**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-QSB**

**(Mark One)**
| **x**                                                   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES**  |
|---------------------------------------------------------|------------------------------------------------------------------------------------|
| ** **                                              | **EXCHANGE ACT OF 1934**                                                           |
| ** **                                              | ** **                                                                         |
| **For the  quarterly period ended March 31, 2007** |
| ** **                                              | ** **                                                                         |
| **o**                                                   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES** |
| ** **                                              | **EXCHANGE ACT OF 1934**                                                           |

** **

**Forthe transition periodfrom                   to                   **

**Commissionfile number 001-10456**

**APOGEETECHNOLOGY, INC.**

(Exact name ofsmall business issuer as specified in its charter)

| **DELAWARE**                                          |   | **04-3005815**      |
|-------------------------------------------------------|--------|---------------------|
| (State or other jurisdiction of                       |   | (I.R.S. Employer    |
| incorporation or organization)                        |   | Identification No.) |
|                                                  |   |                |
| **129 MORGAN DRIVE, NORWOOD, MASSACHUSETTS 02062**    |
| (Address of principal executive offices)              |
|                                                  |
| **(781) 551-9450**                                    |
| (Issuer’s telephone number, including area code) |
|                                                  |
| **NOT APPLICABLE**                                    |
| (Former name, former address and former fiscal year,  |
| if changed since last report)                         |

 

Check whether the issuer: (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Actduring the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes   x  No   o

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

State the number of shares outstanding of each of theIssuer’s classes of common equity, as of the latest practicable date:  Asof April 27, 2007, there were 11,968,332 shares of Common Stock, $.01 parvalue per share, outstanding.

Transitional SmallBusiness Disclosure Format (Check one):  Yes  o    No  x

 

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**APOGEETECHNOLOGY, INC.**

**INDEXOF INFORMATION CONTAINED IN FORM 10-QSB FOR THE**

**PERIODSENDED MARCH 31, 2007 AND MARCH 31, 2006**
| **PART I - FINANCIAL  INFORMATION** |                                                                                                                                                   |   |
|------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                     |                                                                                                                                                   |   |   |
| Item 1 -                                 | Financial Statements                                                                                                                                   |   |   |
|                                     | Consolidated Balance  Sheets at March 31, 2007 (unaudited) and December 31, 2006  (audited)                                                  |   | 3 |
|                                     | Consolidated  Statements of Operations and Accumulated Deficit for the Three Months Ended  March 31, 2007 and March 31, 2006 (all unaudited) |   | 4 |
|                                     | Consolidated  Statements of Cash Flows for the Three Months Ended March 31, 2007 and March 31,  2006 (all unaudited)                         |   | 5 |
|                                     |                                                                                                                                                   |   |   |
|                                     | Notes to  Consolidated Financial Statements (all unaudited)                                                                                            |   | 6 |
|                                     |                                                                                                                                                   |   |   |
| Item 2 -                                 | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                            |   | 14 |
|                                     |                                                                                                                                                   |   |   |
| Item 3 -                                 | Controls and Procedures                                                                                                                                |   | 20 |
|                                     |                                                                                                                                                   |   |   |
| **PART II  - OTHER INFORMATION**    |                                                                                                                                                   |   |
|                                     |                                                                                                                                                   |   |   |
| Item 1 -                                 | Legal Proceedings                                                                                                                                      |   | 20 |
|                                     |                                                                                                                                                   |   |   |
| Item 2 -                                 | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                                           |   | 20 |
|                                     |                                                                                                                                                   |   |   |
| Item 3 -                                 | Defaults Upon  Senior Securities                                                                                                                       |   | 20 |
|                                     |                                                                                                                                                   |   |   |
| Item 4 -                                 | Submission of Matters  to a Vote of Security Holders                                                                                                   |   | 20 |
|                                     |                                                                                                                                                   |   |   |
| Item 5 -                                 | Other Information                                                                                                                                      |   | 20 |
|                                     |                                                                                                                                                   |   |   |
| Item 6 -                                 | Exhibits                                                                                                                                               |   | 20 |
|                                     |                                                                                                                                                   |   |   |
| Signatures                               |                                                                                                                                                   | 21     |

 

2

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**PART I **                **FINANCIAL INFORMATION**

**Item 1****                     FinancialStatements**

**APOGEETECHNOLOGY, INC. AND SUBSIDIARY**

 **CONSOLIDATEDBALANCE SHEETS**
| ** **                                                                                                                                        | ** ** | **MARCH 31,  2007** | ** **    | **DECEMBER 31,  2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|---------------|-----------------------------|------------|
| ** **                                                                                                                                        | ** ** | **(Unaudited)**          | ** **    | **(Audited)**               | ** ** |
| **ASSETS**                                                                                                                                        |       |                     |          |                        |       |
| ** **                                                                                                                                        | ** ** | ** **               | ** **    | ** **                  | ** ** |
| **Current  assets**                                                                                                                               |       |                     |          |                        |       |
| Cash and cash equivalents                                                                                                                         | ** ** | **$**                    | **2,277,259** | ** **                  | **$**      | **3,051,420** | ** ** |
| Accounts receivable, net of allowance for doubtful  accounts of $13,245 in 2007 and 2006 respectively                                             | ** ** | **24,127**               | ** **    | **11,196**                  | ** ** |
| Inventories, net                                                                                                                                  | ** ** | **—**               | ** **    | **—**                  | ** ** |
| Prepaid expenses and other current assets                                                                                                         | ** ** | **55,658**               | ** **    | **69,465**                  | ** ** |
|                                                                                                                                              |       |                     |          |                        |       |
| Total current assets                                                                                                                              | ** ** | **2,357,044**            | ** **    | **3,132,081**               | ** ** |
|                                                                                                                                              |       |                     |          |                        |       |
| **Property  and equipment, net**                                                                                                                  | ** ** | **216,342**              | ** **    | **117,217**                 | ** ** |
|                                                                                                                                              |       |                     |          |                        |       |
| **Other  assets**                                                                                                                                 |       |                     |          |                        |       |
| Patents                                                                                                                                           | ** ** | **238,357**              | ** **    | **208,703**                 | ** ** |
| Exclusive licensing, net                                                                                                                          | ** ** | **32,634**               | ** **    | **22,574**                  | ** ** |
| Construction in progress                                                                                                                          | ** ** | **—**               | ** **    | **90,642**                  | ** ** |
| ** **                                                                                                                                        | ** ** | ** **               | ** **    | ** **                  | ** ** |
| ** **                                                                                                                                        | ** ** | **$**                    | **2,844,377** | ** **                  | **$**      | **3,571,217** | ** ** |
|                                                                                                                                              |       |                     |          |                        |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                    |       |                     |          |                        |       |
|                                                                                                                                              |       |                     |          |                        |       |
| **Current  liabilities**                                                                                                                          |       |                     |          |                        |       |
| Accounts payable and accrued expenses                                                                                                             | ** ** | **$**                    | **671,577**   | ** **                  | **$**      | **710,187** | ** ** |
|                                                                                                                                              |       |                     |          |                        |       |
| Total current liabilities                                                                                                                         | ** ** | **671,577**              | ** **    | **710,187**                 | ** ** |
|                                                                                                                                              |       |                     |          |                        |       |
| **Commitments  and Contingencies**                                                                                                                | ** ** | **—**               | ** **    | **—**                  | ** ** |
| ** **                                                                                                                                        | ** ** | ** **               | ** **    | ** **                  | ** ** |
| **Stockholders’  equity**                                                                                                                    |       |                     |          |                        |       |
| Common stock, $.01 par value; 20,000,000 shares  authorized, 11,968,332 issued and outstanding at March 31, 2007 and  December 31, 2006 | ** ** | **119,683**              | ** **    | **119,683**                 | ** ** |
| Additional paid-in capital                                                                                                                        | ** ** | **18,421,510**           | ** **    | **18,396,909**              | ** ** |
| Accumulated deficit                                                                                                                               | ** ** | **(16,368,393**          | **)**         | **(15,655,562**             | **)**      |
|                                                                                                                                              |       |                     |          |                        |       |
| Total stockholders’ equity                                                                                                                   | ** ** | **2,172,800**            | ** **    | **2,861,030**               | ** ** |
| ** **                                                                                                                                        | ** ** | **$**                    | **2,844,377** | ** **                  | **$**      | **3,571,217** | ** ** |

 

*The accompanying notes are anintegral part of these consolidated financial statements.*

3

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**APOGEETECHNOLOGY, INC. AND SUBSIDIARY**

