November 18, 2005
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Kate Tillan, Assistant Chief Accountant
Re: Sierra Monitor Corporation
Form 10-KSB for the Fiscal Year Ended December 31, 2004
Forms 10-QSB for the Fiscal Quarters Ended
March 31, 2005 and June 30, 2005
File No. 0-07441
Dear Ms. Tillan:
Sierra Monitor Corporation (the "Company") is submitting this letter in
response to the Securities and Exchange Commission's (the "Commission") letter
dated October 12, 2005 (the "Comment Letter"). For your convenience, we have
repeated your comments 1 through 8 below and the headings and numbered responses
in this response letter correspond to the headings and numbered comments
contained in the Comment Letter. Please feel free to contact me at the number at
the end of this response letter with any further questions or comments you may
have.
Form 10-KSB for the Fiscal Year Ended December 31, 2004
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Financial Statements, page F-1
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Note 1 - Summary of the Company and Significant Accounting Policies, page F-6
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Revenue Recognition, page F-8
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1. Please tell us and revise future filings to disclose how you recognize
revenue from each type of product and service you provide to customers,
identifying in each instance those events that would indicate that each
criterion outlined in SAB Topic 13.A has been met.
Response:
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In response to the Staff's comment, we supplementally advise the Staff that
according to Topic 13: Revenue Recognition of Staff Accounting Bulleting ("SAB")
No. 104, "Revenue Recognition," revenue generally is realized or realizable and
earned when all of the following criteria are met:
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 2
A) persuasive evidence of an arrangement exists,
B) delivery has occurred or services have been rendered,
C) the seller's price to the buyer is fixed or determinable, and
D) collectibility is reasonably assured.
Some revenue arrangements contain multiple revenue-generating activities.
The SEC staff believes that the determination of the units of accounting
within an arrangement should be made prior to the application of the
guidance in this SAB Topic by reference to the applicable accounting
literature (i.e. EITF 00-21).
We apply the provisions of Topic 13.A to our products as follows:
1. Gas Detection and Environment Control Products are sold as off-the-shelf
products based on released product numbers with prices fixed at the time of
order (criteria C). Orders delivered to the Company by phone, fax, mail or
email are considered valid purchase orders and once accepted by the Company
are deemed to be the final understanding between the Company and our
customer as to the specific nature and terms of the agreed-upon sale
transaction (criteria A). Products are considered delivered when (a) for
FOB factory orders they leave our shipping dock, or (b) for FOB customer
dock upon confirmation of delivery (criteria B). The creditworthiness of
customers is generally assessed prior to the Company accepting their first
order. Additionally, international customers and customers who have
developed a history of payment problems are generally required to prepay or
pay through a letter-of-credit (criteria D).
2. Gas Detection and Environment Control Services consist of customer orders
for field service. Generally field service requires a visit to a customer
site for inspection of the installation, assistance with start-up and user
training. These services are provided under purchase orders which are
provided separate from product orders. Orders are accepted in the same
forms as above with hourly prices fixed at the time of order (criteria A
and C). The services are provided by a Company employee or contractor
visiting a site and completing work. A job ticket or report is completed
and invoicing/revenue recognition occurs only when the service activity is
completed (criteria B). Such services are provided to current and prior
customers, and, as noted above, creditworthiness has generally already been
assessed. In cases where probability of receiving payment is low, a credit
card number is collected for immediate processing (criteria D).
3. FieldServer Products are small boxes similar to computer network hubs. The
Products have multiple ports for connection to various electronics
controls. They are sold in the same manner as Gas Detection and Environment
Control Products except that there is a high content of software that is
integral to the operation of the product. Orders delivered to the Company
by phone, fax, mail or email are considered valid purchase orders. The
Company determines whether it can accept the purchase order by comparing
the requirement of the order against the capabilities of the FieldServer
software products. Upon acceptance by the Company the orders are deemed to
be the final understanding between the Company and our customer as to the
specific nature and terms (including fixed price) of the agreed-upon sale
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 3
transaction (criteria A and C). Products are considered delivered when (a)
for FOB factory orders they leave our shipping dock, or (b) for FOB
customer dock upon confirmation of delivery (criteria B). The
creditworthiness of customers is generally assessed prior to the Company
accepting their first order. Additionally, international customers and
customers who have developed a history of payment problems are generally
required to prepay or pay through a letter-of-credit (criteria D). The
software to be provided with the order includes two items: (a) a compiled
program containing (i) the basic operating system for FieldServers which is
common to every unit and (ii) the correct set of protocol drivers based on
the customer order (see FieldServer Services below for more information);
and (b) a configuration file, like an Excel spreadsheet, that identifies
and links each data point as identified by the customer.
