**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-KSB/A**

**Amendment No. 1**

**(Mark One)**

**x**                              ANNUAL REPORT UNDER SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended December 31, 2006**

**OR**

**o**                                 TRANSITIONREPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

**Forthe transition period from                          to**

**APOGEE TECHNOLOGY, INC.**

(Exact name of registrantas specified in its charter)

Commission File No: **001-10456**

| **DELAWARE**                              |   | **04-3005815**                        |
|-------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction             |   | (I.R.S. Employer  Identification No.) |
| of incorporation  or organization)        |   |                                  |
| **129 MORGAN DRIVE**                      |   | ** **                            |
| **NORWOOD,  MASSACHUSETTS**               |   | **02062**                             |
| (Address of  principal executive offices) |   | (Zip Code)                            |

 

Registrant’s telephonenumber, including area code: **(781) 551-9450**

Securities registeredpursuant to Section 12(b) of the Exchange Act:

| Title of each class                     | ** ** | **Name of each exchange  on which registered** |
|-----------------------------------------|------------|------------------------------------------------|
| Common Stock, $.01  Par Value Per Share |       | American Stock  Exchange                       |

 

Securities registeredpursuant to Section 12(g) of the Exchange Act:  None

Check whether the issuer is not required to filereports pursuant to Section 13 or 15(d) of the Exchange Act: o

Check whether issuer (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the past 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes x    No o

Check if there is no disclosure of delinquent filerspursuant to Item 405 of Regulation S-B contained in this form, and nodisclosure will be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in Part IIIof this Form  10-KSB or any amendment to this Form 10-KSB. o

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).Yes o    No x

State issuer’s revenue for the most recent year: $1.9million

The aggregate market value of the voting and non-votingcommon stock held by non-affiliates of the registrant on March 15, 2007,based on the last sale (closing) price of the common stock on the AmericanStock Exchange of $1.35 per share on such date was $9,689,936.

The number of outstanding shares of the registrant’sCommon Stock, $.01 par value, as of March 15, 2007 was 11,968,331.

**DOCUMENTS INCORPORATED BYREFERENCE**

None.

Transitional Small BusinessDisclosure Format: Yes o    No x

 

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**INDEX**
|                   | ** ** | ** **                                                                                                                                           | ** ** | **PAGE** |
|-------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| ** **        |       | EXPLANATORY NOTE                                                                                                                                     |       | 3        |
| **PART I**   |       |                                                                                                                                                 |       |     |
| ITEM 3       |       | Legal  Proceedings                                                                                                                                   |       | 4        |
| **PART II**  |       |                                                                                                                                                 |       |     |
| ITEM 6       |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                            |       | 4        |
| **PART III** |       |                                                                                                                                                 |       |     |
| ITEM 9       |       | Directors, Executive Officers, Promoters and Control  Persons and Corporate Governance; Compliance with Section 16(a) of  the Exchange Act |       | 21       |
| ITEM 10      |       | Executive Compensation                                                                                                                               |       | 26       |
| ITEM 11      |       | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters                                       |       | 30       |
| ITEM 12      |       | Certain Relationships and Related Transactions, and  Director Independence                                                                           |       | 32       |
| ITEM 13      |       | Exhibits                                                                                                                                             |       | 33       |
| ITEM 14      |       | Principal Accountant Fees and Services                                                                                                               |       | 35       |
|              |       | Signatures                                                                                                                                           |       | 37       |

 

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**EXPLANATORY NOTE**

ThisAmendment No. 1 on Form 10-KSB/A (the “Amended Report”) amendsthe original Annual Report on Form 10-KSB of Apogee Technology, Inc.for the fiscal year ended December 31, 2006, filed with the Securities andExchange Commission, or the SEC, on March 29, 2007 (the “Original Report”),to amend certain information regarding Apogee’s legal proceedings,  add a risk factor regarding litigation ingeneral, make several immaterial amendments for minor typographical andprinting errors, and add certain information required by the following items ofForm 10-KSB:

| **Item**      | ** ** | ** **                                                                                                                                         | ** ** | **Description** | ** ** | ** ** |
|---------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|------------|------------|
| ITEM 9.  |       | Directors, Executive Officers, Promoters, Control  Persons and Corporate Governance; Compliance with Section 16(a) of  the Exchange Act. |
| ITEM 10. |       | Executive Compensation.                                                                                                                            |
| ITEM 11. |       | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters.                                                   |
| ITEM 12. |       | Certain Relationships  and Related Transactions, and Director Independence.                                                                        |
| ITEM 13.      |       | Exhibits.                                                                                                                                          |
| ITEM 14. |       | Principal Accountant Fees and Services.                                                                                                            |

 

We hereby amend and restate Items 9, 10, 11, 12, 13and 14 of Part III of our Original Report by deleting the text of suchItems 9, 10, 11, 12, 13 and 14 in their entirety and replacing them with theinformation provided below under the respective headings in Part III. Otherthan those items discussed in this *EXPLANATORY NOTE*,**the Amended Report does not affect any other items in ourOriginal Report. As this amendment does not impact our financials, we are onlyfiling as exhibits to this Amended Report updated certifications pursuant to Section 302of the Sarbanes-Oxley Act of 2002.

Except as otherwise expressly stated for the itemsnewly included or amended in this Amended Report, this Amended Report continuesto speak as of the date of the Original Report, and we have not updated thefinancial disclosure or other disclosures contained herein to reflect eventsthat have occurred since the filing of the Original Report. Accordingly, thisAmended Report should be read in conjunction with our Original Report and ourother filings made with the SEC subsequent to the filing of the OriginalReport.

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**PART I**

**Item 3.**                        LEGALPROCEEDINGS.

From time to time, Apogee may be a party to variouslegal proceedings arising in the ordinary course of its business. If and whenthese proceedings arise, Apogee is committed to vigorously defending itself inany such legal actions.

On March 29, 2007,contemporaneous with the filing of the Original Report, Apogee received acomplaint, which had been filed at the Superior Court in Norfolk County,Massachusetts, entitled *Michael S. Danielsonv. Apogee Technology*,*Case No. 0700512*.A former Apogee employee initiated the complaint alleging, among other things,that Apogee failed to pay certain bonuses and retirement contributions inconnection with a compensatory arrangement concerning the development ofcertain digital amplifier technology. The former employee claims unpaidcompensation of approximately $155,000 and the request for relief asks for theamount to be trebled, and include costs and attorneys’ fees. The management ofApogee believes the former employee’s claim to be without merit and the Companywill defend itself vigorously against all of the claims asserted in this legalaction.

**PART II**

**Item 6.**                        MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

**THE FOLLOWING DISCUSSION AND ANALYSIS OF THE COMPANY’SFINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTIONWITH THE COMPANY’S FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE INTHE ORIGINAL REPORT ON FORM 10-KSB. THIS DISCUSSION CONTAINS, INADDITION TO HISTORICAL STATEMENTS, FORWARD-LOOKING STATEMENTS THAT INVOLVERISKS AND UNDERTAINTIES. THE COMPANY’S ACTUAL RESULTS COULD DIFFERSIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE FACTORSDISCUSSED ABOVE IN THE SECTION BELOW ENTITLED “RISK FACTORS” AS WELL ASOTHER FACTORS IN THE ORIGINAL REPORT AND THIS AMENDED REPORT.**

**OVERVIEW**

Apogee designs, develops and commercializes advancedintradermal and dermal drug delivery and sensor solutions based upon itsproprietary Micro-Electro Mechanical Systems (“MEMS”), nano fabrication anddrug delivery technologies. Our Medical Products Group is developing advancedintradermal drug delivery systems to meet the needs of patients, healthinsurers, companies’ developing pharmaceuticals, as well as, governments andinternational health organizations. We are in preclinical development of ourPyraDermTM intradermal drug system, which we believe has significant advantagesover competitive approaches for the delivery of vaccines, low dose high potencytherapeutic protein drugs and other active ingredients. We have evaluated thefeasibility of PyraDerm by performing in-vitro tests with model drugs and areplanning to start in vivo testing in the near future. We are working toestablish pharmaceutical industry compliant manufacturing methods and to defineregulatory strategies to support its commercialization. Our business strategyis flexible and includes: (i) the licensing or selling of ourtechnologies to pharmaceutical or medical device companies, (ii) establishingpartnerships with pharmaceutical and device companies to commercialize ourproducts; and (iii) developing, producing (with outsourcing assistance)and marketing our own medical products. Our Sensor Products Group is focused onthe design, development and marketing of proprietary MEMS/Nanotechnology basedsensors for the medical, automotive, industrial and consumer markets. In December 2005,we introduced our first sensor products, a family of miniature pressure sensordie, trademarked under the Sensilica® brand name. These 

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devices are produced usinga novel manufacturing technology that we believe reduces size and cost whileimproving reliability as compared to alternative MEMS sensor solutions. Weintend to sell these sensor devices as stand-alone die to sensor integratorsand as packaged solutions directly and through independent representatives anddistributors. We have begun the sales cycle by providing customer samples ofour sensor die and packaged products and by shipping small quantities ofproduction sensor die.

In 2006, the majority of our revenue was derived fromthe sale of the remaining DDX IC inventory, primarily as a result of therecognition of all the deferred distributor revenue. We expect that futurerevenue will initially be the result of sensor sales, potential licensing anddevelopment revenues resulting from the grant of rights to our intellectualproperty. In order to support our operations and maintain our AMEX listing, weintend to secure additional funding in 2007. We plan to add a network of directsales staff, independent sales representatives and distributors to support ourmedical and sensor products. We currently outsource the manufacturing, assemblyand certain testing of our medical and sensor products.

At December 31, 2006,we had an accumulated deficit of approximately $15.7 million, as compared to adeficit of $12.7 million as of December 31, 2005. Our historical netlosses and accumulated deficit (since 1995) result primarily from the costsassociated with our efforts to design, develop and market our DDX technology aswell as costs associated with our efforts to develop new medical and sensorproduct.

**Results ofOperations**

Thefollowing table sets forth financial statement data expressed as a percentageof sales:

| ** **                           | ** ** | **Fiscal Year Ended  December 31,** | ** ** |
|--------------------------------------|------------|----------------------------------------------------|------------|
| ** **                           | ** ** | **2006**                                           | ** ** | **2005** | ** ** |
| Product Sales                        |       | 99.93                                              | %          | 87.04 | % |
| Royalties                            |       | 0.07                                               |       | 9.29 |   |
| Consulting                           |       | —                                             |       | 3.67 |   |
| Cost of Sales                        |       | (71.70                                             | )          | (76.68 | ) |
| Research and  Development            |       | (91.48                                             | )          | (52.38 | ) |
| Selling, General  and Administrative |       | (124.65                                            | )          | (77.61 | ) |
| Operating Loss                       |       | (187.83                                            | )%         | (106.67 | )% |
| Other Income  (Expense)*             |       | 30.20                                              |       | 163.64 |   |
| Net Loss                             |       | (157.63                                            | )%         | 57.07 | % |

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*                    Includesapproximately $8.9 million in gain on sale of assets to SigmaTel, Inc. on October 5,2005.

**CRITICAL ACCOUNTING POLICIES AND ESTIMATES.**

Apogee prepares itsconsolidated financial statements in conformity with accounting principlesgenerally accepted in the United States of America. The preparation of thesefinancial statements requires us to make estimates, judgments and assumptionsthat we believe are reasonable based upon the information currently available.These estimates and assumptions affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the periods presented. Any future changes to theseestimates and assumptions could have a significant impact on the reportedamounts of revenue, expenses, assets and liabilities in our financial statements.The significant accounting policies which we believe are the most critical toaid in fully understanding and evaluating our reported financial resultsinclude the following:

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**Revenue Recognition**

Apogee recognizes revenue in accordance withSecurities and Exchange Commission Staff Accounting Bulletin No. 104 (“SAB104”), “Revenue Recognition in Financial Statements: Revenue Recognition”,which states that revenue should be recognized when the following revenuerecognition criteria are met:  (1) persuasive evidence of anarrangement exists; (2) the product has been shipped and the customertakes ownership and assumes the risk of loss; (3) the selling price isfixed or determinable; and (4) collection of the resulting receivable isreasonably assured. The following policies apply to Apogee’s two major productsales categories for revenue recognition. Sales to end users (“OEM”): Revenueis recognized under our standard terms and conditions of sale, title and riskof loss transfer to the customer at the time products are shipped from ourwarehouse or delivered to the customer’s representative/freight forwarder.Sales to Distributors: From time to time we provide stock rotation rights,price protection and other incentives to our Distributors. See Footnote 2 ofthe financial statements.

As a result of these incentives, Apogee has adopted apolicy of deferring recognition of revenue until the distributor sells productsto its customers based upon receipt of point-of-sale reports from thedistributors. We accrue the estimated cost of post-sale obligations includingproduct warranty returns, based on historical experience. To date we haveexperienced minimal warranty returns.

In addition, we recordroyalty revenue when earned in accordance with the underlying agreements.Consulting and licensing revenue is recognized as services are performed.

**Accounts Receivable**

Apogee performs creditevaluations of customers and determines credit limits based upon paymenthistory, customers’ creditworthiness and other factors, as determined by ourreview of their current credit information. For a majority of our larger sales,we can require the issuance of a Letter of Credit. Smaller accounts must eitherpay via credit card or in advance of shipment. We continuously monitorcollections and payments from our customers, and we maintain a provision forestimated credit losses based upon our historical experience and any specificcustomer collection issues that we have identified. While we have not had anysignificant credit losses to date, we cannot guarantee that we will continue toavoid credit losses in the future. If the financial condition of our customerswere to deteriorate, resulting in an impairment of their ability to makepayments, additional allowances may be required. Since our accountsreceivable are highly concentrated in a small number of customers, asignificant change in the liquidity or financial position of any one of thesecustomers could have a material adverse impact on the collectibility of ouraccounts receivable, our liquidity or our future results of operations.

