##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended SEPTEMBER 30, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the Transition period from  to
 Commission file number 0-28484
 QualMark Corporation
 
 Colorado
    
    84-1232688(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 4580 Florence Street, Denver, CO
    
    80238(Address of principal executive offices)
    
    (Zip Code)
  
 þ o
 
 o o
 o þ
    o þ




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTSItem 3.PART II OTHER INFORMATIONItem 1. Legal ProceedingsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESINDEX TO EXHIBITSCEO Certification of Section 302CFO Certification of Section 302Certification of Section 906    Table of Contents  
  
  
 For the three
    
    For the three
    
    For the nine
    
    For the ninemonths ended
    
    months ended
    
    months ended
    
    months endedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Net revenue
    
    $
    2,709
    
    
    $
    3,638
    
    
    $
    9,996
    
    
    $
    12,124Cost of sales
    
    
    1,735
    
    
    
    2,250
    
    
    
    5,912
    
    
    
    7,028Gross profit
    
    
    974
    
    
    
    1,388
    
    
    
    4,084
    
    
    
    5,096Selling, general and administrative expenses
    
    
    1,051
    
    
    
    1,013
    
    
    
    3,365
    
    
    
    3,582Research and development expenses
    
    
    193
    
    
    
    192
    
    
    
    633
    
    
    
    528(Loss) income from operations
    
    
    (270
    )
    
    
    183
    
    
    
    86
    
    
    
    986Other expense:Interest, net
    
    
    (69
    )
    
    
    (84
    )
    
    
    (232
    )
    
    
    (234
    )(Loss) income before income taxes
    
    
    (339
    )
    
    
    99
    
    
    
    (146
    )
    
    
    752Benefit (provision) for income taxes
    
    
    150
    
    
    
    93
    
    
    
    68
    
    
    
    (30
    )Net (loss) income
    
    $
    (189
    )
    
    $
    192
    
    
    $
    (78
    )
    
    $
    722Other
comprehensive income (loss), net of tax:Unrealized holding gain arising from available
for sale securities
    
    
    *
    
    
    
    
    
    
    
    *
    
    
    
    Comprehensive (loss) income
    
    $
    (189
    )
    
    $
    192
    
    
    $
    (78
    )
    
    $
    722Net (loss) income per share  basic
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.01
    )
    
    $
    0.08Net (loss) income per share  diluted
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.01
    )
    
    $
    0.08Weighted average number of common shares  basic
    
    
    8,825,000
    
    
    
    6,240,000
    
    
    
    8,805,000
    
    
    
    5,050,000Weighted average number of common shares  diluted
    
    
    8,825,000
    
    
    
    6,931,000
    
    
    
    8,805,000
    
    
    
    5,799,000
 
 *
    
    Amount less than $1,000.  2




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##### Table of Contents



September 30, 2007
    
    December 31, 2006(UNAUDITED)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,401
    
    
    $
    1,179Available for sale securities
    
    
    63
    
    
    
    Trade accounts receivable, net of allowance for
doubtful accounts of $50 for each period
    
    
    2,328
    
    
    
    3,420Inventories, net
    
    
    3,052
    
    
    
    2,524Current deferred tax assets, net
    
    
    943
    
    
    
    943Other current assets
    
    
    382
    
    
    
    143Total current assets
    
    
    8,169
    
    
    
    8,209Property and equipment, net
    
    
    722
    
    
    
    787Restricted cash
    
    
    90
    
    
    
    90Goodwill
    
    
    1,057
    
    
    
    1,057Intangible assets
    
    
    1,002
    
    
    
    1,012Non-current deferred tax assets, net
    
    
    508
    
    
    
    430Other assets
    
    
    444
    
    
    
    464$
    11,992
    
    
    $
    12,049LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    810
    
    
    $
    719Accrued expenses
    
    
    736
    
    
    
    682Deferred revenue and customer deposits
    
    
    220
    
    
    
    18Advance billings on contracts
    
    
    246
    
    
    
    Current portion of long-term debt
    
    
    1,544
    
    
    