The configuration file is a separate line item on the order and, although
it is an electronic file, it should not be considered software; it is
simply engineering work product. The Company does not deem the hardware,
operating system with protocol drivers and configuration files to be
separate units of accounting, as defined in EITF 00-21, "Revenue
Arrangements with Multiple Deliverables," because we do not believe that
they have value on a stand-alone basis. The hardware is useless without the
software, and the software is only intended to be used in FieldServer
hardware. Additionally, the software included in each sale is deemed to not
require significant production, modification or customization, as described
in Statement of Position (SOP) 97-02, "Software Revenue Recognition", as
amended, and therefore we recognize revenues upon the shipment or delivery
of products (depending on shipping terms), as described above.
4. FieldServer Services consist of orders for custom development of protocol
drivers. Orders are received in the same manner as above, but due to the
non-recurring engineering (the "NRE") aspect of the driver development we
are more likely to have a written evidence trail of a quotation and a hard
copy order (criteria A and C). The driver development involves further
research after receipt of order, preparation of a scope document to be
approved by the customer and then engineering time to write, test and
release the driver program. When development of the driver is complete the
customer is notified and can proceed with a product order (see paragraph 3
above). Revenues for driver development are billed and recognized upon
shipment or delivery of the related product that includes the developed
protocol drivers (criteria B, as noted in paragraph 3 above).
Collectibility (criteria D) is reasonably assured as described in paragraph
3 above.
In light of the foregoing, we intend to disclose our revenue recognition
policies in future filings with the Commission as follows:
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 4
Revenue Recognition
The Company recognizes revenues in accordance with Staff Accounting Bulleting
("SAB") No. 104, "Revenue Recognition," when all of the following conditions
exist: a) persuasive evidence of an arrangement exists in the form of an
accepted purchase order; b) delivery has occurred, based on shipping terms, or
services have been rendered; c) the Company's price to the buyer is fixed or
determinable, as documented on the accepted purchase order; and d)
collectibility is reasonably assured. By product and service type, revenues are
recognized when the following specific conditions are met:
Gas Detection and Environment Control Products
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Gas Detection and Environment Control products are sold as off-the-shelf
products with prices fixed at the time of order. Orders delivered to the Company
by phone, fax, mail or email are considered valid purchase orders and once
accepted by the Company are deemed to be the final understanding between us and
our customer as to the specific nature and terms of the agreed-upon sale
transaction. Products are shipped and are considered delivered when (a) for FOB
factory orders they leave our shipping dock or (b) for FOB customer dock orders
upon confirmation of delivery. The creditworthiness of customers is generally
assessed prior to the Company accepting a customer's first order. Additionally,
international customers and customers who have developed a history of payment
problems are generally required to prepay or pay through a letter-of-credit.
Gas Detection and Environment Control Services
- ----------------------------------------------
Gas Detection and Environment Control Services consist of field service orders
(technical support) and training, which are provided separate from product
orders. Orders are accepted in the same forms as discussed for Gas Detection and
Environment Control Products above with hourly prices fixed at the time of
order. Revenue recognition occurs only when the service activity is completed.
Such services are provided to current and prior customers, and, as noted above,
creditworthiness has generally already been assessed. In cases where the
probability of receiving payment is low, a credit card number is collected for
immediate processing.