**CONSOLIDATEDSTATEMENTS OF INCOME**

**(UNAUDITED)**
| ** **                                                             | ** ** | **THREE MONTHS ENDED MARCH 31,** | ** **      |
|------------------------------------------------------------------------|------------|------------------------------------------------------|-----------------|
| ** **                                                             | ** ** | **2007**                                             | ** **      | **2006** | ** ** |
|                                                                   |       |                                                 |            |   |   |
| **Revenues**                                                           | ** ** | ** **                                           | ** **      | ** ** | ** ** |
| Product sales                                                          | ** ** | **$**                                                | **53,670**      |   | $ | 985,398 |   |
|                                                                   |       |                                                 |            |   |   |
| ** **                                                             | ** ** | ** **                                           |            |   |   |
| ** **                                                             | ** ** | **53,670**                                           |            | 985,398 |   |
|                                                                   |       |                                                 |            |   |   |
| **Costs and expenses**                                                 | ** ** | ** **                                           | ** **      | ** ** | ** ** |
| Product sales                                                          | ** ** | **216**                                              |            | 725,244 |   |
| Research and  development                                              | ** ** | **244,260**                                          |            | 394,576 |   |
| Selling, general  and administrative                                   | ** ** | **553,892**                                          |            | 626,709 |   |
|                                                                   |       |                                                 |            |   |   |
| ** **                                                             | ** ** | **798,368**                                          |            | 1,746,529 |   |
|                                                                   |       |                                                 |            |   |   |
| **Operating loss**                                                     | ** ** | **(744,698**                                         | **)**           | (761,131 | ) |
|                                                                   |       |                                                 |            |   |   |
| **Other income (expense)**                                             | ** ** | ** **                                           | ** **      | ** ** | ** ** |
| Interest/other  income                                                 | ** ** | **31,867**                                           |            | 53,715 |   |
| Interest/other  expense                                                | ** ** | **—**                                           |            | (21,586 | ) |
|                                                                   |       |                                                 |            |   |   |
| ** **                                                             | ** ** | **31,867**                                           |            | 32,129 |   |
|                                                                   |       |                                                 |            |   |   |
| **Net loss**                                                           | ** ** | **$**                                                | **(712,831**    | **)** | $ | (729,002 | ) |
|                                                                   |       |                                                 |            |   |   |
| Accumulated deficit—beginning                                     | ** ** | **$**                                                | **(15,655,562** | **)** | $ | (12,684,559 | ) |
| ** **                                                             | ** ** | ** **                                           | ** **      | ** ** | ** ** |
| **Accumulated deficit—ending**                                    | ** ** | **(16,368,393**                                      | **)**           | (13,413,561 | ) |
| ** **                                                             | ** ** | ** **                                           | ** **      | ** ** | ** ** |
| **Basic and diluted loss per  common share**                           | ** ** | **$**                                                | **(0.06**       | **)** | $ | (0.06 | ) |
|                                                                   |       |                                                 |            |   |   |
| **Weighted  average common shares outstanding—basic and diluted** | ** ** | **11,968,332**                                       |            | 11,968,332 |   |

 

*The accompanying notes are anintegral part of these consolidated financial statements.*

4

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**APOGEETECHNOLOGY, INC. AND SUBSIDIARY**

 **CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(UNAUDITED)**
| ** **                                                                             | ** ** | **THREE MONTHS ENDED MARCH 31,** | ** **    |
|----------------------------------------------------------------------------------------|------------|------------------------------------------------------|---------------|
| ** **                                                                             | ** ** | **2007**                                             | ** **    | **2006** | ** ** |
|                                                                                   |       |                                                 |          |   |   |
| **Cash flows from operations**                                                         | ** ** | ** **                                           | ** **    | ** ** | ** ** |
| Net income (loss)                                                                      | ** ** | **$**                                                | **(712,831**  | **)** | $ | (729,002 | ) |
| *Adjustments to reconcile net  income (loss)to net cash used in operating activities:* |       |                                                 |          |   |   |
| Provision for  doubtful accounts                                                       | ** ** | **—**                                           |          | (56,926 | ) |
| Provision for  slow moving, excess and obsolete inventory                              | ** ** | **(73,950**                                          | **)**         | 32,270 |   |
| Depreciation and  amortization                                                         | ** ** | **18,291**                                           |          | (2,873 | ) |
| Stock  compensation expense                                                            | ** ** | **24,603**                                           |          | 74,590 |   |
| *Changes  in operating assets and liabilities:*                                        | * *   | * *                                             | * *      | * * | * * |
| Accounts  receivable                                                                   | ** ** | **(12,931**                                          | **)**         | 68,949 |   |
| Inventories                                                                            | ** ** | **73,950**                                           |          | 682,108 |   |
| Prepaid expenses  and other current assets                                             | ** ** | **13,806**                                           |          | 30,934 |   |
| Accounts payable  and accrued expenses                                                 | ** ** | **(38,610**                                          | **)**         | (218,551 | ) |
| Deferred  distributor revenue                                                          | ** ** | **—**                                           |          | (711,501 | ) |
|                                                                                   |       |                                                 |          |   |   |
| Net cash used in  operating activities                                                 | ** ** | **(707,672**                                         | **)**         | (830,002 | ) |
|                                                                                   |       |                                                 |          |   |   |
| **Cash flows from investing  activities**                                              | ** ** | ** **                                           | ** **    | ** ** | ** ** |
| Purchases of  property and equipment                                                   | ** ** | **(25,222**                                          | **)**         | (4,882 | ) |
| Patent costs                                                                           | ** ** | **(29,654**                                          | **)**         | (4,509 | ) |
| Leasehold  improvements                                                                | ** ** | **165**                                              | ** **    | **—** | ** ** |
| License fee                                                                            | ** ** | **(11,778**                                          | **)**         | **—** | ** ** |
|                                                                                   |       |                                                 |          |   |   |
| Net cash used in  investing activities                                                 | ** ** | **(66,489**                                          | **)**         | (9,391 | ) |
|                                                                                   |       |                                                 |          |   |   |
| **Cash flows from financing  activities**                                              | ** ** | ** **                                           | ** **    | ** ** | ** ** |
|                                                                                   |       |                                                 |          |   |   |
| Net cash  provided by financing activities                                             | ** ** | **—**                                           |          | — |   |
|                                                                                   |       |                                                 |          |   |   |
| **Decrease in cash and cash  equivalents**                                             | ** ** | **(774,161**                                         | **)**         | (839,393 | ) |
|                                                                                   |       |                                                 |          |   |   |
| Cash and cash  equivalents—beginning                                              | ** ** | **3,051,420**                                        |          | 5,512,974 |   |
|                                                                                   |       |                                                 |          |   |   |
| **Cash  and cash equivalents—ending**                                             | ** ** | **$**                                                | **2,277,259** |   | $ | 4,673,581 |   |

 

*The accompanying notes are anintegral part of these consolidated financial statements.*

5

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**APOGEETECHNOLOGY, INC. AND SUBSIDIARY**

 **NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31,2007 AND MARCH 31, 2006 (UNAUDITED)**

**1.        ****The Company and Basis ofPresentation**

***The Company***

Apogee Technology, Inc. and Subsidiary (the “Company”or “Apogee”, “we”, “us”, or “our”) designs, develops and commercializesadvanced drug delivery and sensor solutions based upon its proprietary MicroElectromechanical Systems (“MEMS”), nano fabrication and drug deliverytechnologies. Our Medical Products Group is developing PyraDermTM an advancedintradermal drug delivery system to meet the needs of patients, healthinsurers, companies’ developing pharmaceuticals, as well as, governments andinternational health organizations. We believe PyraDermTM has significantadvantages over competitive approaches for the delivery of vaccines, highpotency therapeutic protein drugs and non FDA regulated cosmeceutical andnutraceutical active ingredients. We have evaluated the feasibility of PyraDermby performing in vitro tests with model drugs and are planning to start in vivotesting this year.  We are working toestablish pharmaceutical industry compliant manufacturing methods and to defineregulatory strategies to support its commercialization. Our business strategyincludes: (i) the licensing or selling of our technologies to pharmaceutical ormedical device companies; (ii) establish partnerships with pharmaceutical anddevice companies to commercialize our products; and (iii) developing, producingand 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. InDecember 2005, we introduced our first sensor products, a family of miniaturepressure sensor die, trademarked under the Sensilica® brand name.  These devices are produced using a novelmanufacturing technology that we believe reduces size and cost while improvingreliability as compared to alternative MEMS sensor solutions. We intend to sellthese sensor devices as stand-alone die to sensor integrators and as packagedsolutions directly and through independent representatives and distributors. Wehave begun the sales cycle by providing customer samples of our sensor die andpackaged products and by shipping small quantities of production sensor die.