**Inventory**

Apogee states itsinventory at the lower of cost (first-in, first-out) or market. This policyrequires that we make certain estimates regarding the market value of theinventory, including an assessment of excess or obsolete inventory. In therecent past, Apogee had determined excess and obsolete inventory based onestimated future demands and estimated selling prices for our products within aspecified time frame, which was generally 12 months. The estimates used forexpected demand were also used for short-term capacity planning and inventorypurchasing and were consistent with revenue forecasts. Our current inventory isassociated with our former audio business. We have chosen to expense our sensordie and sensor packaged products until such time as we have material resultsfrom this business. We are still in the research and developmental phase of ourmedical products and thus do not have related inventory. For the fiscal yearended December 31, 2006 we have approximately $1.8 million of audio ICinventory that has been 100% reserved and has no carrying value on the balancesheet. This compares to inventory at December 31, 2005, net of reserves,of approximately $1.3 million consisting of $719,000 held at distributors withthe remaining $609,000 held at Apogee.

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**Valuation ofLong-Lived Assets**

Property, plant andequipment, patents, trademarks and other intangible assets are amortized overtheir estimated useful lives. Useful lives are based on management’s estimatesover the period that such assets will generate revenue. Intangible assets arereviewed for impairment whenever events or changes in circumstances indicatethat the carrying value of an asset may not be recoverable. Future adversechanges in market conditions or poor operating results of underlying capitalinvestments or intangible assets could result in losses or an inability torecover the carrying value of such assets, thereby possibly requiring animpairment charge in the future.

**Stock Compensation**

Prior to fiscal 2006, we accounted for stock-basedcompensation plans under the recognition and measurement provisions of APBOpinion No. 25. Effective January 1, 2006, we adopted the provisionsof SFAS 123(R) using the modified-prospective-transition method.SFAS 123(R) requires companies to recognize the fair-value ofstock-based compensation transactions in the statement of income. The fairvalue of our stock-based awards is estimated at the date of grant using theBlack-Scholes option pricing model. The Black-Scholes valuation calculationrequires us to estimate key assumptions such as future stock price volatility,expected terms, risk-free rates and dividend yield. Expected stock pricevolatility is based on implied volatility from traded options on our stock inthe marketplace and historical volatility of our stock. We use historical datato estimate option exercises and employee terminations within the valuationmodel.

The expected term ofoptions granted is derived from an analysis of historical exercises andremaining contractual life of stock options, and represents the period of timethat options granted are expected to be outstanding. The risk-free rate isbased on the U.S. Treasury yield curve in effect at the time of grant. We havenever paid cash dividends, and do not currently intend to pay cash dividends,and thus have assumed a 0% dividend yield. If our actual experience differssignificantly from the assumptions used to compute our stock-based compensationcost, or if different assumptions had been used, we may have recorded toomuch or too little stock-based compensation cost. In addition, we are requiredto estimate the expected forfeiture rate of our stock grants and only recognizethe expense for those shares expected to vest. If the actual forfeiture rate ismaterially different from our estimate, our stock-based compensation expensecould be materially different.

**Off Balance SheetArrangements**

We have no off balancesheet arrangements nor do we have any special purpose entities.

**Year Ended December 31,2006 Compared to Year Ended December 31, 2005**

**Revenue**

We derive our revenue from three sources: (1) productsales, which consist of merchandise sales made either directly to originalequipment manufacturers or sell through point of sale (“POS”) by distributors.All such shipments are fulfilled from our contracted warehouse in Hong Kong orfrom our Norwood, Massachusetts office and is reported net of returns; (2) royaltyrevenue, which formerly consisted of royalties paid by STMicroelectronics whichhave now been sold as part of the transaction with SigmaTel and (3) consultingincome related to contractual services or development activities for thirdparties. The Company may, in the future, receive royalties under itsremaining audio licensing agreements and from new agreements contemplated underits two new business groups. See Footnote 2 of the financial statements.

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Apogee recognized revenue for the fiscal year endedDecember 31, 2006 of approximately $1.9 million, a decrease of $3.3million or 64% from revenue recognized in 2005 of approximately $5.2 million.This decline in revenue is directly related to the sale of certain assets ofthe audio division, including the DDX® technology and the associated royalties toSigmaTel in October 2005. Product sales consisted of semiconductorproducts sold directly to end users or POS revenue by our distributors.Subsequent to the transaction with SigmaTel, we no longer recognize, or areeligible to receive, royalties under the ST Licensing Agreement. As a result,no royalty revenue was recorded for the fiscal year ended December 31,2006 under the ST Licensing Agreement. For the fiscal year endedDecember 31, 2006, we did, however, record royalty revenue of $1,250 as aresult of an agreement with QSound Labs, Inc. For the fiscal year endedDecember 31, 2005 we recognized royalty revenue of approximately $480,000,primarily related to the ST Licensing Agreement. Apogee did not earn anyconsulting revenue for the fiscal year ended December 31, 2006 compared toapproximately $190,000 for the fiscal year ended December 31, 2005.

Totalrevenue for the years 2006 and 2005 consisted of:

| ** **      | ** ** | **For the Fiscal Year Ended  December 31,** | ** ** |
|-----------------|------------|----------------------------------------------------------------------|------------|
| ** **      | ** ** | **2006**                                                             | ** ** | **2005** | ** ** |
| Product Revenue |       | $                                                                    | 1,883,534  |   | $ | 4,502,333 |   |
| Royalties       |       | 1,250                                                                |       | 480,468 |   |
| Consulting      |       | —                                                               |       | 190,000 |   |
| Total:          |       | $                                                                    | 1,884,784  |   | $ | 5,172,801 |   |

 

Some revenue from the saleof DDX products is expected to continue over the short term as the remainingDDX inventory is sold. In addition, licensing revenue from the ST LicensingAgreement has been assigned to SigmaTel in conjunction with the sale of certainDDX assets to SigmaTel. Accordingly, we expect that the decline in our revenueswill continue until such time as we are able to generate revenues from the saleof our medical and sensor products.

**Cost of Revenue**

Cost of revenue decreased as a result of reducedproduct revenue to approximately $1.4 million for the fiscal year ended December 31,2006, compared to approximately $4.0 million for the fiscal year ended December 31,2005. Cost of revenue from our former DDX business primarily consists ofpurchasing finished semiconductor chips and storage fees associated withwarehousing a large portion of our semiconductor products in Asia. For the 12months ended December 31, 2006 we recorded a gross margin from productrevenue of approximately 28%, compared to a gross margin of approximately 23%for the 12 months ended December 31, 2005. This increase in grossmargin from product revenue was due to an adjustment to Cost of Goods forrecovery of previous reserve provision.

During the twelve monthsended December 31, 2006 we recorded a net recovery of previous provisions ofapproximately $117,000 to adjust for current inventory levels. For the fiscalyears ended December 31, 2006 and 2005, the Company wrote offapproximately $11,000 and $44,000, respectively, of obsolete inventory.

**Operating Expenses**

**Research andDevelopment Costs**

The Company’s research and development (“R&D”)expenses consist primarily of salaries, development material costs, externalconsulting and service costs related to the design of new products and therefinement of existing products. Research and development expenses were reducedto approximately 

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$1.7 million for the12 months ended December 31, 2006, compared to approximately$2.7 million for the prior fiscal year. This decrease of approximately$1.0 million or 36% was the result of the transaction with SigmaTel andthe transfer of our audio related R&D staff to SigmaTel. Human resourcecosts decreased by approximately $1.1 million or 62% to approximately$694,000 for the twelve months ended December 31, 2006, compared toapproximately $1.8 million for the same period in 2005. For the fiscalyear ended December 31, 2005, human resource costs associated with ourformer audio division were approximately $1.4 million. Although ouroverall human resource expense was reduced, we continue to support both ourmedical and sensor groups and anticipate that human resource expense associatedwith R&D will increase in the coming quarters. For the 12 months ended December 31,2006, approximately $39,000 in human resource expense was a result of ouradoption of SFAS 123(R) effective as of January 1, 2006.

During the fiscal year ended December 31, 2006essentially all our $1.7 million in R&D in expense was associated withthe development of our medical and sensor products, compared to approximately$1.0 million for the 12 months ended December 31, 2005. In an effortto support and expand the development of both our medical device and sensorproducts, we incurred approximately $531,000 in professional fees for the 12months ended December 31, 2006 compared to approximately $295,000 for thesame period in 2005. This represents an increase of approximately $235,000 or80%. In addition, due to the technical nature of both the medical device andsensor components, for the 12 month-period ended December 31, 2006 weincurred approximately $264,000 in developmental wafer costs as well asdevelopmental costs associated with our micro needle project. This representsan increase of approximately $207,000 or 366% for the same period in 2005. Ofthis amount we expensed approximately $146,000 in wafers related to our sensorbusiness. We will continue to invest in the development of our medical andsensor products. During the fourth quarter of 2006 we completed most of theconstruction of our formulation and analytical laboratory at our Norwoodheadquarters to support our medical product research and developmentactivities. The installation of the laboratory was completed in January 2007.Our investment in laboratory equipment and the associated renovation of ourfacility are estimated to be $210,000. We expect that this new capability willallow us to have greater efficiency and productivity as well as better controlof expenses. In January 2006, we consolidated our MEMS division to ourhome office in

Norwood, Massachusetts andclosed our Long Island, New York office. We anticipate that we will continue tocommit resources to research and development activities and R&D costs areexpected to increase in the future.

**Selling, Generaland Administrative Costs**

Selling expenses consist primarily of salaries andrelated expenses for personnel engaged in the marketing and selling of theCompany’s products, as well as costs related to trade shows, productliterature, travel and other promotional support costs. In addition, sellingexpenses had included costs related to the operation of Apogee’s Hong Kong,Taiwan, China and Japan sales offices. Subsequent to the SigmaTel transaction,the Taiwan and China offices were closed. In February 2006 we closed ourHong Kong office and in July 2006 we closed our Japanese office. Generaland administrative costs consist primarily of executive and administrativesalaries, professional fees and other associated corporate expenses. Selling,General and Administrative (“SG & A”) expenses decreased approximately$1.7 million or 41% to approximately $2.3 million for the twelvemonths ended December 31, 2006, compared to approximately$4.0 million for the 12 months ended December 31, 2005. The decreasein SG&A, described below, was attributable primarily to the closing of theHong Kong, Japanese and Taiwan offices as well as decreased selling anddistribution costs, professional fees, travel and human resource costspartially offset by an increase in human resource costs as a result of ouradoption of SFAS 123(R).

Human resource costs decreased by approximately$200,000 or 16% to approximately $1.3 million for the 12 months ended December 31,2006, compared to approximately $1.5 million for the twelve months 

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ended December 31,2005. This decrease was partially offset by the inclusion of the stock basedcompensation expense as a result of our adoption of SFAS 123(R). With ouradoption of SFAS 123(R), the human resource expense for the twelve monthsended December 31, 2006 was increased by approximately $254,000. Thisdecrease, net of stock based compensation expense, reflects the reduction instaffing and subsequent closing of the Taiwan office in 2005, the Hong Kongoffice in February 2006 and the Japanese office in July 2006, as aresult of the sale of the audio division to SigmaTel, Inc. in October 2005.As of December 31, 2006, Apogee employed a total of 12 employees, alloperating out of our Norwood office. As of December 31, 2005 we employed atotal of 12 employees, 10 domestically with 1 employee each in our HongKong and Japanese offices. However, prior to the sale of the audio business toSigmaTel in October 2005, we had 36 employees.

Professional expenses decreased by approximately$899,000 or 60% to approximately $569,000 for the twelve months ended December 31,2006, compared to approximately $1.5 million for the twelve months ended December 31,2005. Of this decrease approximately $471,000 or 52% was the result ofdecreased legal and accounting fees as a result of becoming compliant with ourfilings required by the Securities Exchange Act of 1934, as amended, and thecompletion of the Audit Committee’s investigation and subsequent restatement ofApogee’s financial statements. This decrease was partially offset by anincrease in legal fees associated with the indemnification costs, in connectionwith the civil case in the Circuit Court of the Fifteenth Judicial Circuit inand for Palm Beach County, Florida entitled Joseph Shamy v. Herbert M. Stein,case No.: 50 2005 CA 007719 XXXXMB, which were approximately $218,000 for the12 months ended December 31, 2006 compared to approximately $60,000 forthe 12 months ended December 31, 2005. See Footnote 12 of thefinancial statements—Indemnification Arrangements with our Executives. For the12-month period ended December 31, 2006, we incurred accountingexpenses of approximately $82,000, compared to accounting expenses ofapproximately $424,000 for the prior fiscal year. A decrease in third partymarketing consultants and recruiting fees accounted for the remainder of the decreasefor the 12 months ended December 31, 2006.

Other expenses contributing to the decrease inSG&A were reduced international travel, closing of our overseas offices aswell as reduced commissions and distribution expense. Travel expense decreasedby approximately $210,000 or 68% to approximately $68,000 for the 12 monthsended December 31, 2006, compared to approximately $278,000 for the priorfiscal year. As a result of the audio division sale of assets to SigmaTel, weclosed the Taiwan Office effective as of December 31, 2005, the Hong KongOffice effective as of February 28, 2006 and the Japanese Office effectiveas of July 21, 2006. Expenses associated with the Hong Kong Office, net ofhuman resources were approximately $14,000 for the 12 months ended December 31,2006, compared to approximately $130,000 for the 12 months ended December 312005. The other major contributor to the decrease in SG&A is the reductionin the distribution and commission expense directly related to the decrease inrevenue resulting from the sale of the audio division to SigmaTel. Distributionand commission expense declined by approximately $106,000 or 92% toapproximately $9,000 for the twelve months ended December 31, 2006,compared to approximately $115,000 for the 12 months ended December 31,2005.