FieldServer Products
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FieldServer products are sold in the same manner as Gas Detection and
Environment Control products (as discussed above) except that the products
contain embedded software, which is integral to the operation of the device. The
software embedded in FieldServer products includes two items: (a) A compiled
program containing (i) the basic operating system for FieldServers, which is
common to every unit, and (ii) the correct set of protocol drivers based on the
customer order (see FieldServer Services below for more information); and (b) a
configuration file that identifies and links each data point as identified by
the customer. The Company does not deem the hardware, operating systems with
protocol drivers and configuration files to be separate units of accounting, as
defined in EITF 00-21, "Revenue Arrangements with Multiple Deliverables,"
because the Company does not believe that they have value on a stand-alone
basis. The hardware is useless without the software, and the software is only
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 5
intended to be used in FieldServer hardware. Additionally, the software included
in each sale is deemed to not require significant production, modification or
customization, as described in Statement of Position (SOP) 97-02, "Software
Revenue Recognition", as amended, and therefore the Company recognize revenues
upon the shipment or delivery of products (depending on shipping terms), as
described in Gas Detection and Environment Control Products above.
FieldServer Services
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FieldServer services consist of orders for custom development of protocol
drivers. Generally customers place orders for FieldServer products concurrently
with their order for protocol drivers. However if custom development of the
protocol driver is required, the product order is not processed until
development of the protocol driver is complete. Orders are received in the same
manner as described in FieldServer Products above, but due to the non-recurring
engineering aspect of the customized driver development the Company is more
likely to have a written evidence trail of a quotation and a hard copy order.
The driver development involves further research after receipt of order,
preparation of a scope document to be approved by the customer and then
engineering time to write, test and release the driver program. When development
of the driver is complete the customer is notified and can proceed with a
FieldServer product (see FieldServer Products above). Revenues for driver
development are billed and recognized upon shipment or delivery of the related
product that includes the developed protocol drivers (as noted in FieldServer
Products above). Collectibility is reasonably assured as described in
FieldServer Products above.
2. Tell us and revise future filings to discuss the types of discounts and
allowances you offer as well as your terms for returns, refund rights and any
other post delivery obligations you have and how they impact the amount and
timing of revenue recognized.
Response:
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In response to the Staff's comment, we supplementally advise the Staff that the
Company offers products for sale to end users at list price. Discounts are
applied in the quote and negotiation period to encourage the customer to place
the order. These discounts vary by project. When products are sold through
representatives there is no discount applicable to a wholesale distributor. In
cases of repeat customers, generally distributors or integrators, we offer set
discounts. In all cases discounts range between 5% and 40%.
1. Discounts are applied at time of order entry and sales are processed
at net pricing.
2. No allowances are offered to customers.
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 6
3. The Company provides a warranty on all electronics sold for a period
of two years after the date of shipment. Warranty issues are usually
resolved with repair or replacement of the product. Trends of sales
returns, exchanges and warranty repairs are tracked as a management
review item in the Company's ISO (International Organization for
Standardization) quality program and data generated from that program
forms a basis for the reserve that management records in our financial
statements. Estimated future warranty obligations related to certain
products and services are provided by charges to operations in the
period in which the related revenue is recognized. At December 31,
2004, warranty reserve approximated $40,000, which is recorded under
other current liabilities on the balance sheet.
4. No refund rights are offered except for occasional returns to stock.
We do not have a specific return policy, however, returns are offered
on a case-by-case basis. Customers are generally allowed to return
product to stock if they ordered the wrong part or have excess
inventory. A 30% restocking fee is charged for returns, which we
believe limits our future exposure to returns. Trends of sales
returns, exchanges and warranty repairs are tracked as a management
review item in the Company's ISO (International Organization for
Standardization) quality program and data generated from that program
forms a basis for the reserve that management records in our financial
statements. During 2005 the total returns for credit are 1% of sales,
which we deem to be immaterial. The 1% return includes circumstances
where the customer returns one item and immediately purchases another
item. For traceability reasons we handle the transaction as a return
and another sale, not an exchange. Because our experience is that the
level of returns, offset by new purchases, is such a low percentage of
sales we do not delay recognition of any revenue for this purpose.