From 1981 until 1995, Apogee Acoustics Incorporated (“Acoustics”)engineered, manufactured, and marketed high quality, patented ribbonloudspeaker systems for use in home audio and video entertainment systems. In1987 Apogee Technology, Inc. was organized as a Delaware corporation andoperated through its wholly owned subsidiary, Acoustics. We discontinued ourloudspeaker business in 1994 and utilized our audio experience on thedevelopment of the worlds’ first all-digital, high efficiency audio amplifierintegrated circuits (“IC”), which we trademarked as Direct DigitalAmplification or DDX®. We transitioned our business to take advantage of thepatent we received in 1991 for related technology and to pursue the marketopportunity created by the industry adoption of digital audio transmission,recording and playback. In 1999, we released our first IC products in 1999, andsubsequently released a total of over 25 IC products. In addition to our ICproduct sales, we also licensed DDX technology to several IC companies,including STMicroelectronics NV (“ST”), one of the world’s largestsemiconductor companies. Under this licensing agreement with ST, Apogeedeveloped and provided intellectual property to be used in royalty bearingproducts produced by ST.

In May 2004, in order to expand our technology baseand to further diversify our product and market opportunities, we acquired aportfolio of MEMS and nanotechnology intellectual property, trade secrets andknow-how developed by Standard MEMS, Inc. MEMS are devices produced using highvolume IC manufacturing techniques that include both electrical circuits andmicroscopic mechanical systems. Concurrently, we hired employees from theformer Standard MEMS, Inc. and established a MEMS Division that we havesubsequently consolidated into our Norwood headquarters.  Since this acquisition, we have been usingthis acquired know-how plus additional technologies to develop MEMS andnanotechnology based drug delivery and sensor systems.

On October 5, 2005, we completed a transaction withSigmaTel, Inc. (“SigmaTel”) whereby we sold certain assets of our audiodivision, including the DDX technology and the associated royalties from ourlicense agreement with ST, for approximately $9.78 million. As part of thetransition, a significant portion of Apogee’s engineering and marketing staffrelated to the audio division left the Company after they were offeredpositions at SigmaTel. By the terms of a non-compete with SigmaTel, signed inconnection with our sale of assets to them, we can no longer compete in theClass D audio/amplifier business for a period of two years. We reorganized theCompany’s remaining MEMS division into two business groups, the MedicalProducts Group and the Sensor Products Group. We also closed our sales officesin China, Japan, Taiwan and Hong Kong and terminated our agreements with ourindependent sales representatives and distributors that supported our audio ICbusiness.   As of March 31, 2007,we are carrying inventory with an original cost of approximately $1.7 millionand a net value of zero, after reserves for slow moving, excess and obsoleteinventory.  This inventory is availablefor sale.

6

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***Basis of Presentation***

***Consolidated Financial Statements***

The financialstatements include the accounts of Apogee Technology, Inc., and its whollyowned inactive subsidiary, DUBLA, Inc. All significant intercompanytransactions and accounts have been eliminated.

***Going Concern***

The accompanying consolidated financial statementshave been prepared on a going concern basis, which contemplates the realizationof assets and satisfaction of liabilities in the normal course of business. Asshown in the consolidated financial statements, we have incurred continuinglosses and negative cash flows from operations. Net losses were approximately$713,000 and negative cash flows from operations were approximately $617,000for the three months ended March 31, 2007. This raises substantial doubt aboutthe Company’s ability to continue as a going concern.

The Company sold certain tangible and intangibleassets associated with its audio business in 2005 and has approximately $2.3million of cash at March 31, 2007. The Company has reduced, in theshort-term, its operating expenses for payroll and related costs, rents andthird party consulting fees. The Company believes that its current workingcapital and amounts that may be raised to support operations will be sufficientto fund its capital and operational requirements at least throughDecember 31, 2007.  The Companyis actively pursuing various options for additional funding. Also see Footnote12 —Notification from the American Stock Exchange.

The long-term success of the Company is dependent uponits ability to successfully develop and market its sensor and medical deviceproducts which are based upon its MEMS technology, to attain profitableoperations and raise additional funds as needed for such purposes. There can beno assurance, however, that the Company will be able to generate sufficientrevenue, become profitable or that additional funds will be available to theCompany on acceptable terms, if at all.

***Use of Estimates in Financial Statements***

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and reported amounts ofrevenues and expenses during the reporting period. Actual results could differfrom those estimates, and such differences could affect the results ofoperations reported in future periods and such differences could be material.

**2.         Summary of Significant AccountingPolicies**

***Revenue Recognition***

The Companyrecognizes revenue in accordance with Securities and Exchange Commission StaffAccounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition in FinancialStatements: Revenue Recognition”, which states that revenue should berecognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) the product hasbeen shipped and the customer takes ownership and assumes the risk of loss;(3) the selling price is fixed or determinable; and (4) collection ofthe resulting receivable is reasonably assured. The following policies apply tothe Company’s major product sales categories for revenue recognition.

Sales to OEMCustomers:  Revenue is recognized under the Company’s standard terms andconditions of sale, title and risk of loss transfer to the customer at the timeproducts are shipped to the customer or the customers’ representative/freightforwarder (shipping terms Ex Works). The Company has experienced minimalwarranty or other returns and based upon historical experience has recorded a$10,000 provision for such returns.

Sales toDistributors:  At times the Company provides incentives such as stockrotation, price protection and other incentives to its distributors. Therefore,under the sell through method of revenue recognition the Company defersrecognition of revenue until such time that the distributor sells products toits customers based upon receipt of point-of-sale reports from thedistributors. Distributor payments received before revenue is recognized arerecorded as deferred revenue. Unsold inventory held at distributors is includedas a component of finished goods inventory. At September 30, 2006 all deferred revenue has been recognized.   If and when material amounts of our sensorand medical products items are shipped to the Company’s distributors, thestated Revenue Recognition Policy will be resumed.

7

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The Companyrecords royalty revenue when earned in accordance with the underlyingagreement. Royalties are based upon sales of products commercialized from theCompany’s licensed technology. Consulting revenue is recognized as services areperformed in accordance with the terms of the underlying agreements.

***Loss Per Share***

Basicnet loss per share is computed by dividing the net loss attributable to commonstockholders for the period by the weighted average number of common stockoutstanding during the period.  Dilutednet loss per share is computed based on the weighted average number of commonstock and dilutive potential common stock outstanding.  The calculation of diluted net loss per shareexcluded potential common stock if the effect is anti-dilutive.  Potential common stock consists of incrementalcommon stock issuable upon the exercise of stock options and common stockissuable upon the exercise of common stock warrants.

***Research andDevelopment***

Costs for research and development are expensed asincurred.

***Inventories***

Inventories arestated at the lower of cost on a first-in, first-out basis or market. SeeFootnote 4 to the financial statements.  This policy requires the Companyto make estimates regarding the market value of the Company’s inventory,including an assessment of excess or obsolete inventory. The Company determinesexcess and obsolete inventory based on an estimate of the future demand andestimated selling prices for the Company’s products within a specified timehorizon, generally 12 to 24 months.

During the threemonths ended March 31, 2007, the Company recorded a recovery of previousreserve provisions for slow moving, excess and obsolete inventory ofapproximately $74,000 to adjust for current inventory levels.  The inventory as of March 31, 2007,entirely consisting of Apogee held inventory, was approximately $1.740 millionbefore the allowance for slow moving, excess and obsolete inventory.  This compares to inventory atDecember 31, 2006, net of reserves, of approximately $1.814 million.

 ***Purchase commitment losses***

The Company accrues forestimated losses on non-cancelable purchase orders of products, whichmay occur if the future sale price declines below the committed purchaseprice. There are no outstanding purchase commitments of product inventory andtherefore no provision was required at March 31, 2007.

***Property andEquipment***

Major replacements andbetterments of equipment are capitalized. Cost of normal maintenance andrepairs is charged to expense as incurred. Depreciation is provided over theestimated useful lives of the assets using accelerated methods. Leaseholdimprovements are amortized over either the term of lease or the estimateduseful life of the improvement.

***Leasehold Improvements/Construction inProgress***

Construction in progress consistsof costs related to the renovations and construction of a laboratory to be usedfor the development of medical device products. On January 3, 2007 the Company announced the completion of itslaboratory.  Subsequently, all costspreviously recorded as Construction in Progress were reclassified to LeaseholdImprovements and are being amortized on a straight-line basis over a three-yearperiod.

***Patents***

Costs incurred toregister and obtain patents will be capitalized and amortized on astraight-line basis over their estimated useful lives.  This policy to be formalized once a patenthas been approved and placed into service. During the fiscal year ended December 31, 2006, the Company submittedfive U. S. patent applications.

***Exclusive License Fee***

The Company is capitalizing license fees paid to thirdparties for costs associated with the exclusive rights to their patents.  The Company is amortizing these fees over aperiod of four years.