Operating expenses areexpected to increase in the future due to additional staffing to support ourSensor and Medical Product Groups.

**Interest and OtherIncome (Expense)**

Interest income includes income from Apogee’s cash andcash equivalents. During twelve months ended December 31, 2006, wegenerated interest income of approximately $198,000 compared to interest incomeof approximately $70,000 the same period in 2005. This increase was primarilydue to interest on the net cash received of approximately $5.7 million asa result of the SigmaTel transaction. In addition, we received approximately$800,000 from the SigmaTel earn-out and early release of the escrow.

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No interest expense was incurred for the 12 monthsended December 31, 2006. For the 12 months ended December 31, 2005,we incurred interest expense of approximately $38,000 as a result of loans byLaurus in August 2005 and loans by Mr. Herbert M. Stein and Mr. DavidSpiegel in May 2005.

The approximately $23,000in other expense for the 12 months ended December 31, 2006 resulted from aloss on the disposal of fixed assets and additional expenses in connection withthe SigmaTel transaction. No interest expense was incurred in 2006.

**Financing Costs**

On August 11, 2005,Apogee entered into agreements with Laurus, whereby we received$2.0 million in gross proceeds (with net proceeds of approximately$1.8 million) through the sale of a 120 day secured term note. The notewas payable by Apogee in cash during the first 120 days following the issuanceof the note, and after the 120 day period it was payable in the amount of$62,500 per month in cash or convertible into the common stock, $0.01 par valueper share, of the Company at a fixed conversion price of $1.15 per share. Totalexpenses incurred in connections with this financing was approximately $424,000including approximately $107,500 for due diligence and management fees,$100,000 paid to Biscayne Capital Markets, Inc. who served as a finder forthis transactions and approximately $100,000 as a premium to Laurus with theremaining $116,500 attributed to legal, escrow and other associated costs. Thecosts associated with this agreement are expected to drop as a result of theamendment to the warrants on December 5, 2005, which removed theregistration rights associated with the securities issued in the financing. On October 5,2005 proceeds from the SigmaTel transaction were used to repay theapproximately $2.0 million owed to Laurus Master Fund, Ltd.

**Income Taxes**

Apogee incurred no stateincome taxes for the 12 months ended December 31, 2006 and approximately$20,000 for the 12 months ended December 31, 2005. There was no federalincome tax expense for either 2006 or 2005. As of December 31, 2006 and2005, we had available a federal net operating loss carryforward ofapproximately $9,796,000 and $8,454,000, respectively and a state net operatingloss carryforward of approximately $3,069,500and $4,037,000**,**respectively. These net operating losscarryforwards will expire at various times between 2007 and 2025.

**Liquidity andCapital Resources**

Our principal source of liquidity at December 31,2006, consisted of approximately $3.1 million in cash and cash equivalentswith a working capital of approximately $2.4 million. We consider all highlyliquid investments with an original maturity of three months or less to be cashequivalents. Substantially all of our cash is held in high quality money marketfunds comprised of short-term, fixed income securities earning interest at4.94% at December 31, 2006. This compares to approximately$5.5 million in cash and cash equivalents as of December 31, 2005. Inaddition, as of December 31, 2006, we had working capital of approximately$2.4 million, compared to a working capital of approximately$5.0 million at December 31, 2005. As of December 31, 2006 and December 31,2005 we had no debt.

Net cash used in operating activities for thetwelve-month period ended December 31, 2006 decreased to approximately$3.0 million compared to approximately $4.9 million in thetwelve-month period ended December 31, 2005. The decrease was primarilydue to a decrease in the net loss as a result of decreased spending followingthe SigmaTel transaction and the transfer of the DDX related engineering andsales staff. As of December 31, 2006, reserves for slow moving, excess andobsolete inventory was at 100% of the remaining DDX inventory. This compares toinventory, net of reserves, of approximately $1.3 million as of December 31,2005. Net accounts receivable was approximately $11,000 at December 31,2006 down from approximately $153,000 at December 31, 2005. As of December 31,2006 we had reserves against bad debt 

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of approximately $13,000compared to a reserve of $145,000 as of December 31, 2005. Given thecurrent accounts receivable we believe that the remaining reserve is sufficientat this time.

Net cash provided by investing activities for thetwelve months ended December 31, 2006 was approximately $523,000, comparedto net cash provided by investing activities of $8.5 million for thetwelve months ended December 31, 2005. On October 5, 2005, Apogeecompleted a transaction with SigmaTel, whereby certain assets of the Audiodivision were sold, including the DDX technology and the associated royaltiesfrom its license agreement with ST, to SigmaTel for approximately$8.6 million, net of certain transaction costs. Pursuant to the EscrowAgreement dated October 5, 2005 between SigmaTel and Apogee, $420,000 wasto be held in escrow for a period of eighteen months for the purpose ofcompensating purchaser pursuant to the indemnification.

No cash was provided by financing activities for thetwelve months ended December 31, 2006 compared to approximately $33,000provided by financing activities for the twelve months ended December 31,2005. During the twelve-month period ended December 31, 2005, we receivedthe proceeds from unsecured interest bearing loans in the amountsof $250,000 from David Spiegel, a shareholder and $250,000 from HerbertStein, Chief Executive Officer and Chairman of the Board. These loans werepayable upon demand and were not subject to any premium or penalty forprepayment. The loan interest rate is 6% per annum, payable monthly in arrearson the outstanding balance. On August 11, 2005, the Company entered intoagreements with Laurus Master Fund, Ltd., whereby we received $2.0 millionin gross proceeds (with net proceeds of approximately $1.8 million)through the sale of a 120 day secured term note. The note was payable by theCompany in cash during the first 120 days following the issuance of the note,and after a 120 day period it was payable in the amount of $62,500 per month incash or convertible into the common stock, $0.01 par value per share, of theCompany at a fixed conversion price of $1.15 per share. In connection with thefinancing, we paid certain costs and expenses of Laurus and issued animmediately exercisable warrant for the purchase of 85,000 shares of commonstock at a price of $1.22 per share. The warrant expires seven years afterissuance. A finder for the transaction received a fee of 5% of the grossproceeds of the offering, together with a seven year warrant to purchase anaggregate of 8,500 shares of common stock immediately exercisable at a price of$1.22 per share. This offering was conducted as a private placement pursuant tothe exemption from registration provided by Section 4(2) of the SecuritiesAct of 1933, as amended, and the rules and regulations promulgatedthereunder. With respect to the transaction with Laurus, the Company enteredinto an agreement to register the common stock underlying the warrants and thecommon stock that may be received upon any conversion of the secured term note.On December 5, 2005, the terms of the 85,000 common share warrants withLaurus were amended, whereby the registration rights associated with thewarrant were terminated in consideration of a reduced exercise price, from$1.22 to $1.15, and the insertion of a cashless exercise provision. On October 5,2005 proceeds from the SigmaTel transaction were used to repay theapproximately $2.0 million owed to Laurus Master Fund, Ltd. and the$500,000 loans to Mr. Herbert Stein and Mr. David Spiegel, as well aspayment of certain expenses related to the transaction. During the 12-monthperiod ended December 31, 2005, we raised $32,500 through the exercise ofoptions by two employees.

We believe that cash flowfrom operations and the funds received from the audio division sale, as well asamounts that may be raised from time to time in private offerings of our commonstock or debt financings will be sufficient to support operations and fundcapital equipment requirements at least through December 31, 2007. TheCompany is currently in the process of securing funding as required by the Planfor Regaining Compliance with Sections 1003 (a) (ii) and 1003 (a) (iii) ofthe American Stock Exchange Company Guide (the “Plan”) submitted to theAmerican Stock Exchange (“AMEX”) on November 30, 2006 with a revised andmore detailed Plan submitted on December 20, 2006 pursuant to notificationfrom AMEX on November 1, 2006 that we were not in compliance with certainof the AMEX’s continued listing standards. Subsequently, on January 12,2007, Apogee was notified that they 

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haddetermined that, “in accordance with Section 1009 of the Company Guide,the Company made a reasonable demonstration of its ability to regain compliancewith the continued listing standards by the end of the plan period, which wehave determined to be no later than November 1, 2007” and that at thistime AMEX was prepared to continue the listing of Apogee subject to certainconditions. See Footnote 20 of the financial statements—Notification from theAmerican Stock Exchange.

**RISK FACTORS**

There are a number ofimportant factors that could cause our actual results to differ materially fromthose indicated or implied by forward-looking statements. Factors that couldcause or contribute to such differences include those discussed below, as wellas those discussed elsewhere in the Original Report and this Amended Report. Wedisclaim any intention or obligation to update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise,except as may be required by law.

**RISKS RELATED TOOUR BUSINESS**

**WE HAVE A HISTORYOF LOSSES, EXPECT FUTURE LOSSES AND MAY NEVER ACHIEVE OR SUSTAINPROFITABILITY.**

As of December 31,2006, we had stockholders’ equity of approximately $2.9 million, an accumulateddeficit of approximately $15.7 million and working capital of approximately$2.4 million. We had a net loss of approximately $3.0 million for the twelvemonths ended December 31, 2006. In the fiscal year ended December 31,2005, we recorded an operating loss of approximately $5.5 million with a netprofit of approximately $3.0 million from a gain of approximately $8.9 million.We will need to generate revenue to sustain profitability and positive cashflow. Our ability to generate future revenue and sustain profitability dependson a number of factors, many of which are described throughout this risk factorsection, including our ability to develop and generate revenues from the salesof our sensor and medical device products, which are at a very early stage ofdevelopment. We cannot assure you when, if ever, we will generate meaningful revenuesfrom the sales of these products under development. If we are unable to achieveand sustain profitability, the Company’s share price would likely decline.

**WE NEED TO RAISEADDITIONAL CAPITAL IN ORDER TO CONTINUE TO PERFORM RESEARCH AND DEVELOPMENT ANDOPERATE OUR BUSINESS, AND SUCH TRANSACTIONS MAY NOT BE AVAILABLE TO US ONFAVORABLE TERMS, IF AT ALL.**

Because we havehistorically had losses and only a limited amount of cash has been generatedfrom operations, we have funded our operating activities to date primarily fromthe sale of securities and the sale of certain assets to SigmaTel. In order tocontinue to fund the development of our business, we will need additionalcapital, either through the sale of securities or through the sale of assets.We cannot be certain that any such financing or asset sales will be availableon acceptable terms, or at all. Moreover, additional financing, if available,would likely be dilutive to the holders of our common stock, and debtfinancing, if available, would likely involve restrictive covenants. If we sellassets that are currently used in the conduct of our business, those assetswould no longer be available to us as a potential source of revenue generation,as was the case with our October 5, 2005 sale of assets. We have reduced,in the short-term, our operating expenses for payroll and related costs, rentsand professional fees amongst others, in order to conserve resources for theoperation of our business. We believe that our current working capital and amountsthat may be raised to support operations will be sufficient to fund our capitaland operational requirements at least through December 31, 2007. If wecannot raise sufficient additional capital by that date through means availableto us, it would adversely affect our ability to achieve our business objectivesand we could be required to further curtail operations.

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**AS A RESULT OF THESALE OF OUR AUDIO BUSINESS OUR ABILITY TO ACHIEVE OR SUSTAIN REVENUE GROWTHCOULD BE HARMED IF WE ARE UNABLE TO COMPLETE THE DEVELOPMENT OF AND SALE OF OURMEDICAL AND SENSOR PRODUCTS.**

Apogee historicallyderived revenue from audio IC product sales, royalties pursuant to our licenseagreement with ST and others and consulting revenues from contracted audioproduct development. In 2006 we derived the majority of our revenue from ourformer audio IC business. With the sale of our audio assets to SigmaTel in October 2005,we will no longer be receiving license revenue and future audio IC sales willdiminish as we sells off our remaining inventory. In 2006 we recorded $383,000in revenue from the one-year earn-out with SigmaTel. Since the earn-out periodexpired on October 5, 2006, no additional earn-out will be realized.Apogee released its first sensor products in December 2005 but onlygenerated nominal revenue in 2006 due to the long qualification process, thetime period required by our customers to design in our pressure sensor dieproducts and specific design limitations that limited adoptions of ourproducts. We may not have any revenues if we are unable to find customersand to develop our sensor products. Due to the long time required to developand approve our medical products, we do not expect to receive income in thenear future.

**WE MAY NOT BEABLE TO LICENSE OUR TECHNOLOGY OR OBTAIN DEVELOPMENT PARTNERS, IN WHICH CASE WEWILL BE SIGNIFICANTLY LIMITED IN OUR ABILITY TO GENERATE REVENUE FROM OUR DRUGDELIVERY TECHNOLOGIES.**

In order to commercializeour drug delivery technologies we intend to pursue licensing, development andpartnership agreements with pharmaceutical and medical device companies, as thecost to develop and obtain regulatory approval for drug delivery products ishigh. If we are unable to complete agreements with potential partners or we areunable to raise sufficient funds to commercialize the products ourselves we maynot be able to receive a return on our investment in our drug deliverytechnologies.

**IF WE ARE UNABLE TOHIRE OR RETAIN KEY PERSONNEL, WE MAY NOT BE ABLE TO OPERATE OUR BUSINESSSUCCESSFULLY.**

We may not be successful in recruiting andretaining executive officers and other key management and technical personnel.The competition for employees with the necessary high level of technicalexpertise to design, market and sell our products is intense, particularly ineastern Massachusetts and Asia. As a result of the October 2005 sale ofcertain assets to SigmaTel, we will need to hire a number of additionaltechnical personnel if we are to sustain the development of new products andour ability to sell those products. Because competition for highly skilledtechnical personnel is so intense, companies in Apogee’s industry are subjectfrom time to time to complaints brought by competitors alleging interferencewith contractual relations or wrongful hiring of employees. Such lawsuitsmay be costly, may divert management attention and resources from theoperation of our business, and may therefore adversely affect ourfinancial condition and results of operations. In addition, the loss of themanagement and technical expertise of our senior management could seriouslyharm us. Our employees may also be recruited away from us by ourcompetitors.

