007       |
|                                                                                                   |                                               |                                    |
| /s/                    DENNIS M. MCCARTHY    Dennis                    M. McCarthy | Director                                           | April                    30, 2007       |
|                                                                                                   |                                               |                                    |

----