    913Revolving line of credit
    
    
    788
    
    
    
    1,100Total current liabilities
    
    
    4,344
    
    
    
    3,432Deferred revenue and other
    
    
    16
    
    
    
    29Long-term debt, net of current portion
    
    
    505
    
    
    
    1,627Total liabilities
    
    
    4,865
    
    
    
    5,088Commitments and contingenciesShareholders equity:Common stock; no par value; 15,000,000 shares
authorized; 8,825,288 shares (2007)
and 8,779,362 shares (2006) issued and outstanding
    
    
    10,653
    
    
    
    10,409Accumulated deficit
    
    
    (3,526
    )
    
    
    (3,448
    )Total shareholders equity
    
    
    7,127
    
    
    
    6,961$
    11,992
    
    
    $
    12,049
  3




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##### Table of Contents



AccumulatedOtherCommon Stock
    
    Accumulated
    
    ComprehensiveShares
    
    Amount
    
    Deficit
    
    Income
    
    TotalBalance January 1, 2007
    
    
    8,779,362
    
    
    $
    10,409
    
    
    $
    (3,448
    )
    
    $
    
    
    
    $
    6,961Common stock issued for interest on convertible debt
    
    
    45,426
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69Options exercised
    
    
    500
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Beneficial conversion feature on convertible debt and interest
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    105Stock-based compensation expense
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69Components of comprehensive income:Unrealized holding gain arising from available for sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    *Net loss
    
    
    
    
    
    
    
    
    
    
    (78
    )
    
    
    
    
    
    
    (78
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (78
    )Balance September 30, 2007
    
    
    8,825,288
    
    
    $
    10,653
    
    
    $
    (3,526
    )
    
    $
    *
    
    
    $
    7,127
 
 *
    
    Less than $1,000.00  4




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##### Table of Contents



For the nine
    
    For the ninemonths ended
    
    months endedSeptember 30,
    
    September 30,2007
    
    2006Cash Flows From Operating Activities:Net (loss) income
    
    $
    (78
    )
    
    $
    722Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Change in provision for inventory allowance
    
    
    9
    
    
    
    (11
    )Change in provision for accounts receivable allowance
    
    
    
    
    
    
    (1
    )Depreciation and amortization
    
    
    251
    
    
    
    275Stock-based compensation expense
    
    
    69
    
    
    
    86Loss (gain) on sale of assets
    
    
    1
    
    
    
    (8
    )Amortization on debt discounts
    
    
    26
    
    
    
    Deferred tax (benefit) expense
    
    
    (78
    )
    
    
    30Paid in kind (common stock) interest expense
    
    
    69
    
    
    
    61Change in operating assets and liabilities:Trade accounts receivable
    
    
    1,092
    
    
    
    156Inventories
    
    
    (489
    )
    
    
    (99
    )Other assets
    
    
    (258
    )
    
    
    (159
    )Accounts payable and accrued expenses
    
    
    145
    
    
    
    (381
    )Advance billings on contracts
    
    
    246
    
    
    
    Deferred revenue and other
    
    
    189
    
    
    
    (46
    )Net cash provided by operating activities
    
    
    1,194
    
    
    
    625Cash Flows From Investing Activities:Cash paid for investments
    
    
    (63
    )
    
    
    Sale of property and equipment
    
    
    
    
    
    
    27Purchase of Derritron, Inc. assets
    
    
    (69
    )
    
    
    Acquisition of property and equipment
    
    
    (117
    )
    
    
    (182
    )Net cash used in investing activities
    
    
    (249
    )
    
    
    (155
    )Cash Flows From Financing Activities:Issuance of common stock upon exercise of options
    
    
    1
    
    
    
    30Proceeds from borrowings
    
    
    500
    
    
    
    400Repayments on borrowings
    
    
    (1,224
    )
    
    
    (685
    )Net cash used in financing activities
    
    
    (723
    )
    
    
    (255
    )Net increase in cash and cash equivalents
    
    
    222
    
    
    
    215Cash and cash equivalents at beginning of period
    
    
    1,179
    
    
    