We do not have in place employment contracts formembers of our senior management, including the CFO, COO and our Vice Presidentof Research and Development.

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**FAILURE TO COMPLY WITH LAWS AND GOVERNMENTREGULATIONS COULD ADVERSELY AFFECT OUR ABILITY TO OPERATE OUR BUSINESS.**

Some of our activities are regulated by federal andstate statutes and government agencies. The expected manufacturing, processing,formulation, packaging, labeling, distribution and advertising of our products,and disposal of waste products arising from these activities, maybe subject toregulation by one or more federal agencies, including the FDA, the DrugEnforcement Agency, which we refer to as the (“DEA”), the Federal TradeCommission, the Consumer Product Safety Commission, the U.S. Department ofAgriculture, the Occupational Safety and Health Administration, and theEnvironmental Protection Agency (“EPA”), as well as by foreign governments incountries where we distribute some of our products.

Noncompliance with applicable FDA policies orrequirements could subject us to enforcement actions, such as suspensions ofmanufacturing or distribution, seizure of products, product recalls, fines,criminal penalties, injunctions, failure to approve pending drug productapplications or withdrawal of product marketing approvals. Similar civil orcriminal penalties could be imposed by other government agencies, such as theDEA, the EPA or various agencies of states and localities. These enforcementactions, if they were to occur, could have a material adverse effect on ourbusiness, financial condition, results of operations and cash flows.

The FDA has the authorityand discretion to withdraw approvals and review the regulatory status ofmarketed products at any time. For example, the FDA may require anapproved marketing application for any drug product marketed if new informationreveals questions about a drug’s safety or efficacy. All drugs must be manufacturedin conformity with current Good Manufacturing Practices and drug productssubject to an approved application must be manufactured, processed, packaged,held and labeled in accordance with information contained in the approvedapplication.

**WE DO NOT HAVE MANUFACTURING CAPABILITIES, AND ASA RESULT, WE WILL RELY ON OUTSIDE MANUFACTURERS TO PRODUCE OUR PRODUCTS.**

We have nomanufacturing capabilities to produce our products. Accordingly, we utilizeoutside manufacturers, assembly and in some cases test companies to produce andqualify our products. There are significant risks associated with our relianceon these manufacturers that can adversely affect our business, operatingresults and financial condition. These risks include:

·       theability to maintain manufacturing relationships, the failure of which couldresult in significant delays in product introduction due to the time necessaryto establish new relationships;

·       delaysin production or shortages in product delivery as a result of production problemsat outside contractors;

·       theloss of manufacturing priority that may limit our ability to obtainproducts on schedule;

·       limitedcontrol over product quality that could result in product returns and the lossof customers;

·       inabilityto control manufacturing yield that could increase production costs, therebyreducing sales potential and operating margins; and

·       lack of access or controlover new process and manufacturing technologies to maintain productcompetitiveness in the market.

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**OUR MARKETS ARESUBJECT TO RAPID TECHNOLOGICAL CHANGE; THEREFORE, OUR SUCCESS DEPENDS ON OURABILITY TO INTRODUCE NEW PRODUCTS IN A TIMELY FASHION.**

The life cycle ofthe technology and any future products developed by us may be limited bythe emergence of new products and technologies, changes in customer preferencesand other factors. Our future performance will depend on our ability toconsistently:

·       identifyemerging technological trends in our market;

·       identifychanging customer requirements;

·       developor maintain competitive technology, including new product offerings;

·       improvethe performance, features and reliability of our products, particularly inresponse to technological change and competitive offerings;

·       bringtechnology to market quickly at cost-effective prices; and

·       protectour intellectual property.

We may not succeed indeveloping and marketing new products that respond to technological andcompetitive developments and changing customer needs, and such productsmay not gain market acceptance or be incorporated into the technology orproducts of third parties. Any significant delay or failure to develop newenhanced technologies, including new product offerings, and any failure of themarketplace to accept any new technology and product offerings would have amaterial adverse effect on our business, financial condition and results ofoperations.

**WE MAY NOT BEABLE TO OBTAIN FDA OR FOREIGN REGULATORY APPROVAL FOR OUR PRODUCTS IN A TIMELYMANNER, OR AT ALL, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR ABILITY TOSELL AND MARKET OUR MEDICAL PRODUCTS.**

Drug delivery systems thatwe may develop in the future cannot be sold in the United States until the FDAapproves such products for medical use. Similar foreign regulatory approvalswill be needed in order to sell any drug delivery system outside of the U.S. Wemay not or any of our potential partners may not be able to obtain FDA orforeign regulatory approval for products incorporating our technologies, in atimely manner, or at all. Delays in obtaining FDA or foreign approvals couldresult in substantial additional costs to us, and, therefore, could adverselyaffect our ability to compete with other drug delivery companies. If we do notobtain such approvals at all, our revenues may be insufficient to supportcontinuing operations.

**OUR ABILITY TOACHIEVE REVENUE GROWTH WILL BE HARMED IF WE ARE UNABLE TO MARKET OUR PRODUCTS.**

We face challenges inpersuading manufacturers and customers to adopt our products based upon newMEMS and nanotechnologies. In order to adopt our products, customers and theirdevelopment staff must understand and accept our new technology. In addition,our products may be more expensive or difficult to use for someapplications than products based on traditional technologies. For thesereasons, prospective customers may be reluctant to adopt our products.

**COMPETITION IN THESENSOR AND MEDICAL DEVICE INDUSTRIES COULD PREVENT US FROM ACHIEVINGPROFITABILITY.**

The medical and sensordevice industries are highly competitive, and we expect the intensity of thecompetition to increase. Many of our competitors have greater financial,technical, research, marketing, sales, distribution, service and otherresources than we do. Moreover, our competitors may offer broader 

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productlines and have greater name recognition than we do, and may offerdiscounts as a competitive tactic, forcing intense pricing pressure on ourproducts. In addition, several development stage companies are currentlycreating or developing technologies and products that compete with or are beingdesigned to compete with our technologies and products. Our competitorsmay develop or market technologies or products that are more effective ormore commercially attractive than our current or future products, or thatmay render our technologies or products less competitive or obsolete.Accordingly, if competitors introduce superior technologies or products and wecannot make enhancements to our technologies and products necessary for them toremain competitive, our  competitive position, and in turn, our business,revenues and financial condition, will be seriously harmed.

**OUR COMPLIANCE WITHTHE SARBANES-OXLEY ACT AND SEC RULES CONCERNING INTERNAL CONTROLS MAY BETIME-CONSUMING, DIFFICULT AND COSTLY FOR US.**

We expect that it will be time-consuming and costlyfor us to develop and implement the internal controls and reporting proceduresrequired by the Sarbanes-Oxley Act.

We may need to hireadditional financial reporting, internal controls and other finance staff inorder to develop and implement appropriate internal controls and reportingprocedures. If we are unable to comply with the internal controls requirementsof the Sarbanes-Oxley Act, we may not be able to obtain the independentaccountant certifications that the Sarbanes-Oxley Act requires publicly-tradedcompanies to obtain.

**OUR QUARTERLYOPERATING RESULTS MAY FLUCTUATE.**

We have changed ourprimary line of business, and, as a result, we will experience fluctuations inour quarterly operating results as we have in the past and it is likely thatthese fluctuations will continue in the future. These fluctuations are causedby many factors, including, but not limited to:

·       availabilityand pricing from our suppliers;

·       changesin the demand for our products by customers;

·       introductionor enhancements of products, or delays in the introductions or enhancements ofproducts, by us or our competitors;

·       rateand success of new customer development;

·       changesin our pricing policies or those of our competitors;

·       successin attracting, retaining and motivating qualified personnel;

·       changesin general economic conditions.

A substantial portion of our operating expenses isrelated to personnel, facilities, and sales and marketing programs and arefixed. Our expense level is based in part on our expectations of futureorders and sales, which are extremely difficult to predict. Accordingly, wemay not be able to adjust our fixed expenses quickly enough to address anysignificant shortfall in demand for our products in relation to our expectations.

Fluctuations in our operating results may alsoresult in fluctuations in our common stock price. In such event, the tradingprice of our common stock would likely suffer and adversely affect our abilityto raise capital and the value of your investment in the Company.

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**AS A RESULT OF OURNEED TO RAISE ADDITIONAL CAPITAL IN ORDER TO CONTINUE TO PERFORM RESEARCHAND DEVELOPMENT, OPERATE OUR BUSINESS AND DUE TO OUR SMALL SIZE ALL LITIGATIONIMPOSES RISK ON US.**

Many companies have legalactions that arise in the ordinary course of business, we are no different inthis regard. However, given our limited number of personnel, currentcapitalization and stage of development after the sale of our audio business toSigmaTel, legal actions that occur in the ordinary course of business may bemore challenging for us than for other companies. Even if successfullydefended, lawsuits may be costly, may divert management attention andresources from the operation of our business, and may therefore adverselyaffect our financial condition and results of operations. If not successfullydefended, any litigation may adversely affect our financial condition andresults of operations.

**RISKS RELATED TOOUR INTELLECTUAL PROPERTY**

**OUR INTELLECTUALPROPERTY AND PROPRIETARY RIGHTS MAY BE INSUFFICIENT TO PROTECT OURCOMPETITIVE POSITION.**

Our business depends, in part, on our ability toprotect our intellectual property. We rely primarily on patent, copyright,trademark and trade secret laws to protect our proprietary technologies. Wecannot be sure that such measures will provide meaningful protection for ourproprietary technologies and processes. We have acquired a portfolio of MEMSintellectual property and the Company is presently reviewing this portfolio todetermine which of the acquired rights can be protected and will be most usefulin its business. We cannot be sure that any existing or future patents will notbe challenged, invalidated or circumvented, or that any rights grantedthereunder would provide us meaningful protection. The failure of any patentsto provide protection to our technology would make it easier for ourcompetitors to offer similar products.

We also generally enterinto confidentiality agreements with our employees and strategic partners, andgenerally control access to and distribution of our documentation and otherproprietary information. Despite these precautions, it may be possible fora third party to copy or otherwise obtain and use our products or technologywithout authorization, develop similar technology independently or designaround our patents. In addition, effective copyright, trademark and tradesecret protection may be unavailable or limited in certain foreigncountries in which we operate.

**WE MAY BESUBJECT TO INTELLECTUAL PROPERTY RIGHTS DISPUTES WHICH THAT COULD DIVERTMANAGEMENT’S ATTENTION AND COULD BE COSTLY.**

The sensor and medical device industries arecharacterized by vigorous protection and pursuit of intellectual propertyrights. From time to time, we may receive notices of claims ofinfringement, misappropriation or misuse of other parties’ proprietary rights.We cannot be sure that we will prevail in these actions, or that other actionsalleging infringement by us of third-party patents, misappropriation or misuseby us of third-party trade secrets or the invalidity of one or more patentsheld by us will not be asserted or prosecuted against us, or that anyassertions of infringement, misappropriation or misuse or prosecutions seekingto establish the invalidity of our patents will not seriously harm ourbusiness. For example, in a patent or trade secret action, an injunction couldbe issued against us requiring that we withdraw particular products from themarket or necessitating that specific products offered for sale or under developmentbe redesigned.

Irrespective of thevalidity or successful assertion of various claims of infringement,misappropriation or misuse of other parties’ proprietary rights, we wouldlikely incur significant costs and diversion of our management and personnelresources with respect to the defense of such claims, which could seriouslyharm our business. If any claims or actions are asserted against us, wemay seek to obtain a license under a third party’s intellectual propertyrights. We cannot be sure that under such circumstances a license would beavailable on commercially reasonable terms, if at all. Moreover, we oftenincorporate the intellectual 

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propertyof our strategic customers into our designs, and we have certain obligationswith respect to the non-use and non- disclosure of such intellectual property.We cannot be sure that the steps taken by us to prevent our or our customers’misappropriation or infringement of the intellectual property will besuccessful.

**RISKS RELATED TOOUR COMMON STOCK**

**WE DO NOT CURRENTLYMEET THE LISTING REQUIREMENTS OF THE AMERICAN STOCK EXCHANGE (THE “AMEX”), ANDIF WE CONTINUE TO FAIL TO MEET SUCH REQUIREMENTS, WE MAY BE DELISTED FROMTHE AMEX.**

Our common stock is quoted on the AMEX. In order tocontinue to be included in the AMEX, we must meet the AMEX maintenancecriteria. As Apogee’s shareholders’ equity was approximately $3.97 millionas of June 30, 2006 and $2.86 million as of this report, the Company isnot in compliance with Section 1003 (a) (ii) of the Company Guideas it has shareholders’ equity of less than $4 million and losses fromcontinuing operations and/or net losses in three out of its four most recentfiscal years. Apogee is also not in compliance with Section 1003 (a) (iii) ofthe Company Guide as it has shareholders’ equity of less than $6 million andlosses from continuing operations in its five most recent fiscal years.

According to the AMEX notice, Apogee submitted a planprior to December 1, 2006 and a subsequent revision on December 20,2006, advising of the action it has taken, or will take, to bring Apogee intocompliance with Sections 1003(a) (ii) and 1003(a) (iii) ofthe Company Guide within a maximum of 12 months.  Although the Plan wasaccepted by AMEX on January 12, 2007, and although the Company ispermitted to continue its listing during the plan period, the Company will besubject to periodic review to determine whether Apogee is making progressconsistent with the plan. There can be no assurance that Apogee will be able tomeet all of the criteria outlined in the Plan. See Footnote 20 of the financialstatements - Notification from the American Stock Exchange.