8

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***Cash and CashEquivalents***

The Company considers allhighly liquid investments with an original maturity of three months or less tobe cash equivalents. Substantially all of the Company’s cash is held in highquality money market funds comprised of short-term, fixed income securitiesearning interest at 4.93% at March 31, 2007.

***Use of Estimates in Financial Statements***

In preparing financial statementsin conformity with generally accepted accounting principles, management isrequired to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities atthe date of financial statements, and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates.

***Accounts Receivable***

The Company carries its trade receivables from direct customers less anallowance for doubtful accounts to ensure that trade receivables are carried atnet realizable value.  On a periodicbasis, the Company evaluates the collectibility of its accounts receivable on avariety of factors, including length of time receivables are past due,indication of customer willingness to pay, significant one-time eventsand historical experience. An additional reserve for individual accounts isrecorded when the Company becomes aware of a customer’s inability to meet itsfinancial obligations, such as in the case of bankruptcy filings or substantialdeterioration in the customer’s operating results or financial position. If the financial condition of the Company’scustomers were to deteriorate, resulting in an impairment of their ability tomake payments, additional allowances may be required.  Accounts receivable are generally consideredpast due if any portion of the receivable balance is outstanding for more than90 days.  If circumstances related to theCompany’s customers change, estimates of the recoverability of receivableswould be further adjusted.

***Fair value of financial instruments***

Carrying amountsof certain of the Company’s financial instruments, including cash and cashequivalents, accounts receivable and notes and accounts payable, approximatetheir fair values due to their relative short maturities and based uponcomparable market information available at the respective balance sheet dates.The Company does not hold or issue financial instruments for trading purposes.

***Stock Based Compensation***

The Company has astock-based compensation plan, the 1997 Employee, Director and Consultant StockOption Plan (“Plan”), which is described below. Prior to fiscal 2006, theCompany accounted for the Plan under the recognition and measurement provisionsof Accounting Principles Board (APB) Opinion No. 25, “Accounting for StockIssued to Employees”, and related Interpretations, as permitted by FinancialAccounting Standards Board (FASB) Statement of Financial Accounting Standards(SFAS) No. 123, “Accounting for Stock-Based Compensation” (SFAS 123).Compensation costs related to stock options granted at fair value under thePlan were not recognized in the consolidated statements of income.

InDecember 2004, FASB issued SFAS 123 (revised 2004), “Share-Based Payments”(SFAS 123(R)). Under the new standard, companies are no longer able to accountfor stock-based compensation transactions using the intrinsic value method inaccordance with APB Opinion No. 25. Instead companies are required toaccount for such transactions using a fair-value method and recognize theexpense in the consolidated statement of income.

Prior toJanuary 1, 2006, the Company had adopted only the disclosure provisions ofSFAS 123(R). It applied APB Opinion No. 25, “Accounting For Stock IssuedTo Employees”, and related interpretations in accounting for the Plan and didnot recognize compensation expense for the Plan.

EffectiveJanuary 1, 2006, the Company adopted SFAS 123(R) using themodified-prospective-transition method. Under this transition method, stockcompensation costs recognized beginning January 1, 2006 include(a)  compensation cost for all stock-based compensation payments grantedprior to, but not yet vested as of January 1, 2006, based on the grantdate fair value estimated in accordance with the original provisions of SFAS123, and (b) compensation cost for all stock-based payments granted on orsubsequent to January 1, 2006, based on the grant date fair valueestimated in accordance with the provisions of SFAS 123(R). Results for priorperiods have not been restated.

Included in theCompany’s net loss for the three months ended March 31, 2007 was acompensation charge of approximately $24,600 due to the adoption of SFAS 123(R).

9

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***Accounting for Stock Compensation***

Stock-basedcompensation costs are generally based on the fair value calculated from theBlack-Scholes option-pricing model on the date of grant for stock options.  The fair values of stock grants are amortizedas compensation expense over the options’ vesting period. Compensation expenserecognized is shown in the operating activities section of theconsolidated statements of cash flow.

In anticipation ofadopting SFAS 123(R), the Company evaluated the assumptions used in the Black-Scholesmodel. The Company continues to calculate the expected volatility based solelyon historical volatility. The Company believes that historical volatilityprovides the best estimate of future stock price volatility.

The expected termwas previously and is currently calculated based on an analysis of vestingperiods and contractual life. The Company believes that this analysis providesa better estimate of option term periods.

The Companycontinues to base the estimate of risk-free rate on the U.S. Treasury yieldcurve in effect at the time of grant. The Company has never paid cash dividendsand does not currently intend to pay cash dividends, and thus has assumed a 0%dividend yield.

As part ofthe requirements of SFAS 123(R), the Company is required to estimate potentialforfeitures of stock grants and adjust compensation cost recorded accordingly.The estimate of forfeitures will be adjusted over the requisite service periodto the extent that actual forfeitures differ, or are expected to differ, fromsuch estimates. Changes in estimated forfeitures will be recognized through acumulative catch-up adjustment in the period of change and will also impact theamount of stock compensation expense to be recognized in future periods.

The Company’s stock compensationactivity with respect to the three months ended March 31, 2007 is summarizedbelow:
| Stock Options                          | ** ** | **Shares** | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|---------------------------------------------|------------|------------|------------|-----------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|
| Outstanding at  December 31, 2006 |       | 2,899,100  |       | $                                       | 4.6512     |                                                 |       |                            |       |   |
| Granted                                     |       | 26,000     |       | 1.2769                                  |       |                                                 |       |                            |       |
| Exercised                                   |       | -0-        |       |                                    |       |                                                 |       |                            |       |
| Cancelled or expired                        |       | (28,500    | )          | 7.6054                                  |       |                                                 |       |                            |       |
| Outstanding at  March 31, 2007         |       | 2,896,600  |       | $                                       | 4.5918     |                                                 | 6.2326     |                            | $          | 13,300,751 |   |
|                                        |       |       |       |                                    |       |                                                 |       |                            |       |
| Vested at March 31,  2007              |       | 2,489,700  |       | $                                       | 5.1727     |                                                 | 5.7719     |                            | $          | 12,878,483 |   |
|                                        |       |       |       |                                    |       |                                                 |       |                            |       |
| Exercisable at  March 31, 2007         |       | 2,489,700  |       | $                                       | 5.1727     |                                                 | 5.7719     |                            | $          | 12,878,483 |   |

 

The followingtable summarizes information about options outstanding as of March 31, 2007:
|                                             | ** ** | **Options Outstanding** | ** ** | **Options  Exercisable**                  | ** ** |
|---------------------------------------------|------------|------------------------------|------------|-------------------------------------------|------------|
| ** **                                  | ** ** | ** **                   | ** ** | **Weighted**                              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Range of Exercise  Prices         | ** ** | **Number  Outstanding**      | ** ** | **Average  Remaining  Contractual  Life** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| $0.25 — 1.69                           |       | 998,400                      |       | 7.3157                                    |       | $ | 0.9603 |   | 591,500 |   | $ | 0.9071 |   |
| $2.71 — 6.590                          |       | 1,299,200                    |       | 5.0149                                    |       | $ | 5.4017 |   | 1,299,200 |   | $ | 5.4017 |   |
| $8.45 — 12.15                          |       | 599,000                      |       | 7.0686                                    |       | $ | 8.8883 |   | 599,000 |   | $ | 8.8883 |   |
|                                        |       |                         |       |                                      |       |   |   |   |   |   |   |
| Total at March 31, 2007 |       | 2,896,600                    |       | 6.2326                                    |       | $ | 4.5918 |   | 2,489,700 |   | $ | 5.1727 |   |

 

During the threemonths ended March 31, 2007, the Company granted options to purchase 26,000shares of its common stock at a weighted average fair market value of$1.0493.  No options were exercisedduring the three months ended March 31, 2007.  During the three monthsended March 31, 2007, options to purchase 8,300 shares of Apogee common stockvested. ** **The weighted average fair value of these options was$0.6205.  Total stock-based compensation expense for the three monthsended March 31, 2007, was approximately $24,600 compared to approximately$74,600 for the three months ended March 31, 2006.

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***Recent AccountingPronouncements***

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities.” This Statement permits entities to choose to measuremany financial instruments at fair value. Unrealized gains and losses on itemsfor which the fair value option has been elected are reported in earnings. SFASNo. 159 is effective for fiscal years beginning after November 15, 2007. TheCompany is currently assessing the impact of SFAS No. 159 on its consolidatedfinancial position and results of operations.

