##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSION
 Washington, DC 20549
  Form 10-Q
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 29, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to    Commission file number 0-26946
  INTEVAC, INC.
 (Exact name of registrant as
    specified in its charter)
   Delaware(State or other jurisdiction
    of
    incorporation or organization)

94-3125814(IRS Employer
    Identification No.)   3560 Bassett Street
 Santa Clara, California 95054
 (Address of principal executive
    office, including Zip Code)
   Registrants telephone number, including area code:
 (408) 986-9888
  þ o
    Large accelerated filer
    o

Accelerated filer
    o

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

Smaller reporting
    company o   Rule 12b-2 o þ
  APPLICABLE
    ONLY TO CORPORATE ISSUERS:




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##### 





INTEVAC,
    INC.
  INDEX
  
  No.



PagePART I. FINANCIAL INFORMATIONItem 1.

Financial Statements (unaudited)Condensed Consolidated Balance Sheets


2Condensed Consolidated Statements of Income and
    Comprehensive Income


3Condensed Consolidated Statements of Cash
    Flows


4Notes to Condensed Consolidated Financial
    Statements


5Item 2.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


17Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


24Item 4.

Controls and Procedures


25PART II. OTHER INFORMATIONItem 1.

Legal Proceedings


26Item 1A.

Risk Factors


27Item 2.

Unregistered Sales of Equity Securities and Use
    of Proceeds


37Item 3.

Defaults Upon Senior Securities


37Item 4.

Submission of Matters to a Vote of Security
    Holders


37Item 5.

Other Information


37Item 6.

Exhibits


38SIGNATURES


39EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   1




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  INTEVAC,
    INC.
  CONDENSED
    CONSOLIDATED BALANCE SHEETS
  March 29,


December 31,2008


2007(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
27,275


$
27,673Short-term investments


18,888



110,985Trade and other accounts receivable, net of allowances of $57 at
    both March 29, 2008 and December 31, 2007


22,831



14,142Inventories


22,203



22,133Prepaid expenses and other current assets


3,266



4,162Deferred tax assets


4,450



3,609Total current assets


98,913



182,704Property, plant and equipment, net


15,604



15,402Long-term investments


78,788



2,009Goodwill


7,905



7,905Other intangible assets, net


1,714



1,782Deferred income taxes and other long term assets


6,317



5,611Total assets

$
209,241


$
215,413LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Note payable

$
1,929


$
1,992Accounts payable


6,825



7,678Accrued payroll and related liabilities


3,478



8,610Other accrued liabilities


5,185



5,454Customer advances


3,910



4,340Total current liabilities


21,327



28,074Other long-term liabilities


190



278Long-term note payable






1,898Shareholders equity:Common stock, $0.001 par value


22



22Additional paid-in capital


122,389



120,056Accumulated other comprehensive income (loss)


(764
)


571Retained earnings


66,077



64,514Total shareholders equity


187,724



185,163Total liabilities and shareholders equity

$
209,241


$
215,413      2




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##### Table of Contents



INTEVAC,
    INC.
 CONDENSED
    CONSOLIDATED STATEMENTS OF INCOME
    AND COMPREHENSIVE INCOME  Three Months EndedMarch 29,


March 31,2008


2007(Unaudited)(In thousands, except per share amounts)Net revenues:Systems and components

$
29,014


$
73,593Technology development


4,161



2,781Total net revenues


33,175



76,374Cost of net revenues:Systems and components


15,169



42,129Technology development


2,474



1,507Inventory provisions


221



(44
)Total cost of net revenues


17,864



43,592Gross profit


15,311



32,782Operating expenses:Research and development


9,388



12,192Selling, general and administrative


7,064



7,513Total operating expenses


16,452



19,705Operating income (loss)


(1,141
)


13,077Interest expense


(65
)


(46
)Interest income and other, net


1,476



1,366Income before income taxes


270



14,397Provision for (benefit from) income taxes


(1,293
)


4,552Net income

$
1,563


$
9,845Other comprehensive income (loss):Unrealized losses on securities held as available for sale


(1,567
)


