##### 





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
 Form 10-K
 ANNUAL REPORT
 PURSUANT TO SECTIONS 13 OR
    15(d) OF THE
 SECURITIES EXCHANGE ACT OF
    1934
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    DECEMBER 29, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    001-11655
  HearUSA, Inc.
 Exact Name of Registrant as
    Specified in Its Charter
  Delaware

22-2748248(State of Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)1250 Northpoint Parkway,
    West Palm Beach, Florida(Address of Principal
    Executive Offices)

33407(Zip
    Code)   Registrants Telephone
    Number, Including Area Code
 (561) 478-8770
  Securities registered pursuant
    to Section 12(b) of the Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $0.10 per share

American Stock Exchange   Securities registered pursuant
    to Section 12(g) of the Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 





PART I
  Item 1.
    Business        Products
        Acquisition
    Program
   1




---



##### 



Managed Care,
    Institutional Contracts and Benefit Providers
      90-days
    Sales
    Development
    Marketing
    
    Newspaper and Special Events:  HearUSA places print
    ads in its markets promoting different hearing aids at a variety
    of technology levels and prices, along with special limited time
    events. Advertising also emphasizes the need to seek help for
    hearing loss as well as promoting the qualitative differences
    and advantages offered by HearUSA. 2




---



##### 




    Direct Marketing:  Utilizing HearUSAs database,
    HearUSA conducts direct mailings and offers free seminars in its
    markets on hearing aids and hearing loss.
    Physician Marketing:  HearUSA attempts to educate both
    physicians and their patients on the need for regular hearing
    testing and the importance of hearing aids and other assistive
    listening devices. HearUSA works to further its image as a
    provider of highly professional services, quality products, and
    comprehensive post-sale consumer education.
    Telemarketing:  HearUSA has a domestic national call
    center, which supports all HearUSA centers. The national call
    center is responsible for both inbound calls from consumers and
    outbound telemarketing. The Company uses a predictive dialer
    system which has improved call center productivity and increased
    the number of qualified appointments in its centers.  Facilities and
    Services
      
    Comprehensive hearing testing using standardized practice
    guidelines
    Interactive hearing aid selection and fitting processes
    Aural rehabilitation and follow up care
    Standardized reporting and physician communications      Revenues
    Segments
  e-commerce
  Centers
   3




---



##### 



Network
      E-commerce
  e-commerce
  Distinguishing
    Features
    Joint Commission on
    Accreditation of Healthcare Organizations
   4




---



##### 



Center Management
    System, Medical Reporting and HearUSA Data Link
        Competition
      and/or
   5




---



##### 



Reliance on
    Manufacturers
      Regulation
  Federal
  30-day
     6




---



##### 



State
   7




---



##### 



speech-language speech-language speech-language
      Canada
     8




---



##### 



Product and
    Professional Liability
    Seasonality
    Employees
    Where to Find
    More Information
  Form 10-K, Form 10-Q Form 8-K
  Item 1A.
    Risk
    Factors  This Annual Report on
    Form 10-K,
    including the management discussion and analysis set out below,
    contains or incorporates a number of forward-looking statements
    within the meaning of Section 27A of the Securities Act of
    1933 and Section 21E of the Securities Act Exchange of
    1934. These forward-looking statements are based on current
    expectations, estimates, forecasts and projections about the
    industry and markets in which we operate and managements
    beliefs and assumptions. Any statements that are not statements
    of historical fact should be considered forward-looking
    statements and should be read in conjunction with our
    consolidated financial statements and notes to the consolidated
    financial statements included in this report as well as the risk
    factors set forth below. The statements are not guarantees of
    future performance and involve certain risks, uncertainties and
    assumptions that are difficult to predict. The risks and
    uncertainties described below are not the only ones facing us.
    Additional risks and uncertainties that we are unaware of may
    become important factors that affect us. If any of the following
    risks occur, our business, financial condition and results of
    operations could be materially and adversely affected.
 9




---



##### 



HearUSA has a
    history of operating losses and may never be
    profitable.
    
    Timing of product sales;
    Level of consumer demand for our products;
    Timing and success of new centers and acquired centers;
    Timing and amounts of payments by health insurance and managed
    care organizations.    We may not
    effectively compete in the hearing care industry.
  and/or
  We are
    dependent on manufacturers who may not perform.
    We may not be
    able to access funds under our credit facility with Siemens if
    we cannot maintain compliance with the restrictive covenants
    contained therein and in our supply agreement with
    Siemens.
   10




---



##### 



We rely on
    qualified audiologists, without whom our business may be
    adversely affected.
    We may not be
    able to maintain existing agreements or enter into new
    agreements with health insurance and managed care organizations,
    which may result in reduced revenues.
    We depend on
    our joint venture for our California operations and may not be
    able to attract sufficient patients to our California centers
    without it.
    We rely on the
    efforts and success of managed care companies that may not be
    achieved or sustained.
    We may not be
    able to maintain JCAHO accreditation, and our revenues may
    suffer.
   11




---



##### 



We are exposed
    to potential product and professional liability that could
    adversely affect us if a successful claim is made in excess of
    insurance policy limits.
    Risks Relating to
    HearUSA Common Stock
  The price of
    our common stock is volatile and could decline.
    
    the amount of our cash resources and ability to obtain
    additional funding;
    economic conditions in markets we are targeting;
    fluctuations in operating results;
    changes in government regulation of the healthcare industry;
    failure to meet estimates or expectations of the market; and
    rate of acceptance of hearing aid products in the geographic
    markets we are targeting.    HearUSA might
    fail to maintain a listing for its common stock on the American
    Stock Exchange, making it more difficult for stockholders to
    dispose of or to obtain accurate quotations as to the value of
    their HearUSA stock.
    
    the company fails to maintain stockholders equity of at
    least $2 million if the company has sustained losses from
    continuing operations or net losses in two of its three most
    recent fiscal years;
    the company fails to maintain stockholders equity of
    $4 million if the company has sustained losses from
    continuing operations or net losses in three of its four most
    recent fiscal years; or
    the company has sustained losses from continuing operations or
    net losses in its five most recent fiscal years. 12




---



##### 



If penny
    stock regulations apply to HearUSA common stock, you may
    not be able to sell or dispose of your shares.
    Conversion of
    outstanding HearUSA convertible instruments and exercise of
    outstanding HearUSA options and warrants could cause substantial
    dilution.
    
    Convertible note with Siemens, convertible into approximately
    6.4 million shares of common stock;
    Warrants to purchase approximately 2.7 million shares of
    common stock and
    Options to purchase approximately 5.2 million shares of
    common stock.    Future sales
    of shares may depress the price of HearUSA common
    stock.
    Because of the
    HearUSA rights agreement and the related rights plan for the
    exchangeable shares, a third party may be discouraged from
    making a takeover offer which could be beneficial to HearUSA and
    its stockholders.
   13




---



##### 



Because
    HearUSA stockholders do not receive dividends, stockholders must
    rely on stock appreciation for any return on their investment in
    HearUSA.
    Other Risks
    Relating to the Business of HearUSA
  We may not be
    able to obtain additional capital on reasonable terms, or at
    all, to fund our operations.
    Future
    acquisitions or investments could negatively affect our
    operations and financial results or dilute the ownership
    percentage of our stockholders.
      
    issue additional stock that would further dilute our current
    stockholders percentage ownership;
    incur debt;
    assume unknown or contingent liabilities; or
    experience negative effects on reported operating results from
    acquisition-related charges and amortization of acquired
    technology, goodwill and other intangibles.    
    potential loss of key employees of acquired organizations;
    problems integrating the acquired business, including its
    information systems and personnel;
    unanticipated costs that may harm operating results;
    diversion of managements attention from business
    concerns; and
    adverse effects on existing business relationships with
    customers.   14




---



##### 



Increased
    exposure to currency fluctuations could have adverse effects on
    our reported earnings.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  e-commerce
  Item 3.
    Legal
    Proceedings    Item 4.
    Submission of
    Matters to a Vote of Security Holders   15




---



##### 



EXECUTIVE
    OFFICERS OF THE COMPANY
  3-year
  First Served asExecutiveName and Position

Age


OfficerStephen J. Hansbrough


61



1993President/Chief Executive Officer
    DirectorGino Chouinard


39



2002Executive Vice President
    Chief Financial Officer     start-up
   16




---



##### 



PART II
  Item 5.
    Market for
    Registrants Common Equity and Related Stockholder
    Matters    Common StockFiscal Quarter

High


Low2007First

$
1.91


$
1.00Second

$
1.95


$
1.50Third

$
1.77


$
1.28Fourth

$
1.70


$
1.282006First

$
1.56


$
1.22Second

$
1.49


$
1.19Third

$
1.80


$
1.25Fourth

$
2.04


$
1.31     Dividend
    Policy
   17




---



##### 



Item 6.
    Selected
    Financial Data    CONSOLIDATED
    STATEMENT OF OPERATIONS DATA:
  Year EndedDecember 29