**3.         Accounts Receivable**

Accounts Receivable at March 31, 2007 andDecember 31, 2006 are comprised of the following:
|                                       | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|---------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                            | ** ** | **2007**           | ** **  | **2006**              | ** ** |
| ** **                            | ** ** | **(Unaudited)**    | ** **  | **(Audited)**         | ** ** |
| Distributor                           | ** ** | **$**              | **14,930**  |                  | $          | 11,162 |   |
| Direct customers                      | ** ** | **22,442**         |        | 13,279                |       |
| ** **                            | ** ** | **$**              | **37,372**  |                  | $          | 24,441 |   |
|                                  |       |               |        |                  |       |
| Less allowance  for doubtful accounts | ** ** | **$**              | **(13,245** | **)**                 | (13,245    | ) |
|                                  |       |               |        |                  |       |
| Net accounts receivable               | ** ** | **$**              | **24,127**  |                  | $          | 11,196 |   |

 

**4.         Inventories**

Inventories are stated at the lower of cost (first-in,first-out) or market. The major classifications of inventories are as follows:
|                                                                | ** ** | **March 31,** | ** **    | **December 31,** | ** ** |
|----------------------------------------------------------------|------------|--------------------|---------------|-----------------------|------------|
| ** **                                                     | ** ** | **2007**           | ** **    | **2006**              | ** ** |
| ** **                                                     | ** ** | **(Unaudited)**    | ** **    | **(Audited)**         | ** ** |
|                                                           |       |               |          |                  |       |
| Raw materials                                                  | ** ** | **$**              | **—**    | ** **            | **$**      | **—** | ** ** |
| Finished goods held by  Apogee                                 | ** ** | **1,740,078**      |          | 1,814,028             |       |
| Finished goods held by  distributors                           | ** ** | **—**         | ** **    | **—**            | ** ** |
|                                                           |       |               |          |                  |       |
| ** **                                                     | ** ** | **$**              | **1,740,078** |                  | $          | 1,814,028 |   |
| Less allowance  for slow moving, excess and obsolete inventory | ** ** | **(1,740,078**     | **)**         | (1,814,028            | )          |
|                                                           |       |               |          |                  |       |
| Inventory—net                                             | ** ** | **$**              | **—**    | ** **            | **$**      | **—** | ** ** |

 

**5.         Property and Equipment**

Property and equipment at March 31, 2007 andDecember 31, 2006 are comprised of the following:
|                                | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|--------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                     | ** ** | **2007**           | ** **  | **2006**              | ** ** |
| ** **                     | ** ** | **(Unaudited)**    | ** **  | **(Audited)**         | ** ** |
|                           |       |               |        |                  |       |
| Equipment                      | ** ** | **$**              | **161,982** |                  | $          | 136,761 |   |
| Software                       | ** ** | **32,943**         |        | 32,943                |       |
| Furniture and fixtures         | ** ** | **22,047**         |        | 22,047                |       |
| Leasehold improvements         | ** ** | **90,477**         |        | 22,954                |       |
|                           |       |               |        |                  |       |
| ** **                     | ** ** | **$**              | **307,449** |                  | $          | 214,715 |   |
|                           |       |               |        |                  |       |
| Less accumulated  depreciation | ** ** | **(91,107**        | **)**       | (97,488               | )          |
|                           |       |               |        |                  |       |
| ** **                     | ** ** | **$**              | **216,342** |                  | $          | 117,217 |   |

 

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Depreciation expense was $16,573 for the three monthsended March 31, 2007.

The estimated useful lives of the classes of physicalassets were as follows:
| Description            | ** ** | **Depreciable Lives** |
|------------------------|------------|----------------------------|
|                   |       |                       |
| Equipment              |       | 5 years                    |
| Software               |       | 3 years                    |
| Furniture and fixtures |       | 7 years                    |
| Leasehold improvements |       | Term of lease              |

 

**6.         Accrued Expenses**
|                        | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **             | ** ** | **2007**           | ** **  | **2006**              | ** ** |
| ** **             | ** ** | **(Unaudited)**    | ** **  | **(Audited)**         | ** ** |
|                   |       |               |        |                  |       |
| Accrued audit expenses | ** ** | **$**              | **66,000**  |                  | $          | 60,000 |   |
| Accrued legal expenses | ** ** | **42,000**         |        | 25,000                |       |
| Accrued taxes          | ** ** | **—**         | ** **  | **—**            | ** ** |
| Other accrued expenses | ** ** | **62,000**         |        | 64,000                |       |
|                   |       |               |        |                  |       |
| ** **             | ** ** | **$**              | **170,000** |                  | $          | 149,000 |   |

 

**8.         Stockholders’ Equity**

***Stock Options***

During the threemonths ended March 31, 2007, Company awarded an employee options to purchase6,000 shares at an exercise price of $1.20 per share.  In addition, the Board of Directors awardedto two new members of the Advisory Board options to purchase 10,000 shares at anexercise price of $1.24 per share and 10,000 shares at an exercise price of$1.36 per share.  These options weregranted under the 1997 Employee, Director and Consultant Stock Option Plan. Theoptions granted to the employee vest over five years beginning at the firstanniversary of the date of grant.  Theoptions granted to the members of the Medical Advisory Board vest over one yearbeginning with 50% at the six-month anniversary of the date of grant and theremaining 50% at the one year anniversary of the date of grant.

**9.         Related Party Transactions**

The Company rentsits facility from an entity controlled by a stockholder for $4,400 per monthpursuant to a lease that expired December 31, 2005. Currently, the Companyis renting the facility on a month-to-month basis.  In addition,****see Footnote 11— Indemnification Agreements with our Executives.

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**10.       Concentrations**

·                  During the threemonths ended March 31, 2007, the Company derived approximately 83% of itsrevenue as a result of sales by three customers.

·                  During the threemonths ended March 31, 2006, the Company derived approximately 76% of itsrevenue as a result of sell through by three distributors.

·                  Four of theCompany’s customers accounted for approximately 100% of the total accountsreceivable balance at March 31, 2007.

·                  Three of theCompany’s customers accounted for approximately 91% of the total accountsreceivable balance at March 31, 2006.

·                  During the threemonths ended March 31, 2006, the Company derived 100% of its revenue fromcustomers located in South America, Asia and North America.

·                  During the threemonths ended March 31, 2006, the Company derived approximately 97% of itsrevenue from distributors located in Asia and Europe.

The Company maintains itscash accounts with high quality financial institutions. Balances usually exceedthe maximum coverage ($100,000) provided by the Federal Deposit InsuranceCorporation on insured depositor accounts.

**11.       Indemnification Arrangements with ourExecutives**

The Company hasbeen assuming and will continue to assume the legal costs and related expensesof Herbert M. Stein, in connection with the civil case in the Circuit Court ofthe Fifteenth Judicial Circuit in and for Palm Beach County, Florida entitled*Joseph Shamy v. Herbert M. Stein, case No.: 50 2005CA 007719 XXXXMB.*  To date wehave incurred approximately $332,000 toward this indemnification.

**12.      Notification from the American StockExchange**

As reported on theCompany’s current report on Form 8-K dated January 12, 2007, Apogee wasnotified on January 12, 2007, by the American Stock Exchange (“AMEX”) thatAMEX has accepted the Company’s plan to regain compliance with AMEX continuedlisting standards, and that the Company’s listing will be continued pursuant toan extension.

The Companysubmitted a plan of compliance to AMEX (the “Plan”) on November 30, 2006, whichwas amend on December 20, 2006, outlining its operational plan andstrategic objectives towards regaining compliance with certain of the AMEXcontinued listing standards. The Plan was prepared in response to a letterreceived from AMEX on November 1, 2006, indicating that the Company was nolonger meeting certain continued listing standards.  The Company does not meet the standards as aresult of having shareholders’ equity of less than $4 million and losses fromcontinuing operations and/or net losses in three out of its four most recentfiscal years, as is required in Section 1003 (a) (ii) of theCompany Guide; and because the Company was also not in compliance withSection 1003 (a) (iii) of the Company Guide, as it hasshareholders’ equity of less than $6 million and losses from continuingoperations in its five most recent fiscal years.

The Company willbe subject to periodic review by the AMEX Staff during the extension period,which ends on November 1, 2007. Failure to make progress consistent withthe plan or to regain compliance with the continued listing standards by theend of the extension period could result in the Company being delisted from theAMEX.

**13.      Notification of Complaint by FormerEmployee**

On March 29, 2007 Apogeereceived a complaint, which had been filed at the Superior Court in NorfolkCounty, Massachusetts, entitled *Michael S.Danielson v. Apogee Technology*,*Case No. 0700512*.  A formerApogee employee initiated the complaint alleging, among other things, thatApogee failed to pay certain bonuses and retirement contributions in connectionwith a compensatory arrangement concerning the development of certain digitalamplifier technology.  The formeremployee claims unpaid compensation of approximately $155,000 and the requestfor relief asks for the amount to be trebled, and include costs and attorneys’fees.  The management of Apogee believesthe former employee’s claim to be without merit and the Company will defenditself vigorously against all of the claims asserted in this legal action.