Foreign currency translation adjustments


232



21Total comprehensive income

$
228


$
9,866Basic income per share:Net income

$
0.07


$
0.46Shares used in per share amounts


21,647



21,293Diluted income per share:Net income

$
0.07


$
0.44Shares used in per share amounts


22,053



22,188    3




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INTEVAC,
    INC.
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Months EndedMarch 29,


March 31,2008


2007(Unaudited)(In thousands)Operating activitiesNet income

$
1,563


$
9,845Adjustments to reconcile net income to net cash and cash
    equivalents provided by (used in) operating activities:Depreciation and amortization


1,085



1,163Inventory provisions


221



(44
)Equity-based compensation


1,527



1,357Deferred income taxes


(298
)


Changes in operating assets and liabilities


(15,921
)


894Total adjustments


(13,386
)


3,370Net cash and cash equivalents provided by (used in) operating
    activities


(11,823
)


13,215Investing activitiesPurchases of investments


(7,000
)


(43,700
)Proceeds from sales and maturities of investments


20,900



23,500Acquisition of DeltaNu LLC, net of cash acquired






(2,084
)Purchases of leasehold improvements and equipment


(1,327
)


(1,856
)Net cash and cash equivalents provided by (used in) investing
    activities


12,573



(24,140
)Financing activitiesNet proceeds from issuance of common stock


804



1,645Payment of note payable


(2,000
)


Tax benefit from equity-based compensation






645Net cash and cash equivalents provided by (used in) financing
    activities


(1,196
)


2,290Effect of exchange rate changes on cash


48



(9
)Net decrease in cash and cash equivalents


(398
)


(8,644
)Cash and cash equivalents at beginning of period


27,673



39,440Cash and cash equivalents at end of period

$
27,275


$
30,796Supplemental Schedule of Cash Flow InformationCash paid (received) for:Income taxes

$



$
1,500Income tax refund


(1,135
)


Other non-cash changesNotes payable issued for the acquisition of DeltaNu, LLC

$



$
3,719    4




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INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Business
    Activities and Basis of Presentation    Equipment:
  Imaging Instrumentation:
    Form 10-Q Regulation S-X. Form 10-K
      ® ® ® tm ® tm tm ®
  2.
    Concentrations      3.
    New
    Accounting Pronouncements   5




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    SFAS 157-1, FAS 157-1). FAS 157-1 FAS 157-1 FAS 157-1
        4.
    Inventories    March 29,


December 31,2008


2007(In thousands)Raw materials

$
12,733


$
13,666Work-in-progress


6,181



6,191Finished goods


3,289



2,276$
22,203


$
22,133     work-in-progress
 6




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Work-in-progress
    Three Months EndedMarch 29,


March 31,2008


2007(In thousands)Beginning balance

$
7,750


$
9,128Provisions in cost of sales


221



(44
)Provisions for refurbishment of consigned products


66



6Disposals of inventory


(248
)


(547
)Miscellaneous adjustments


(106
)


Ending balance

$
7,683


$
8,543   5.
    Stock-Based
    Compensation        Compensation
    Expense
    Three Months EndedMarch 29,


March 31,2008


2007Stock-based compensation by type of award:Stock options

$
1,325


$
1,145Employee stock purchase plan


202



213Amounts capitalized as inventory (released to cost of sales)


69



(4
)Total stock-based compensation


1,596



1,354Tax effect on stock-based compensation


(626
)


(428
)Net effect on net income

$
970


$
926Effect on earnings per share:Basic

$
0.04


$
0.04Diluted

$
0.04


$
0.04  7




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Valuation
    Assumptions
      Three Months EndedMarch 29,


March 31,2008


2007Stock Options:Expected volatility


65.18
%


67.42
%Risk free interest rate


2.33
%


4.49
%Expected term of options (in years)


4.5



4.5Dividend yield


None



NoneStock Purchase Rights:Expected volatility


61.26
%


63.48
%Risk free interest rate


1.5
%


4.84
%Expected term of purchase rights (in years)


1.3



1.0Dividend yield


None



None      8




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock
    Plan Activity
  2004
    Equity Incentive Plan
    WeightedAverageRemaining


AggregateWeighted Average


Contractual Term


IntrinsicShares


Exercise Price


(Years)