December 30


December 31


December 25


December 272007


2006


2005


2004


2003Dollars in thousandsTotal net revenues

$
102,804


$
88,786


$
76,672


$
68,749


$
67,080Income from operations (1 and 2)


6,823



3,809



3,715



2,338



2,268Non-operating income:Gain from insurance settlement(3)






203



430







Interest income


164



152



54



18



21Interest expense(4)


(8,022
)


(5,964
)


(4,641
)


(4,564
)


(2,828
)Income tax expense


(769
)


(741
)


(1,759
)


(690
)


(390
)Minority interest


(1,478
)


(633
)










Loss from continuing operations


(3,282
)


(3,174
)


(2,201
)


(2,898
)


(929
)Loss before dividends on preferred stock


(3,282
)


(3,174
)


(2,264
)


(3,449
)


(1,499
)Net loss applicable to common stockholders


(3,419
)


(3,312
)


(2,965
)


(4,157
)


(2,126
)Loss per common share:Basic and diluted, loss from continuing operations, including
    dividends on preferred stock


(0.09
)


(0.10
)


(0.09
)


(0.12
)


(0.05
)Basic and diluted, net loss applicable to common stockholders


(0.09
)


(0.10
)


(0.09
)


(0.14
)


(0.07
)     (1)
    
    Income from operations in 2007 and 2006 includes approximately
    $606,000 and $976,000, respectively of non-cash employee
    stock-based compensation expense, which did not exist in prior
    years.(2)
    
    Income from operations includes approximately $896,000,
    $815,000, $618,000, $478,000 and $457,000, in 2007, 2006, 2005,
    2004 and 2003, respectively, of intangible assets amortization.(3)
    
    The gain from insurance settlement is from insurance proceeds
    and final payment resulting from 2005 and 2004 hurricane damages
    and business interruption claims sustained in Florida hearing
    care centers.(4)
    
    Interest expense includes approximately $3.5 million,
    $2.7 million, $2.5 million, $2.1 million and
    $517,000 in 2007, 2006, 2005, 2004 and 2003, respectively, of
    non-cash debt discount amortization (including $1.4 million
    in 2007 due to the reduction in the price of warrants related to
    the 2003 Convertible Subordinated Notes) and approximately
    $319,000 and $513,000 in 2006 and 2005, respectively, of
    non-cash decreases in interest expense related to a decrease in
    the fair market value of the warrant liability. 18




---



##### 



BALANCE SHEET
    DATA:
  As ofDecember 29


December 30


December 31


December 25


December 272007


2006


2005


2004


2003Dollars in thousandsTotal assets

$
100,542


$
83,276


$
71,044


$
61,774


$
68,883Working capital deficit(1)


(16,012
)


(14,896
)


(3,549
)


(4,898
)


(2,330
)Long-term debt:Long-term debt, net of current maturities


36,499



28,599



19,970



17,296



20,580Convertible subordinated notes and subordinated notes, net of
    debt discount of $278,000, $2,078,000, $5,444,000 and $7,424,000
    in 2006, 2005, 2004 and 2003, respectively






3,762



6,222



2,056



76Mandatorily redeemable convertible preferred stock














4,710



4,600     (1)
    
    Includes approximately $2.6 million, $3.5 million,
    $2.2 million, $2.9 million and $2.9 million in
    2007, 2006, 2005, 2004 and 2003, respectively, representing the
    current maturities of the long-term debt to Siemens which may be
    repaid through rebate credits and approximately
    $2.5 million and $652,000, net of debt discount, in 2006
    and 2005 respectively, related to the $7.5 million
    convertible subordinated notes that could be repaid by either
    cash or stock, at the option of the Company. 19




---



##### 



Item 7.
    Managements
    Discussion and Analysis of Results of
    Operationsand Financial Condition  GENERAL
             20




---



##### 



RESULTS OF
    OPERATIONS
  2007 compared
    to 2006 (in thousands of dollars)
  Revenues
  Revenues

2007


2006


Change


% ChangeHearing aids and other products

$
95,936


$
82,820


$
13,116



15.8
%Services


6,868



5,966



902



15.1
%Total net revenues

$
102,804


$
88,786


$
14,018



15.8
%   % Change2007


2006


Change


(3)Revenues from centers acquired in 2006(1)

$
8,193


$



$
8,193



9.2
%Revenues from centers acquired in 2007


4,600







4,600



5.2
%Revenues from acquired centers


12,793







12,793



14.4
%Revenues from comparable centers(2)


90,011



88,786



1,225



1.4
%Total net revenues

$
102,804


$
88,786


$
14,018



15.8
%     (1)
    
    Represents that portion of revenues from the 2006 acquired
    centers recognized for those acquisitions that had less than one
    full year of revenues recorded in 2006 due to the timing of
    their acquisition.(2)
    
    Also includes revenues from the network business segment as well
    as the impact of fluctuation of the Canadian exchange rate.(3)
    
    The revenues from acquired centers percentage changes are
    calculated by dividing those revenues by the total of 2006 total
    net revenues.     21




---



##### 



Cost of Products
    Sold and Services
  Cost of products sold and services

2007


2006


Change


%Hearing aids and other products

$
26,017


$
24,942


$
1,075



4.3
%Services


2,088



1,761



327



18.6
%Total cost of products sold and services

$
28,105


$
26,703


$
1,402



5.3
%Percent of total net revenues


27.3
%


30.1
%


(2.8
)%


(9.3
)%       Rebate credits included above

2007


2006


Change


%Base required payments on Tranche C forgiven

$
3,945


$
2,922


$
1,023



35.0
%Required payments of $65 per Siemens unit from acquired centers
    on Tranche B forgiven


539



190



349



183.7
%Interest expense on Tranches B and C forgiven


2,703



626



2,077



331.8
%Total rebate credits

$
7,187


$
3,738


$
3,449



92.3
%Percent of total net revenues


7.0
%


4.2
%


2.8
%


66.7
%         Expenses
  Operating expenses

2007


2006


Change


%Center operating expenses

$
50,401


$
42,281


$
8,120



19.2
%Percent of total net revenues


49.0
%


47.6
%


1.4
%


2.9
%General and administrative expenses

$
15,227


$
14,005


$
1,222



8.7
%Percent of total net revenues


14.8
%


15.8
%


(1.0
)%


(6.3
)%Depreciation and amortization

$
2,248


$
1,988


$
260



11.413.1
%Percent of total net revenues


2.2
%


2.2
%


0.0
%


0.0
%  22




---



##### 



Interest
    Expense
  Interest expense

2007


2006


Change


%Notes payable from business acquisitions and others(1)

$
642


$
264


$
371



140.5
%Siemens Tranche C2  Interest paid with monthly
    payments(2)






345



(345
)


(100.0
)%Siemens Tranches C1 and C3  accrued interest added to
    loan balance(2)






1,130



(1,130
)


(100.0
)%Siemens Tranches A, B and C  interest forgiven(3)


2,696



626



2,077



331.8
%Siemens Tranche D


691







691



2003 Convertible Subordinated Notes(4)


3,168



2,556



612



23.9
%2005 Subordinated Notes(5)


825



1,361



(536
)


(39.4
)%Warrant liability change in value(6)






(319
)


319



(100.0
)%Total interest expense

$
8,022


$
5,963


$
2,059



34.5
%   23




---



##### 



2007


2006


Change


%Total cash interest expense(7)

$
1,703


$
2,962


$
(1,266
)


(42.7
)%Total non-cash interest expense(8)


6,319



3,001



3,325



110,.8
%Total interest expense

$
8,022


$
5,963


$
2,059



34.5
%     (1)
    
    Includes $131,000 of non-cash interest expense related to the
    recording of notes at their present value by discounting future
    payments at an imputed rate of interest (see
    Note 6  Long-term Debt, Notes to Consolidated
    Financial Statements included herein).(2)
    
    The loan balances related to this interest expense have been
    transferred to the new self-liquidating loan with Siemens under
    the new December 30, 2006 agreement (Tranches B and
    C) and will now be forgiven going forward so long as
    minimum purchase requirements are met (see
    Note 6  Long-term Debt, Notes to Consolidated
    Financial Statements included herein and Liquidity and Capital
    Resources, below).(3)
    
    The interest expense on Tranches B and C is forgiven by Siemens
    as long as the minimum purchase requirements are met and a
    corresponding rebate credit is recorded in reduction of the cost
    of products sold (see Note 6  Long-term Debt,
    Notes to Consolidated Financial Statements included herein and
    Liquidity and Capital Resources, below).(4)
    
    Includes $3.0 million in 2007 and $1.8 million in 2006
    of non-cash debt discount amortization (see
    Note 7  Convertible Subordinated Notes, Notes to
    Consolidated Financial Statements included herein).(5)
    
    Includes $496,000 in 2007 and $850,000 in 2006 of non-cash debt
    discount amortization (see Note 8  Subordinated
    Notes and Warrant Liability, Notes to Consolidated Financial
    Statements included herein).(6)
    