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**ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS.**

**GENERAL**

The following Management’sDiscussion and Analysis of the Company’s Financial Condition and Results ofOperations for the three-month periods ended March 31, 2007 and March 31,2006 should be read in conjunction with the Company’s Financial Statements andrelated Notes included elsewhere in this Quarterly Report on Form 10-QSB.This discussion contains, in addition to historical statements, forward-lookingstatements that involve risks and uncertainties. The Company’s actual resultscould differ significantly from the results discussed in the forward-lookingstatements. Factors that could cause or contribute to such differences includethe factors discussed in the section titled “Certain Risk Factors ThatMay Affect Future Results of Operations And Our Common Stock Price” aswell as other factors described in the Company’s Annual Report onForm 10-KSB for the year ended December 31, 2006, as amended.

**OVERVIEW**

Apogee designs, developsand commercializes advanced drug delivery and sensor solutions based upon itsproprietary Micro Electromechanical Systems (“MEMS”), nano fabrication and drugdelivery technologies. Our Medical Products Group is developing PyraDermTM anadvanced intradermal drug delivery system to meet the needs of patients, healthinsurers, companies’ developing pharmaceuticals, as well as, governments andinternational health organizations. We believe PyraDermTM will have significantadvantages over competitive approaches for the delivery of vaccines, highpotency therapeutic protein drugs and non FDA regulated cosmeceutical andnutraceutical active ingredients. We have evaluated the feasibility of PyraDermby performing in vitro tests with model drugs and are planning to start in vivotesting this year.  We are working toestablish pharmaceutical industry compliant manufacturing methods and to defineregulatory strategies to support its commercialization. Our business strategy includes:(i) the licensing or selling of our technologies to pharmaceutical or medicaldevice companies, (ii) establish partnerships with pharmaceutical and devicecompanies to commercialize our products and; (iii) develop, have made andmarket our own medical products. Our Sensor Products Group is focused on thedesign, development and marketing of proprietary MEMS/Nanotechnology basedsensors for the medical, automotive, industrial and consumer markets. InDecember 2005, we introduced our first sensor products, a family of miniaturepressure sensor die, trademarked under the Sensilica® brand name.  These devices are produced using a novelmanufacturing technology that we believe reduces size and cost while improvingreliability as compared to alternative MEMS sensor solutions. We intend to sellthese sensor devices as stand-alone die to sensor integrators and as packagedsolutions directly and through independent representatives and distributors. Wehave begun the sales cycle by providing customer samples of our sensor die andpackaged products and by shipping small quantities of production sensor die.

During the three months ended March 31, 2007, virtuallyall of our revenue was derived from the sales of the remaining audio ICinventory.  We expect that future revenuewill 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 March 31,2007, we had an accumulated deficit of approximately $16.4 million, as comparedto a deficit of $15.7 million as of December 31, 2006. 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.

As of March 31,2007, we had 12 employees compared to 14 employees for the same period in 2006.This reduction in employees was a result of the final closing of our Hong Kongand Japanese operations is a direct result of the audio business sale toSigmaTel, Inc. in October 2005.

During the three-monthperiod ended March 31, 2007, we derived approximately 83% of our revenueas a result of sales to three customers. As of March 31, 2006, Apogee recognized substantially all of thedeferred revenue, approximately $252,000, related to one of our formerdistributors. At December 31, 2005, we had formally terminated this distributorcontract. At March 31, 2006, it was determined that we would have nocontinuing involvement with this distributor as it related to the former audioIC business. All of the revenue was attributable to the former audio ICdivision.

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**SELECTED CONSOLIDATED FINANCIAL DATA**

The following selected financial data for thethree-month periods ended March 31, 2007 and 2006 have been derived fromour unaudited financial statements. Any trends reflected by the following tablemay not be indicative of future results.
|                                           | ** ** | **For the Three Months ended  March 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
| ** **                                | ** ** | ** **                                                         | ** ** | ** ** | ** ** |
| Statement of Operations  Data:            |       |                                                               |       |   |   |
| Revenue                                   |       | $                                                                  | 53,670     |   | $ | 985,398 |   |
| Costs and expenses                        |       | 798,368                                                            |       | 1,746,529 |   |
| Other income (expense)                    |       | 31,867                                                             |       | 32,129 |   |
| Net loss                                  |       | $                                                                  | (712,831   | ) | $ | (729,002 | ) |
|                                      |       |                                                               |       |   |   |
| Shares outstanding                        |       | 11,968,332                                                         |       | 11,968,332 |   |
|                                      |       |                                                               |       |   |   |
| Balance Sheet Data:                       |       |                                                               |       |   |   |
| Total assets                              |       | $                                                                  | 2,844,377  |   | $ | 6,112,641 |   |
| Stockholders’ equity                 |       | $                                                                  | 2,172,800  |   | $ | 4,885,135 |   |
| Loss per share  (basic and fully diluted) |       | $                                                                  | (0.06      | ) | $ | (0.06 | ) |

 

**RESULTSOF OPERATIONS OF THE COMPANY**

**Revenue**

We havetraditionally derived our revenue from three sources: (1) product sales,which consist of merchandise sales made either directly to original equipmentmanufacturers or sell through point of sale (“POS”) by distributors. All suchshipments are fulfilled from our contracted warehouse in Hong Kong or from ourNorwood, Massachusetts office and are reported net of returns; (2) royaltyrevenue, which formerly consisted of royalties paid by STMicroelectronics,which have now been sold as part of the transaction with SigmaTel and(3) consulting income related to contractual services or developmentactivities for third parties. The Company may, in the future, receiveroyalties under its remaining audio licensing agreements and from newagreements contemplated under its two new business groups. See Footnote 2 ofthe financial statements.  We anticipatethat future revenue streams will come from both our sensor and medical deviceproducts, generally in the form of strategic alliances or arrangements withdevelopment or marketing partners, direct product sales and distributionarrangements.  We envision the future ofour medical devices as (i) licensing or selling of our technologies topharmaceutical or medical device companies; (ii) establishing partnerships withpharmaceutical and device companies to commercialize our products; and (iii)developing, producing and marketing our own medical products..

Total revenue declined byapproximately $931,700 or 95% to approximately $53,700 for the three monthsended March 31, 2007 from approximately $985,400 for the three monthsended March 31, 2006.  Duringthe three months ended March 31, 2007 and March 31, 2006substantially all revenue recorded was from the sale of remaining inventoryrelated to the former audio IC business.

Some revenue fromthe sale of products related to the former audio IC business is expected tocontinue over the short term as the remaining inventory is sold.  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 decreasedas a result of reduced product revenue to $216 for the three months endedMarch 31, 2007, compared to approximately $725,000 for the threemonths ended March 31, 2006. Cost of revenue from our former audio ICbusiness primarily consists of purchased finished semiconductor chips andstorage fees associated with warehousing a large portion of our semiconductorproducts in Asia.  The nominal cost ofgoods for the three months ended March 31, 2007 is a result of our havingpreviously reserved 100% of the remaining from the audio IC business inventory.

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**Operating Expenses**

**Research and Development (“R&D”)Expenses**

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 $244,300 for the 3 months ended March 31, 2007, comparedto approximately $394,600 for the three months ended March 31, 2006. Thisdecrease of approximately $150,300 or 38% was the result of reduced utilizationof third party consultants.  For thethree months ended March 31, 2007, expenses incurred from utilization of thirdparty consultants decreased by approximately $131,300 or 90% to approximately$14,600, compared to approximately $145,900 for the same period in 2006.

In addition, to the reduction in the use of thirdparty consultants, expense reductions in development costs related to thesensor group, less travel and entertainment expense, fewer softwareexpenditures, the Company also closed its facility in Long Island and alaboratory located in Connecticut, which contributed to the overall decrease inR&D expenses.

We anticipate that we will continue to commitresources to research and development activities as our financial positionallows, and as a result, R&D costs are expected to increase substantiallyin the future.

**Selling, General and Administrative (“SG&A”)Expenses**

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 andJapan sales offices. Subsequent to the SigmaTel transaction, the Taiwan andChina offices were closed. In February 2006 we closed our Hong Kong officeand in July 2006 we closed our Japanese office.  General and Administrative costs consistprimarily of executive and administrative salaries, professional fees and otherassociated corporate expenses. Selling, General and Administrative (“SG&A”)expenses decreased approximately $72,800 or 12% to approximately $553,900 forthe three months ended March 31, 2007, compared to approximately$626,700 for the three months ended March 31, 2007.  The decrease in SG&A was attributableprimarily to the closing of the Hong Kong and Japanese offices as well asdecreased human resource costs, business development and travel andentertainment costs partially offset by increases in professional fees andcorporate insurance.