    529Cash and cash equivalents at end of period
    
    $
    1,401
    
    
    $
    744Supplemental Disclosure:Interest paid
    
    $
    186
    
    
    $
    187Income taxes paid
    
    $
    14
    
    
    $
    35Non-Cash Investing and Financing Activities:Beneficial conversion feature on convertible debt
    
    $
    105
    
    
    $
    3,132Conversion of convertible debt to common stock
    
    $
    
    
    
    $
    40Transfer of equipment to inventory held for resale
    
    $
    48
    
    
    $
    40Preferred stock dividends
    
    $
    
    
    
    $
    156Accretion of preferred stock
    
    $
    
    
    
    $
    183
  5




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6




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Expected life
    
    3 yearsVolatility
    
    
    126
    %Risk-free interest rate
    
    
    4.6
    %Dividend yield
    
    
    0.0
    %
   WeighedWeighted
    
    
    AverageShares
    
    
    Average
    
    
    Remaining
    
    
    AggregateUnder
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOption
    
    
    Price
    
    
    Life
    
    
    ValueOutstanding at January 1, 2007
    
    
    861,360
    
    
    $
    1.86Granted
    
    
    
    
    
    
    Exercised
    
    
    (500
    )
    
    
    0.60Forfeited
    
    
    (37,750
    )
    
    
    2.37Outstanding at September 30, 2007
    
    
    823,110
    
    
    $
    1.81
    
    
    3.57 Years
    
    $
    Exercisable at September 30, 2007
    
    
    668,490
    
    
    $
    1.82
    
    
    3.53 Years
    
    $
    
  7




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##### Table of Contents



Nonvested
    
    
    WeightedShares
    
    
    AverageUnder
    
    
    Grant DateOption
    
    
    Fair ValueNonvested at January 1, 2007
    
    
    251,570
    
    
    $
    1.76Granted
    
    
    
    
    
    
    Vested
    
    
    (89,980
    )
    
    
    0.71Forfeited
    
    
    (6,970
    )
    
    
    1.60Nonvested at September 30, 2007
    
    
    154,620
    
    
    $
    1.79
        8




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##### Table of Contents



September 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    2,295
    
    
    $
    2,098Work in process
    
    
    258
    
    
    
    250Finished goods
    
    
    702
    
    
    
    370Less: Allowance for obsolescence
    
    
    (203
    )
    
    
    (194
    )$
    3,052
    
    
    $
    2,524
    September 30, 2007
    
    December 31, 2006Ling Electronics trade name/symbol (indefinite life)
    
    $
    849
    
    
    $
    849ACG Dynamics customer list (5 year life)
    
    
    152
    
    
    
    152ACG Dynamics non-compete agreement (2 year life)
    
    
    74
    
    
    
    74Derritron Inc. intangible assets (10 year life)
    
    
    20
    
    
    
    Copyright, patents, and trademarks (2 to 20 year life)
    
    
    402
    
    
    
    402CE Certification (4 year life)
    
    
    64
    
    
    
    64Other intangibles (3 to 5 year life)
    
    
    80
    
    
    
    611,641
    
    
    
    1,602Less: Accumulated amortization
    
    
    (639
    )
    
    
    (590
    )$
    1,002
    
    
    $
    1,012
    Credit Agreement
   9




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Convertible Debt
     10




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Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006BASIC:Net (loss) income
    
    $
    (189
    )
    
    $
    192
    
    
    $
    (78
    )
    
    $
    722Accretion of redeemable preferred stock
    
    
    
    
    
    
    (109
    )
    
    
    
    
    
    
    (183
    )Preferred stock dividends
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    (156
    )Net (loss) income available to common
shareholders  basic
    
    $
    (189
    )
    
    $
    49
    
    
    $
    (78
    )
    
    $
    383Weighted average shares outstanding  basic
    
    
    8,825
    
    
    
    6,240
    
    
    
    8,805
    
    
    
    5,050Net (loss) income per share  basic
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.01
    )
    