If our common stock weredelisted, we would trade on the Over the Counter Bulletin Board or the PinkSheets, LLC, which may have significantly less liquidity than the AMEX. Inorder to have our common stock relisted on the AMEX, we would be required tomeet the criteria for initial listing, which are more stringent than themaintenance criteria. Accordingly, we cannot assure that if we were delisted,we would be able to have our common stock relisted on the AMEX, and most likelyour common stock would be quoted on the Over the Counter Bulletin Board. Inaddition, if our common stock were delisted from the AMEX, it might become moredifficult for us to raise additional capital and accomplish our businessobjectives through the sale of our common stock or securities convertible intoour common stock, due to increased costs and potential diminished liquidity inthe market for our common stock.

**FACTORS UNRELATEDTO OUR BUSINESS COULD NEGATIVELY IMPACT THE MARKET PRICE OF OUR COMMON STOCK.**

The stock marketshave experienced extreme price and volume fluctuations that have affected andcontinue to affect the market prices of equity securities of many technologycompanies. These fluctuations often have been unrelated or disproportionate tothe operating performance of those companies. We expect that the market priceof our Common Stock will fluctuate as a result of variations in our quarterlyoperating results, or for other reasons that are not related to the performanceof our business. These fluctuations may be exaggerated if the tradingvolume of our Common Stock is low. In addition, due to the technology-intensivenature of our business, the market price for our Common Stock may rise andfall in response to various factors, including:

·       announcementsof technological innovations or new products, or competitive developments;

·       investorperceptions and expectations regarding our or our competitors’ products;

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·       acquisitionsor strategic alliances by us or our competitors; and

·       the gain or loss of a significant customer or order.

In addition, marketfluctuations, as well as general economic, political and market conditions suchas recessions, interest rate changes or international currency fluctuations,may negatively impact the market price of our Common Stock.

**NEITHER OURDISCLOSURE CONTROLS AND PROCEDURES NOR OUR INTERNAL CONTROL OVER FINANCIALREPORTING CAN PREVENT ALL ERRORS OR FRAUD.**

Our management does not expect that our disclosurecontrols and procedures or our internal control over financial reporting couldprevent all errors or fraud. A control system, no matter how well conceived andoperated, can provide only reasonable, not absolute, assurance that theobjectives of the control system will be attained. Furthermore, the design of acontrol system must reflect the fact that there are resource constraints andthe benefits of controls must be considered relative to their costs. Because ofthe inherent limitations in a cost-effective control system, no evaluation ofcontrols can provide absolute assurance that all misstatements due to error orfraud, if any, may occur and not be detected on a timely basis. Theseinherent limitations include the possibility that judgments in decision-makingcan be faulty and that breakdowns can occur because of errors or mistakes. Ourcontrols and procedures can also be circumvented by the individual acts of somepersons, by collusion of two or more people or by management override of thecontrols.

The design of any system of controls is based inpart on certain assumptions about the likelihood of future events andthere can be no assurance that any design will succeed in achieving its statedgoals under all potential future conditions. Furthermore, controlsmay become inadequate because of changes in conditions or deterioration inthe degree of compliance with policies or procedures.

While we seek to designour controls and procedures to provide reasonable assurance that informationrequired to be disclosed in our periodic filings is timely disclosed, theseinherent limitations expose us to breakdowns in such controls and procedures.

**QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

The Company’s financial instruments include: cash,cash equivalents, accounts receivable and accounts payable. At December 31,2006 and December 31, 2005, the carrying value of the Company’s cash, cashequivalents, accounts receivable and accounts payable approximate fair values giventhe short maturity of these instruments.

The Company believes that it does not have materialforeign currency exchange rate risk since any international sales will be paidin U.S. dollars and material purchases from foreign suppliers are typically alsodenominated in U.S. dollars. Additionally, the functional currency of theCompany’s foreign sales office is the U.S. dollar.

It is the Company’s policy not to enter intoderivative financial instruments for speculative purposes.

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**PART III**

**Item 9.**                        DIRECTORS,EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

**Directors andExecutive Officers**

***The Board of Directors***

The Company’s Certificate of Incorporation, as amended,and Restated By-Laws provide for the Company’s business to be managed by orunder the direction of the Board of Directors. Under the Company’s Certificateof Incorporation, as amended and Restated Bylaws, the number of directors isfixed from time to time by the Board of Directors. The Board of Directors iscurrently fixed at a minimum of four (4) and a maximum of nine (9). Thereare currently five members on the Board of Directors.

Setforth below are the names of the directors as of the date of this report, theirages, their offices in the Company, if any, their principal occupations oremployment for the past five years, the length of their tenure as directors andthe names of other public companies in which such persons hold directorships.
| Name                             | **Age** | **Position with the Company**                                   | **Term Ending at  Annual Meeting** |
|----------------------------------|---------|-----------------------------------------------------------------|------------------------------------|
| Herbert M. Stein                 | 78      | Chairman of the  Board, President and

Chief Executive  Officer | 2007                               |
| Craig A.  Dubitsky(3)            | 41      | Director                                                        | 2008                               |
| Arthur S.  Reynolds(1), (2), (3) | 63      | Director                                                        | 2009                               |
| Sheryl B. Stein                  | 52      | Director                                                        | 2009                               |
| Alan W. Tuck(1),  (2), (3)       | 59      | Director                                                        | 2008                               |

 

(1)          Memberof the Audit Committee

(2)          Memberof the Compensation Committee

(3)          Memberof the Governance and Nominating Committee

Mr. Herbert M. Stein, a Class III director, hasserved as the Company’s President and Chief Executive Officer since January 2001.Mr. Stein has been a director of the Company since 1996 and has beenChairman of the Board since January 2000. Mr. Stein was Chairman ofthe Board of Directors of Organogenesis Inc. from 1991 through 1999 and wasChief Executive Officer of Organogenesis from 1987 through 1999.

Mr. Craig A. Dubitsky, a Class I director,has served as a director since June 30, 2004. Mr. Dubitsky is theFounder and Managing Partner of 20-10 LLC, an early stage venture capitaland strategic advisory firm. Mr. Dubitsky was Senior Vice President ofVenture Development for the Simon Property Group, the largest retail REIT inthe United States from October 2000 through March 2002. In addition Mr. Dubitskywas Founder and CEO of BIGMOVE, Inc./Masterkey until it was acquired byPublic Storage in 2000 as well as Vice President and LME Specialist at theSalomon Smith Barney division of Citigroup from 1994 through 1999. Mr. Dubitskycurrently serves on the Board of Directors of, Sharps USA, LLCOT-Overtime LLC,Digital Advertising Network and Upsource Partners.

Mr. Arthur S. Reynolds, a Class II director, hasserved as a director since November 2003. Mr. Reynolds is the Founderof Rexon Limited of London and New York where, since 1999, he has served asManaging Director. Mr. Reynolds was Founder, Co-owner and Managing Partnerof London-based Value Management & Research (UK) Limited from 1997 to1999.

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In addition, Mr. Reynolds has held executivepositions at Merrill Lynch International Bank Limited, Banque de la SocieteFinanciere Europeene, J.P. Morgan & Company and Mobil Corporation.

Ms. Sheryl B. Stein, a Class II director, hasserved as a director of the Company since August 2000. Since January 1993,Ms. Stein has been employed at Bedford Group, Inc. where shecurrently serves as Co-Chief Executive Officer.

Mr. Alan W. Tuck, a Class I director, has servedas a director of the Company since 1998. He was Chief Strategic Officer of OrganogenesisInc. from September 1997 to July 2000, and, at various times from August 1996to June 1998, was Strategic Advisor to Dyax Corp., Executive VicePresident and Chief Strategic Officer of Biocode, Inc., and ChiefStrategic Officer of ImmuLogic Pharmaceutical Corporation. Mr. Tuck wasPresident and Chief Executive Officer of T Cell Sciences, Inc. from February 1992to May 1996. He is currently a director of GTC Biotherapeutics, Inc.and a Partner at the Bridgespan Group, a non-profit consulting company.

***Executive Officers***

The names of, and certain information regarding,executive officers of the Company who are not also directors, are set forthbelow. The executive officers serve at the pleasure of the Board of Directors.
| Name                    | **Age** | **Position with the Company**                          |
|-------------------------|---------|--------------------------------------------------------|
| Paul J. Murphy          | 59      | Chief Financial Officer  and Vice President of Finance |
| David B. Meyers         | 48      | Chief Operating  Officer                               |
| Alexander J.  Andrianov | 49      | Vice President  Research and Development               |

 

Mr. Paul J. Murphy joined the Company in June 2005in the role of Chief Financial Officer and Vice President of Finance, includingthe responsibilities of the Company’s Principal Accounting Officer. Prior tojoining the Company, from June 2004 to June 2005, Mr. Murphy wasan independent contractor with JH Cohn, LLP, an accounting firm, working onengagements with public companies to design, assess and test controls forcompliance with Section 404 of the Sarbanes-Oxley Act of 2002. From March 2002until June 2004, Mr. Murphy worked as a self-employed consultant forcompanies on short-term projects of the type ordinarily undertaken by a ChiefFinancial Officer. From February 1999 through January 2002, Mr. Murphywas the Senior Vice President, Chief Financial Officer and Treasurer of ArtelVideo Systems, Inc., a video networking technology company. From 1979through 1999, Mr. Murphy worked as a Chief Financial Officer with fourcompanies, three of which were publicly traded issuers.

Mr. David B. Meyers was appointed the Company’s ChiefOperating Officer in February 2001. From January 2000 until February 2001he was the Company’s Vice-President, Business Development. Since 1996 he hasserved under various research, engineering and development roles at Apogee andis one of the inventors of the DDX technology. Prior to joining the Company, Mr. Meyerswas a principal engineer with Arinc Research Corporation and held engineeringand research positions at Northrop Grumman Corporation and RockwellInternational performing systems analysis and MEMS sensordevelopment.

Mr. Alexander K. Andrianov joined the Company in September 2006.Dr. Andrianov will support the design and development of novel drugcoating and encapsulation technologies for the Company’s PyraDermTM intradermaldrug delivery system. Dr. Andrianov brings over 20 years experience inapplications of polymers as biomaterials and drug delivery systems. Mostrecently he was the founder Chief Scientific Officer of Parallel Solutions from2001 until 2006, where he developed biodegradable polymers for protein deliveryand discovered a new class of potent vaccine immunoadjuvants. Prior to startingParallel, he worked for Physical Science, Inc. as Principal ResearchScientist and at Avant Immuonotherapeutics, Inc. as Director of PolymerSynthesis and Formulation. Dr. Andrianov is listed as an inventor on over35 patents and patent applications and has published numerous technical papers.

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Dr. Andrianov received his Ph.D. in PolymerScience from Moscow State University in 1985 and served as a faculty memberuntil 1991. He continued his academic training at the Massachusetts Instituteof Technology working with Professor Robert Langer.

*FamilyRelationships*

Herbert M. Stein is thefather of Sheryl B. Stein. There are no other family relationships among ourdirectors, executive officers or persons nominated or chosen to becomedirectors or executive officers.

*Involvement inCertain Legal Proceedings*

No events have occurredduring the past five years that are required to be disclosed pursuant to Item 401(d) ofRegulation S-B.

**Section 16(a) BeneficialOwnership Reporting Compliance**

Section 16(a) of the Securities Exchange Actof 1934 (the “Exchange Act”) requires the Company’s directors and officers, andpersons who own more than 10% of the Company’s Common Stock, to file with theSEC initial reports of beneficial ownership and reports of changes inbeneficial ownership of the Common Stock and other equity securities of theCompany. Officers, directors and greater than 10% beneficial owners are requiredby SEC regulation to furnish the Company with copies of all Section 16(a) formsthey file.

To the Company’sknowledge, based solely on its review of copies of such reports furnished tothe Company and written representations that no other reports were required,during the fiscal year ended December 31, 2006, all Section 16(a) filingrequirements applicable to its officers, directors and greater than 10%beneficial owners were complied with except for a grant on August 17, 2006that was made to all of our directors and executive officers serving at thetime, which was subsequently remedied by a filing for all parties on September 12,2006.

**Code of Ethics**

Our Board of Directors hasadopted a code of ethics, which applies to all of our directors, officers andemployees. Our code of ethics is specifically intended to comply with Item 406of Regulation S-B. This code of ethics, which is included as part of theCompany’s Code of Conduct and Ethics, is posted on the Company’s websiteat:  http://www.apogeemems.com.

**CorporateGovernance**

*StockholderCommunications with the Board*

Any Stockholder maycontact the Chairman of the Board or other members of the Board of Directors bysending an email to the following address: *bod@apogeemems.com*.Alternatively, a stockholder can contact the Chairman of the Board or the othermembers of the Board of Directors by writing to:  Board of Directors, c/o Compliance Officer,Apogee Technology, Inc., 129 Morgan Drive, Norwood, Massachusetts 02062. Allcommunications received either electronically or in writing will be distributedto the Chairman of the Board or the other members of the Board deemedappropriate depending on the facts and circumstances outlined in thecommunication received.

**DirectorNominations and Qualifications**

The Company’s By-Lawscontain provisions that address the process by which a stockholder may nominatean individual to stand for election to the Company’s Board of Directors at theAnnual Meeting of Stockholders.  Norecommendations have been received from stockholders requesting that thenominating and corporate governance committee consider a candidate forinclusion as a nominee to be 

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presentedat the 2006 Annual Meeting of Stockholders. The nominating and corporategovernance committee will consider qualified candidates for director suggestedby a stockholder. Stockholders can suggest qualified candidates for director bywriting to our corporate secretary at 129 Morgan Drive, Norwood, Massachusetts02062.