We maintain an allowance for doubtful accounts which is analyzed on a periodic
basis to insure that it is adequate to the best of management's knowledge. We
believe that we have demonstrated the ability to make reasonable and reliable
estimates of product returns and of allowances for doubtful accounts based on
significant historical experience. Trends of sales returns, exchanges and
warranty repairs are tracked as a management review item in the Company's ISO
(International Organization for Standardization) quality program and data
generated from that program forms a basis for the reserve that management
records in our financial statements.
In light of the foregoing, we intend to disclose our revenue recognition
policies in future filings with the Commission as follows:
Discounts and Allowances
- ------------------------
Discounts are applied at time of order entry and sales are processed at net
pricing. No allowances are offered to customers.
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 7
We intend to change the warranty statement in Note 1-Summary of the Company and
Significant Accounting Policies in future annual filings with the Commission as
follows:
The Company provides a warranty on all electronics sold for a period of two
years after the date of shipment. Warranty issues are usually resolved with
repair or replacement of the product. Trends of sales returns, exchanges and
warranty repairs are tracked as a management review item in the Company's ISO
(International Organization for Standardization) quality program and data
generated from that program forms a basis for the reserve that management
records in our financial statements. Estimated future warranty obligations
related to certain products and services are provided by charges to operations
in the period in which the related revenue is recognized. At December 31, 2004,
warranty reserve approximated $40,000, which is recorded under other current
liabilities on the balance sheet.
As there is no formal return policy and the historical level of returns is
immaterial, management does not intend to include a returns disclosure in future
filings.
3. We note from your website that sales relating to your FieldServers
actually include software, hardware, training and technical support. You make
mention that you offer free software in certain instances. Please tell us then
why you believe that you do not enter into multiple-element arrangements related
to the sales of FieldServers. Specifically, please tell us and revise future
filings to address how you allocate total consideration for multi-element
transactions and how you determine fair value, particularly when there are
undelivered elements such as installation and training.
Response:
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In response to the Staff's comment, we respectfully advise the Staff that the
Company does not deem FieldServer hardware, operating system with protocol
drivers and configuration files to be separate units of accounting, as defined
in EITF 00-21, "Revenue Arrangements with Multiple Deliverables," because we do
not believe that they have value on a stand-alone basis, which is also discussed
in the response to item #1 above. With respect to the issues of hardware and
software sales, please see the response to item #1 above.
Training is offered on a fee basis only and it is not linked to the sale of the
hardware/software package. Generally, when a customer determines that it will be
a repeat customer, it may sign up to attend a fee based class so that the
customer can do more configuration work and better understand the capabilities
of the product. Training is a single element sale on a stand alone basis.
Training revenue is recognized in the same manner as Gas Detection and
Environment Control Services, as discussed in the response to item #1 above.
Technical support is offered on a fee basis. A customer who does not purchase
our configuration service can call the Company and obtain 30 minutes of free
telephone support, which is deemed insignificant. At the beginning of the
contact, the customer is advised that he will need to purchase further
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 8
assistance on a fee basis by providing a credit card number. Technical support
revenue is recognized in the same manner as Gas Detection and Environment
Control Services, as discussed in the response to item #1 above.
The Company does not offer installation services except in rare instances. In
such cases installation is quoted and orders are booked separately from the
Product sale and the order is invoiced after the services have been performed at
the customer's site, in the same manner as Gas Detection and Environment Control
Services, as discussed in the response to item #1 above.
We note the Staff's reference to free software which we believe is related to
Free Modbus Source Code offered on the ProtoCessor website. The software is
simply a demonstration package that is not sold or linked to any other sale and
therefore does not contribute to a multiple element arrangement. It is available
for free at random other websites and is considered a marketing tool.
??? Paul Shinn: Should we make a statement that we will not be changing future
filings??
Note 11 - Segment Reporting, page F-17
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4. We noted your discussion of the three main products groups, consisting
of gas detection devices, environmental controllers and communications bridges,
in the business section and in the management's discussion and analysis section.
