##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from          to
 Commission file number 001-33391
 Veraz Networks, Inc.
  Delaware
    
    94-3409691(State or other jurisdiction of
    
    (I.R.S. Employer Identificationincorporation or organization)
    
    Number)
 926 Rock Avenue, Suite 20
San Jose, California 95131
(408) 750-9400
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



VERAZ NETWORKS, INC.
 FORM 10-Q
 For the Quarterly Period Ended June 30, 2008
 INDEX
 PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    21ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    30ITEM 4. CONTROLS AND PROCEDURES
    
    
    30PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    31ITEM 1A. RISK FACTORS
    
    
    31ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    47ITEM 3. DEFAULTS ON SENIOR SECURITIES
    
    
    47ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    47ITEM 5. OTHER INFORMATION
    
    
    48ITEM 6. EXHIBITS
    
    
    48SIGNATURES
    
    
    49EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 VERAZ NETWORKS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 (in thousands, except share and per share data)
 (Unaudited)
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    31,366
    
    
    $
    52,232Restricted cash
    
    
    618
    
    
    
    610Short-term investments
    
    
    6,336
    
    
    
    5,354Accounts receivable (net of allowances of $861 and $151 as
of June 30, 2008, and December 31, 2007, respectively)
    
    
    37,410
    
    
    
    40,814Inventories
    
    
    12,497
    
    
    
    9,505Prepaid expenses
    
    
    2,481
    
    
    
    1,497Deferred tax assets
    
    
    1,186
    
    
    
    410Other current assets
    
    
    3,796
    
    
    
    5,776Due from related parties
    
    
    892
    
    
    
    686Total current assets
    
    
    96,582
    
    
    
    116,884Property and equipment, net
    
    
    6,114
    
    
    
    6,720Other assets
    
    
    100
    
    
    
    143Total assets
    
    $
    102,796
    
    
    $
    123,747LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,498
    
    
    $
    11,066Accrued expenses
    
    
    12,238
    
    
    
    16,983Income tax payable
    
    
    117
    
    
    
    219Current portion of loan payable (net of unamortized discount
of $40 and $170 as of June 30, 2008, and December 31, 2007,
respectively)
    
    
    1,497
    
    
    
    3,147Deferred revenue
    
    
    15,364
    
    
    
    14,354Due to related parties
    
    
    9,523
    
    
    
    10,438Total current liabilities
    
    
    47,237
    
    
    
    56,207Commitments and contingencies (Note 10)Stockholders equity:Undesignated preferred stock, $0.001 par value; 10,000,000 and no
shares authorized; no shares issued and outstanding as of June 30,
2008 and December 31, 2007, respectively
    
    
    
    
    
    
    Common stock, $0.001 par value; 200,000,000 shares authorized;
42,140,456 and 41,100,459 shares issued and outstanding as of June
30, 2008 and December 31, 2007, respectively
    
    
    42
    
    
    
    41Additional paid-in capital
    
    
    126,738
    
    
    
    124,081Deferred stock-based compensation
    
    
    (192
    )
    
    
    (352
    )Accumulated other comprehensive loss
    
    
    (113
    )
    
    
    Accumulated deficit
    
    
    (70,916
    )
    
    
    (56,230
    )Total stockholders equity
    
    
    55,559
    
    
    
    67,540Total liabilities and stockholders equity
    
    $
    102,796
    
    
    $
    123,747
  3




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##### Table of Contents



VERAZ NETWORKS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:IP Products
    
    $
    9,696
    
    
    $
    21,369
    
    
    $
    30,440
    
    
    $
    39,019DCME Products
    
    
    1,239
    
    
    
    4,496
    
    
    
    2,815
    
    
    
    9,630Services
    
    
    5,332
    
    
    
    5,293
    
    
    
    10,895
    
    
    
    9,964Total revenues
    
    
    16,267
    
    
    
    31,158
    
    
    
    44,150
    
    
    
    58,613Cost of Revenues:IP Products
    
    
    4,775
    
    
    
    7,637
    
    
    
    13,183
    
    
    
    14,833DCME Products
    
    
    495
    
    
    
    1,166
    
    
    
    1,080
    
    
    
    3,287Services
    
    
    3,896
    
    
    
    3,055
    
    
    
    7,834
    
    
    
    5,753Total cost of revenues
    
    
    9,166
    
    
    
    11,858
    
    
    
    22,097
    
    
    
    23,873Gross profit
    
    
    7,101
    
    
    
    19,300
    
    
    
    22,053
    
    
    
    34,740Operating Expenses:Research and development (net
of grants from the Office of
the Chief Scientist in Israel
of $692 and $370 in the three
months ended June 30, 2008 and
2007, respectively,and $1.3
million and $736 in the six
months ended June 30, 2008 and
2007, respectively)
    
    
    7,262
    
    
    
    7,870
    
    
    
    15,135
    
    
    
    15,604Sales and marketing
    
    
    6,993
    
    
    
    6,976
    
    
    
    14,799
    
    
    
    12,939General and administrative
    
    
    5,690
    
    
    
    2,368
    
    
    
    8,626
    
    
    
    4,721Total operating expenses
    
    
    19,945
    
    
    
    17,214
    
    
    
    38,560
    
    
    
    33,264Income (loss) from
operations
    
    
    (12,844
    )
    
    
    2,086
    
    
    
    (16,507
    )
    
    
    1,476Other income (expense), net
    
    
    651
    
    
    
    305
    
    
    
    1,287
    
    
    
    105Income (loss) before
income taxes
    
    
    (12,193
    )
    
    
    2,391
    
    
    
    (15,220
    )
    