Human resource costsdecreased approximately $92,700 or 29% to approximately $231,900 for the threemonths ended March 31, 2007 compared to approximately $324,600 for thethree months ended March 31, 2006. This decrease reflects thereduction in staffing and subsequent closing of the Hong Kong and Japaneseoffices as well as a reduction in the stock compensation expense for thequarter ended March 31, 2007.  As ofMarch 31, 2007, Apogee employed a total of 12 employees all located inNorwood, Massachusetts.  As ofMarch 31, 2006, we employed a total of 14 employees, 12 domestically with1 employee each in Hong Kong and Japan.

Professional expensesincreased by approximately $56,900 or 43% to approximately $189,800 for thethree months ended March 31, 2007, compared to approximately$132,900, for the three months ended March 31, 2006. Of thisincrease, approximately $40,200 was as a result of an increase in legalexpenses.  Investor relations andSarbanes Oxley consultants accounted for the remaining increase in professionalfees.  Legal expenses increased toapproximately $132,700 for the three-month period ended March 31, 2007,compared to approximately $92,500 for the three months ended March 31, 2006. Thisincrease was as a result of indemnification costs, which were approximately$53,500 for the 3 months ended March 31, 2007, compared to approximately$35,100 for the 3 months ended March 31, 2006. See Footnote 11 of thefinancial statements—Indemnification Arrangements with our Executives.  Accounting expenses decreased toapproximately $17,000 for the three months ended March 31, 2007, compared toapproximately $28,000 for the same period in 2006.  Investor relations and Sarbanes Oxleyconsultants accounted for approximately $15,600 and $12,900, respectively forthe three months ended March 31, 2007. Business development expenses associated with the Sensor Program were reducedby approximately $27,600 to approximately $1,300 for the three months endedMarch 31, 2007, compared to approximately $28,900 for the same period in 2006.

Other expenses contributing to the decrease inSG&A were reduced travel and entertainment expense as well as a reductionin tax liability.  Travel andentertainment expense decreased by approximately $5,300 or 20% to approximately$21,800 for the three months ended March 31, 2007, compared toapproximately $27,100 for the three months ended March 31, 2006.  Corporate taxes were reduced by approximately$5,800 or 79% to approximately $1,500 for the three months ended March 31, 2007,compared to approximately $7,300 for the same period in 2006.  These reductions were partially offset by anincrease in corporate insurance as a result of the Company obtaining Directors’and Officers’ effective as of November 27, 2006.  For the three months ended March 31, 2007,Directors’ and Officers’ insurance expense was approximately $18,200.

Operating expenses are expected to increase over thenext few quarters to support our Sensor and Medical Product groups.

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**Interest Income (Expense)**

Interest income includes income from Apogee’s cash andcash equivalents and from investments and expenses related to its financingactivities. During the three months ended March 31, 2007, wegenerated interest income of approximately $31,900 compared to interest incomeof approximately $53,700 during the same period in 2006. This decrease ininterest income for the three months ended March 31, 2007 wasprimarily due to reduced interest on reduced cash balances as ofMarch 31, 2007.

No interest expense was incurred for the three monthsended March 31, 2007 and 2006.  Forthe three months ended March 31, 2006, we incurred approximately $20,000 in otherexpense which resulted from a loss on the disposal of fixed assets andadditional expenses in connection with the SigmaTel transaction.

**Net Loss**

Apogee’s net loss for thethree months ended March 31, 2007 was approximately $712,800 or $0.06per basic and diluted common share, compared to a net loss of approximately$729,000 or $0.06 per basic and diluted common share for the three months endedMarch 31, 2006.

**LIQUIDITY AND CAPITAL RESOURCES**

Our principal source of liquidity at March 31, 2007,consisted of approximately $2.3 million in cash and cash equivalents. Weconsider all highly liquid investments with an original maturity of threemonths or less to be cash equivalents. Substantially all of our cash is held inhigh quality money market funds comprised of short-term, fixed incomesecurities earning interest at 4.93% at March 31, 2007. This compares toapproximately $3.1 million in cash and cash equivalents as ofDecember 31, 2006. In addition, as of March 31, 2007, we had workingcapital of approximately $1.7 million compared to working capital ofapproximately $4.3 million at March 31, 2006.  As of March 31, 2007, and the sameperiod in 2006 we had no debt.

Net cash used inoperating activities for the three-month period ended March 31, 2007decreased to approximately $707,700 compared to approximately $830,000 in thethree-month period ended March 31, 2006. The decrease was primarilydue to a decrease operating expenses as a result of decreased spendingfollowing the closing of the Hong Kong and Japanese offices.

As of March 31, 2007,reserves for slow moving, excess and obsolete inventory was at 100% of theremaining inventory related to the former audio IC business.  This compares to inventory, net of reservesof approximately $614,000 as of March 31, 2006.  Net accounts receivable was approximately$24,000 at March 31, 2007, down from approximately $119,300 at March 31, 2006.  As of March 31, 2007 we hadreserves against bad debt of approximately $13,000 compared to a reserve of$88,000 as of March 31, 2006. Given the quality of current accountsreceivable, we believe that the remaining reserve is sufficient at this time.

Net cash used ininvesting activities for the three months ended March 31, 2007 wasapproximately $66,500, compared to approximately $9,300 for the three monthsended March 31, 2006.  OnJanuary 3, 2007 we announced the completion of our state-of-the-artlaboratory to be used to develop advanced drug delivery systems.  Along with the laboratory we completedrenovations to the entire facility.

No cash was provided byfinancing activities for the three months ended March 31, 2007 andMarch 31, 2006.

We believe that cash flow from operations as well asthe funds from the audio division sale will be sufficient to support operationand fund its capital requirements at least through December 31, 2007.  The Company requires additional funding andis reviewing our its capital needs and is exploring its alternatives toaccomplish its funding goals.  TheCompany requires additional capital to conduct the research and developmentactivity needed to support its medical device and sensor business.  Also see Footnote 12 of the financialstatements—Notification from the American Stock Exchange.

**CRITICALACCOUNTING POLICIES AND ESTIMATES**

Apogee preparesits consolidated 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 financialstatements. The significant accounting policies which we believe are the mostcritical to aid in fully understanding and evaluating our reported financialresults include the following:

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**RevenueRecognition**

Apogee recognizesrevenue in accordance with Securities and Exchange Commission Staff AccountingBulletin No. 104 (“SAB 104”), “Revenue Recognition in FinancialStatements: Revenue Recognition”, which states that revenue should berecognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) the product hasbeen shipped and the customer takes ownership and assumes the risk of loss;(3) the selling price is fixed or determinable; and (4) collection ofthe resulting receivable is reasonably assured. The following policies apply toApogee’s two major product sales categories for revenue recognition. Sales toend users (“OEM”):  Revenue is recognized under our standard terms andconditions of sale, title and risk of loss transfer to the customer at the timeproducts are shipped from our warehouse or delivered to the customer’srepresentative/freight forwarder. Sales to Distributors:  From time totime we provide stock rotation rights, price protection and other incentives toour Distributors. See Footnote 2 of the financial statements. As a result ofthese incentives, Apogee has adopted a policy of deferring recognition ofrevenue until the distributor sells products to its customers based uponreceipt of point-of-sale reports from the distributors. We accrue the estimatedcost of post-sale obligations including product warranty returns, based onhistorical experience. To date we have experienced minimal warranty returns.

In addition, we record royalty revenue when earned inaccordance with the underlying agreements. Consulting and licensing revenue isrecognized as services are performed.

**Accounts Receivable**

Apogee performscredit evaluations 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. All our currentinventory is associated with our former audio business. We have chosen toexpense our sensor die and sensor packaged products until such time as we havematerial results from this business. We are still in the research anddevelopmental phase of our medical products business and thus do not have anyrelated inventory. For the three months ended March 31, 2007, we haveapproximately $1.7 million of inventory related to our former audio IC businessthat has been 100% reserved and has no carrying value on our balance sheet.This compares to inventory at December 31, 2006, of approximately $1.8million of audio IC inventory which had been 100% reserved and carried no valueon the balance sheet.

**Valuation of Long-Lived Assets**

Property, plantand equipment, patents, trademarks and other intangible assets are amortizedover their estimated useful lives. Useful lives are based on management’sestimates over the period that such assets will generate revenue. Intangibleassets are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying value of an asset may not be recoverable.Future adverse changes in market conditions or poor operating results ofunderlying capital investments or intangible assets could result in losses oran inability to recover the carrying value of such assets, thereby possiblyrequiring an impairment charge in the future.