We also noted that each group contributed more than 10% of total revenues in
each of the years presented. Furthermore, we note you have a fourth product
group or "business unit" which you refer to as the OEM Coprocessors, on your
website but not mentioned in your filing. Based on this information, please tell
us why you believe that you only operate in one operating segment. Also tell us
why these product groups or business units do not represent separate operating
and reporting segments of your company in accordance with SFAS 131.
Response:
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In response to the Staff's comment, we respectfully advise the Staff that our
analysis of whether the Company operates in a single reporting segment is based
in our understanding of Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 defines an operating segment as a component of an enterprise (a) that
engages in business activities from which it may earn revenues and incur
expenses, (b) whose operating results are regularly reviewed by the enterprise's
chief operating decision maker to make decisions about resources to be allocated
to the segment and to assess its performance, and (c) for which discrete
financial information is available. We believe that we appropriately report our
operations as being in only one segment for the following reasons:
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 9
1. Our chief operating decision maker, Gordon Arnold (Chief Executive
Officer and Chief Financial Officer), only reviews revenues by product
line. He does not review costs, assets or profitability by product
line. Costs, assets, and the results of operations are only reviewed
on an entity-wide basis.
2. As Mr. Arnold does not review costs, assets, or profitability by
product line, such information has never been tracked or internally
reported (i.e. discrete financial information only exists for revenues
by product line, which we have disclosed).
3. As stated in paragraph 6 of SFAS No. 131, "this Statement requires
that an enterprise report a measure of segment profit or loss and
certain items included in determining segment profit or loss, segment
assets, and certain related items." We do not believe that we would be
able to develop such information for each product line in a
cost-effective or timely manner, and based on our current financial
condition, such costs would be excessive.
4. Because our chief operating decision maker does not make decisions
based on costs, assets, or profitability by product line as such
information does not exist and the cost to develop such information is
deemed to be excessive, we do not believe that our product lines are
separate "segments" as defined by SFAS No. 131, and therefore the
quantitative thresholds of paragraph 18 of such Statement (e.g.
segment revenues greater than 10% of combined revenues) and the
disclosure requirements of this Statement do not apply.
Regarding our OEM Coprocessors (also known as the "ProtoCessor") we had no sales
of such product for the year ended December 31, 2004, and we have had no
significant sales since such date. Additionally, we consider the ProtoCessor to
be a subset of our FieldServer line of products, as both ProtoCessors (protocol
coprocessors) and FieldServers (protocol translators/gateways) allow
interoperability of devices through the use of a similar driver library. As
such, we plan to discuss ProtoCessor sales in conjunction with FieldServer sales
in future disclosures when such sales become significant.
Note 7 - Warrants, page F-14
- ----------------------------
5. Please tell us why you deferred $30,800 of expense relating to the fair
value of a warrant granted to a consultant in 2004.
Response:
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In response to the Staff's comments, we note that Emerging Issues Task Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services" and SFAS No. 123, "Accounting for Stock-Based Compensation" establish
the measurement principles for transactions in which equity instruments are
issued in exchange for the receipt of goods or services. Paragraph 8 of SFAS No.
123 states that those transactions should be measured at the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. We believe that the fair value of the
warrants to be more reliably measurable than an estimate of the fair value of
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 10
the services obtained because we have no prior history with this consultant and
no historical base for estimating the value of the services to be provided. SFAS
No. 123 does not, however, prescribe the measurement date or provide guidance on
recognition of the cost of those transactions. In EITF No. 96-18, the Task Force
reached a consensus that an expense would be recognized in the same period(s)
and in the same manner as if the enterprise had paid cash for the goods or
services.
In December 2004, we entered into a consulting agreement with an independent
contractor. Such contract is to terminate the earlier of the completion of
services, 14 days written notification of either party, or breach of contract by
the consultant. Warrants to acquire 110,000 shares of our restricted common
stock at $0.65 per share were granted at the inception of the contract as
compensation for services to be provided. We estimated that approximately 50% of
the services were provided prior to December 31, 2004, and the balance of the
services was to be provided in 2005. Had we paid cash up front for these
services, we would have recorded the related expense as the services were
performed (in this case 50% in 2004), and we would have deferred as a prepaid
expense any amounts related to services not performed by December 31, 2004 (i.e.
the matching principle).