    $
    0.08DILUTED:Net (loss) income
    
    $
    (189
    )
    
    $
    192
    
    
    $
    (78
    )
    
    $
    722Accretion of redeemable preferred stock and
preferred stock dividends
    
    
    
    
    
    
    (143
    )
    
    
    
    
    
    
    (339
    )Interest expense from convertible debt
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    55Net (loss) income available to common
shareholders  diluted
    
    $
    (189
    )
    
    $
    68
    
    
    $
    (78
    )
    
    $
    438Weighted average shares outstanding  basic
    
    
    8,825
    
    
    
    6,240
    
    
    
    8,805
    
    
    
    5,050Dilutive stock options and warrants
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    146Convertible securities
    
    
    
    
    
    
    578
    
    
    
    
    
    
    
    603Weighted average shares outstanding 
diluted
    
    
    8,825
    (a)
    
    
    6,931
    (b)
    
    
    8,805
    (a)
    
    
    5,799
    (b)Net (loss) income per share diluted
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.01
    )
    
    $
    0.08
 
 (a)
    
    Does not include common shares obtainable upon conversion of convertible debt
and stock options, as the effect would be anti-dilutive.(b)
    
    Does not include common shares obtainable upon conversion of preferred stock,
as the effect would be anti-dilutive.
   11




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HALT/HASS
    
    ED
    
    TOTALTHREE MONTHS ENDED SEPTEMBER
30, 2007Net revenue
    
    $
    1,596
    
    
    $
    1,113
    
    
    $
    2,709Gross profit
    
    
    614
    
    
    
    360
    
    
    
    974THREE MONTHS ENDED SEPTEMBER
30, 2006Net revenue
    
    $
    2,931
    
    
    $
    707
    
    
    $
    3,638Gross profit
    
    
    1,208
    
    
    
    180
    
    
    
    1,388
 HALT/HASS
    
    ED
    
    TOTALNINE MONTHS ENDED SEPTEMBER 30, 2007Net revenue
    
    $
    7,470
    
    
    $
    2,526
    
    
    $
    9,996Gross profit
    
    
    3,430
    
    
    
    654
    
    
    
    4,084NINE MONTHS ENDED SEPTEMBER 30, 2006Net revenue
    
    $
    9,884
    
    
    $
    2,240
    
    
    $
    12,124Gross profit
    
    
    4,480
    
    
    
    616
    
    
    
    5,096
 12




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AUSTRALIA/UNITED
    
    
    
    
    
    ASIA
    
    NEWSTATES
    
    EUROPE
    
    PACIFIC
    
    ZEALAND
    
    TOTALTHREE MONTHS ENDED
SEPTEMBER 30, 2007Net revenue
    
    $
    2,297
    
    
    $
    270
    
    
    $
    142
    
    
    
    
    
    
    $
    2,709Long lived assets, net
    
    
    3,174
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    3,225THREE MONTHS ENDED
SEPTEMBER 30, 2006Net revenue
    
    $
    2,173
    
    
    $
    387
    
    
    $
    1,078
    
    
    
    
    
    
    $
    3,638
 AUSTRALIA/UNITED
    
    
    
    
    
    ASIA
    
    NEWSTATES
    
    EUROPE
    
    PACIFIC
    
    ZEALAND
    
    TOTALNINE MONTHS ENDED SEPTEMBER 30, 2007Net revenue
    
    $
    6,923
    
    
    $
    1,380
    
    
    $
    1,693
    
    
    
    
    
    
    $
    9,996Long lived assets, net
    
    
    3,174
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    3,225NINE MONTHS ENDED SEPTEMBER 30, 2006Net revenue
    
    $
    6,848
    
    
    $
    1,181
    
    
    $
    3,923
    
    
    $
    172
    
    
    $
    12,124
    13




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Three Months Ended September 30, 2007 Compared With Three Months Ended September 30, 2006
   HALT/HASS Revenue (HALT/HASS)
  14




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Electrodynamic Revenue (ED)
            15