ValueOptions outstanding at December 31, 2007


2,587,854


$
13.37



7.64Options granted


18,250


$
11.79Options forfeited


(48,774
)

$
18.97Options exercised


(7,750
)

$
8.38Options outstanding at March 29, 2008


2,549,580


$
13.27



7.53


$
6,657,122Vested and expected to vest at March 29, 2008


2,191,776


$
12.91



7.37


$
6,232,141Options exercisable at March 29, 2008


969,050


$
10.23



6.03


$
4,454,637Available to grant at March 29, 2008


670,377       2003
    Employee Stock Purchase Plan
    WeightedAverageRemaining

AggregateWeighted Average

Contractual Term

IntrinsicShares

Exercise Price

(Years)

ValuePurchase rights outstanding at March 29, 2008


308,291


$
9.72



1.07


$
1,091,350        9




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    6.
    Business
    Combinations            2008 (remaining 9 months)

$
267,0002009


152,0002010


143,0002011


132,0002012


132,000Beyond


768,000Total

$
1,594,000    10




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Warranty  case-by-case
      Three Months EndedMarch 29,


March 31,2008


2007(In thousands)Beginning balance

$
3,092


$
5,283Expenditures incurred under warranties


(674
)


(1,235
)Accruals for product warranties issued during the reporting
    period


435



1,074Adjustments to previously existing warranty accruals


(275
)


107Ending balance

$
2,578


$
5,229     March 29,


December 31,2008


2007(In thousands)Other accrued liabilities

$
2,413


$
2,814Other long-term liabilities


165



278Total warranty provision

$
2,578


$
3,092   8.
    Guarantees   11




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  9.  Cash,
    Cash Equivalents and Investments
    March 29,


December 31,2008


2007(In thousands)Amortized Principal Amount:Debt securities issued by the US government and its agencies

$
20,893


$
29,744Auction rate securities


76,783



81,450Corporate debt securities






1,800Total investments in debt securities

$
97,676


$
112,994Short-term investments

$
18,888


$
110,985Long-term investments


78,788



2,009Total investments in debt securities

$
97,676


$
112,994Approximate fair value of investments in debt securities

$
97,802


$
113,029   97-98%
   12




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    03-01 SFAS 115-1 124-1,
  10.
    Net
    Income Per Share    Three Months EndedMarch 29,


March 31,2008


2007(In thousands)Numerator:Numerator for diluted earnings per share  income
    available to common stockholders

$
1,563


$
9,845Denominator:Denominator for basic earnings per share 
    weighted-average shares


21,647



21,293Effect of dilutive securities:Employee stock compensation(1)


406



895Dilutive potential common shares


406



895Denominator for diluted earnings per share  adjusted


22,053



22,188     (1)
    
    Potentially dilutive securities, consisting of shares issuable
    upon exercise of employee stock options, are excluded from the
    calculation of diluted EPS when their effect would be
    anti-dilutive. The weighted average number of employee stock
    options excluded for the three-month periods ended
    March 29, 2008 and March 31, 2007 was 1,597,575 and
    249,850 respectively.  11.
    Segment
    Reporting  Segment
    Description
   13




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Segment
    Profit or Loss and Segment Assets
    Business
    Segment Net Revenues
  Three Months EndedMarch 29,


March 31,2008


2007(In thousands)Equipment

$
26,973


$
72,446Imaging Instrumentation


6,202



3,928Total

$
33,175


$
76,374   Business
    Segment Profit & Loss
  Three Months EndedMarch 29,


March 31,2008


2007(In thousands)Equipment

$
496


$
14,989Imaging Instrumentation


(821
)


(1,600
)Corporate activities


(816
)


(312
)Operating income (loss)


(1,141
)


13,077Interest expense


(65
)


(46
)Interest income


1,513



1,238Other income and expense, net


(37
)


128Income before income taxes

$
270


$
14,397   Business
    Segment Net Assets
  March 29,


December 31,2008


2007(In thousands)Equipment

$
44,614


$
36,637Imaging Instrumentation


25,745



26,715Corporate activities


138,882



152,061Total

$
209,241


$
215,413  14




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Geographic
    Area Net Trade Revenues
  Three Months EndedMarch 29,