Submissions received thatmeet the criteria set forth below will be forwarded to the chairman of thenominating and corporate governance committee for further review andconsideration. To be timely, a stockholder’s notice pertaining to an annualmeeting shall be delivered to the Secretary at the principal executive officesof the Corporation not later than the close of business on the sixtieth(60th) day nor earlier than the close of business on the ninetieth(90th) day prior to the first anniversary of the preceding year’s annualmeeting; provided, however, that in the event that the date of the annualmeeting is more than thirty (30) days before or more than sixty (60) daysafter such anniversary date, notice by the stockholder to be timely must be sodelivered not earlier than the close of business on the ninetieth (90th) dayprior to such annual meeting and not later than the close of business on thelater of the sixtieth (60th) day prior to such annual meeting or the closeof business on the tenth (10th) day following the thy on which publicannouncement of the date of such meeting is first made by the Corporation. Astockholder shall also comply with all applicable requirements of theSecurities Exchange Act of 1934, as amended (or any successor provision), andthe rules and regulations thereunder with respect to the matters set forthin the by-laws. Nominations not received, in the appropriate manner or duringthe  time frame discussed above will notbe voted on at the Annual Meeting. Even if a nomination is received in thecorrect manner and during that time frame, the proxies that the Companysolicits for the meeting may still exercise discretionary voting authority onthe nomination under circumstances consistent with the proxy rules of theSecurities and Exchange Commission.

**General InformationConcerning the Board of Directors and its Committees**

During the fiscal yearended December 31, 2006 there were four (4) meetings of the Board ofDirectors. In addition, from time to time, the members of the Board ofDirectors acted by unanimous written consent pursuant to Delaware law. TheBoard of Directors has four standing committees: the audit committee, thecompensation committee, the nominating and corporate governance committee, andthe executive committee. Each of the directors attended all of the meetings ofthe Board and Board Committees (of which he or she was a member) held duringthe last fiscal year with the exception of one director who did not attend onemeeting.

*Audit Committee.*

The Board of Directors has established a separatelydesignated, standing Audit Committee that performs the role described insection 3(a)(58)(A) of the Securities Exchange Act of 1934. The AuditCommittee is currently comprised of Messrs. Alan W. Tuck and Arthur S.Reynolds, each of whom is independent in accordance with the applicable rules promulgatedby the SEC and The American Stock Exchange Listing Standards. The AuditCommittee selects and retains the independent auditors to audit the Company’sfinancial statements, approves the terms of the engagement of the independentauditor and reviews and approves all fees charged for audits and for anynon-audit projects. The Board of Directors has adopted a revised writtencharter for the Audit Committee, a copy of which is posted on the Company’swebsite at:  http://www.apogeemems.com.

The Board of Directors hasconcluded that Mr. Reynolds meets the definition of an Audit CommitteeFinancial Expert as such term is used in the rules and regulations of theSEC. The Audit Committee’s responsibilities also include: overseeing the integrityof the Company’s financial statements, the Company’s compliance with legal andregulatory requirements, the independent auditors’ qualifications andindependence, the performance of the Company’s independent auditors and othersuch matters as may be 

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assignedby the Board of Directors. During the fiscal year ended December 31, 2006,the Audit Committee held five (5) meetings.

*CompensationCommittee.*

The Compensation Committee is currently comprised of Messrs. AlanW. Tuck and Arthur S. Reynolds, each of whom qualifies as an independentdirector under the rules of The American Stock Exchange. The CompensationCommittee reviews and determines salaries, equity grants and incentivecompensation of the chief executive officer and other executive officers and isresponsible for performing the other related responsibilities set forth in itsDuties and Responsibilities.

During the fiscal yearended December 31, 2006, the Compensation Committee held one (1) meeting.

*Nominating andCorporate Governance Committee.*

The Nominating and Corporate Governance Committee iscurrently comprised of Messrs. Alan W. Tuck and Arthur S. Reynolds, eachof whom is independent in accordance with the applicable American StockExchange Listing Standards. The Nominating and Corporate Governance Committeeselects and recommends individuals to be presented to the shareholders of theCompany for election or re-election to the Board or Directors, oversees theevaluation of the Board of Directors and Company management, monitors corporategovernance principles, practices and guidelines for the Board of Directors andthe Company and is responsible for performing other responsibilities as setforth in its written charter, a copy of which is posted on the Company’swebsite at:  http://www.apogeemems.com

In evaluatingdirector nominees, the nominating and corporate governance committee considersthe following factors:

·       business-relatedknowledge, skills and experience of the nominee;

·       experiencewith corporate governance matters and compliance obligations of a publiccompany, including experience with disclosure and accounting rules andpractices;

·       integrityof the nominee;

·       mixof talent and experience and diversity of the directors as a group;

·       otherprofessional and business commitments of the nominee, including the number of otherboards on which the nominee serves, including public and private boards; and

·       otherfactors as may be deemed to be in the best interests of the Company and its Stockholders.

The Board of Directorscurrently does not have a policy regarding attendance by directors at theCompany’s annual meeting of Stockholders; however, they are encouraged toattend and it schedules a meeting of the Board of Directors on the same date asthe annual stockholders meeting. The following directors of the Companyattended the annual stockholders meeting in 2006:  Arthur S. Reynolds, Sheryl B. Stein and AlanW. Tuck.

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**Item 10.**                 EXECUTIVECOMPENSATION.

The table below sets forth information concerningcompensation paid to Herbert M. Stein, Paul J. Murphy, David B. Meyers,Alexander K. Andrianov and Nevenka Golubovic-Liakopoulos. As set forth below,our compensation program for our executive officers consists of base salary anddiscretionary option awards.

**SUMMARYCOMPENSATION TABLE**
| Name and Principal Position(1)                            | ** ** | ** ** | **Year** | ** ** | ** ** | **Salary  ($)** | ** ** | ** ** | **Option Awards  ($)(3)** | ** ** | ** ** | **All Other  Compensation  ($)** | ** ** | ** ** | **Total   ($)** | ** ** |
|--------------------------------------------------------------------------|------------|------------|----------|------------|------------|-----------------|------------|------------|--------------------------------|------------|------------|---------------------------------------|------------|------------|----------------------|------------|
| Herbert  M. Stein  President and Chief Executive Officer                 |       |       | 2006     |       |       |            | $          | 295,000    | (2)                            |       |       |                                  | $          | 228,360    |                 |       |   |   | $ | 278,941 | (4) |   |   | $ | 801,779 |   |
| Paul  J. Murphy  Vice President Finance and Chief Financial Officer      |       |       | 2006     |       |       |            | $          | 160,000    |                           |       |       |                                  | $          | 15,403     |                 |       |   |   | $ | 0 |   |   |   | $ | 175,403 |   |
| David  B. Meyers  Chief Operating Officer                                |       |       | 2006     |       |       |            | $          | 170,000    |                           |       |       |                                  | $          | 3,228      |                 |       |   |   | $ | 0 |   |   |   | $ | 173,228 |   |
| Alexander  K. Andrianov  Vice President Research and Development         |       |       | 2006     |       |       |            | $          | 39,917     | (5)                            |       |       |                                  | $          | 3,744      |                 |       |   |   | $ | 0 |   |   |   | $ | 43,661 |   |
| Nevenka  Golubovic-Liakopoulos  Vice President Medical Products Group(6) |       |       | 2006     |       |       |            | $          | 126,083    |                           |       |       |                                  | $          | 7,986      |                 |       |   |   | $ | 5,000 |   |   |   | $ | 139,069 |   |

(1)          Currently,none of the officers of the Company are under employment contracts with theexception of Mr. Herbert M. Stein.

(2)          Mr. Stein iscompensated pursuant to an employment agreement of which the initial termends on January 1, 2007,the agreement is automatically extended foradditional two-year periods unless terminated by Mr. Stein or the Board ofDirectors no later than 120 days prior to the end of the initial termor any successive term. Mr. Stein is entitled to an annual base salary,effective January 1, 2004, of $295,000 which may be increased at thediscretion of the Company’s Board of Directors, and annual bonuses asdetermined by the Company’s Board of Directors.

(3)          The amounts in thiscolumn reflect the dollar amount recognized for financial statement reportingpurposes for the fiscal year ended December 31, 2006, in accordance withSFAS 123(R) of awards of stock options and thus include amounts fromawards granted in and prior to 2006. Assumptions used in this calculation areincluded in Part II - Item 7, Financial Statements and Supplementary Dataof this Annual Report on Form 10-KSB/A and Footnote 2 of theFinancial Statements—Summary of Accounting Policies—Stock Based Compensationand Footnote 17 of the Financial Statements—Stock Based Compensation.

(4)          The Company has beenassuming and will continue to assume the legal costs and related expenses ofHerbert M. Stein, in connection with the civil case in the Circuit Court of theFifteenth Judicial Circuit in and for Palm Beach County, Florida entitledJoseph Shamy v. Herbert M. Stein, case No.: 50 2005 CA 007719 XXXXMB. Asof December 31, 2006, the Company has incurred $278,419 toward thisindemnification.

(5)          Dr. Andrianovjoined the Company on September 12, 2006.

(6)          Separatedfrom the Company as of December 20, 2006.

**EmploymentAgreements**

In March 2004,the Company entered into an employment agreement with Herbert M. Stein pursuantto which Mr. Stein serves as the Company’s Chief Executive Officer andPresident, as well as Chairman of 

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theBoard of Directors, subject to the rights of the shareholders of the Company toelect the Company’s directors. The employment agreement is for an initialterm ending on January 1, 2007 and is to be automatically extended foradditional two-year periods unless terminated by either party no laterthan 120 days prior to the end of the initial term or anysuccessive term. Mr. Stein is entitled to an annual base salary, effectiveJanuary 1, 2004, of $295,000 which may be increased at the discretion ofthe Company’s Board of Directors, and annual bonuses as determined by theCompany’s Board of Directors. Upon a change of control of the Company, asdefined in the agreement, all stock options held by Mr. Stein shall becomefully vested. The Company may terminate the employment agreement with orwithout cause, as defined in the agreement. In the event of Mr. Stein’sdeath or disability, the agreement provides that he (or his estate) shall beentitled to accrued salary through the date of termination, any bonus the Boardof Directors has determined appropriate, and any proceeds or other benefitsfrom insurance policies or other benefit plans to which he (or his estate)would be entitled. In the event that Mr. Stein’s employment is terminatedfor cause, he shall only be entitled to accrued salary through the date oftermination. In the event that Mr. Stein is terminated without cause,he shall be entitled to accrued salary through the date of termination,continued base salary payments for the greater of 24 months or the remainder ofthe term of the agreement, continued medical plan benefits for 24 monthsfollowing the date of termination, and an amount equal to the highest bonus hehas previously received under the agreement, prorated to the date oftermination. In the event that Mr. Stein voluntarily terminates hisemployment, he shall be entitled to accrued salary through the date oftermination and an amount equal to the highest bonus he has previously receivedunder the agreement, prorated to the date of termination.

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**OUTSTANDING EQUITYAWARDS AT FISCAL YEAR-END**

Thefollowing table shows grants of stock options and grants of unvested incentiveplan awards on the last day of the fiscal year ended December 31, 2006, toeach of the executive officers named in the Summary Compensation Table.
|                                | ** ** | ** ** | **Option Awards**                                                             | ** ** |
|--------------------------------|------------|------------|------------------------------------------------------------------------------------|------------|
| **Name**                       | ** ** | ** ** | **Number of  Securities  Underlying  Unexercised  Options  (#)  Exercisable** | ** ** | ** ** | **Number of   Securities  Underlying  Unexercised  Options  (#)  Unexercisable** | ** ** | ** ** | **Equity Incentive  Plan Awards:  Number of  Securities  Underlying  Unexercised  Unearned  Options  (#)** | ** ** | ** ** | **Option  Exercise  Price  ($)** | ** ** | ** ** | **Option  Expiration  Date** | ** ** |
| Herbert M. Stein               |       |       |                                                                               | 300,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 0.950 |   |   |   | 08/17/2016 |   |
|                           |       |       |                                                                               | 200,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 8.920 |   |   |   | 06/07/2014 |   |
|                           |       |       |                                                                               | 175,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 8.650 |   |   |   | 03/25/2014 |   |
|                           |       |       |                                                                               | 200,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 4.080 |   |   |   | 03/27/2013 |   |
|                           |       |       |                                                                               | 100,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 2.710 |   |   |   | 01/21/2013 |   |
|                           |       |       |                                                                               | 100,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 5.500 |   |   |   | 04/03/2012 |   |
|                           |       |       |                                                                               | 350,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 6.300 |   |   |   | 12/21/2011 |   |
|                           |       |       |                                                                               | 100,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 6.300 |   |   |   | 08/16/2011 |   |
|                           |       |       |                                                                               | 100,000    |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 6.250 |   |   |   | 02/12/2011 |   |
|                           |       |       |                                                                               | 80,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 1.240 |   |   |   | 05/19/2010 |   |
|                           |       |       |                                                                               | 40,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | .0275 |   |   |   | 07/01/2007 |   |
| David B. Meyers                |       |       |                                                                               | 0          |   |   |   |   | 25,000 | (1) |   |   |   | 0 |   |   |   |   | $ | 0.950 |   |   |   | 08/17/2016 |   |
|                           |       |       |                                                                               | 0          |   |   |   |   | 15,000 | (2) |   |   |   | 0 |   |   |   |   | $ | 0.800 |   |   |   | 09/12/2016 |   |
|                           |       |       |                                                                               | 50,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 9.060 |   |   |   | 06/02/2014 |   |
|                           |       |       |                                                                               | 50,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 8.650 |   |   |   | 03/24/2014 |   |
|                           |       |       |                                                                               | 50,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 4.325 |   |   |   | 03/18/2013 |   |
|                           |       |       |                                                                               | 50,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 5.900 |   |   |   | 03/04/2012 |   |
|                           |       |       |                                                                               | 35,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 6.250 |   |   |   | 02/12/2011 |   |
|                           |       |       |                                                                               | 20,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 1.690 |   |   |   | 04/06/2010 |   |
|                           |       |       |                                                                               | 74,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 0.250 |   |   |   | 07/01/2007 |   |
| Paul J. Murphy                 |       |       |                                                                               | 0          |   |   |   |   | 25,000 | (3) |   |   |   | 0 |   |   |   |   | $ | 0.950 |   |   |   | 08/17/2016 |   |
|                           |       |       |                                                                               | 12,000     |   |   |   |   | 48,000 | (4) |   |   |   | 0 |   |   |   |   | $ | 1.270 |   |   |   | 06/01/2015 |   |
| Alexander K. Andrianov         |       |       |                                                                               | 0          |   |   |   |   | 60,000 | (5) |   |   |   | 0 |   |   |   |   | $ | 0.800 |   |   |   | 09/12/2016 |   |
| Nevenka  Golubovic-Liaopoulos* |       |       |                                                                               | 2,500      |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 1.270 |   |   |   | 03/20/2007 |   |
|                           |       |       |                                                                               | 25,000     |   |   |   |   | 0 |   |   |   |   | 0 |   |   |   |   | $ | 8.500 |   |   |   | 03/20/2007 |   |

(1)          25,000Options granted on August 17, 2006; vesting at 20% per year beginning atthe first anniversary of the grant date.