    
    1,581Provision (benefit) for income taxes
    
    
    (601
    )
    
    
    265
    
    
    
    (534
    )
    
    
    629Net income (loss)
    
    
    (11,592
    )
    
    
    2,126
    
    
    
    (14,686
    )
    
    
    952Deemed dividend on Series D convertible
preferred stock
    
    
    
    
    
    
    (5,980
    )
    
    
    
    
    
    
    (5,980
    )Net loss allocable to common
stockholders
    
    $
    (11,592
    )
    
    $
    (3,854
    )
    
    $
    (14,686
    )
    
    $
    (5,028
    )Net loss allocable to common
stockholders per share  basic and
diluted
    
    $
    (0.28
    )
    
    $
    (0.10
    )
    
    $
    (0.35
    )
    
    $
    (0.19
    )Weighted-average shares outstanding
used in computing net loss allocable to
common stockholders per share  basic
and diluted
    
    
    41,998
    
    
    
    39,727
    
    
    
    41,696
    
    
    
    26,899
 Related Party Transactions
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Revenues:IP Products, related party sales
    
    $
    5
    
    
    $
    84
    
    
    $
    59
    
    
    $
    109DCME Products, related party sales
    
    
    
    
    
    
    134
    
    
    
    
    
    
    
    279Cost of Revenues:IP Products, costs arising from related party purchases
    
    
    
    
    
    
    8
    
    
    
    184
    
    
    
    16DCME Products, costs arising from related party purchases
    
    
    447
    
    
    
    490
    
    
    
    982
    
    
    
    1,875Services, costs arising from related party purchases
    
    
    45
    
    
    
    
    
    
    
    90
    
    
    
    Operating Expenses:Research and development
    
    
    339
    
    
    
    544
    
    
    
    723
    
    
    
    1,213Sales and marketing
    
    
    758
    
    
    
    1,481
    
    
    
    1,555
    
    
    
    2,336General and administrative
    
    
    88
    
    
    
    93
    
    
    
    132
    
    
    
    206
  4




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VERAZ NETWORKS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 Six Months EndedJune 30,2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    (14,686
    )
    
    $
    952Adjustments to reconcile net income (loss) to net cash used in operating
activities:Depreciation
    
    
    1,749
    
    
    
    1,889Loss on disposal of property and equipment
    
    
    37
    
    
    
    Stock-based compensation
    
    
    2,303
    
    
    
    1,097Provision for doubtful accounts
    
    
    759
    
    
    
    (16
    )Amortization of debt issuance cost and accretion of loan payable
    
    
    129
    
    
    
    224Deferred income taxes
    
    
    (739
    )
    
    
    (166
    )Net changes in operating assets and liabilities:Accounts receivable
    
    
    2,645
    
    
    
    (12,044
    )Inventories
    
    
    (2,992
    )
    
    
    625Prepaid expenses and other current assets
    
    
    998
    
    
    
    (1,675
    )Due from related parties
    
    
    (206
    )
    
    
    744Accounts payable
    
    
    (2,741
    )
    
    
    3,268Accrued expenses
    
    
    (4,745
    )
    
    
    (1,484
    )Income tax payable
    
    
    (102
    )
    
    
    (146
    )Deferred revenue
    
    
    1,010
    
    
    
    (1,205
    )Due to related parties
    
    
    (915
    )
    
    
    (2,600
    )Net cash used in operating activities
    
    
    (17,496
    )
    
    
    (10,537
    )Cash flows from investing activities:Restricted cash
    
    
    (8
    )
    
    
    (101
    )Maturities and sales of short-term investments
    
    
    5,001
    
    
    
    Purchases of short-term investments
    
    
    (5,981
    )
    
    
    (3,070
    )Purchases of property and equipment, net
    
    
    (1,007
    )
    
    
    (912
    )Other assets
    
    
    4
    
    
    
    58Net cash used in investing activities
    
    
    (1,991
    )
    
    
    (4,025
    )Cash flows from financing activities:Proceeds from the exercise of stock options
    
    
    515
    
    
    
    338Proceeds from sale of common stock in connection with the Companys initial public offering
    
    
    
    
    
    
    54,000Proceeds from sale of Series D convertible preferred stock
    
    
    
    
    
    
    3,449Issuance cost for Series D convertible preferred stock
    
    
    
    
    
    
    (34
    )Payment of offering costs
    
    
    
    
    
    
    (4,610
    )Redemption of redeemable preferred stock
    
    
    
    
    
    
    (14
    )Repayment of loan
    
    
    (1,779
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (1,264
    )
    
    
    53,129Effect of exchange rate changes
    
    
    (115
    )
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (20,866
    )
    
    
    38,567Cash and cash equivalents at beginning of period
    
    
    52,232
    
    
    
    23,189Cash and cash equivalents at end of period
    
    $
    31,366
    
    
    $
    61,756Supplemental disclosure of cash flow information:Cash paid:Interest
    
    $
    127
    
    
    $
    205Income taxes
    
    $
    346
    
    
    $
    440Non-cash financing activities:Deemed dividend on Series D convertible preferred stock
    
    $
    
    
    
    $
    5,980
  5




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VERAZ NETWORKS, INC. AND SUBSIDIARIES
 
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 NOTE 1  THE COMPANY
  NOTE 2  BASIS OF PRESENTATION
    NOTE 3  SIGNIFICANT ACCOUNTING POLICIES
  (a) Use of Estimates
  (b) Concentrations
  6




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(c) Revenue Recognition
  Reporting Revenue Gross as a Principal versus Net as an
Agent
 Revenue Recognition Revenue Arrangements with
Multiple Deliverables.
  Software
Revenue Recognition Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions.
  7