    Relates to the change in value of the warrants related to the
    2005 subordinated notes and is a non-cash item (see
    Note 8  Subordinated Notes and Warrant
    Liability, Notes to Consolidated Financial Statements included
    herein).(7)
    
    Represents the sum of the cash interest portion paid on the
    notes payable for business acquisitions and others, the cash
    interest paid to Siemens on the Siemens loans (Tranche C2
    in 2006 and Tranche D in 2007) and the cash portion
    paid on the Convertible Subordinated and Subordinated Notes.(8)
    
    Represents the sum of the non-cash interest portion imputed on
    the notes payable for business acquisitions to adjust the
    interest rates at market value, the Siemens non-cash interest
    imputed on Tranches C1 and C3 in 2006 and Tranches B and C in
    2007 and the non-cash interest imputed to the 2003 Convertible
    Subordinated Notes and 2005 Subordinated Notes related to the
    debt discount amortization.     24




---



##### 



Income
    Taxes
    and/or
  Minority
    Interest
    2006 compared
    to 2005 (in thousands of dollars)
  Revenues
  Revenues

2006


2005


Change


% ChangeHearing aids and other products

$
82,820


$
71,445


$
11,375



15.9
%Services


5,966



5,227



739



14.1
%Total net revenues

$
88,786


$
76,672


$
12,114



15.8
%   25




---



##### 



2006


2005


Change


% Change(3)Revenues from centers acquired in 2005(1)

$
1,341


$



$
1,341



1.7
%Revenues from centers acquired in 2006


5,331







5,331



7.0
%Total Revenues from acquired centers


6,672







6,672



8.7
%Revenues due to an additional week in 2005






1,400



(1,400
)


(1.8
)%Revenues from comparable centers(2)


82,114



75,272



6,842



9.1
%Total net revenues

$
88,786


$
76,672


$
12,114



15.8
%     (1)
    
    Represents that portion of revenue from the 2005 acquired
    centers recognized for those acquisitions that had less than one
    full year of revenues recorded in 2005 due to the timing of
    their acquisition.(2)
    
    Includes revenues from the network business segment as well as
    the impact of fluctuation of the Canadian exchange rate.(3)
    
    The revenues from acquired centers percentage changes are
    calculated by dividing them by the total 2005 net revenues.      Cost of Products
    Sold and Services
  Cost of products sold and services

2006


2005


Change


%Hearing aids and other products

$
24,942


$
20,973


$
3,969



18.9
%Services


1,761



1,794



(33
)


(1.8
)%Total cost of products sold and services

$
26,703


$
22,767


$
3,936



17.3
%Percent of total net revenues


30.1
%


29.7
%


0.4
%


1.3
%    26




---



##### 



Rebate Credits included above

2006


2005


Change


%Base required payments on Tranches A and C forgiven

$
2,922


$
2,923


$
(1
)


0.0
%Required payments of $65 per Siemens unit from acquired centers
    on Tranche B forgiven


190







190



n/aInterest expense on Tranches A, B and C forgiven


626



389



237



60.9
%Total rebate credits

$
3,738


$
3,312


$
426



11.4
%Percent of total net revenues


4.2
%


4.3
%


(0.1
)%


(2.3
)%     Expenses
  Operating expenses

2006


2005


Change


%Center operating expenses

$
42,281


$
36,472


$
5,809



15.9
%Percent of total net revenues


47.6
%


47.6
%






0.0
%General and administrative expenses

$
14,005
(1)

$
11,745


$
2,260



19.2
%Percent of total net revenues


15.8
%(1)


15.3
%


0.5
%


3.3
%Depreciation and amortization

$
1,988


$
1,974


$
14



0.7
%Percent of total net revenues


2.2
%


2.6
%


(0.4
)%


(15.4
)%     (1)
    
    Includes approximately $976,000 or 1.1% of total net revenues of
    non-cash stock-based compensation that did not exist in 2005.     27




---



##### 



Interest
    Expense
  Interest expense

2006


2005


Change


%Notes payable from business acquisitions and others

$
264


$
68


$
196



288.2
%Siemens Tranche C2  Interest paid with monthly
    payments(1)


345



190



155



81.6
%Siemens Tranches C1 and C3  accrued interest added to
    loan balance(1)


1,130



964



166



17.2
%Siemens Tranches A, B and C  interest forgiven


626



389



237



60.9
%2003 Convertible Subordinated Notes(2)


2,556



2,948



(392
)


(13.3
)%2005 Subordinated Notes(3)


1,361



595



766



128.7
%Warrant liability change in value(4)


(319
)


(513
)


194



37.8
%Total interest expense

$
5,963


$
4,641


$
1,322



28.5
%     (1)
    
    The loan balances related to these interest expenses have been
    transferred to the new self-liquidating loan with Siemens under
    the new December 30, 2006 agreement and will now be
    forgiven going forward so long as minimum purchase requirement
    is met (see Note 6  Long-term Debt, Notes to
    Consolidated Financial Statements included herein and Liquidity
    and Capital Resources, below).(2)
    
    Includes $1.8 million in 2006 and $2.2 million in 2005
    of non-cash debt discount amortization (see
    Note 7  Convertible Subordinated Notes, Notes to
    Consolidated Financial Statements included herein).(3)
    
    Includes $850,000 in 2006 and $389,000 in 2005 of non-cash debt
    discount amortization (see Note 8  Subordinated
    Notes and Warrant Liability, Notes to Consolidated Financial
    Statements included herein).(4)
    
    Relates to the change in value of the warrants related to the
    2003 Subordinated Notes and is a non-cash item (see
    Note 8  Subordinated Notes and Warrant
    Liability, Notes to Consolidated Financial Statements included
    herein).   28




---



##### 



Dividends
    LIQUIDITY AND
    CAPITAL RESOURCES
  Siemens
    Transaction
      Financing and rebate arrangement
    1 3
     29




---



##### 



Calculation of Pro Forma Rebates to HearUSA When at Least 90%
    ofUnits Sold are from Siemens(1)Quarterly Siemens Unit Sales Compared to Prior
    YearsComparable Quarter90% but < 95%


95% to 100%


> 100% < 125%


125% and >Tranche B Rebate

$
65/ unit


$
65/ unit


$
65/ unit


$
65/ unitPlus



Plus



Plus



PlusTranche C Rebate

$
500,000


$
500,000


$
500,000


$
500,000Additional Volume Rebate






156,250



312,500



468,750Interest Forgiveness Rebate(3)

$
712,500


$
712,500


$
712,500



712,500$
1,212,500


$
1,368,750


$
1,525,000


$
1,681,250     (1)
    
    Calculated using trailing twelve month units sold by the Company(2)
    
    Siemens units sold by acquired businesses ($65 per unit)(3)
    
    Assuming the first $30 million portion of the line of
    credit is fully utilized      Marketing arrangement
    Investor and other rights arrangement
     30




---



##### 



Form S-3
      Working
    Capital
      Cash
    Flows
     31




---



##### 



Contractual
    Obligations
    Payments Due by Period (000s)Contractual




Less than 1








More Thanobligations

Total


Year


1-3 Years


4-5 Years


5 yearsLong-term debt(1 and 3)

$
47,692


$
11,026


$
10,627


$
6,301


$
19,738Subordinated notes


1,540



1,540











Subtotal of obligations recorded on balance sheet


49,232



12,566



10,627



6,301



19,738Interest to be paid on long-term debt (2 and 3)


15,816



3,864



6,474



5,097



381Interest to be paid on subordinated notes


44



44











Operating leases


20,837



6,295



9,340



3,554



1,648Employment agreements


3,795



1,996



1,799







Purchase obligations


2,197



1,117



540



540



Total contractual cash obligations


91,921



25,882



28,780



15,492



21,767     (1)
    
    Approximately $29.0 million can be repaid through rebate
    credits from Siemens, including $2.6 million in less than
    1 year and $5.2 million in years 1-3,
    $5.2 million in years 4-5 and $16.0 million in more
    than 5 years.(2)
    
    Interest on long-term debt includes the interest on the new
    Tranches B and C that can be repaid through rebate credits from
    Siemens pursuant to the Amended and Restated Credit Agreement,
    including $2.7 million in less than 1 year and
    $4.6 million in years 1-3, $3.6 in years 4-5 and $212,000
    in more than 5 years. Interest repaid through preferred
    pricing reductions was $2.7 million in 2007. (See
    Note 6  Long-Term Debt, Notes to Consolidated
    Financial Statements included herein). 32




---



##### 



(3)
    
    Principal and interest payments on long-term debt is based on
    cash payments and not the fair value of the discounted notes
    (See Note 6  Long-Term Debt, Notes to
    Consolidated Financial Statements included herein).  OUTLOOK
      SUBSEQUENT
    EVENT
      CRITICAL
    ACCOUNTING POLICIES
    Goodwill
  e-commerce.
 33