The contract was not deemed to have a commitment for performance by the
contractor, as defined in EITF No. 96-18, so the measurement date for this
transaction was deemed to be the completion of services by the contractor. EITF
No. 96-18 allows for transactions where the quantity and terms of the equity
instruments are known up front (as described in the preceding paragraph) that
when it is appropriate under generally accepted accounting principles for the
issuer to recognize any cost of the transaction during financial reporting
periods prior to the measurement date (as noted in the preceding paragraph), for
purposes of recognition of costs during those periods the equity instruments
should be measured at their then-current fair values at each of those interim
financial reporting dates. Using the Black-Scholes option pricing model, we
valued the warrants at approximately $62,000 at the date of grant. We noted no
significant changes in the estimated fair value of such warrants between the
date of grant and December 31, 2004, so 50% was expensed prior to December 31,
2004, with the balance ($30,800) deferred until services were completed in 2005.
Exhibit 31
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6. We note that the certifications filed in Exhibit 31 were not in the
proper form. The required certifications must be in the exact form prescribed;
the wording of the required certification may not be changed in any respect,
except for the modification temporarily permitted to be made to the fourth
paragraph of the certification required to be filed as Exhibit 31 pursuant to
Part III.E of Release No. 8238. Accordingly, please amend your Form 10-KSB to
comply with Item 601(b)(31) of Regulation S-B.
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 11
Response:
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We respectfully advise the Staff that the Company's Form 10-KSB has been amended
to comply with Item 601(b)(31) of Regulation S-B. Please see our Form 10-KSB/A
filed on November 14, 2005.
Forms 10-QSB for the quarters ended March 31, and June 30, 2005
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Notes to the Unaudited Interim Condensed Financial Statements, page 5
- ---------------------------------------------------------------------
a) Revenue Recognition, page 5
- ------------------------------
7. We note that you have expanded your footnote to now include government
contracts. Please tell us further the nature of your government contracts and
why you believe that accounting for them including the percentage of completion
method is appropriate.
Response:
- ---------
In response to the Staff's comment, we note that the paragraph regarding revenue
recognition from government contracts was inadvertently included in our Form
10-QSB filings for the periods ended March 31, 2005 and June 30, 2005. In the
past it was our practice to account for government contracts using the
percentage of completion method, but since we do not currently have any
government contracts and do not anticipate any government contracts in the near
term, we will remove the statement from future filings.
Item 3 - Controls and Procedures, page 12
- -----------------------------------------
8. We note your disclosure that management has concluded that your
disclosure control and procedures are effective "to ensure that information we
are required to disclose in reports that we file or submit under the Securities
and Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in SEC rules and forms." The language that is
currently included after the word "effective" in your disclosure appears to be
superfluous, since the meaning of "disclosure controls and procedures" is
established by Rule 13a-15(e) of the Exchange Act. However, if you do not wish
to eliminate this language, please revise future filings so that the language
that appears after the word "effective" is substantially similar in all material
respects to the language that appears in the entire two-sentence definition of
"disclosure controls and procedures" set forth in Rule 13a-15(e).
Response:
- ---------
We note the Staff's comment and will revise future filings to eliminate the
superfluous language identified by the Staff in the Company's disclosure
regarding management's controls and procedures.
Securities and Exchange Commission
Attention: Kate Tillan
November 18, 2005
Page 12
In connection with this response to the Comment Letter the Company acknowledges
that:
o the Company is responsible for the adequacy and accuracy of the
disclosure in the filings referenced above;
o staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filing; and
o the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Should the Staff have any additional comments or questions, please contact
me at (408) 262-6611 ext. 120. We respectfully request that the Staff confirm
that it has no additional requests or comments.
Sincerely,
Gordon R. Arnold
________________________________
Chief Financial Officer
cc: Gordon R. Arnold - Chief Executive Officer,
Chairman of the Board of Directors
C. Richard Kramlich - Chairman of the Audit Committee
Ray Hermanson - Squar, Milner, Reehl & Williamson, LLP
Paul Shinn - Wilson Sonsini Goodrich & Rosati, P.C.