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8




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(d) Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB Opinion No. 25 Accounting for Stock-Based Compensation Accounting for Stock-Based  Compensation Transition and Disclosure
   9




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Share-Based Payment
 Disclosure About Fair Value of Financial Instruments
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Expected term in years
    
    

    6.06

    
    

    6.25

    
    

    6.06

    
    
    6.25Risk-free interest rate
    
    

    3.68
    %

    

    4.69
    %

    

    3.68
    %

    
4.72
    %Volatility
    
    

    61
    %

    

    73
    %

    

    61
    %

    
    73
    %Dividend yield
    
    

    

    
    

    

    
    

    
    

    
    Estimated fair value
per share of
underlying common
stock
    
    

    $1.92

    
    

    $7.00

    
    

    $1.92

    
    
    $8.55
    10




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(e) Net Loss Allocable to Common Stockholders per Share
 Earnings per Share
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Stock options
    
    
    3,029,102

    
    
    5,869,924

    
    
    3,521,601

    
    
    5,859,710Stock options granted outside of plans
    
    
    49,693

    
    
    56,549

    
    
    52,703

    
    
    56,549Restricted stock units
    
    
    

    
    
    

    
    
    

    
    
    
 Participating Securities and the Two-Class Method
under FASB Statement 128
  (f) Investments
  11




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(g) Government-Sponsored Research and Development
  (h) Comprehensive Income (Loss)
 Reporting Comprehensive Income
 (i) Recent Accounting Pronouncements
  Disclosures about Derivative Instruments and
Hedging Activities Accounting for Derivative Instruments and Hedging Activities,
 Fair Value Measurements
 NOTE 4  FINANCIAL INSTRUMENTS
  Level 1:
    
    
    
    Unadjusted quoted prices in active markets for identical assets or liabilitiesLevel 2:
    
    
    
    Unadjusted quoted prices in active markets for similar assets or liabilities,
or unadjusted quoted prices for identical or similar assets or liabilities in
markets that are not active, or inputs other than quoted prices that are
observable for the assets or liabilityLevel 3:
    
    
    
    Unobservable inputs for the asset or liability
  12




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Fair Value at Reporting Date UsingTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Fixed income available-for-sale securities
    
    $
    23,754
    
    
    $
    
    
    
    $
    23,754
    
    
    $
    
  NOTE 5  RELATED PARTY TRANSACTIONS
     13




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NOTE 6  SHORT-TERM INVESTMENTS
  Amortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain (Loss)
    
    
    ValueBonds, notes and
other securities
issued by the
United States
government and
agencies
    
    $
    4,712
    
    
    
    2
    
    
    $
    4,714Commercial paper
    
    
    922
    
    
    
    
    
    
    
    922Corporate bonds
    
    
    700
    
    
    
    
    
    
    
    700$
    6,334
    
    
    $
    2
    
    
    $
    6,336
 14




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NOTE 7  INVENTORIES
  June 30,
    
    
    December 31,2008
    
    
    2007Finished products
    
    $
    4,876
    
    
    $
    2,760Work in process at customers locations
    
    
    3,935
    
    
    
    3,084Raw material and components
    
    
    3,686
    
    
    
    3,661$
    12,497
    
    
    $
    9,505
  Restatement and
Revision of Accounting Research Bulletins, Chapter 4: Inventory Pricing
 NOTE 8  FACTORING
 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
  NOTE 9  LOAN
   15




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Interest on Receivables and Payables
  NOTE 10  COMMITMENTS AND CONTINGENCIES
 (a) Leases
  Six months ending December 31, 2008
    
    $
    1,309Year ending December 31, 2009
    
    
    2,032Year ending December 31, 2010
    
    
    1,826Year ending December 31, 2011
    
    
    859Year ending December 31, 2012
    
    
    515Total
    
    $
    6,541
 (b) Office of the Chief Scientist Grants
  (c) Guarantees
   16




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(d) Purchase Commitments
  (e) SEC Investigation
   NOTE 11  INCOME TAXES
   Accounting for Uncertainty in Income
 Taxes  an interpretation of FASB Statement No. 109
  17




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NOTE 12  STOCKHOLDERS EQUITY
 (a) Employee Benefit Plans
      (b) Stock Award Activity
  18




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WeightedNumber of
    
    
    
    
    
    
    
    
    
    AverageShares
    
    Number of
    
    Weighted
    
    Contractual
    
    AggregateAvailable
    
    Options
    
    Average
    
    Life
    
    Intrinsicfor Grant
    
    Outstanding
    
    Exercise Price
    
    (in Years)
    
    ValueBalance at December 31, 2007
    
    
    82,815
    
    
    
    6,766,352
    
    
    $
    1.39Authorized
    
    
    2,433,013
    
    
    
    Restricted stock units granted
    
    
    (1,059,105
    )
    
    
    Restricted stock units cancelled and forfeited
    
    
    72,117
    
    
    
    Options granted
    
    
    (120,000
    )
    
    
    120,000
    
    
    $
    1.92Options exercised
    
    
    
    
    
    
    (937,100
    )
    
    $
    0.55Options cancelled and forfeited
    
    
    196,987
    
    
    
    (196,987
    )
    
    $
    2.57Balance at June 30, 2008
    
    
    1,605,827
    
    
    
    5,752,265
    
    
    $
    1.50
    
    
    
    6.28
    
    
    $
    4,388Options vested and expected to vest at June 30, 2008
    
    
    
    
    
    
    5,700,352
    
    
    $
    1.48
    
    
    