---



##### 



Revenue recognition
                 34




---



##### 



Allowance for doubtful accounts
      Sales returns
    Vendor rebates
    Marketing allowances
   35




---



##### 



Impairment of Long-Lived Assets
    Stock-based compensation
  Share-Based Payment
    Income taxes
         36




---



##### 



RECENT ACCOUNTING
    PRONOUNCEMENTS
    ,
    SFAS 157-2,
 37




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosure About Market Risk    Fixed Rate9.5%


7%


Variable RateDue February


Due August


5% to 13.9%2013


2008


Other


Total$


$


$


$(000s)


(000s)


(000s)


(000s)2008


(6,835
)


(1,540
)


(3,914
)


(12,289
)2009


(2,631
)






(3,201
)


(5,832
)2010


(2,610
)






(2,046
)


(4,656
)2011


(2,611
)






(1,116
)


(3,727
)2012


(2,542
)










(2,542
)2013


(19,739
)










(19,739
)Total


(36,968
)


(1,540
)


(10,277
)


(48,785
)Estimated fair value


(36,968
)


(1,516
)


(9,675
)


(48,159
)  38




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data   
 PageIndex to Financial StatementsFinancial Statements:Report of Independent Registered Certified Public
    Accounting Firm


39Consolidated Balance Sheets at December 29,
    2007 and December 30, 2006


40Consolidated Statements of Operations for the
    years ended December 29, 2007, December 30, 2006 and
    December 31, 2005


41Consolidated Statements of Changes in
    Stockholders Equity for the years ended December 29,
    2007, December 30, 2006 and December 31, 2005


42Consolidated Statements of Cash Flows for the
    years ended December 29, 2007, December 30, 2006 and
    December 31, 2005


44Notes to Consolidated Financial Statements


46Financial Statement Schedule:II Valuation and Qualifying Accounts 
    For the years ended December 29, 2007, December 30,
    2006 and December 31, 2005


75   39




---



##### 



Report of
    Independent Registered Certified Public Accounting
    Firm              No. FIN 48-1
      40




---



##### 



HearUSA,
    Inc.
 Consolidated
    Balance Sheets
  December 29,


December 30,2007


2006(Dollars in thousands)ASSETS (Note 6)Current assetsCash and cash equivalents

$
3,369


$
2,326Accounts and notes receivable, less allowance for doubtful
    accounts of $498,000 and $434,000


8,825



7,591Inventories


2,441



2,371Prepaid expenses and other


1,283



1,400Deferred tax asset


62



67Total current assets


15,980



13,755Property and equipment, net(Notes 3 and 4)


4,356



3,878Goodwill(Notes 3 and 5)


63,134



50,970Intangible assets, net(Notes 3 and 5)


16,165



13,592Deposits and other


691



876Restricted cash and cash equivalents


216



205Total Assets

$
100,542


$
83,276LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable

$
12,467


$
10,463Accrued expenses


2,523



2,509Accrued salaries and other compensation


3,521



2,826Current maturities of long-term debt


10,746



8,391Current maturities of convertible subordinated notes, net of
    debt discount of $1,263,000 in 2006






2,487Current maturities of subordinated notes, net of debt discount
    of $60,000 and $452,000


1,480



1,308Dividends payable


34



34Minority interest in net income of consolidated joint venture,
    currently payable


1,221



633Total current liabilities


31,992



28,651Long-term debt(Notes 3 and 6)


36,499



28,599Deferred income taxes


6,462



5,234Convertible subordinated notes, net of debt discount of
    $218,000(Note 7)






2,282Subordinated notes, net of debt discount of $60,000 in 2006(Note 8)






1,480Warrant liability(Note 8)






110Total long-term liabilities


42,961



37,705Commitments and contingencies






Stockholders equity(Note 10 and 11)Preferred stock (aggregate liquidation preference $2,330,000,
    $1 par, 7,500,000 shares authorized)Series H Junior Participating (none outstanding)






Series J (233 shares outstanding)






Total preferred stock






Common stock: $.10 par; 75,000,000 shares authorized
    38,325,414 and 32,029,750 shares issued


3,833



3,203Stock subscription


(412
)


(412
)Additional paid-in capital


133,261



123,972Accumulated deficit


(113,076
)


(109,521
)Accumulated other comprehensive income


4,468



2,163Treasury stock, at cost: 523,662 common shares


(2,485
)


(2,485
)Total Stockholders Equity


25,589



16,920Total Liabilities and Stockholders Equity

$
100,542


$
83,276   See accompanying notes to consolidated financial
    statements
 41




---



##### 



HearUSA,
    Inc.
 Consolidated
    Statements of Operations
  Year EndedDecember 29,


December 30,


December 31,2007


2006


2005(Dollars and shares in thousands,except per share amounts)Net revenuesHearing aids and other products

$
95,936


$
82,820


$
71,445Services


6,868



5,966



5,227Total net revenues


102,804



88,786



76,672Operating costs and expensesHearing aids and other products


26,017



24,942



20,973Services


2,088



1,761



1,794Total cost of products sold and services


28,105



26,703



22,767Center operating expenses


50,401



42,281



36,472General and administrative expenses (including approximately
    $606,000 and $976,000 in 2007 and 2006 of non-cash employee
    stock-based compensation expense  
    Notes 1 and 11)


15,227



14,005



11,744Depreciation and amortization


2,248



1,988



1,974Total operating costs and expenses


95,981



84,977



72,957Income from operations


6,823



3,809



3,715Non-operating income (expense):Gain from insurance settlement






203



430Interest income


164



152



54Interest expense (including approximately $3.5 million,
    $2.7 million and $2.5 million of non-cash debt
    discount amortization and a non-cash reduction of approximately
    $319,000 and $513,000 for the decrease in the fair value of the
    warrant liability in 2006 and 2005  Note 8)


(8,022
)


(5,964
)


(4,641
)Loss from continuing operations before income tax expense,
    loss from discontinued operations and minority interest in
    income of consolidated Joint Venture


(1,035
)


(1,800
)


(442
)Income tax expense(Note 14)


(769
)


(741
)


(1,759
)Minority interest in income of consolidated Joint Venture


(1,478
)


(633
)


Loss from continuing operations


(3,282
)


(3,174
)


(2,201
)Gain on disposition of assets from discontinued operations
    (Note 19)










333Loss from discontinued operations










(396
)Loss from discontinued operations










(63
)Net loss


(3,282
)


(3,174
)


(2,264
)Dividends on preferred stock(Notes 9 and 10C)


(137
)


(138
)


(701
)Net loss applicable to common stockholders

$
(3,419
)

$
(3,312
)

$
(2,965
)Net loss from continuing operations, including dividends on
    preferred stock, applicable to common stockholders-basic and
    diluted(Note 1)

$
(0.09
)

$
(0.10
)

$
(0.09
)Net loss applicable to common stockholders per common
    share  basic and diluted(Note 1)

$
(0.09
)

$
(0.10
)

$
(0.09
)Weighted average number of shares of common stock outstanding(Notes 1, 10 and 11)


36,453



32,225



31,611   See accompanying notes to consolidated financial
    statements
 42




---



##### 



HearUSA,
    Inc.
 Consolidated
    Statements of Changes in Stockholders Equity
  Year EndedDecember 29, 2007


December 30, 2006


December 31, 2005Shares


Amount


Shares


Amount


Shares


Amount(Dollars and shares in thousands)Preferred stockBalance beginning and end of year





$







$







$
Common stockBalance, beginning of year


32,030


$
3,203



31,893


$
3,189



30,061


$
3,006Exercise of employee stock options


473



47



7



1



130



13Issuance of common stock for exchangeable shares


164



17



30



3



102



10Issuance of restricted stock










100



10







Issuance of common stock for convertible debt


3,158



316















Warrant exercise


2,500



250











1,600



160Balance, end of year


38,325


$
3,833



32,030


$
3,203



31,893


$
3,189Treasury stockBalance beginning and end of year


524


$
(2,485
)


524


$
(2,485
)


524


$
(2,485
)Stock subscriptionBalance beginning and end of year





$
(412
)





$
(412
)





$
(412
)Additional paid-in capital:Balance, beginning of year





$
123,972






$
121,935






$
120,198Cumulative effect of adjustment (Note 8)






246Employee stock-based compensation expense






606







976







Value of warrants issued with debt














917







Exercise of employee stock options






399







4







55Issuance of common stock for exchangeable shares






(16
)






(3
)






(10
)Exercise of warrants






2,871















1,665Consulting expense






32







143







27Issuance of common stock for convertible debt






5,151















Balance, end of year





$
133,261






$
123,972






$
121,935   See accompanying notes to consolidated financial
    statements
 43




---



##### 



HearUSA,
    Inc.
 Consolidated Statements of
    Changes in Stockholders Equity
  Year EndedDecember 29, 2007


December 30, 2006


December 31, 2005Amount


Amount


Amount(Dollars in thousands)Accumulated deficit:Balance, beginning of year

$
(109,521
)