March 31,2008


2007(In thousands)United States

$
6,771


$
7,000Asia


25,845



69,004Europe


559



370Total

$
33,175


$
76,374   12.
    Income
    Taxes        non-U.S. income
  13.
    Contingencies   15




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            14.
    Capital
    Transactions    15.
    Financial
    Presentation   16




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  This Quarterly Report on
    Form 10-Q
    contains forward-looking statements, which involve risks and
    uncertainties. Words such as believes,
    expects, anticipates and the like
    indicate forward-looking statements. These forward looking
    statements include comments related to our shipments, projected
    revenue recognition, product costs, gross margin, operating
    expenses, interest income, cash balances and financial results
    in 2008; our projected customer requirements for new capacity
    and for technology upgrades for their installed base of our
    thin-film disk sputtering equipment, and when, and if, our
    customers will place orders for these products; our Imaging
    Instrumentation business ability to proliferate its
    technology into major military weapons programs and to develop
    and introduce commercial imaging products; the timing of
    delivery
    and/or
    acceptance of the systems and products that comprise our backlog
    for revenue; and that the auction rate securities market
    recovery is delayed. Our actual results may differ materially
    from the results discussed in the forward-looking statements for
    a variety of reasons, including those set forth under Risk
    Factors and in other documents we file from time to time
    with the Securities and Exchange Commission, including our
    Annual Report on
    Form 10-K
    filed in March 2008, and our periodic
    Form 10-Qs
    and
    Form 8-Ks.
  Critical
    Accounting Policies and Estimates
  Form 10-K.
        Revenue
    Recognition
   17




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Inventories
  work-in-progress
  Warranty
  case-by-case
 18




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Income
    Taxes
        Results
    of Operations
  Three
    Months Ended March 29, 2008 and March 31,
    2007.
  Net
    revenues
  Change overThree Months Ended


Prior PeriodMarch 29,


March 31,2008


2007


Amount


%(In thousands, except percentages)Equipment net revenues

$
26,973


$
72,446


$
(45,473
)


(63
)%Imaging Instrumentation net revenues


6,202



3,928



2,274



58
%Total net revenues

$
33,175


$
76,374


$
(43,199
)


(57
)%     tm ®
 19




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##### Table of Contents



Gross
    margin
  Three Months EndedMarch 29,


March 31,2008


2007


% Change(In thousands, except percentages)Equipment gross profit

$
12,708


$
31,345



(59
)%% of Equipment net revenues


47.1
%


43.3
%Imaging instrumentation gross profit

$
2,603


$
1,437



81
%% of Imaging net revenues


42.0
%


36.6
%Total gross profit

$
15,311


$
32,782



(53
)%% of net revenues


46.2
%


42.9
%      20




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Research
    and development
  Change overThree Months Ended

Prior PeriodMarch 29,

March 31,2008

2007

Amount

%(In thousands, except percentages)Research and development expense

$
9,388


$
12,192


$
(2,804
)


(23
)%% of net revenues


28.2
%


16.0
%     tm
    Selling,
    general and administrative
  Change overThree Months Ended

Prior PeriodMarch 29,

March 31,2008

2007

Amount

%(In thousands, except percentages)Selling, general and administrative expense

$
7,064


$
7,513


$
(449
)


(6
)%% of net revenues


21.3
%


9.8
%    21




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Interest
    income and other, net
  Change overThree Months Ended

Prior PeriodMarch 29,

March 31,2008

2007

Amount

%(In thousands, except percentages)Interest income and other, net

$
1,411


$
1,320


$
91



7
%     Provision
    for income taxes
  Change overThree Months Ended

Prior PeriodMarch 29,

March 31,2008

2007

Amount

%(In thousands, except percentages)Provision for income taxes

$
(1,293
)

$
4,552


$
(5,845
)


N/A      22




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Stock-Based
    Compensation
        Liquidity
    and Capital Resources
                 23




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##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodTotal


< 1 Year


1-3 Years


3-5 Years


> 5 Years(In thousands)Operating lease obligations

$
10,393


$
2,553


$
5,044


$
2,737


$
59Purchase obligations


17,086



17,086











Total

$
27,479


$
19,639


$
5,044


$
2,737


$
59   Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest rate risk.
    Fair2008