    6.27
    
    
    $
    4,384Options exercisable at June 30, 2008
    
    
    
    
    
    
    4,543,816
    
    
    $
    1.06
    
    
    
    5.89
    
    
    $
    4,132
   NOTE 13  SEGMENT AND GEOGRAPHIC INFORMATION
 Disclosures about Segments of an Enterprise and Related Information
 19




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Europe, Middle East and Africa
    
    $
    8,287
    
    
    $
    15,557
    
    
    $
    23,312
    
    
    $
    30,553North America
    
    
    3,412
    
    
    
    9,064
    
    
    
    7,956
    
    
    
    13,818Asia Pacific and India
    
    
    1,715
    
    
    
    4,070
    
    
    
    7,153
    
    
    
    8,559Caribbean and Latin America
    
    
    2,853
    
    
    
    2,467
    
    
    
    5,729
    
    
    
    5,683$
    16,267
    
    
    $
    31,158
    
    
    $
    44,150
    
    
    $
    58,613Foreign countries which contributed more than 10% of revenues:
    
    Russia
    
    Russia
    
    Russia
    
    Russia
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Sales originating from:United States
    
    $
    7,527
    
    
    $
    16,162
    
    
    $
    21,137
    
    
    $
    30,203Israel
    
    
    7,704
    
    
    
    13,042
    
    
    
    19,550
    
    
    
    24,459Other foreign countries
    
    
    1,036
    
    
    
    1,954
    
    
    
    3,463
    
    
    
    3,951$
    16,267
    
    
    $
    31,158
    
    
    $
    44,150
    
    
    $
    58,613
 June 30,
    
    
    December 31,2008
    
    
    2007Long-lived assets, net:United States
    
    $
    2,585
    
    
    $
    3,121Israel
    
    
    2,964
    
    
    
    3,067Other foreign countries
    
    
    565
    
    
    
    532$
    6,114
    
    
    $
    6,720
 NOTE 14  SUBSEQUENT EVENT
    20




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis should be read in conjunction with our Consolidated Financial
Statements and Notes thereto for the year ended December 31, 2007, included in our Annual Report on
Form 10-K, filed with the Securities and Exchange Commission on March 14, 2008. The discussion in
this Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and
uncertainties, such as statements of our future financial operating results, plans, objectives,
expectations and intentions. Our actual results could differ materially from those discussed here.
See Risk Factors in Item 1A of Part II for factors that could cause future results to differ
materially.
 Overview
       21




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Critical Accounting Policies and Estimates
  Results of Operations
 Comparison of Three Months Ended June 30, 2008 and 2007
 Revenues
 Three Months Ended June 30,2008
    
    
    2007Percentage
    
    
    
    
    
    
    Percentageof Total
    
    
    
    
    
    
    of Total
    
    
    Period-to-Period ChangeAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Percentage(dollars in thousands)Revenues:IP Products
    
    $
    9,696
    
    
    
    60
    %
    
    $
    21,369
    
    
    
    69
    %
    
    $
    (11,673
    )
    
    
    (55
    )%DCME Products
    
    
    1,239
    
    
    
    7
    
    
    
    4,496
    
    
    
    14
    
    
    
    (3,257
    )
    
    
    (72
    )%Services
    
    
    5,332
    
    
    
    33
    
    
    
    5,293
    
    
    
    17
    
    
    
    39
    
    
    
    1
    %Total revenues
    
    $
    16,267
    
    
    
    100
    %
    
    $
    31,158
    
    
    
    100
    %
    
    $
    (14,891
    )
    
    
    (48
    )%Revenue by Geography:Europe, Middle East and Africa
    
    $
    8,287
    
    
    
    51
    %
    
    $
    15,557
    
    
    
    50
    %
    
    $
    (7,270
    )
    
    
    (47
    )%North America
    
    
    3,412
    
    
    
    21
    
    
    
    9,064
    
    
    
    29
    
    
    
    (5,652
    )
    
    
    (62
    )%Asia Pacific and India
    
    
    1,715
    
    
    
    10
    
    
    
    4,070
    
    
    
    13
    
    
    
    (2,355
    )
    
    
    (58
    )%Caribbean and Latin America
    
    
    2,853
    
    
    
    18
    
    
    
    2,467
    
    
    
    8
    
    
    
    386
    
    
    
    16
    %Total revenues
    
    $
    16,267
    
    
    
    100
    %
    
    $
    31,158
    
    
    
    100
    %
    
    $
    (14,891
    )
    
    
    (48
    )%
     22




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Cost of Revenues and Gross Profit
 Three Months Ended June 30,2008
    
    
    2007Percentage
    
    
    
    
    
    
    Percentageof Total
    
    
    
    
    
    
    of Total
    
    
    Period-to-Period ChangeAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Percentage(dollars in thousands)Cost of Revenues:IP Products
    
    $
    4,775
    
    
    
    49
    %
    
    $
    7,637
    
    
    
    36
    %
    
    $
    (2,862
    )
    
    
    (37
    )%DCME Products
    
    
    495
    
    
    
    40
    %
    
    
    1,166
    
    
    
    26
    %
    
    
    (671
    )
    
    
    (58
    )%Services
    
    
    3,896
    
    
    
    73
    %
    
    
    3,055
    
    
    
    58
    %
    
    
    841
    
    
    
    28
    %Total cost of revenues
    
    $
    9,166
    
    
    
    56
    %
    
    
    11,858
    
    
    
    38
    %
    
    $
    (2,692
    )
    
    
    (23
    )%Gross Profit:IP Products
    
    $
    4,921
    
    
    