$
(106,209
)

$
(103,244
)Cumulative effect adjustment (Note 8)


(136
)






Net loss


(3,282
)


(3,174
)


(2,264
)Dividends on preferred stock


(137
)


(138
)


(701
)Balance, end of year

$
(113,076
)

$
(109,521
)

$
(106,209
)Accumulated other comprehensive income:Balance, beginning of year

$
2,163


$
2,214


$
1,558Foreign currency translation adjustment


2,305



(51
)


656Balance, end of year

$
4,468


$
2,163


$
2,214Comprehensive income (loss):Net loss

$
(3,282
)

$
(3,174
)

$
(2,265
)Foreign currency translation adjustment


2,305



(51
)


656Comprehensive loss

$
(977
)

$
(3,225
)

$
(1,609
)   See accompanying notes to consolidated finanical
    statements
 44




---



##### 



HearUSA,
    Inc.
 Consolidated
    Statements of Cash Flows
  Year EndedDecember 29,


December 30,


December 31,2007


2006


2005(Dollars in thousands)Cash flows from operating activitiesNet loss

$
(3,282
)

$
(3,174
)

$
(2,264
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Debt discount amortization


2,122



2,694



2,540Depreciation and amortization


2,248



1,988



1,974Interest on Siemens Tranche C and Tranche D






1,130



964Employee stock-based compensation


606



976



Interest on reduction of warrant exercise price


1,371







Minority interest in income of consolidated subsidiary


1,478



633



Provision for doubtful accounts


478



379



354Interest on discounted notes payable


117







Loss from discontinued operations










64Consulting stock-based compensation


32



28



27Principal payments on long-term debt made through rebate credits


(4,491
)


(3,112
)


(2,923
)Deferred tax expense


769



870



1,681Decrease in fair value of warrant liability






(319
)


(513
)Other


(8
)


7



(51
)(Increase) decrease in:Accounts and notes receivable


(1,209
)


(1,233
)


(983
)Inventories


(281
)


(767
)


(863
)Prepaid expenses and other


287



218



(607
)Increase in:Accounts payable and accrued expenses


1,171



4,348



1,633Accrued salaries and other compensation


666



233



596Net cash provided by continuing activities


2,074



4,899



1,629Net cash used in discontinued operations










(113
)Net cash provided by operating activities


2,074



4,899



1,516Cash flows from investing activitiesPurchase of property and equipment


(736
)


(1,200
)


(1,185
)Capital expenditures from discontinued operations










(13
)Proceeds from sale of discontinued operations










1,101Proceeds from redemption of certificates of deposit






226



Business acquisitions


(6,963
)


(9,601
)


(1,589
)Net cash used in investing activities


(7,699
)


(10,575
)


(1,686
)Cash flows from financing activitiesProceeds from issuance of long-term debt, net of financing cost
    of $252,000 in 2005


11,806



7,539



5,000Proceeds from subordinated notes, net of issuing cost of
    $330,000 in 2005










5,170Payments on long-term debt


(3,803
)


(3,039
)


(1,708
)Payments on subordinated notes


(1,760
)


(1,760
)


(440
)Payments on convertible subordinated notes


(784
)


(1,250
)


Exchange and redemption of capital stock










(4,928
)Proceeds from exercise of employee stock options


447



5



68Proceeds from the exercise of warrants


1,750







1,825Distributions paid to minority interest


(890
)






Dividends on preferred stock


(137
)


(138
)


(770
)Net cash provided by financing activities


6,629



1,357



4,217   See accompanying notes to consolidated financial
    statements
 45




---



##### 



HearUSA,
    Inc.
 Consolidated Statements of Cash
    Flows
  Year EndedDecember 29,


December 30,


December 31,2007


2006


2005Effects of exchange rate changes on cash


39



(62
)


45Net increase (decrease) in cash and cash equivalents


1,043



(4,381
)


4,092Cash and cash equivalents at beginning of year


2,326



6,707



2,615Cash and cash equivalents at end of year

$
3,369


$
2,326


$
6,707Supplemental disclosure of cash flow information:Cash paid for interest

$
1,659


$
1,200


$
1,244Supplemental schedule of non-cash investing and financing
    activities:Principal payments on long-term debt through rebate credits

$
4,491


$
3,112


$
2,923Interest payments on long-term debt through rebate credits

$
2,696


$
626


$
389Issuance of note payable in exchange for business acquisitions

$
6,445


$
6,711


$
2,250Issuance of capital leases in exchange for property and equipment

$
416


$
172


$
142Conversion of accounts payable to notes payable

$



$
2,200


$
   See accompanying notes to consolidated financial
    statements
 46




---



##### 



HearUSA,
    Inc.
 Notes to
    Consolidated Financial Statements
  1.
    Description of
    the Company and Summary of Significant Accounting
    Policies  The
    Company
    Basis of
    Consolidation
      Revenue
    Recognition
         47




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
             Foreign Currency
    Translation
    Comprehensive
    Income (Loss)
    Fiscal
    year
    Concentration of
    credit risk
   48




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     Allowance for
    doubtful accounts
    Inventories
    (first-in,
  Property and
    equipment
    Goodwill and
    other intangible assets
    Pre-opening
    costs
    Long-lived
    assets  impairments and disposals
    Convertible
    Instruments, Warrants, Amortization of Debt Discount and Fair
    Value Determination
  No. 98-5
 49




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   00-27 No. 98-5
  Convertible
    Instruments and Amortization of Debt Discount
  No. 98-5 00-27 No. 98-5
  Vendor rebates
    Marketing
    allowances
    Advertising
    costs
    Sales return
    policy
   50




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   Warranties
    Income
    taxes
      Net loss per
    common share
      Stock-based
    compensation
   51




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
         December 31,2005Net loss applicable to common stockholders as reported

$
(2,965
)Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    tax effects


(1,529
)Pro forma, net loss

$
(4,494
)Loss per share-basicBasic and diluted-as reported

$
(0.09
)Basic and diluted-pro forma

$
(0.14
)       Year EndedDecember 29,


December 30,


December 31,2007


2006


2005Risk free interest rate


4.63
%


4.69
%


4.39
%Expected life in years


10



10



5-10Expected volatility


84
%


86
%


96
%Weighted average fair value

$
1.28


$
1.30


$
1.39    52




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
       Cash and Cash
    Equivalents
    Estimates
    2.
    Restricted Cash
    and Cash Equivalents    3.
    Business
    Acquisitions       53




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     December 29,


December 30,2007


2006Total revenue

$
111,011


$
99,834Net loss

$
(2,535
)

$
(2,402
)Net loss applicable to common stockholder per share 
    basic and diluted

$
(0.07
)

$
(0.07
)       December 30,


December 31,2006


2005Total revenue

$
98,000


$
91,000Net loss

$
(1,947
)

$
(1,957
)Net loss applicable to common stockholder per share 
    basic and diluted

$
(0.06
)

$
(0.06
)      54




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   4.
    Property and
    Equipment and Leases    Range of


December 29,


December 30,Useful Lives


2007


2006Equipment, furniture and fixtures


5 -10 years


$
12,661


$
11,385Leasehold Improvements


5 -10 years



8,629



7,928Computer systems


3 years



3,887



3,501Construction in progress


N/A



63



39925,240



23,213Less accumulated depreciation and amortization






20,884



19,335$
4,356


$
3,878     2008

$
1,3562009


1,0362010


6382011


3072012


176Thereafter


843       2008

$
6,2952009


5,2292010


4,1112011


2,2452012


1,309Thereafter


1,648  55




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   5.
    Goodwill and
    Intangible Assets    December 30,





Deferred Tax


Currency


December 29,2006


Additions


Adjustments


Translation


2007Centers

$
50,090


$
10,434


$



$
1,730


$
62,254Network


880















880$
50,970


$
10,434


$



$
1,730


$
63,134   December 31,


Additions and


Deferred Tax


Currency


December 30,2005


Adjustments


Adjustments


Translation


2006Centers

$
37,578


$
13,310


$
(723
)

$
(75
)

$
50,090Network


880















880$
38,458


$
13,310


$
(723
)

$
(75
)

$
50,970     December 29,


December 30,2007


2006Amortizable intangible assets:Customer lists

$
11,268


$
8,946Non-Compete agreements


1,268



354Computer Software


1,584



1,542Accumulated amortization  customer list


(3,935
)


(3,154
)Accumulated amortization  non-compete


(255
)


(46
)Accumulated amortization  computer software


(1,487
)


(1,483
)Amortizable intangible assets, net


8,443



6,159Trademark and trade names


7,700



7,411Intellectual property


22



22$
16,165


$
13,592       2008

$
1,0352009


9852010


8852011


8212012


746Thereafter


3,971  56




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   6.
    Long-term Debt
    (also see Notes 3, 7 and 8)    December 29,