2009


2010


Beyond


Total


Value(In thousands, except percentages)Cash equivalentsFixed rate amounts

$
5,991














$
5,991


$
5,995Weighted-average rate


3.32
%Variable rate amounts

$
8,569














$
8,569


$
8,569Weighted-average rate


1.30
%Short-term investmentsFixed rate amounts

$
18,888














$
18,888


$
19,005Weighted-average rate


4.25
%Long-term investmentsFixed rate amounts





$
2,005










$
2,005


$
2,014Weighted-average rate






4.43
%Variable rate amounts













$
76,783


$
76,783


$
76,783Weighted-average rate














3.78
%Total investment portfolio

$
33,448


$
2,005






$
76,783


$
112,236


$
112,366   03-01
 24




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##### Table of Contents



FSP SFAS 115-1 124-1,
  Foreign exchange risk.
  Item 4.
    Controls
    and Procedures  Evaluation
    of disclosure controls and procedures.
  Form 10-Q Rule 13a-15(b)
  Rule 13a-14
  Definition
    of Disclosure Controls
    Limitations
    on the Effectiveness of Controls
   25




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Changes
    in internal controls over financial reporting
  Form 10-Q
 PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Patent
    Infringement Complaint against Unaxis
            Other
    Legal Matters
   26




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##### Table of Contents



Item 1A.
    Risk
    Factors  Demand
    for capital equipment is cyclical, which subjects our business
    to long periods of depressed revenues interspersed with periods
    of unusually high revenues.
      If
    demand for hard disk drives does not continue to grow and our
    customers do not replace or upgrade their installed base of disk
    sputtering systems, then future sales of our disk sputtering
    systems will suffer.
         27




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We are
    exposed to risks associated with a highly concentrated customer
    base.
    Our
    operating results fluctuate significantly from quarter to
    quarter, which may cause the price of our stock to
    decline.
    
    changes in the demand, due to seasonality, cyclicality and other
    factors in the markets, for computer systems, storage subsystems
    and consumer electronics containing disks our customers produce
    with our systems;
    delays or problems in the introduction and acceptance of our new
    products, or delivery of existing products;
    timing of orders, acceptance of new systems by our customers or
    cancellation of those orders; and
    new products, services or technological innovations by our
    competitors or us.    Our
    long-term revenue growth is dependent on new products. If these
    new products are not successful, then our results of operations
    will be adversely affected.
     28




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##### Table of Contents



Our
    sales cycle is long and unpredictable, which requires us to
    incur high sales and marketing expenses with no assurance that a
    sale will result.
       29




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We
    operate in an intensely competitive marketplace, and our
    competitors have greater resources than
    we do.
    We may
    not be successful in maintaining and obtaining the necessary
    export licenses to conduct operations abroad, and the United
    States government may prevent proposed sales to foreign
    customers.
    Our
    products are complex, constantly evolving and often must be
    customized to individual customer requirements.
   30




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Our
    Imaging Instrumentation business depends heavily on government
    contracts, which are subject to immediate termination and are
    funded in increments. The termination of or failure to fund one
    or more of these contracts could have a negative impact on our
    operations.
        Unexpected
    increases in the cost to develop or manufacture our products
    under fixed-price contracts may cause us to experience
    un-reimbursed cost overruns.
    Our
    sales of Equipment products are dependent on substantial capital
    investment by our customers, far in excess of the cost of our
    products.
    Our
    stock price is volatile.
    