    51
    %
    
    $
    13,732
    
    
    
    64
    %
    
    $
    (8,811
    )
    
    
    (64
    )%DCME Products
    
    
    744
    
    
    
    60
    %
    
    
    3,330
    
    
    
    74
    %
    
    
    (2,586
    )
    
    
    (78
    )%Services
    
    
    1,436
    
    
    
    27
    %
    
    
    2,238
    
    
    
    42
    %
    
    
    (802
    )
    
    
    (36
    )%Total gross profit
    
    $
    7,101
    
    
    
    44
    %
    
    $
    19,300
    
    
    
    62
    %
    
    $
    (12,199
    )
    
    
    (63
    )%
 Cost of Revenues.
   Gross Profit.
 Gross Margin.
  23




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Operating Expenses
 Three Months Ended June 30,2008
    
    
    2007Percentage
    
    
    
    
    
    
    Percentageof Total
    
    
    
    
    
    
    of Total
    
    
    Period-to-Period ChangeAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Percentage(dollars in thousands)Research and development,
net
    
    $
    7,262
    
    
    
    45
    %
    
    $
    7,870
    
    
    
    25
    %
    
    $
    (608
    )
    
    
    (8
    )%Sales and marketing
    
    
    6,993
    
    
    
    43
    %
    
    
    6,976
    
    
    
    22
    %
    
    
    17
    
    
    
    0
    %General and administrative
    
    
    5,690
    
    
    
    35
    %
    
    
    2,368
    
    
    
    8
    %
    
    
    3,322
    
    
    
    140
    %Total operating expenses
    
    $
    19,945
    
    
    
    123
    %
    
    $
    17,214
    
    
    
    55
    %
    
    $
    2,731
    
    
    
    16
    %
 Research and development expenses, net.
  Sales and marketing expenses.
  General and administrative expenses.
 24




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Other income (expense), net.
 Provision
(benefit) for income taxes
 Net income (loss).
 Deemed dividend on Series D convertible preferred stock.
 Comparison of Six Months Ended June 30, 2008 and 2007
 Revenues
 Six Months Ended June 30,2008
    
    
    2007Percentage
    
    
    
    
    
    
    Percentageof Total
    
    
    
    
    
    
    of Total
    
    
    Period-to-Period ChangeAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Percentage(dollars in thousands)Revenues:IP Products
    
    $
    30,440
    
    
    
    69
    %
    
    $
    39,019
    
    
    
    67
    %
    
    $
    (8,579
    )
    
    
    (22
    )%DCME Products
    
    
    2,815
    
    
    
    6
    
    
    
    9,630
    
    
    
    16
    
    
    
    (6,815
    )
    
    
    (71
    )%Services
    
    
    10,895
    
    
    
    25
    
    
    
    9,964
    
    
    
    17
    
    
    
    931
    
    
    
    9
    %Total revenues
    
    $
    44,150
    
    
    
    100
    %
    
    $
    58,613
    
    
    
    100
    %
    
    $
    (14,463
    )
    
    
    (25
    )%Revenue by Geography:Europe, Middle East
and Africa
    
    $
    23,312
    
    
    
    53
    %
    
    $
    30,553
    
    
    
    52
    %
    
    $
    (7,241
    )
    
    
    (24
    )%North America
    
    
    7,956
    
    
    
    18
    
    
    
    13,818
    
    
    
    24
    
    
    
    (5,862
    )
    
    
    (42
    )%Asia Pacific and India
    
    
    7,153
    
    
    
    16
    
    
    
    8,559
    
    
    
    14
    
    
    
    (1,406
    )
    
    
    (16
    )%Caribbean and Latin
America
    
    
    5,729
    
    
    
    13
    
    
    
    5,683
    
    
    
    10
    
    
    
    46
    
    
    
    1
    %Total revenues
    
    $
    44,150
    
    
    
    100
    %
    
    $
    58,613
    
    
    
    100
    %
    
    $
    (14,463
    )
    
    
    (25
    )%
 25




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Cost of Revenues and Gross Profit
 Six Months Ended June 30,2008
    
    
    2007Percentage
    
    
    
    
    
    
    Percentageof Total
    
    
    
    
    
    
    of Total
    
    
    Period-to-Period ChangeAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Percentage(dollars in thousands)Cost of Revenues:IP Products
    
    $
    13,183
    
    
    
    43
    %
    
    $
    14,833
    
    
    
    38
    %
    
    $
    (1,650
    )
    
    
    (11
    )%DCME Products
    
    
    1,080
    
    
    
    38
    %
    
    
    3,287
    
    
    
    34
    %
    
    
    (2,207
    )
    
    
    (67
    )%Services
    
    
    7,834
    
    
    
    72
    %
    
    
    5,753
    
    
    
    58
    %
    
    
    2,081
    
    
    
    36
    %Total cost of revenues
    
    $
    22,097
    
    
    
    50
    %
    
    
    23,873
    
    
    
    41
    %
    
    $
    (1,776
    )
    
    
    (7
    )%Gross Profit:IP Products
    
    $
    17,257
    
    
    
    57
    %
    
    $
    24,186
    
    
    
    62
    %
    
    $
    (6,929
    )
    
    
    (29
    )%DCME Products
    
    
    1,735
    
    
    
    62
    %
    
    
    6,343
    
    
    
    66
    %
    
    
    (4,608
    )
    
    
    (73
    )%Services
    
    
    3,061
    
    
    
    28
    %
    
    
    4,211
    
    
    
    42
    %
    
    
    (1,150
    )
    
    
    (27
    )%Total gross profit
    
    $
    22,053
    
    
    