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Nine Months Ended September 30, 2007 Compared With Nine Months Ended Sept 30, 2006
   HALT/HASS Revenue (HALT/HASS)
  Electrodynamic Revenue (ED)
  16




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17




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Credit Agreement
    Convertible Debt
    18




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Business Environment
  Suppliers
  International Operations
  19




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Intellectual Property
  Acquisition
  Legal Proceedings
  Government Regulation
  Critical Accounting Policies and Estimates
   Contractual Obligations
  Recently Issued Accounting Pronouncements
     20




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##### Table of Contents



(a)
    
    Internal Control Over Financial Reporting:
  
  
   
   
   
   
   
  (a)
    
    Exhibits  See Index to Exhibits(b)
    
    Reports on Form 8-K during the quarter ended September 30, 2007:On July 25, 2007, the Company issued a press release announcing its earnings for the quarter
ended June 30, 2007.On September 17, 2007, the Company issued a press release announcing Mr. Jeffrey Hale, the
Companys Vice President of Sales and Marketing, agreed to end his employment with the Company.
 21




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##### Table of Contents



QualMark CorporationDate: November 13, 2007
    By:
    /s/ CHARLES D. JOHNSTONCharles D. Johnston President,Chief Executive OfficerDate: November 13, 2007
    By:
    /s/ ANTHONY A. SCALESEAnthony A. ScaleseChief Financial Officer
& Principal Accounting Officer 22




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EXHIBITNUMBER
    
    DESCRIPTION3.1
    
    Amended and Restated Articles of Incorporation of the Company.(1)3.2
    
    Amended and Restated Bylaws of the Company.(1)3.3
    
    Certificate of Designation for Series A Preferred Stock.(5)3.4
    
    Amended Certificate of Designation for Series A Preferred Stock.(5)3.5
    
    Statement of Change of Registered Agent.(5)4.1
    
    Form of Certificate for Shares of Common Stock.(1)4.6
    
    Form of Warrant issued to holders of 10% secured promissory notes.(1)10.1
    
    Qualmark Corporation 1993 Incentive Stock Option Plan.(1)10.2
    
    Qualmark Corporation 1996 Stock Option Plan.(3)10.3
    
    Employment Agreement dated March 1, 1993 by and between the Company and W. Preston Wilson.(1)10.4
    
    Employment Agreement dated August 15, 1994 by and between the Company and J. Wayne Farlow.(1)10.5
    
    Agreement dated September 30, 1995 by and between the Company and Gregg K. Hobbs.(1)10.8
    
    Addendum to Agreement dated as of December 21, 1995 by and between the Company and Gregg K.
Hobbs.(1)10.11
    
    Loan and Security Agreement dated April 30, 1996, by and between Qualmark Corporation and Silicon
Valley Bank, as amended by Amendment to Loan and Security Agreement dated August 18, 1997.(2)10.12
    
    Loan and Security Agreement dated December 22, 1998, by and between Qualmark Corporation and U.S.
Bank National Association.(4)10.13
    
    Waiver and Amendment to Loan Agreement dated March 15, 1999 by and between Qualmark and U.S. Bank
National Association.(4)10.14
    
    Second Amendment to Loan Agreement dated August 23, 1999 by and between Qualmark and U.S. Bank
National Association.(5)10.15
    
    Settlement Agreement dated August 30, 1999 by and among Qualmark Corporation and Screening Systems,
Inc.(5)10.16
    
    Preferred Stock Purchase Agreement dated September 1, 1999, including Warrant to Purchase 139,535
Shares of Common Stock.(5)10.17
    
    Third Amendment to Loan Agreement dated March 31, 2000 by and between Qualmark and U.S. Bank
National Association.(6)10.18
    
    Employment Agreement dated July 17, 2000 by and between the Company and Charles D. Johnston.(7)10.19
    
    Second Amendment to Promissory Notes and Fifth Amendment to Loan Agreement dated February 1, 2001
by and between Qualmark and U.S. Bank National Association.(8)10.20
    
    Third Amendment to Promissory Notes and Sixth Amendment to Loan Agreement dated June 29, 2001 by
and between Qualmark and U.S. Bank National Association.(9)10.21
    