(2)          15,000 Options grantedon September 12, 2006; vesting at 20% per year beginning at the firstanniversary of the grant date.

(3)          25,000 Options grantedon August 17, 2006; vesting at 20% per year beginning at the firstanniversary of the grant date.

(4)          60,000 Options grantedon June 1, 2005; vesting at 20% per year beginning at the firstanniversary of the grant date.

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(5)          60,000 Options grantedon September 12, 2006; vesting at 20% per year beginning at the firstanniversary of the grant date.

*                    Separatedfrom the Company as of December 20, 2006 resulting in the cancellation ofan additional 65,000 options.

**Termination orChange in Control Arrangements**

Other than Mr. Stein’semployment agreement, which may provide for payments in connection with histermination, as discussed above, there are no arrangements with any executiveofficer that would provide for payments in connection with their termination ora change in control of the Company.

**DIRECTORCOMPENSATION**

Directors who are also employees of the Company do notreceive compensation for serving as directors. Directors who are not employeesof the Company are paid a retainer and are reimbursed for ordinary andnecessary travel expenses incurred in connection with attendance at each boardmeeting. The annual retainer in fiscal 2006 was $5,000. In fiscal 2006, eachnon-employee director earned $1,250 per quarter. In addition members of boththe audit committee and compensation committee received an annual retainer of$2,000 payable quarterly. During fiscal 2006 the Audit Committee chairpersonreceived an annual retainer $5,000 and the Compensation Committee chairpersonreceived an annual retainer of $4,000, payable quarterly.

In addition to the cash compensation discussed above,Directors are eligible to participate in the Company’s 1997 Employee, Directorand Consultant Stock Option Plan (the “Plan”). Options granted under the Planto non-employee directors’ vest over a five year period beginning after oneyear of service from the date of grant. Options to purchase 20,000 shares ofthe Company’s Common Stock, at an exercise price of $0.95 per share, vestingover five years, were granted under the Plan during the year ended December 31,2006 to each of Craig A. Dubitsky, Arthur S. Reynolds, Sheryl B. Stein and AlanW. Tuck.

| Name               | ** ** | ** ** | **Fees Earned or  Paid in  Cash  ($)** | ** ** | ** ** | **Option  Awards  ($)(1)** | ** ** | ** ** | **Total  ($)** | ** ** |
|--------------------|------------|------------|-------------------------------------------------------|------------|------------|----------------------------|------------|------------|----------------|------------|
| Craig A. Dubitsky  |       |       |                                                  | $          | 5,000      |                       |       |       | $              | 1,834      |   |   | $ | 6,834 |   |
| Arthur S. Reynolds |       |       |                                                  | $          | 12,000     |                       |       |       | $              | 9,023      |   |   | $ | 21,023 |   |
| Sheryl B. Stein    |       |       |                                                  | $          | 5,000      |                       |       |       | $              | 1,834      |   |   | $ | 6,834 |   |
| Alan W. Tuck       |       |       |                                                  | $          | 11,000     |                       |       |       | $              | 5,428      |   |   | $ | 16,428 |   |

 

(1)          The amounts in thiscolumn reflect the dollar amount recognized for financial statement reportingpurposes for the fiscal year ended December 31, 2006, in accordance withSFAS 123(R) of awards of stock options and thus include amounts fromawards granted in and prior to 2006. Assumptions used in this calculation areincluded in Part II - Item 7, Financial Statements and Supplementary Dataof the previously filed Annual Report on Form 10-KSB and Footnote 2 of theFinancial Statements—Summary of Accounting Policies—Stock Based Compensationand Footnote 17 of the Financial Statements—Stock Based Compensation.

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**Item 11.**                 SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS.

The following table setsforth certain information as of April 24, 2007 concerning the beneficialownership of Common Stock by each Stockholder known by the Company to be thebeneficial owner of more than 5% of its outstanding shares of Common Stock,each current member of the Board of Directors, each executive officer named inthe Summary Compensation Table on page 6 hereof, and all current directorsand executive officers as a group. Beneficial ownership is determined inaccordance with the rules of the SEC and includes voting or investmentpower with respect to the securities.
|                                                                                 | ** ** | ** ** | Shares Beneficially   Owned (1) | ** **    |
|---------------------------------------------------------------------------------|------------|------------|------------------------------------------------|---------------|
| **Name and Address****                                                | ** ** | ** ** | **Number**                                     | ** **    | ** ** | **Percent** | ** ** |
| Herbert  M. Stein  71 Fairlee Road, Waban, MA 02468                             |       |       |                                           | 3,418,834(2)  |   |   |   |   | 28.57% |   |   |
| H.M.  Stein Associates   C/o Herbert M. Stein  71 Fairlee Road, Waban, MA 02468 |       |       |                                           | 1,466,334(3)  |   |   |   |   | 12.25% |   |   |
| David  Spiegel  600 Mountain Street, Sharon, MA 02067                           |       |       |                                           | 1,814,532(4)  |   |   |   |   | 15.16% |   |   |
| Sheryl B. Stein  150 East 57th Street, New York, NY 10022                  |       |       |                                           | 880,470(5)    |   |   |   |   | 7.36% |   |   |
| Leo  Spiegel  30 Ashcroft Road, Sharon, MA 02067.                               |       |       |                                           | 783,636       |   |   |   |   | 6.55% |   |   |
| David B. Meyers                                                                 |       |       |                                           | 329,000(6)    |   |   |   |   | 2.75% |   |   |
| Alan W. Tuck                                                                    |       |       |                                           | 301,500(7)    |   |   |   |   | 2.52% |   |   |
| Arthur S. Reynolds                                                              |       |       |                                           | 54,500(8)     |   |   |   |   | * |   |   |
| Paul J. Murphy                                                                  |       |       |                                           | 24,000(9)     |   |   |   |   | * |   |   |
| Craig A. Dubitsky                                                               |       |       |                                           | 20,000(10)    |   |   |   |   | * |   |   |
| All executive officers and directors as a group (8 persons)                     |       |       |                                           | 5,028,304(11) |   |   |   |   | 35.05% |   |   |

*                    Representsbeneficial ownership of less than 1% of the Company’s outstanding shares ofCommon Stock.

**             Addressesare given for beneficial owners of more than 5% of the Company’s outstandingstock only.

(1)          Thenumber of shares of Common Stock issued and outstanding on April 24, 2007was 11,968,331. The calculation of percentage ownership of each listedbeneficial owner is based upon the number of shares of Common Stock issued andoutstanding on April 24, 2007, including shares of Common Stock subject tooptions and/or warrants held by such person at April 24, 2007 andexercisable within 60 days thereafter. On December 28, 2005, Apogee fileda Form 8-K with the SEC announcing that the Board of Directorsapproved the accelerated vesting of certain unvested stock options awarded toemployees and non-employee members of the Board of Directors. As a result ofthe Board’s approval, the vesting provisions for options covering approximately880,000 underlying shares of Common Stock were accelerated. Approximately665,000 of the underlying Shares, of the total accelerated, belong to executiveofficers and non-employee members of the Board of Directors. The Board onlyaccelerated the vesting of those options having exercise prices in excess of$2.00 per share and did not accelerate the vesting of any options with exerciseprices below $2.00 per share. The persons and entities named in the table havesole voting and investment power with respect to all Shares shown asbeneficially owned by them, except as noted below.

(2)          Includes 96,100 sharesof Common Stock owned directly by Mr. Stein, 1,745,000 shares of CommonStock which may be purchased by Mr. Stein upon the exercise of fullyvested options, 111,400 shares of Common Stock owned by Mr. Stein’s wife,and 1,466,334 shares of Common Stock owned by H.M. Stein Associates (“HMSA”).

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(3)          Thepartners of HMSA are Herbert M. and Renee Stein, their daughters, Erica, Sheryland Sharyn and Fairlee Corporation. Mr. Stein has an 8% generalpartnership interest in HMSA. Mr. Stein and his wife, Renee Stein, are thesole stockholders of Fairlee Corporation, which has a 1% general partnershipinterest in HMSA. Mr. Stein disclaims beneficial ownership of 91% of suchshares.

(4)          Includes1,731,232 shares of Common Stock owned directly by Mr. Spiegel, 200 sharesof Common Stock owned by Mr. Spiegel’s wife and 400 shares of Common Stockowned by Mr. Spiegel’s wife as custodian for two minor children. Includes82,700 shares of Common Stock owned by The Spiegel Family Limited Partnership.Mr. Spiegel has sole voting and investment power with respect to theseshares, but disclaims beneficial ownership of 68% of such shares.

(5)          Includes260,400 shares of Common Stock owned directly by Ms. Stein, 100,000 sharesof Common Stock which may be purchased by Ms. Stein upon exercise of fullyvested options. Includes 19,400 shares of Common Stock owned by H.M. Stein &Co. and 500,670 shares of Common Stock owned by HMSA.

(6)          Includes329,000 shares of Common Stock which may be purchased by Mr. Meyers uponexercise of fully vested options.

(7)          Includes127,000 shares of Common Stock owned directly by Mr. Tuck, 104,500 sharesof Common Stock which may be purchased by Mr. Tuck upon exercise of fullyvested options, 60,000 shares owned by Mr. Tuck’s wife and 10,000 sharesheld in a trust for Mr. Tuck’s brother of which Mr. Tuck disclaimsbeneficial ownership.

(8)          Includes54,500 shares of Common Stock which may be purchased by Mr. Reynolds uponexercise of fully vested options.

(9)          Includes12,000 shares of Common Stock which may be purchased by Mr. Murphy uponexercise of fully vested options and 12,000 shares of Common Stock which may bepurchased within 60 days of April 24, 2007.

(10) Includes 20,000 shares of Common Stock whichmay be purchased by Mr. Dubitsky upon exercise of fully vested options.

(11) Includes 2,365,000 shares of Common Stock whichmay be purchased upon exercise of fully vested options and 12,000 shares ofCommon Stock which may be purchased within 60 days of April 24, 2007.

**SecuritiesAuthorized for Issuance Under Equity Compensation Plans**

The table below providescertain aggregate information with respect to the Company’s 1997 Employee,Director and Consultant Stock Option Plan in effect as of December 31,2006.
| Plan Category                                          | ** ** | ** ** | **Number of Securities to be  Issued Upon Exercise of  Outstanding Options** | ** ** | ** ** | **Weighted Average  Exercise Price of  Outstanding Options** | ** ** | ** ** | **Number of Securities  Remaining Available  for Future Issuance  Under Equity Compensation  Plans (excluding securities  reflected in first column)** | ** ** |
|-------------------------------------------------------------|------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|------------|----------------------------------------------------------------------------------|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity Compensation  Plans Approved by Security Holders(1)  |       |       |                                                                                                                 | 2,899,100  |       |                                                                             |       |       | $                                                                                                                                                                                                                  | 4.65       |   |   |   |   | 631,180 |   |   |
| Equity Compensation  Plans not Approved by Security Holders |       |       |                                                                                                                 | N/A        |       |                                                                             |       |       | N/A                                                                                                                                                                                                                |       |   |   |   | N/A |   |   |
| Total                                                       |       |       |                                                                                                                 | 2,899,100  |       |                                                                             |       |       | $                                                                                                                                                                                                                  | 4.65       |   |   |   |   | 631,180 |   |   |

(1)          This plan consists ofthe 1997 Employee, Director and Consultant Stock Option Plan initially approvedby the Company’s stockholders in 1997.

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**Item 12.**                 CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

**RelatedTransactions**

In April 1997,the Company moved its principal executive offices to a facility owned by Mr. DavidSpiegel, a major shareholder of the Company. On October 1, 2001 theCompany signed a 24-month lease for this facility, expiring September 30,2003. Subsequently, the Company signed two lease extensions. The most recentlease extension expired on December 31, 2005.

The Company is currently renting this facility on amonth-to-month basis. The Company rents the facility for $4,400 per montheffective October 1, 2001. Rent paid during 2006, 2005 and 2004 amountedto $158,400 in the aggregate. The Company believes that amounts paid pursuantto this lease are at or below market value.

In March 2004,the Company entered into an employment agreement with Herbert M. Stein asdescribed above.