    50
    %
    
    $
    34,740
    
    
    
    59
    %
    
    $
    (12,687
    )
    
    
    (37
    )%
 Cost of Revenues.
  26




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Gross Profit.
 Gross Margin.
    Operating Expenses
 Six Months Ended June 30,2008
    
    
    2007Percentage
    
    
    
    
    
    
    Percentageof Total
    
    
    
    
    
    
    of Total
    
    
    Period-to-Period ChangeAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Percentage(dollars in thousands)Research and development,
net
    
    $
    15,135
    
    
    
    34
    %
    
    $
    15,604
    
    
    
    27
    %
    
    $
    (469
    )
    
    
    (3
    )%Sales and marketing
    
    
    14,799
    
    
    
    34
    %
    
    
    12,939
    
    
    
    22
    %
    
    
    1,860
    
    
    
    14
    %General and administrative
    
    
    8,626
    
    
    
    19
    %
    
    
    4,721
    
    
    
    8
    %
    
    
    3,905
    
    
    
    83
    %Total operating expenses
    
    $
    38,560
    
    
    
    87
    %
    
    $
    33,264
    
    
    
    57
    %
    
    $
    5,296
    
    
    
    16
    %
 Research and development expenses, net.
 27




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Sales and marketing expenses.
  General and administrative expenses.
  Other income (expense), net.
 Provision
(benefit) for income taxes
 Net income (loss).
 Deemed dividend on Series D convertible preferred stock.
 Liquidity and Capital Resources
  28




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Operating Activities
    Investing Activities
    Financing Activities
    29




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Contractual Obligations and Commitments
  July 1, 2008
    
    
    January 1, 2009
    
    
    January 1, 2010
    
    
    January 1, 2011through
    
    
    through
    
    
    through
    
    
    throughTotal
    
    
    December 31, 2008
    
    
    December 31, 2009
    
    
    December 31, 2010
    
    
    December 31, 2012Contractual Obligations:Debt obligations
    
    $
    1,569
    
    
    $
    1,569
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating lease obligations
    
    
    6,541
    
    
    
    1,309
    
    
    
    2,032
    
    
    
    1,826
    
    
    
    1,374Purchase obligations
    
    
    3,136
    
    
    
    3,136
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    11,246
    
    
    $
    6,014
    
    
    $
    2,032
    
    
    $
    1,826
    
    
    $
    1,374
 Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Currency Risk
  Interest Rate Sensitivity
   
 ITEM 4. CONTROLS AND PROCEDURES
 Limitations of Disclosure Controls and Procedures and Internal Control Over Financial Reporting
  Disclosure Controls and Procedures
  30




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Risks Related to Our Business
 We
commenced a restructuring initiative during the third quarter of 2008 to streamline our
operations and to reduce our overall cash burn rate. The restructuring may impact our ability to
execute our business plan and may not achieve the sought after cash reductions.
  We received a letter regarding a confidential informal inquiry by the SEC, and cooperation
with such governmental inquiry has and will continue to cost significant amounts of money and
management resources.
  31




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We have not been in compliance with SEC reporting requirements and may continue to face compliance
issues with such regulatory bodies. If we are unable to remain in compliance with SEC reporting
requirements and NASDAQ listing requirements our business will be
harmed.
  If we fail to continue to comply with the listing requirements of NASDAQ, the price of our common
stock and our ability to access the capital markets could be negatively impacted.
 
 An informal inquiry by the SEC may result in charges filed against us and in fines or
penalties.
  The demand for our solutions depends in large part on continued capital spending in the
telecommunications equipment industry. A decline in demand, or a decrease or delay in capital
spending by service providers, could have a material adverse effect on our results of operations.
  
    
    capital spending levels of service providers;
    
    competition among service providers;
    
    pricing pressures in the telecommunications equipment market;
    
    end user demand for new services;
    
    service providers emphasis on generating revenues from traditional infrastructure
instead of migrating to emerging networks and technologies;
    
    lack of or evolving industry standards;
    
    consolidation in the telecommunications industry;
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
    
    changes in the regulation of communications services; and
    
    general global economic conditions including a general global recession or other general
decrease in corporate spending.
  Our success depends in large part on continued migration to an IP network architecture for
interactive communications. If the migration to IP networks does not occur or if it occurs more
slowly than we expect, our operating results would be harmed.
  We have not had sustained profits and our losses could continue.
  We face intense competition from the leading telecommunications networking companies in the world
as well as from emerging companies. If we are unable to compete effectively, we might not be able
to achieve sufficient market penetration, revenue growth or profitability.
   33




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##### Table of Contents




    
    provide extremely high reliability, compression rates and voice quality;
    
    scale and deploy easily and efficiently;
    
    interoperate with existing network designs and other vendors equipment;
    
    support existing and emerging industry, national and international standards;
    
    provide effective network management;
    
    are accompanied by comprehensive customer support and professional services;
    
    provide a cost-effective and space efficient solution for service providers; and
    
    offer a broad array of services.
  We currently conduct a significant amount of business with ECI Telecom Ltd., or ECI. If our
relationship with ECI is adversely affected for any reason our business could be harmed and our
results of operations would likely be negatively affected.
     34




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##### Table of Contents



ECI beneficially owns a significant percentage of our common stock, which will allow ECI to
significantly influence us and matters requiring stockholder approval and could discourage
potential acquisitions of our company.
  Our revenue and operating results may be adversely impacted if sales of our IP products and other
products are unstable and if revenue from our DCME products continues to fluctuate and if the mix between
new sales and expansion sales changes substantially.
  Our accountants identified and reported to us material weaknesses for the years ended December 31,
2003, 2004 and 2005, relating to our internal controls over financial reporting and significant
deficiencies for the year ended December 31, 2006. If we fail to maintain proper and effective
internal controls, our ability to produce accurate financial statements could be impaired, which
could adversely affect our operating results, our ability to operate our business and our stock
price.
      35