**Stock Compensation**

Prior to fiscal2006, we accounted for stock-based compensation plans under the recognition andmeasurement provisions of APB Opinion No. 25. Effective January 1,2006, we adopted the provisions of SFAS 123(R) using themodified-prospective-transition method. SFAS 123(R) requirescompanies to recognize the fair-value of stock-based compensation transactionsin the statement of income. The fair value of our stock-based awards isestimated at the date of grant using the Black-Scholes option pricing model.The Black-Scholes valuation calculation requires us to estimate key assumptionssuch as future stock price volatility, expected terms, risk-free rates anddividend yield. 

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Expected stockprice volatility is based on implied volatility from traded options on ourstock in the marketplace and historical volatility of our stock. We usehistorical data to estimate option exercises and employee terminations withinthe valuation model.

The expected termof options granted is derived from an analysis of historical exercises and remainingcontractual life of stock options, and represents the period of time thatoptions granted are expected to be outstanding. The risk-free rate is based onthe U.S. Treasury yield curve in effect at the time of grant. We have neverpaid cash dividends, and do not currently intend to pay cash dividends, andthus 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.

**OffBalance Sheet Arrangements**

We have no offbalance sheet arrangements, nor do we have any special purpose entities.

**RISKFACTORS**

There are a numberof important factors that could cause our actual results to differ materiallyfrom those indicated or implied by forward-looking statements. We disclaim anyintention or obligation to update or revise any forward-looking statements,whether as a result of new information, future events or otherwise, except asmay be required by law.

Aside from those risksdiscussed below, there have been no material changes to the risk factorsincluded in our Annual Report on Form-KSB, as amended, for the fiscal yearDecember 31, 2006.

**RISKSRELATED TO OUR BUSINESS**

**WE HAVEA HISTORY OF LOSSES, EXPECT FUTURE LOSSES AND MAY NEVER ACHIEVE OR SUSTAINPROFITABILITY.**

As of March 31,2007, we had stockholders’ equity of approximately $2.2 million, an accumulateddeficit of approximately $16.4 million and working capital of approximately$1.7 million. We had a net loss of approximately $712,800 for the three monthsended March 31 2007. In the fiscal year ended December 31, 2006, we recordednet loss of approximately $3.0 million. We will need to generate revenue tosustain profitability and positive cash flow. Our ability to generate futurerevenue and sustain profitability depends on a number of factors, many of whichare described throughout this risk factor section, including our ability todevelop and generate revenues from the sales of our sensor and medical deviceproducts, which are at a very early stage of development. We cannot assure youwhen, if ever, we will generate meaningful revenues from the sales of theseproducts under development. If we are unable to achieve and sustainprofitability, the Company’s share price would likely decline.

**SPECIALNOTE REGARDING FORWARD-LOOKING STATEMENTS**

This document andthe documents incorporated by reference herein contain forward-lookingstatements within the meaning of the Private Securities Litigation Reform Actof 1995. Also, Apogee’s management may make forward-looking statements orallyor in writing to investors, analysts, the media and others. Forward-lookingstatements express our expectations or predictions of future events or results.They are not guarantees and are subject to many risks and uncertainties. Thereare a number of factors that could cause actual events or results to be significantlydifferent from those described in the forward-looking statements.Forward-looking statements might include one or more of the following:

·       anticipated financingactivities;

·       anticipated strategicalliances or arrangements with development or marketing partners;

·       anticipated research andproduct development results;

·       projected development andcommercialization timelines;

·       descriptions of plans orobjectives of management for future operations, products or services;

·       forecasts of futureeconomic performance; and

·       descriptions or assumptionsunderlying or relating to any of the above items.

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Forward-lookingstatements can be identified by the fact that they do not relate strictly tohistorical or current facts or events. They use words such as “anticipate”, “estimate”,“expect”, “project”, “intend”, “opportunity”, “plan”, “potential”, “believe” orwords of similar meaning. They may also use words such as “will”, “would”, “should”,“could” or “may”.

Although webelieve that the expectations reflected in the forward-looking statements arereasonable, we cannot guarantee future results, levels of activity, performanceor achievements. Moreover, we do not assume responsibility for the accuracy andcompleteness of such statements. We do not intend to update any of theforward-looking statements after the date of this report to conform suchstatements to actual results except as required by law. Given theseuncertainties, you should not place undue reliance on these forward-lookingstatements, which speak only as of the date of this report. You shouldcarefully consider that information before you make an investment decision. Youshould review carefully the risks and uncertainties identified in this reportand in the Company’s Annual Report on From 10-KSB, as amended.

**ITEM 3 –CONTROLS AND PROCEDURES**

(a)   Evaluationof Disclosure Controls and Procedures. The Company’s chief executive officerand principal financial officer have reviewed and evaluated the effectivenessof the Company’s disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) as of the end of the period covered bythis quarterly report. Based on that evaluation, the chief executive officerand principal financial officer have concluded that the Company’s currentdisclosure controls and procedures are adequate and effective to ensure thatmaterial information relating to the Company was made known to them by others,particularly during the period in which this Quarterly Report onForm 10-QSB was being prepared.

(b)   Changesin Internal Controls. There were no changes in our internal control overfinancial reporting, identified in connection with the evaluation of suchinternal control that occurred during our last fiscal quarter that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

**PART II- OTHER INFORMATION**

 **ITEM 1 -LEGAL PROCEEDINGS**

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

On March 29, 2007Apogee received a complaint, which had been filed at the Superior Court inNorfolk County, Massachusetts, entitled *MichaelS. Danielson v. Apogee Technology*,*Case No. 0700512*.  A formerApogee employee initiated the complaint alleging, among other things, thatApogee failed to pay certain bonuses and retirement contributions in connectionwith a compensatory arrangement concerning the development of certain digitalamplifier technology.  The formeremployee claims unpaid compensation of approximately $155,000 and the requestfor relief asks for the amount to be trebled, and include costs and attorneys’fees.  The management of Apogee believesthe former employee’s claim to be without merit and the Company will defenditself vigorously against all of the claims asserted in this legal action.
| ITEM 2 - UNREGISTERED SALES OF EQUITY  SECURITIES AND USE OF PROCEEDS |
|-----------------------------------------------------------------------|
| ** **                                                            | ** ** |
| **None.**                                                             | ** ** |
| ** **                                                            | ** ** |
| **ITEM 3 - DEFAULTS UPON SENIOR  SECURITIES**                         |
|                                                                  |   |
| None.                                                                 |   |
| ** **                                                            | ** ** |
| **ITEM 4 - SUBMISSION OF MATTERS  TO A VOTE OF SECURITY HOLDERS**     |
|                                                                  |   |
| None.                                                                 |   |
| ** **                                                            | ** ** |
| **ITEM 5 - OTHER INFORMATION**                                        |
|                                                                  |   |
| None.                                                                 |   |
| ** **                                                            | ** ** |
| **ITEM 6 - EXHIBITS**                                                 |
|                                                                  |   |
| (a)                                                                   | Exhibits: |
|                                                                  |
| See Exhibit Index                                                |
|                                                                       |  |  |

 

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**SIGNATURES**

In accordance with the requirements of the SecuritiesExchange Act of 1934, as amended, the registrant has caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.
|                         | ** ** | **APOGEE  TECHNOLOGY, INC.**                               |   |             |
|-------------------------|------------|-----------------------------------------------------------------|--------|------------------|
|                    |       |                                                            |
| Date: May 15, 2007 |       | By:                                                             | /s/    | Herbert M. Stein |   |   |   |
|                    |       | Name: Herbert M.  Stein                                         |   |             |   |
|                    |       | Title: Chairman  of the Board,                                  |   |             |   |
|                    |       | President, Chief  Executive Officer                             |   |             |   |
|                    |       | (principal  executive officer)                                  |   |             |   |
|                    |       |                                                            |   |             |   |
|                    |       |                                                            |   |             |   |
| ** **              | ** ** | **APOGEE  TECHNOLOGY, INC.**                               |   |             |   |
|                    |       |                                                            |   |             |   |
| Date: May 15, 2007 |       | By:                                                             | /s/    | Paul J. Murphy   |   |   |   |   |
|                    |       | Name: Paul J.  Murphy                                           |   |             |   |
|                    |       | Title: Chief  Financial Officer and Vice President of Finance   |   |             |   |
|                    |       | (principal  financial officer and principal accounting officer) |   |             |   |
|                         |            |                                                                 |        |                  |  |  |  |  |  |  |  |

 

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FORM-10-QSB

MARCH 31,2007

**EXHIBIT INDEX**
| Exhibit  Number | ** ** | **Description**                                                                                                                    |
|-----------------|------------|------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                               |
| 31.1            |       | Certifications  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive  Officer.                             |
|            |       |                                                                                                                               |
| 31.2            |       | Certifications  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial  Officer.                        |
|            |       |                                                                                                                               |
| 32              |       | Statement  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief  Executive Officer and Chief Financial Officer. |

 

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