December 30,2007


2006Notes payable to SiemensTranche B

$
5,403


$
3,543Tranche C


23,670



23,997Tranche D


7,895



2,200



Total notes payable to Siemens


36,968



29,740Notes payable from business acquisitions and other


10,277



7,25047,245



36,990Less current maturities


10,746



8,391$
36,499


$
28,599     2008

$
10,7462009


5,8322010


4,6562011


3,7302012


2,542Thereafter


19,739   Notes payable to
    Siemens
     57




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     1 3
  Rebates on
    Product Sales
        2007


2006


2005(Dollars in thousands)Portion applied against quarterly principal payments

$
4,491


$
3,112


$
2,923Portion applied against quarterly interest payments


2,696



626



389$
7,187


$
3,738


$
3,312      58




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     Conversion
    Rights
    Form S-3
    Covenants
    Notes payable
    from business acquisitions and other
   59




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   7.
    Convertible
    Subordinated Notes          8.
    Subordinated
    Notes and Warrant Liability     60




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
       EITF 00-19-2,
    9.
    Mandatorily
    Redeemable Convertible Preferred Stock   61




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
         10.
    Stockholders
    Equity  A.
    Private
    Placement    B.
    Stock
    Subscription    C.
    Series J
    Preferred Stock       62




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
       D.
    Shareholder
    Rights Plan        E.
    Series H
    Junior Participating Preferred Stock    F.
    Exchangeable
    Rights Plan   63




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     G.
    Warrants        Outstanding

Expiration

ExerciseWarrants

Date

Price260

2008

1.75240

2010

1.25560

2010

1.311,555

2010

2.00100

2013

1.562,715   H.
    Aggregate and Per
    Share Cumulative Preferred Dividends    I.
    Exchangeable
    Shares  winding-up
  J.
    Common
    Stock   64




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     11.
    Stock-based
    Benefit Plans  A.
    Stock Options and
    Awards          Impact of the
    Adoption of SFAS 123(R)
   65




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     Stock-based
    Payment Award Activity
    WeightedAverageWeighted


RemainingAverage


Contractual Term


AggregateShares


Exercise


(in years)


Intrinsic Value(Options in thousands)Outstanding at December 30, 2006


5,373


$
1.31Granted


730


$
1.47Exercised


(472
)

$
0.95






$
265Forfeited/expired/cancelled


(473
)

$
2.28Outstanding at December 29, 2007


5,158


$
1.28Vested and expected to vest at December 29, 2007


5,158


$
1.28



5.75


$
1,334Exercisable at December 29, 2007


3,698


$
1.22



4.68


$
1,315     Options Outstanding


Options ExercisableAverage


Weighted





WeightedNumber


Remaining


Average


Number


AverageRange of Exercise Price

Outstanding


Contractual Life


Exercise Price


Exercisable


Exercise PriceOptions in thousands$ .35  $  .77


1,368



4.26


$
0.44



1,368


$
0.44$ .78  $ 2.00


3,458



6.65


$
1.38



2,017


$
1.38$2.01  $ 5.40


290



2.89


$
3.19



271


$
3.19$5.41  $ 8.75


38



.76


$
6.57



38


$
6.57$8.76  $18.75


4



.32


$
15.58



4


$
15.585,158











3,698    66




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   B.
    Non-Employee
    Director Non-Plan Grant    12.
    Major Customers
    and Suppliers      13.
    Related Party
    Transactions    14.
    Income
    Taxes    2007


2006


2005Current:Federal

$



$



$
State






(129
)


78Foreign










Current income tax provision

$



$
(129
)

$
78Deferred:Federal and state deferred

$
595


$
437


$
1,335Foreign deferred


155



415



327Deferred income tax provision

$
750


$
852


$
1,662Benefit applied to reduce goodwill  foreign


19



18



19Total income tax provision

$
769


$
741


$
1,759  67




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     2007


2006


2005Domestic

$
(1,570
)

$
(2,962
)

$
(1,340
)Foreign


535



1,162



898Total loss from continuing operations

$
(1,035
)

$
(1,800
)

$
(442
)         Balance as of January 1, 2007

$
Additions to tax provisions related to the current year


Additions to tax provision related to prior years


Reduction for tax provisions of prior years


Balance as of December 29, 2007

$
          68




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     2007


2006Deferred income tax assets:Fixed assets depreciation

$
1,267


$
1,241Employee stock-based compensation-non-qualified


27



352Accrued severance


79



Inventory costs


41



199Joint venture


275



251Accrued vacation


358



347Bad debts


173



144Charitable contributions


15



34Section 1231 loss carryforwards






73Net operating loss carryforwards(1)


22,924



28,341Total deferred tax assets


25,159



30,982Less valuation allowance


(24,644
)


(29,639
)Net deferred tax assets

$
515


$
1,343Deferred income tax liabilities:Amortization of definite lived intangibles


(515
)


(656
)Amortization of indefinite lived intangibles


(2,200
)


(2,200
)Amortization of goodwill for tax purposes


(3,423
)


(2,748
)Beneficial conversion feature






(687
)Total deferred tax liabilities


(6,138
)


(6,291
)Net deferred income tax liability

$
(5,623
)

$
(4,948
)     (1)
    
    The deferred tax assets for net operating loss carry forwards in
    2007 have been reduced by approximately $5.6 million for
    adoption of FIN 48. This amount was fully valued in prior
    years. 69




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     2007


2006Deferred income tax assets:Fixed assets depreciation

$
420


$
583Net loss carryforwards


62



67Other


35



30Capital loss carryforwards


5,838



4,901Total deferred tax assets


6,355



5,581Less: valuation allowance


(5,838
)


(4,901
)Net deferred tax assets

$
517


$
680Deferred income tax liabilities:Amortizable intangible assets

$
(267
)

$
(267
)Indefinite lived intangibles and goodwill for tax purposes


(1,027
)


(632
)Total deferred income tax liability


(1,294
)


(899
)Net deferred income tax liability

$
(777
)

$
(219
)         2007


2006


2005Benefit at Federal statutory rate

$
(855
)

$
(612
)

$
(151
)State income taxes, net of Federal income tax effect


(37
)


(116
)


(64
)Nondeductible expenses


687



(82
)


(148
)Effect of foreign earnings


(25
)


(12
)


Change in valuation allowance


965



1,128



678Deferred tax liability recorded to goodwill


(80
)


438



Other


114



(3
)


1,444Income tax expense

$
769


$
741


$
1,759  70




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     15.
    Commitments and
    Contingencies          16.
    Quarterly
    Financial Data  Year Ended

First


Second


Third


FourthDecember 29, 2007

Quarter


Quarter


Quarter


QuarterNet revenues

$
23,586


$
24,920


$
26,862


$
27,436Operating costs and expenses


21,944



24,110



24,353



25,574Income from operations


1,642



810



2,509



1,862Net income (loss) applicable to common stockholders

$
(595
)

$
(3,351
)

$
488


$
39Net income (loss) from continuing operations, including
    dividends on preferred stock, applicable to common
    stockholders  basic

$
(0.02
)

$
(0.09
)

$
0.01


$
0.00Net income (loss) applicable to common stockholders per common
    share  basic (Note 1)

$
(0.02
)

$
(0.09
)

$
0.01


$
0.00   71




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   Year Ended

First


Second


Third


FourthDecember 30, 2006

Quarter


Quarter


Quarter


QuarterNet revenues

$
21,657


$
22,257


$
22,042


$
22,830Operating costs and expenses


19,984



20,628



21,637



22,729Income (from operations)


1,673



1,629



404



102Net income (loss) applicable to common stockholders

$
41


$
(100
)

$
(1,682
)

$
(1,571
)Net loss from continuing operations, including dividends on
    preferred stock, applicable to common stockholders-basic

$
0.00


$
0.00


$
(0.05
)

$
(0.05
)Net loss applicable to common stockholders per common
    share-basic (Note 1)

$
0.00


$
0.00


$
(0.05
)

$
(0.05
)   17.
    Fair Value of
    Financial Instruments        December 29, 2007


December 30, 2006(Dollars in thousands)

Book Value


Fair Value


Book Value


Fair ValueLong-term debt


47,245



46,643



36,990



36,409Convertible subordinated notes










4,769



6,208Subordinated notes


1,480



1,516



2,788



3,290   18.
    Recent Accounting
    Pronouncements    ,
 72




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
       SFAS 157-2,
  19.
    Discontinued
    Operations      (Dollars in thousands, except per share amounts)Net revenues of discontinued operations:Combined net revenues

$
1,825Combined pre-tax net losses

$
396Combined net loss from discontinued operations applicable to
    common stockholders-basic and diluted

$
0.00   20.
    Segments   73




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
   e-commerce E-commerce
    Centers


E-commerce


Network


Corporate


TotalFor the years ended:Hearing aids and other products revenuesDecember 29, 2007