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The largest customers in the telecommunications industry have substantial negotiating leverage,
which may require that we agree to terms and conditions that are less advantageous to us than the
terms and conditions of our existing customer relationships or risk limiting our ability to sell
our products to these large service providers, thereby harming our operating results.
   Consolidation or downturns in the telecommunications industry may affect demand for our products
and the pricing of our products which could limit our growth and may harm our business.
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If we fail to anticipate and meet specific customer requirements or if our products fail to
interoperate with our customers existing networks or with existing and emerging industry,
national and international standards, we may not be able to retain our current customers or
attract new customers.
   We expect that a majority of the revenues generated from our products, especially our IP products,
including our ControlSwitch, will be generated from a limited number of customers. If we lose
customers or are unable to grow and diversify our customer base, our revenues may fluctuate and
our growth likely would be limited.
  
    
    consolidation in the telecommunications industry affecting our customers;
    
    unwillingness of customers to implement our new products or renew contracts as they expire;
    
    potential customer concerns about our status as an emerging telecommunications equipment
vendor;
    
    delays or difficulties that we may experience in the development, introduction and/or
delivery of products or product enhancements;
    
    deterioration in the general financial condition (including bankruptcy filings) of our
customers;
    
    new product introductions by our competitors;
    
    geopolitical risks and uncertainties in countries where our customers or our own facilities are
located; or
    
    failure of our products to perform as expected.
 Our quarterly operating results have fluctuated significantly in the past and may continue to
fluctuate in the future, which could lead to volatility in the price of our common stock.
  
    
    fluctuation in demand for our products and the timing and size of customer orders;
 37




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
    
    the length and variability of the sales cycle for our products;
    
    new product introductions and enhancements by our competitors and us;
    
    our ability to develop, introduce and ship new products and product enhancements that
meet customer requirements in a timely manner;
    
    the mix of product configurations sold and the mix of sales to new customers and expansion
sales to existing customers;
    
    our ability to obtain sufficient supplies of sole or limited source components;
    
    our ability to attain and maintain production volumes and quality levels for our products;
    
    costs related to acquisitions of complementary products, technologies or businesses;
    
    changes in our pricing policies, the pricing policies of our competitors and the prices of the
components of our products;
    
    the timing of revenue recognition, amount of deferred revenues and receivables collections;
    
    difficulties or delays in deployment of customer IP networks that would delay anticipated
customer purchases of additional products and services;
    
    general economic conditions, as well as those specific to the telecommunications, networking
and related industries;
    
    consolidation within the telecommunications industry, including acquisitions of or by our
customers; and
    
    the failure of certain of our customers to successfully and timely reorganize their
operations, including emerging from bankruptcy.
     If we do not respond rapidly to technological changes or to changes in industry standards, our
products could become obsolete.
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Because our products are sophisticated and designed to be deployed in complex environments and in
multiple locations, they may have errors or defects that we find only after full deployment. If
these errors lead to customer dissatisfaction or we are unable to establish and maintain a support
infrastructure and required support levels to service these complex environments, our business may
be seriously harmed.
  
    
    cancellation of orders or other losses of, or delays in, revenues;
    
    loss of customers and market share;
    
    harm to our reputation;
    
    a failure to attract new customers or achieve market acceptance for our products;
    
    increased service, support and warranty costs and a diversion of development resources;
    
    increased insurance costs and losses to our business and service provider customers; and
    
    costly and time-consuming legal actions by our customers.
   
    
    loss of customers and market share;
    
    a failure to attract new customers in new geographies;
    
    increased service, support and warranty costs and a diversion of development resources; and
    
    network performance penalties.
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The long and variable sales and deployment cycles for our products may cause our operating results
to vary materially, which could result in a significant unexpected revenue shortfall in any given
quarter.
   We rely on channel partners for a significant portion of our revenue. Our failure to effectively
develop and manage these third party distributors, systems integrators and resellers specifically
and our indirect sales channel generally, and disruptions to the processes and procedures that
support our indirect sales channels could adversely affect our ability to generate revenues from
the sale of our products.
     We may face risks associated with our international sales that could impair our ability to grow
our revenues.
  40




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##### Table of Contents




    
    difficulty enforcing contracts and collecting accounts receivable in foreign jurisdictions,
leading to longer collection periods;
    
    certification and qualification requirements relating to our products;
    
    the impact of recessions in economies outside the United States;
    
    unexpected changes in foreign regulatory requirements, including import and export
regulations, and currency exchange rates;
    
    certification and qualification requirements for doing business in foreign jurisdictions;
    
    inadequate protection for intellectual property rights in certain countries;
    
    less stringent adherence to ethical and legal standards by prospective customers in
certain foreign countries, including compliance with the Foreign Corrupt Practices Act;
    
    potentially adverse tax consequences;
    
    unfavorable foreign exchange movements, particularly the continued devaluation of the US
dollar, which could result in decreased revenues and/or increased expenses; and
    
