Semiconductor memory is a fundamental element of electronic systems. It is used in virtually every computing, communications, consumer electronics, defense, aerospace and industrial application. Some of the most memory-intensive applications include high-end PCs, servers, workstations, storage systems, routers, and switches. Other memory-intensive applications include mobile phones, personal digital assistants, digital cameras and digital audio players. Memory is particularly important in systems requiring greater processing power and higher functionality, and comprises a significant portion of the total cost of materials.

The market for memory is large and rapidly growing. In 2005, the most common type of memory, DRAM, generated $25.2 billion of revenue, or 51% of global memory revenue, according to the market research firm Gartner Dataquest. Gartner Dataquest further estimates that worldwide DRAM shipments will grow at a compound annual growth rate, or CAGR, of 54.6%, from 238 billion megabytes in 2005, to 1.36 trillion megabytes in 2009.

The market for servers is growing, and the amount of memory in these servers is increasing. For example, market research firm International Data Corporation, or IDC, expects server shipments to grow from 7.0 million in 2005 to 10.7 million in 2009, representing a CAGR of 10.9%, and the amount of DRAM memory in those servers is expected to increase at a higher CAGR of 26.4%. These market projections underscore the continuing importance of memory in electronic systems.

The Company has a portfolio of proprietary technologies and design techniques and has assembled an engineering team with expertise in semiconductor, PCB, memory subsystem and system design.

The Company was the first one to create a 1 gigabyte memory subsystem in a form factor of less than one inch in height. The Company utilizes advanced, proprietary techniques to optimize electronic signal strength and integrity within a PCB. These techniques include the use of 8- or 10-layer boards, matching conductive trace lengths, a minimized number of conductive connectors, or vias, and precise load balancing to, among other things, help reduce noise and crosstalk between adjacent traces.

The Company’s planar solutions are designed to provide high density solutions in a more cost-effective manner than traditional chip-stacking. The Company’s planar solutions achieve the same densities as chip-stacked modules but do so by leveraging its PCB design expertise to place ICs in two rows in the same plane rather than on top of each other. The Company’s planar memory subsystem designs feature high memory capacity with improved thermal characteristics by dissipating heat uniformly throughout the PCB.

The Company has designed blocks of custom logic that can be implemented in a stand-alone IC or integrated with other functional blocks in other ICs. The Company uses these custom logic blocks to effectively increase density and reduce costs by allowing the use of two current-generation, lower density DRAM ICs in lieu of a single next-generation higher density IC.

The Company uses its innovative and proprietary DRAM load simulators during the product development stage to carefully assess DRAM IC load balancing requirements in its memory subsystems. The Company’s DRAM load simulators are mounted in a memory subsystem in place of DRAM ICs to test the electronic signal strength and integrity of the memory design without disrupting signal quality.

The Company designs its memory subsystems to ensure effective heat dissipation. The Company uses thermal cameras to obtain thermal profiles of the memory subsystem during the design phase. The Company uses thermal simulation and modeling software to create comprehensive heat transfer models of its memory subsystems, which enables the engineers to quickly develop accurate solutions to potential thermal issues. The Company also develops and uses proprietary heat spreaders to enhance the thermal management characteristics of its memory subsystems.

Gross profit for the six months ended June 30, 2006 was $8.5 million, an increase of $6.3 million, or 290%, over the comparable period in 2005.

Research and development expenses for the six months ended June 30, 2006 were $1.5 million, a decrease of $0.4 million compared to the same period in 2005.

Selling, general and administrative expenses for the six months ended June 30, 2006 were $3.9 million, an increase of $1.6 million compared to the same period of 2005.

Other expense, net, for the first six months of 2006 was $0.9 million, an increase of $0.5 million compared to 2005.