$
95,861


$
75


$



$



$
95,936December 30, 2006

$
82,769


$
51


$



$



$
82,820December 31, 2005

$
71,365


$
80


$



$



$
71,445Service revenuesDecember 29, 2007

$
5,306


$



$
1,562


$



$
6,868December 30, 2006

$
4,371


$



$
1,596


$



$
5,967December 31, 2005

$
3,805


$



$
1,422


$



$
5,227Income (loss) from operationsDecember 29, 2007

$
21,417


$
(66
)

$
1,081


$
(15,609
)

$
6,823December 30, 2006

$
17,233


$
(188
)

$
966


$
(14,202
)

$
3,809December 31, 2005

$
15,221


$
(105
)

$
549


$
(11,950
)

$
3,715As of and for years ended:December 29, 2007Depreciation and amortization

$
1,863


$



$
3


$
382


$
2,248Total assets

$
81,735


$



$
934


$
17,811


$
100,480Capital expenditures

$
199


$



$



$
537


$
736December 30, 2006Depreciation and amortization

$
1,788


$



$
3


$
197


$
1,988Total assets

$
66,362


$



$
971


$
15,943


$
83,276Capital expenditures

$
667


$



$



$
533


$
1,200December 31, 2005Depreciation and amortization

$
1,764


$



$
5


$
205


$
1,974Total assets

$
52,181


$



$
1,131


$
17,732


$
71,044Capital expenditures

$
970


$



$



$
228


$
1,198     2007


2006


2005Hearing aid revenues


95.3
%


95.9
%


95.5
%Other products revenues


4.7
%


4.1
%


4.5
%  74




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
     2007


2006


2005Hearing aid repairs


49.8
%


51.7
%


53.4
%Testing and other income


50.2
%


48.3
%


46.6
%     2007


2006


2005General and administrative expense

$
15,227


$
14,005


$
11,745Depreciation and amortization

$
382


$
197


$
205Corporate loss from operations

$
15,609


$
14,202


$
11,950       United States


Canada


United States


Canada


United States


Canada2007


2007


2006


2006


2005


2005$


$


$


$


$


$Hearing aid and other product revenues


82,789



13,147



73,542



9,278



63,500



7,945Service revenues


6,305



563



5,539



428



4,835



392Long-lived assets


68,728



15,834



58,071



11,451



44,218



10,171Total assets


81,013



19,467



69,995



13,281



58,412



12,632     21.
    Liquidity       75




---



##### 



HearUSA, Inc.
 Notes to Consolidated Financial
    Statements  (Continued)
    76




---



##### 



HearUSA Inc.
    Schedule II  Valuation and Qualifying
    Accounts
  Balance at








Balance atBeginning








EndOf Period


Additions


Deductions


Of PeriodDecember 29, 2007Allowance for doubtful accounts

$
434


$
478


$
(414
)

$
498Allowance for sales returns(1)

$
443


$
132


$
(190
)

$
385Valuation allowance  US

$
29,639


$



$
(4,995
)

$
24,644Valuation allowance  foreign

$
4,901


$
937


$



$
5,838December 30, 2006Allowance for doubtful accounts

$
413


$
379


$
(358
)

$
434Allowance for sales returns(1)

$
440


$
97


$
(94
)

$
443Valuation allowance

$
27,764


$
1,875


$



$
29,639Valuation allowance  foreign

$
5,648


$



$
(747
)

$
4,901December 31, 2005Allowance for doubtful accounts

$
373


$
354


$
(314
)

$
413Allowance for sales returns

$
425


$
17


$
(2
)

$
440Valuation allowance

$
27,098


$
666


$



$
27,764Valuation allowance  foreign

$
5,636


$
12


$



$
5,648   (1)
    
    Allowance for sales returns is included in accounts payable on
    the Consolidated Balance Sheets. 77




---



##### 



Item 9.
    Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure    Item 9A.
    Controls and
    Procedures  a.
    Evaluation of
    Disclosure Controls and Procedures  Form 10-K, Rules 13a-15(e) 15d-15(e)
  b.
    Managements
    Report on Internal Control over Financial Reporting  Rules 13a-15(f) 15d-15(f)
        c.
    Changes in
    Internal Control over Financial Reporting  Rules 13a-15(f) 15d-15(f)
  PART III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K.
 78




---



##### 



Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters      Equity Compensation Plan InformationNumber of SecuritiesRemaining AvailableNumber of Securities





for Future Issuanceto be Issued Upon


Weighted-Average


Under EquityExercise of


Exercise Price of


Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesWarrants and Rights


Warrants and Rights


Reflected in ColumnPlan Category

(a)


(b)


(a))Equity compensation plans approved by security holders


5,032,667


$
1.30



2,362,500Equity compensation plans not approved by security holders


125,000
(1)

$
0.35



Total equity compensation plans approved and not approved by
    security holders


5,157,667


$
1.28



2,362,500     (1)
    
    Consists of non-employee director options granted outside of the
    Non- Employee Director Plan in 2003.        Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence   79




---



##### 



Item 14.
    Principal
    Accountant Fees and Services    PART IV
  Item 15.
    Exhibits,
    Financial Statement Schedules, and Report on
    Form 8-K      (i)
    Consolidated Balance Sheets as of December 29, 2007 and
    December 30, 2006. Consolidated Statements of Operations
    for the years ended December 29, 2007, December 30,
    2006 and December 31, 2005.  (ii)
    Consolidated Statements of Changes in Stockholders Equity
    for the years ended December 29, 2007, December 30,
    2006 and December 31, 2005.  (iii)
    Consolidated Statements of Cash Flows for the years ended
    December 29, 2007, December 30, 2006 and
    December 31, 2005.  (iv)
    Notes to Consolidated Financial Statements    Schedule II


Valuation and Qualifying Accounts     2
.1

Plan of Arrangement, including exchangeable share provisions
    (incorporated herein by reference to Exhibit 2.3 to the
    Companys Joint Proxy Statement/Prospectus on
    Form S-4
    (Reg.
    No. 333-73022)).3
.1

Restated Certificate of Incorporation of HEARx Ltd., including
    certain certificates of designations, preferences and rights of
    certain preferred stock of the Company (incorporated herein by
    reference to Exhibit 3 to the Companys Current Report
    on
    Form 8-K,
    filed May 17, 1996 (File
    No. 001-11655)).3
.2

Amendment to the Restated Certificate of Incorporation
    (incorporated herein by reference to Exhibit 3.1A to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended June 28, 1996 (File
    No. 001-11655)).3
.3

Amendment to Restated Certificate of Incorporation including one
    for ten reverse stock split and reduction of authorized shares
    (incorporated herein to Exhibit 3.5 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ending July 2, 1999 (File
    No. 001-11655)).3
.4

Amendment to Restated Certificate of Incorporation including an
    increase in authorized shares and change of name (incorporated
    herein by reference to Exhibit 3.1 to the Companys
    Current Report on
    Form 8-K,
    filed July 17, 2002 (File
    No. 001-11655)).3
.5

Certificate of Designations, Preferences and Rights of the
    Companys 1999 Series H Junior Participating Preferred
    Stock (incorporated herein by reference to Exhibit 4 to the
    Companys Current Report on
    Form 8-K,
    filed December 17, 1999 (File
    No. 001-11655)).3
.6

Certificate of Designations, Preferences and Rights of the
    Companys Special Voting Preferred Stock (incorporated
    herein by reference to Exhibit 3.2 to the Companys
    Current Report on
    Form 8-K,
    filed July 19, 2002 (File
    No. 001-11655)).3
.7

Amendment to Certificate of Designations, Preferences and Rights
    of the Companys 1999 Series H Junior Participating
    Preferred Stock (incorporated herein by reference to
    Exhibit 4 to the Companys Current Report on
    Form 8-K,
    filed July 17, 2002 (File
    No. 001-11655)). 80




---



##### 



3
.8

Certificate of Designations, Preferences and Rights of the
    Companys 1998-E Convertible Preferred Stock (incorporated
    herein by reference to Exhibit 4.1 to the Companys
    Current Report on
    Form 8-K,
    filed August 28, 2003 (File
    No. 001-11655)).3
.9

Amendment of Restated Certificate of Incorporation (increasing
    authorized capital) (incorporated herein by reference to
    Exhibit 3.9 to the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended June 26, 2004).3
.10

Amended and Restated By-Laws of HearUSA, Inc. (effective
    May 9, 2005) (incorporated herein by reference to
    Exhibit 3.1 to the Companys Current Report on
    Form 8-K,
    filed May 13, 2005).4
.1

Amended and Restated Rights Agreement, dated July 11, 2002
    between HEARx and the Rights Agent, which includes an amendment
    to the Certificate of Designations, Preferences and Rights of
    the Companys 1999 Series H Junior Participating
    Preferred Stock (incorporated herein by reference to
    Exhibit 4.9.1 to the Companys Joint Proxy/Prospectus
    on
    Form S-4
    (Reg.
    No. 333-73022)).4
.2