    political and economic instability.
 Maintaining
and improving our financial controls and the requirements of being a
public company may
strain our resources, divert managements attention and affect our ability to attract and retain
qualified board members.
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If we lose the services of one or more members of our current executive management team or other
key employees, or if we are unable to attract additional executives or key employees, we may not be
able to execute on our business strategy.
    We have no internal hardware manufacturing capabilities and we depend exclusively upon contract
manufacturers to manufacture our hardware products. Our failure to successfully manage our
relationships with Flextronics, ECI or other replacement contract manufacturers would impair our
ability to deliver our products in a manner consistent with required volumes or delivery
schedules, which would likely cause us to fail to meet the demands of our customers and damage our
customer relationships.
    We and our contract manufacturers rely on single or limited sources for the supply of some
components of our products and if we fail to adequately predict our manufacturing requirements or
if our supply of any of these components is disrupted, we will be unable to ship our products on a
timely basis, which would likely cause us to fail to meet the demands of our customers and damage
our customer relationships.
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Failure to manage expenses and inventory risks associated with meeting the demands of our
customers may adversely affect our business or results of operations.
  If we are not able to obtain necessary licenses of third-party technology at acceptable prices, or
at all, our products could become obsolete.
  Failures by our strategic partners or by us in integrating our products with those provided by our
strategic partners could seriously harm our business.
  
    
    a loss of, or delay in, recognizing revenues;
    
    increased service, support and warranty costs and a diversion of development resources; and
    
    network performance penalties.
  
    
    a loss of customers and market share; and
    
    a failure to attract new customers or achieve market acceptance for our products.
 Our ability to compete and our business could be jeopardized if we are unable to protect our
intellectual property.
  43




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Possible third-party claims of infringement of proprietary rights against us could have a material
adverse effect on our business, results of operation or financial condition.
  
    
    stop selling, incorporating or using our products that use the challenged intellectual
property;
    
    obtain from the owner of the infringed intellectual property right a license to sell or
use the relevant technology, which license may not be available on reasonable terms, or at
all; or
    
    redesign those products that use any allegedly infringing technology.
  Regulation of the telecommunications industry could harm our operating results and future
prospects.
  Compliance with regulations and standards applicable to our products may be time consuming,
difficult and costly, and if we fail to comply, our product sales will decrease.
   44




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Failure of our hardware products to comply with evolving industry standards and complex government
regulations may prevent our hardware products from gaining wide acceptance, which may prevent us
from growing our sales.
   We have invested substantially in our enhanced access switching solution and we may be unable
to achieve and maintain substantial sales.
  Future interpretations of existing accounting standards could adversely affect our operating
results.
  Software Revenue Recognition Software
Revenue Recognition with Respect to Certain Transactions
 
    
    software arrangements that include undelivered elements for which we do not have vendor
specific objective evidence, or VSOE, of fair value;
    
    requirements that we deliver services for significant enhancements and modifications to
customize our software for a particular customer;
 45




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
    
    material acceptance criteria or other identified product-related issues; or
    
    payment terms extending beyond our customary terms.
  Product liability claims related to our customers networks could result in substantial costs.
  Increased political, economic and social instability in the Middle East, may adversely affect our
business and operating results.
    Our operations may be disrupted by the obligations of our personnel to perform military service.
  46




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The grants we have received from the Israeli government for certain research and development
expenditures restrict our ability to manufacture products and transfer technologies outside of
Israel and require us to satisfy specified conditions. If we fail to satisfy these conditions, we
may be required to refund grants previously received together with interest and penalties.
   
    
    we could be required to pay the OCS a portion of the consideration we receive upon any
transfer of such technology or upon an acquisition of our Israeli subsidiary by an entity
that is not Israeli. Among the factors that may be taken into account by the OCS in
calculating the payment amount are the scope of the support received, the royalties that
were paid by us, the amount of time that elapsed between the date on which the know-how was
transferred and the date on which the grants were received, as well as the sale price; and
    
    the transfer of manufacturing rights could be conditioned upon an increase in the royalty
rate and payment of increased aggregate royalties and payment of interest on the grant
amount.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (a) Sales of Unregistered Securities
  (b) Use of Proceeds from Public Offering of Common Stock
  
 ITEM 3. DEFAULTS ON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   47




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Director
    

    Votes For
    


    WithheldDror Nahumi
    
    
    40,085,830
    
    
    
    296,160W. Michael West
    
    
    40,098,330
    
    
    
    283,660
   For
    

    Against
    


    Abstain
    


    Broker Non-Votes19,570,863
    
    
    15,382,364
    
    
    
    1,108
    
    
    
    5,427,655
   For
    

    Against
    


    Abstain40,295,706
    
    
    45,442
    
    
    
    40,842
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  Exhibit
    
    Description of document3.1
    
    Amended and Restated Certificate of Incorporation of the Registrant (1)3.2
    
    Amended and Restated Bylaws of the Registrant (1)4.1
    
    Reference is made to Exhibits 3.1 and 3.24.2
    
    Specimen stock certificate (1)31.1
    
    Certification of Chief Executive Officer, pursuant to Securities
Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer, pursuant to Securities
Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Filed as an exhibit to Veraz Networks, Inc. Registration Statement on
Form S-1 (No. 333-138121) and incorporated herein by reference. 48




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SIGNATURE
  Veraz Networks, Inc.Date: August 14, 2008
    By:
    /s/ Al WoodAl Wood, Chief Financial Officer(Principal Financial and Chief Accounting Officer) 49




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EXHIBIT INDEX
 Exhibit
    
    Description of document3.1
    
    Amended and Restated Certificate of Incorporation of the Registrant (1)3.2
    
    Amended and Restated Bylaws of the Registrant (1)4.1
    
    Reference is made to Exhibits 3.1 and 3.24.2
    
    Specimen stock certificate (1)31.1
    
    Certification of Chief Executive Officer, pursuant to Securities
Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer, pursuant to Securities
Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 
 
 50