    our perceived prospects;
    hard disk drive market expectations; 31




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##### Table of Contents




    variations in our operating results and whether we achieve our
    key business targets;
    sales or purchases of large blocks of our stock;
    changes in, or our failure to meet, our revenue and earnings
    estimates;
    changes in securities analysts buy or sell recommendations;
    differences between our reported results and those expected by
    investors and securities analysts;
    announcements of new contracts, products or technological
    innovations by us or our competitors;
    market reaction to any acquisitions, joint ventures or strategic
    investments announced by us or our competitors;
    our high fixed operating expenses, including research and
    development expenses;
    developments in the financial markets; and
    general economic, political or stock market conditions in the
    United States and other major regions in which we do business.    The
    liquidity of our Auction Rate Securities is currently impaired,
    which may impact our ability to meet our cash requirements and
    require additional debt funding.
  97-98%
  Fair Value Measurements.
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and/or
      Changes
    in tax rates or tax liabilities could affect future
    results.
      We
    have experienced significant growth and contraction in our
    business and operations and if we do not appropriately manage
    this growth and contraction, now and in the future, then our
    operating results will be negatively affected.
      Our
    current and future success depends on international sales and
    the management of global operations.
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
    varying regional and geopolitical business conditions and
    demands;
    global trade issues;
    variations in protection of intellectual property and other
    legal rights in different countries;
    rising raw material and energy costs;
    variations in the ability to develop relationships with
    suppliers and other local businesses;
    changes in laws and regulations of the United States (including
    export restrictions) and other countries, as well as their
    interpretation and application;
    fluctuations in interest rates and currency exchange rates,
    particularly with the recent decline in the value of the
    U.S. dollar;
    the need to provide sufficient levels of technical support in
    different locations;
    political instability, natural disasters (such as earthquakes,
    hurricanes or floods), pandemics, terrorism or acts of war where
    we have operations, suppliers or sales;
    cultural differences; and
    shipping delays.  Changes
    in existing financial accounting standards or practices or
    taxation rules or practices may adversely affect our results of
    operations.
    We are
    required to evaluate our internal control over financial
    reporting under Section 404 of the Sarbanes-Oxley Act of
    2002, and any adverse results from such evaluation could result
    in a loss of investor confidence in our financial reports and
    have an adverse effect on our stock price.
  Form 10-K
    Our
    dependence on suppliers for certain parts, some of them
    sole-sourced, makes us vulnerable to manufacturing interruptions
    and delays, which could affect our ability to meet customer
    demand.
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Our
    business depends on the integrity of our intellectual property
    rights and failure to protect our intellectual property rights
    adequately could have a material adverse effect on our
    business.
    
    any of our pending or future patent applications will be allowed
    or that any of the allowed applications will be issued as
    patents or will issue with claims of the scope we sought;
    any of our patents will not be invalidated, deemed
    unenforceable, circumvented or challenged;
    the rights granted under our patents will provide competitive
    advantages to us;
    other parties will not develop similar products, duplicate our
    products or design around our patents; or
    our patent rights, intellectual property laws or our agreements
    will adequately protect our intellectual property or competitive
    position.  We may
    be subject to claims of intellectual property
    infringement.
    Our
    success is dependent on recruiting and retaining a highly
    talented work force.
      Changes
    in demand caused by fluctuations in interest and currency
    exchange rates may reduce our international sales.
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Difficulties
    in integrating past or future acquisitions could adversely
    affect our business.
    We use
    hazardous materials and are subject to risks of non-compliance
    with environmental and safety regulations.
    Future
    sales of shares of our common stock by our officers, directors
    and affiliates could cause our stock price to
    decline.
    Anti-takeover
    provisions in our charter documents and under Delaware law could
    prevent or delay a change in control, which could negatively
    impact the value of our common stock by discouraging a favorable
    merger or acquisition of us.
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We
    could be involved in litigation.
  Form 10-Q
  Business
    interruptions could adversely affect our
    operations.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Item 3.
    Defaults
    upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security-Holders    Item 5.
    Other
    Information   37




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Item 6.
    Exhibits    ExhibitNumber

Description31
.1

Certification of President and Chief Executive Officer Pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Vice President, Finance and Administration,
    Chief Financial Officer, Treasurer and Secretary Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certifications Pursuant to U.S.C. 1350 Adopted Pursuant to
    Section 906 of the Sarbanes- Oxley Act of 2002.  38




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SIGNATURES      By:
    /s/  KEVIN
    FAIRBAIRN        By:
    /s/  JEFFREY
    ANDRESON   
   39




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EXHIBIT
    INDEX
  ExhibitNumber

Description31
.1

Certification of President and Chief Executive Officer Pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Vice President, Finance and Administration,
    Chief Financial Officer, Treasurer and Secretary Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certifications Pursuant to U.S.C. 1350 Adopted Pursuant to
    Section 906 of the Sarbanes- Oxley Act of 2002.