**DirectorIndependence**

The Board of Directors hasdetermined that Messrs. Tuck, Reynolds and Dubitsky are independent inaccordance with applicable American Stock Exchange Listing Standards.Mr. Stein is not considered independent because he is currently serving asthe Company’s President and Chief Executive Officer. Ms. Stein is notconsidered independent because she is the daughter of Mr. Stein, theCompany’s President and Chief Executive Officer.

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**Item 13.**                 EXHIBITS.

**None**

| **Item 13(a)**             | The following documents are filed as part of this  annual report on Form 10-KSB/A                                              |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------|
| **Item  13(a)(1) and (2)** | The Consolidated  Financial Statements were filed as part of our Original Report for the fiscal  year ended December 31, 2006. |
| **Item 13(a)(3)**          | *Exhibits*                                                                                                                          |

 

The following is a list of exhibits filed as part ofthis Annual Report on Form 10-KSB/A.

| Exhibit  No | ** ** | **Description**                                                                                                                                                                                                                                                                                         | ** ** | **Filed with this Form  10-KBS/A** |
|-------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|
| 3.1         |       | Certificate of Incorporation of Apogee  Technology, Inc., incorporated herein by reference to Exhibit 3.1  to the Registrant’s Form 10-SB, as amended (File No. 000-17053).                                                                                                    |       |                               |
| 3.2         |       | Amendment of Certificate  of Incorporation of Apogee Technology, Inc., incorporated herein by  reference to Exhibit 3.2 to the Registrant’s Form 10-SB, as  amended (File No. 000-17053).                                                                                      |       |                               |
| 3.3         |       | Certificate of Amendment  to Certificate of Incorporation of Apogee Technology, Inc., incorporated  herein by reference from Exhibit 3.3 to the Registrant’s Quarterly  Report on Form 10-QSB for the quarter ended June 30, 2001  (File. No. 000-30656).                 |       |                               |
| 3.4         |       | Restated By-Laws of  Apogee Technology, Inc., incorporated herein by reference from  Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-QSB  for the quarter ended June 30, 2001 (File. No. 000-30656).                                                          |       |                               |
| 10.1*       |       | License Agreement dated  February 2, 2001 by and between the Registrant and STMicroelectronics,  NV, incorporated herein by reference from Exhibit 10.1 to the  Registrant’s Quarterly Report on Form 10-QSB for the quarter ended  March 31, 2001. (File No. 000-30656). |       |                               |
| 10.2        |       | Letter Agreement between  Laurus Master Fund and Apogee Technology, Inc., dated December 5,  2005, filed with the Current Report on Form 8-K, dated  December 7, 2005 (File No. 001-10456).                                                                                    |       |                               |
| 10.3        |       | Termination of  Registration Rights Agreement, dated December 5, 2005 filed with the  Current Report on Form 8-K, dated December 7, 2005 (File  No. 001-10456).                                                                                                                     |       |                               |
| 10.4        |       | Apogee  Technology, Inc. Amended and Restated Common Stock Purchase Warrant,  filed with the Current Report on Form 8-K, dated December 7,  2005 (File No. 001-10456).                                                                                                              |       |                               |
| 10.5        |       | Securities Purchase  Agreement, by and between Apogee Technology, Inc. and Laurus Master  Fund, Ltd., incorporated herein by reference from Exhibit 10.1 to the  Registrant’s Form 8K as filed on August 9, 2005 (File No. 001-10456).                                    |       |                               |
| 10.6        |       | Master Security  Agreement, by and between Apogee Technology, Inc. and Laurus Master  Fund, Ltd., incorporated herein by reference from Exhibit 10.2 to the  Registrant’s Form 8K as filed on August 9, 2005 (File No. 001-10456).                                        |       |                               |

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| 10.7   |   | Form of Laurus  Master Fund, Ltd. Warrant, incorporated herein by reference from  Exhibit 10.3 to the Registrant’s Form 8K as filed on August 9,  2005 (File No. 001-10456).                                                                                                                                                                                     |   |   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| 10.8   |   | Grant of Security  Interest In Patents and Trademarks, by and between Apogee  Technology, Inc. and Laurus Master Fund, Ltd., incorporated herein by  reference from Exhibit 10.4 to the Registrant’s Form 8K as filed on  August 9, 2005 (File No. 001-10456).                                                                                                   |   |   |
| 10.9   |   | Registration Rights  Agreement, by and between Apogee Technology, Inc. and Laurus Master  Fund, Ltd., incorporated herein by reference from Exhibit 10.5 to the  Registrant’s Form 8K as filed on August 9, 2005 (File No. 001-10456).                                                                                                                           |   |   |
| 10.10  |   | Form of Biscayne  Capital Markets, Inc. Warrant, incorporated herein by reference from  Exhibit 10.7 to the Registrant’s Form 8K as filed on August 9,  2005 (File No. 001-10456).                                                                                                                                                                          |   |   |
| 10.11  |   | Secured Convertible Term  Note, by and between Apogee Technology, Inc. and Laurus Master Fund,  Ltd., incorporated herein by reference from Exhibit 10.7 to the  Registrant’s Form 8K as filed on August 9, 2005 (File No. 001-10456).                                                                                                                           |   |   |
| 10.12  |   | Asset Purchase Agreement  dated as of October 5, 2005, by and among SigmaTel, Inc., Apogee  Technology, Inc., certain stockholders, and with respect to the  provisions of Section 8.15 only, David B. Meyers, incorporated herein by  reference from Exhibit 99.1 to the Registrant’s Form 8K as filed on  October 7, 2005 (File No. 001-10456). |   |   |
| 10.13  |   | Escrow Agreement dated  as of October 5, 2005, among SigmaTel, Inc., Apogee  Technology, Inc., and Wells Fargo Bank, N.A., incorporated herein by  reference from Exhibit 99.2 to the Registrant’s Form 8K as filed on  October 7, 2005 (File No. 001-10456).                                                                                          |   |   |
| 10.14  |   | Indemnification  Agreement dated as of October 5, 2005, among SigmaTel, Inc., Apogee  Technology, Inc., Herbert M. Stein, H.M. Stein Associates, and Sheryl B.  Stein. incorporated herein by reference from Exhibit 99.3 to the  Registrant’s Form 8K as filed on October 7, 2005 (File No. 001-10456).                                               |   |   |
| 10.15  |   | Settlement Agreement  between Apogee Technology, Inc. and National Hybrid, Inc., dated  December 31, 2005 and incorporated herein by reference from  Exhibit 10.15 to the Registrant’s Form 10-KSB for the fiscal  year ended December 31, 2005 (File No. 001-10456).                                                                                  |   |   |
| 10.16* |   | Transfer Employment and  Royalty Agreement, dated May 11, 2004 and incorporated herein by  reference from Exhibit 10.16 to the Registrant’s Form 10-KSB  for the fiscal year ended December 31, 2005 (File No. 001-10456).                                                                                                                                       |   |   |
| 14     |   | Code of Conduct and  Ethics, incorporated herein by reference to Exhibit 14 to the  Registrant’s Form 10-KSB for the year ended December 31, 2003  (File No. 000-30656).                                                                                                                                                                                              |   |   |
| 23     |   | Consent of Independent  Accountants to the incorporation by reference in the Registration Statement on  Form S-8 (Nos. 333-106316, 333-61486 and No. 333-90558)  of the consolidated financial statements which appear in this Annual Report  on Form 10-KSB.                                                                                                                   |   |   |

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| 31.1 |   | Certifications pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive  Officer. Filed with the Registrant’s Form 10-KSB for the fiscal  year ended December 31, 2006 (File No. 001-10456) and  incorporated herein by reference.                        |   |   |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| 31.2 |   | Certifications pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Financial  Officer. Filed with the Registrant’s Form 10-KSB for the fiscal  year ended December 31, 2006 (File No. 001-10456) and  incorporated herein by reference.                    |   |   |
| 32   |   | Statement pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer  and Principal Financial Officer. Filed with the Registrant’s Form 10-KSB  for the fiscal year ended December 31, 2006 (File No. 001-10456)  and incorporated herein by reference. |   |   |
| 31.3 |   | Certifications pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive  Officer.                                                                                                                                                                                             |   | X      |
| 31.4 |   | Certifications pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal  Financial Officer.                                                                                                                                                                                         |   | X      |

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*                    Confidentialtreatment requested as to certain portions of the document, which portions havebeen omitted and filed separately with the Securities and Exchange Commission.

**Item 14.**                 PRINCIPALACCOUNTANT FEES AND SERVICES.

Miller Wachman LLP audited the Company’s financialstatements for the fiscal years ended December 31, 2006, December 31,2005, December 31, 2004 and restated December 31, 2003. The Companyexpects that representatives of Miller Wachman LLP will be present at theMeeting, with the opportunity to make a statement if they so desire, and willbe available to respond to appropriate questions.

The following tablepresents fees for professional audit services rendered by Miller Wachman LLP,our independent registered public accounting firm, for the audit of the Company’sannual financial statements for the years ended December 31, 2006 and December 31,2005, and fees billed for other services rendered by Miller Wachman LLP duringthose periods.

| ** **                  | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|
| **Audit  fees:(1)**         |       | $        | 68,960     |     | $          | 95,000 |   |
| **Audit  related fees:(2)** |       | 0        |       | 0        |       |
| **Tax  fees:(3)**           |       | 10,000   |       | 8,000    |       |
| **All  other fees:(4)**     |       | 0        |       | 0        |       |
| **Total**                   |       | $        | 78,960     |     | $          | 103.000 |   |

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(1)          Audit fees consisted ofaudit work performed in the preparation of financial statements, as well aswork generally only the independent auditor can reasonably be expected toprovide, such as statutory audits.

(2)          The****Company incurred no fees in this categoryduring fiscal year 2005 or fiscal year 2006.

(3)          Tax fees consistprincipally of assistance with matters related to tax compliance and reporting.

(4)          TheCompany incurred no fees in this category during fiscal year 2006 or fiscalyear 2005.

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**Policy on AuditCommittee Pre-Approval of Audit and Permissible Non-audit Services ofIndependent Auditors**

Consistent with SEC policies regarding auditorindependence, the Audit Committee has responsibility for appointing, settingcompensation and overseeing the work of the independent auditor. In recognitionof this responsibility, the Audit Committee has established a policy topre-approve all audit and permissible non-audit services provided by theindependent auditor.

Prior to engagement of the independent auditor for thenext year’s audit, management will submit an aggregate of services expected tobe rendered during that year for each of four categories of services to theAudit Committee for approval.

1.     ***Audit***servicesinclude audit work performed in the preparation of financial statements, aswell as work that generally only the independent auditor can reasonably beexpected to provide, including comfort letters, statutory audits, and attestservices and consultation regarding financial accounting and/or reportingstandards.

2.     ***Audit-Related***services are for assurance and related services that are traditionallyperformed by the independent auditor, including due diligence related tomergers and acquisitions, employee benefit plan audits, and special proceduresrequired to meet certain regulatory requirements.

3.     ***Tax*** services includeall services performed by the independent auditor’s tax personnel except thoseservices specifically related to the audit of the financial statements, andincludes fees in the areas of tax compliance, tax planning, and tax advice.

4.     ***Other Fees*** are thoseassociated with services not captured in the other categories. The Companygenerally does not request such services from the independent auditor.

Prior to engagement, the Audit Committee pre-approvesthese services by category of service. The fees are budgeted and the AuditCommittee requires the independent auditor and management to report actual feesversus the budget periodically throughout the year by category of service.During the year, circumstances may arise when it may become necessary to engagethe independent auditor for additional services not contemplated in theoriginal pre-approval. In those instances, the Audit Committee requiresspecific pre-approval before engaging the independent auditor.

The Audit Committee may delegate pre-approvalauthority to one or more of its members. The member to whom such authority isdelegated must report, for informational purposes only, any pre-approvaldecisions to the Audit Committee at its next scheduled meeting.

In the event that ratification of the appointment ofMiller Wachman LLP as the independent registered public accounting firm for theCompany is not obtained at the Meeting, the Board of Directors will reconsiderthe appointment.

The affirmative vote of a majority of the shares votedat the Meeting is required to ratify the appointment of the independent publicaccountants.

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**SUPPLEMENTALINFORMATION**

We have not sent an annualreport or proxy statement to security holders regarding the fiscal year ended December 31,2006. Such report and proxy statement will be furnished to security holders inconnection with our Annual Meeting, which we anticipate scheduling for mid-summerin 2007. Copies of such material will be furnished to the SEC when it is sentto security holders.

**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized**.**

|        |   | APOGEE TECHNOLOGY, INC. |
|--------|--------|-------------------------|
|   |   | By:                     |   | /s/ HERBERT M. STEIN |   | Date: April 27,  2007 |
|   |   |                    |   | Herbert M. Stein, President |   |   |
|   |   |                    |   | Chief Executive Officer, |   |   |
|   |   |                    |   | Chairman of the Board |   |   |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities indicated below and on the dates indicated.

| **Signatures** | ** **           | ** ** | ** **                          | ** ** | **Title**                  | ** ** | ** ** | ** ** | **Date** | ** ** |
|----------------|----------------------|------------|-------------------------------------|------------|----------------------------|------------|------------|------------|----------|------------|
| By:            | /s/ HERBERT M. STEIN |       | President, Chief  Executive Officer |       | Date:  April 27, 2007 |
|           | Herbert M. Stein     |       | Chairman of the Board               |       |                       |
| By:            | /s/ PAUL J. MURPHY   |       | Chief Financial  Officer            |       | Date:  April 27, 2007 |
|           | Paul J. Murphy       |       | Vice President of  Finance          |       |                       |
|           |                 | Treasurer  |                                |       |
|                |                      |            |                                     |            |                            |            |            |            |          |            |  |

 

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