Form of Support Agreement among HEARx Ltd., HEARx Canada, Inc.
    and HEARx Acquisition ULC (incorporated herein by reference to
    Exhibit 99.3 to the Companys Joint Proxy
    Statement/Prospectus on
    Form S-4
    (Reg
    No. 333-73022)).4
.3

Form of 2003 Convertible Subordinated Note due November 30,
    2008 (incorporated herein by reference to Exhibit 4.1 to
    the Companys Current Report on
    Form 8-K,
    filed December 31, 2003).9
.1

Form of Voting and Exchange Trust Agreement among HearUSA,
    Inc., HEARx Canada, Inc and HEARx Acquisition ULC and
    ComputerShare Trust Company of Canada (incorporated herein
    by reference to Exhibit 9.1 to the Companys Joint
    Proxy Statement/Prospectus on
    Form S-4
    (Reg.
    No. 333-73022)).10
.1

HEARx Ltd. 1987 Stock Option Plan (incorporated herein by
    reference to Exhibit 10.11 to the Companys
    Registration Statement on
    Form S-18
    (Reg.
    No. 33-17041-NY))#10
.2

HEARx Ltd. Stock Option Plan for Non-Employee Directors and Form
    of Option Agreement (incorporated herein by reference to
    Exhibits 10.35 and 10.48 to Post-Effective Amendment
    No. 1 to the Companys Registration Statement on
    Form S-18
    (Reg.
    No. 33-17041-NY))#10
.3

1995 Flexible Employee Stock Plan (incorporated herein by
    reference to Exhibit 4 to the Companys 1995 Proxy
    Statement)#10
.4

Employment Agreement, dated August 31, 2005 with
    Dr. Paul A. Brown (incorporated herein by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q,
    for the quarter ended October 1, 2005.)#10
.5

Employment Agreement, dated August 31, 2005 with Stephen J.
    Hansbrough (incorporated herein by reference to
    Exhibit 10.2 to the Companys Quarterly Report on
    Form 10-Q,
    for the quarter ended October 1, 2005.)#10
.6

Employment Agreement, dated August 31, 2005 with Gino
    Chouinard (incorporated herein by reference to Exhibit 10.3
    to the Companys Quarterly Report on
    Form 10-Q,
    for the quarter ended October 1, 2005.)#10
.7

Employment Agreement, dated August 31, 2005 with Ken
    Schofield (incorporated herein by reference to Exhibit 10.4
    to the Companys Quarterly Report on
    Form 10-Q,
    for the quarter ended October 1, 2005.)#10
.8

Form of Change in Control Agreement (incorporated herein by
    reference to Exhibit 10.5 to the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended October 1, 2005.)#10
.9

Credit Agreement, dated December 7, 2001 between HEARx Ltd
    and Siemens Hearing Instruments, Inc (incorporated herein by
    reference to Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K,
    filed December 26, 2001)10
.10

Security Agreement, dated December 7, 2001 between HEARx
    Ltd and Siemens Hearing Instruments, Inc (incorporated herein by
    reference to Exhibit 10.2 to the Companys Current
    Report on
    Form 8-K,
    December 26, 2001)10
.11

Supply Agreement, dated December 7, 2001 between HEARx Ltd
    and Siemens Hearing Instruments, Inc (incorporated herein by
    reference to Exhibit 10.3 to the Companys Current
    Report on
    Form 8-K,
    December 26, 2001)10
.12

HearUSA 2002 Flexible Stock Plan (incorporated herein by
    reference to Exhibit 10.9 to the Companys Joint Proxy
    Statement/Prospectus on
    Form S-4
    (Reg.
    No. 333-73022)# 81




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##### 



10
.13

Amendment to Security Agreement, dated March 12, 2003
    between HearUSA, Inc. and Siemens Hearing Instruments, Inc.
    (incorporated herein by reference to Exhibit 10.2 to the
    Companys Form 10Q for the period ended March 29,
    2003).10
.14

Amendment to Credit Agreement, dated March 12, 2003 between
    HearUSA, Inc. and Siemens Hearing Instruments, Inc.
    (incorporated herein by reference to Exhibit 10.1 to the
    Companys
    Form 10-Q
    for the period ended March 29, 2003).10
.15

Purchase Agreement dated August 19, 2005 by and among
    HearUSA, Inc. and the purchasers named therein (incorporated by
    reference to Exhibit 10.1 to the Companys
    Registration Statement on
    Form S-3/A
    filed October 7, 2005).10
.16

Form of Registration Rights Agreement by and among HearUSA, Inc.
    and the purchasers named in the Purchase Agreement dated
    August 19, 2005 (incorporated by reference to
    Exhibit 10.2 to the Companys Registration Statement
    on
    Form S-3/A
    filed October 7, 2005).10
.17

Asset Purchase Agreement dated June 15, 2005, between
    HearUSA, Inc. and Sonus-USA, Inc. (incorporated herein by
    reference to Exhibit 10.5 to the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended July 2, 2005).10
.18

Amended and Restated Security Agreement, dated February 10,
    2006 between HearUSA, Inc. and Siemens Hearing Instruments, Inc.
    (incorporated herein by reference to Exhibit 10.2 to the
    Companys Form 10Q for the period ended April 1,
    2006).10
.19

Amended and Restated Credit Agreement, dated February 10,
    2006 between HearUSA, Inc. and Siemens Hearing Instruments, Inc.
    (incorporated herein by reference to Exhibit 10.1 to the
    Companys
    Form 10-Q
    for the period ended April 1, 2006 ).10
.20

Amended and Restated Supply Agreement, dated February 10,
    2006 between HearUSA, Inc. and Siemens Hearing Instruments, Inc.
    (incorporated herein by reference to Exhibit 10.3 to the
    Companys Form 10Q for the period ended April 1,
    2006).*10
.21

Second Amendment to the Second Amended and Restated Credit
    Agreement dated September 24, 2007 between HearUSA, Inc.
    and Siemens Hearing Instruments, Inc. (incorporated herein by
    reference to Exhibit 10.1 to the Companys
    Form 10Q for the period ended September 29, 2007).10
.22

First Amendment to the Second Amended and Restated Supply
    Agreement, dated September 24, 2007 between HearUSA, Inc.
    and Siemens Hearing Instruments, Inc. (incorporated herein by
    reference to Exhibit 10.2 to the Companys
    Form 10Q for the period ended September 29, 2007).10
.23

First Amendment to the Form of Registration Rights Agreement by
    and among HearUSA, Inc. and Siemens Hearing Instruments, Inc.
    dated September 24, 2007 (incorporated herein by reference
    to Exhibit 10.3 to the Companys Form 10Q for the
    period ended September 29, 2007).10
.24

Separation Agreement and Release by and between the Company and
    Kenneth Schofield dated October 12, 2007.#10
.25

Amended and Restated HearUSA 2007 Equity Incentive Compensation
    Plan.#10
.26

Form of option grant agreement pursuant to 2007 Equity Incentive
    Compensation Plan (incorporated herein by reference to Current
    Report on
    Form 8-K
    filed by the Company on September 18, 2007).#10
.27

Form of time-vesting restricted stock unit grant agreement
    pursuant to 2007 Equity Incentive Compensation Plan.#10
.28

Form of performance-based restricted stock unit grant agreement
    pursuant to 2007 Equity Incentive Compensation Plan.#10
.29

Form of time-vesting restricted stock unit grant agreement
    pursuant to 2002 Flexible Stock Plan.#10
.30

Retirement Agreement entered into by and between Paul A.
    Brown, M.D. and the Company dated February 4, 2008.#10
.31

Amended and Restated Executive Employment Agreement entered into
    by and between the Company and Stephen J. Hansbrough as of
    February 25, 2008.#10
.32

Amended and Restated Executive Employment Agreement entered into
    by and between the Company and Gino Chouinard as of
    February 25, 2008.#21


List of Subsidiaries23


Consent of the Independent Public Accountants 82




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##### 



31
.1

CEO Certification, pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200231
.2

CFO Certification, pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200232


CEO and CFO Certification, pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002     #
    Denotes compensatory plan or arrangement for Company officer or
    director.   83




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##### 



SIGNATURES
    
  By:
    /s/  Stephen
    J. Hansbrough         Signature

Title

Date/s/  Paul
    A. BrownPaul
    A. Brown, M.D.

Director

March 28, 2008/s/  Stephen
    J. HansbroughStephen
    J. Hansbrough

Chairman of the Board
    Chief Executive Officer and Director

March 28, 2008/s/  Gino
    ChouinardGino
    Chouinard

Chief Financial Officer

March 28, 2008/s/  David
    J. McLachlanDavid
    J. McLachlan

Director

March 28, 2008/s/  Thomas
    W. ArchibaldThomas
    W. Archibald

Director

March 28, 2008/s/  Joseph
    L. Gitterman IIIJoseph
    L. Gitterman III

Director

March 28, 2008/s/  Michel
    LabadieMichel
    Labadie

Director

March 28, 2008/s/  Bruce
    BagniBruce
    Bagni

Director

March 28, 2008  84