    Fourth Amendment to Promissory Notes and Seventh Amendment to Loan Agreement dated January 31, 2002
by and between Qualmark and U.S. Bank National Association. (10)10.22
    
    Series C Preferred Stock Purchase Agreement dated March 27, 2002 (11)10.23
    
    Series C Preferred Stock Certificate of Designations (11)10.24
    
    Series B Preferred Stock Certificate of Designations (11)10.25
    
    Fifth Amendment to Promissory Notes and Eighth Amendment to Loan Agreement dated January 23, 2003
by and between Qualmark and U.S. Bank National Association.(12)10.25(b)
    
    Sixth Amendment to Promissory Notes and Ninth Amendment to Loan Agreement dated July 25, 2003 by
and between Qualmark and U.S. Bank National Association(13)10.26
    
    Irrevocable Letter of Credit issued to Catellus Development Corporation (12)




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION10.26(b)
    
    Warrant agreement to purchase 25,000 shares of Common Stock dated July 25, 2003 (13)10.27
    
    Seventh Amendment to Promissory Notes and Tenth Amendment to Loan Agreement dated February 27, 2004
by and between Qualmark and U.S. Bank National Association. (14)10.28
    
    Settlement Agreement and Payment Schedule dated February 13, 2004, by and between Qualmark
Corporation and Gregg K. Hobbs. (14)10.29
    
    Eighth Amendment to Promissory Notes and Eleventh Amendment to Loan Agreement dated April 20, 2004
by and between Qualmark and U.S. Bank National Association.(15)10.30
    
    Loan and Security Agreement dated November 9, 2004 by and between Qualmark and Silicon Valley Bank
(16)10.31
    
    Loan and Security Agreement dated November 11, 2004 by and between Qualmark and Partners for Growth
(17)10.32
    
    Asset Purchase Agreement dated November 12, 2004 by and between Qualmark and ACG Dynamics, Inc. (17)10.33
    
    Loan and Security Agreement dated December 8, 2005 by and between Qualmark and Silicon Valley Bank
(18)10.34
    
    Amendment to Loan and Security Agreement dated December 12, 2005 by and between Qualmark and
Partners for Growth (18)10.35
    
    Asset Purchase Agreement dated December 13, 2005 by and between Qualmark and SatCon Technology.(18)10.36
    
    Loan and Security Agreement dated February 20, 2007 by and between Qualmark and Partners for Growth
(19)10.37
    
    Fifth Amendment to Loan and Security Agreement dated March 13, 2006 by and between Qualmark and
Silicon Valley Bank (19)10.38
    
    Sixth Amendment to Loan and Security Agreement dated April 2, 2007 by and between Qualmark and
Silicon Valley Bank (20)10.39
    
    Loan Modification and Limited Waiver dated May 7, 2007 by and between Qualmark and Partners for
Growth, L.P. (20)14
    
    Director and Officer Code of Ethics (14)31.1
    
    CEO Certification of Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    CFO Certification of Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certifications of Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference from the Companys Registration Statement No. 333-1454-D on Form
SB-2.(2)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10- QSB for the quarter
ended September 30, 1997.(3)
    
    Incorporated by reference from the Companys Proxy Statement for the 1996 Annual Meeting of
Shareholders.(4)
    
    Incorporated by reference from the Companys Annual Report of Form 10-KSB for the year ended
December 31, 1998.(5)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10- QSB for the quarter
ended September 30, 1999.(6)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10- QSB for the quarter
ended June 30, 2000.(7)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10- QSB for the quarter
ended September 30, 2000.(8)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2000.(9)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10- QSB for the quarter
ended June 30, 2001.




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##### Table of Contents



(10)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2001.(11)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2002.(12)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2002.(13)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10-QSB for the quarter
ended June 30, 2003.(14)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2003.(15)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2004.(16)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10-QSB for the quarter
ended September 30, 2004.(17)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2004.(18)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2005.(19)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2006.(20)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10-QSB for the quarter
ended June 30, 2007