Temporary differences which created deferred tax assets and liabilities at December 31, 2002 and 2001 are as follows: 2002 2001 Current Non-Current Current Non-Current Accumulated depreciation ($4,650,784) ($5,310,950) Investments 3,799,191) (2,972,651) Accounts receivable $892,048 $1,644,845 Inventory 1,807,156 2,735,264 Accruals 2,100,186 (421,172) 1,524,646 Deferred tax asset (liability) $4,799,390 ($1,272,765) $5,904,755 ($8,283,601) No valuation allowance was deemed necessary by management as of December 31, 2002 and 2001, as the realization of recorded deferred tax assets is considered more likely than not. The board of directors of ADTRAN ™ adopted the 1996 Employees Incentive Stock Option Plan (the “1996 Plan”)  effective February 14, 1996, as amended, under which 8,488,100 shares of common stock were reserved for issuance to certain employees and officers through incentive stock options and non-qualified stock options. ADTRAN currently has options outstanding under its 1986 Employee Incentive Stock Option Plan (the “1986 Plan”), which expired on February 14, 1996. Options granted under the 1996 Plan or the 1986 Plan become exercisable after one year of continued employ- ment, normally pursuant to a four or five-year vesting schedule beginning on the first anniversary of the grant date. Expiration dates of options outstanding under the 1996 Plan and the 1986 Plan at December 31, 2002, range  from 2003 to 2012. The board of directors of ADTRAN adopted the Directors Stock Option Plan (“Directors Plan”) effective  October 31, 1995, as amended, under which 200,000 shares of common stock have been reserved. The Directors Plan  is a formula plan to provide options to directors of ADTRAN. At December 31, 2002, 182,250 options had been granted under the Directors Plan. Expiration dates of options outstanding under the Directors Plan at December 31, 2002, range from 2005 to 2012. On January 28, 2002, ADTRAN’s board of directors approved a voluntary stock option exchange program  for its employees, executive officers and directors. In conjunction with the exchange offer, ADTRAN filed a Tender  Offer Statement on Schedule TO with the Securities and Exchange Commission. Under the option exchange program, employees, executive officers and directors who held options to purchase ADTRAN’s common stock and who had not received options after July 23, 2001, were given the opportunity to exchange unexercised stock options granted prior to September 30, 2000, with exercise prices of at least $40 per share. For every four shares of an eligible option, three shares were made available under the new option grant. The newly issued options vest according to the vesting schedule of the tendered options. A total of 1,434,400 options were tendered and cancelled. As of December 31, 2002, a total of 991,683 new options were granted to qualified participants in the exchange program. The new option grant was made on  August 30, 2002, at an exercise price of $17.39 per share. 7 Stock Option Plans 30 ADTRAN 2002 Annual Report